HomeMy WebLinkAbout12 - Approval of 2023 Water and Sewer Rate Studies and Setting of Public Hearing for Water and Sewer RatesQ �EwPpRT
CITY OF
s NEWPORT BEACH
`q44:09 City Council Staff Report
September 26, 2023
Agenda Item No. 12
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Mark Vukojevic, Utilities Director - 949-644-3011,
mvukojevic@newportbeachca.gov
PREPARED BY: Mark Vukojevic, Utilities Director, mvukojevic@newportbeachca.gov
PHONE: 949-644-3011
TITLE: Approval of 2023 Water and Sewer Rate Studies and Setting of
Public Hearing for Water and Sewer Rates
ABSTRACT:
Following a review by the Finance Committee, the City Council conducted a study session
on August 22, 2023, regarding the 2023 Water and Sewer (also known as wastewater)
Rate Studies. The completed studies analyze the cost of services, revenues and
reserves, and recommend increases to the water and sewer rates. Increases are needed
to fund the increased costs to purchase and pump water, to operate the system, and to
fund the increased Capital Improvement Program to rehabilitate and maintain the City of
Newport Beach's (City) water and sewer infrastructure for the long term. Staff is seeking
City Council approval of both studies, for a public hearing to be set for November 14,
2023, and for authorization to send notices to Newport Beach property owners and water
and sewer customers in compliance with state law.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Approve the 2023 Water and Sewer Rate Studies;
c) Direct staff to send a notice of proposed water and sewer rates to property owners
and customers in compliance with Proposition 218 State Law; and
d) Set the date of November 14, 2023, for the tabulation of protests and conduct a public
hearing of proposed rates pending the results of the protest.
DISCUSSION:
Executive Summary:
• Both the Water and Wastewater Enterprise Funds operate at a structural deficit,
drawing down on net working capital reserves to fund the current Capital
Improvement Programs.
12-1
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 2
• Rate studies were previously completed in 2017 and 2019; and future rate
schedules are either expired or nearing expiration.
• Increased replacement and rehabilitation of the water and sewer system pipes and
components (the Capital Improvement Program) are needed, and are estimated
to cost $45 million over the next five years.
• Current and future inflationary costs are affecting the Capital Improvement
Program, as well as all operational costs for materials, supplies, labor and
electricity. The cost of pumping groundwater and purchasing imported water
continues to increase.
• Comprehensive Water and Sewer Rate Studies have been completed and the
Finance Committee has reviewed the information.
• Water and sewer rate increases are recommended to properly sustain the water
and sewer system, with regular increases each year for five years.
• The average rate increase for the first year is approximately $4.77/month for water
and $2.20/month for sewer services, per household.
If approved, water and sewer rate adjustments will commence on January 1, 2024, and
will adjust annually on January 1 of each subsequent year. The total amount of a
customer's bill will depend on the amount of water consumed. Based on the typical
single-family residential customer with a 5/8" metered connection and consuming 10 HCF
per month, the bills will increase as noted below:
emu. Im
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Gbh
Single Family Residential
Monthly Typical Bill (5/8" meter and 10 HCF)
Water $63.92 $68.69
$74.19 $80.19 $86.19
$92.19
$ Increase $4.77
$5.50
$6.00
$6.00
$6.00
Sewer 7 $13.65 1 $15.85
$18.35
$21.35
$24.85
$28.35
$ Increase 1 $2.20
$2.50
$3.00
$3.50
$3.50
Rate Studv Backaround:
Every few years, as the current rate schedules expire, a separate financial plan and rate
studies are necessary to evaluate the water and sewer rates and to determine the charge
for customers. Rate studies were previously completed in 2017 for sewer and in 2019 for
water. These studies represent a best practice for determining utility rates that are fair,
equitable and reflective of the demand placed on the systems by the customers. The City
retained Black & Veatch Corporation to conduct the studies and assess the City's water
and sewer rate structures. The goal was to ensure that the City's plans for critical
infrastructure maintenance and for funding capital improvement projects with cash, are in
alignment with the proposed rates. On May 11, 2023, and July 26, 2023, the Finance
Committee delved into the water and sewer rate financial analysis of both Enterprise
Funds. This included the reserve policy, the continued reinvestment needs for
infrastructure replacement through the Capital Improvement Program, inflationary cost
increases, and preparation for future droughts. Briefly discussed were typical steps and
decision points for evaluating rates and rate structures.
12-2
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 3
Staff recommended, and there was concurrence with the Finance Committee, with
maintaining a similar and simplified, easy -to -understand rate structure and moving fixed
and variable rates to better match actual costs. On August 22, 2023, the City Council held
a study session to review the water and sewer rate studies, and the proposed rates.
The rate studies have been constructed with a financial plan that corrects the structural
deficit and sufficiently funds operations, capital and reserves. Each fund has a reserve
policy/target, which considers the various types of risk the utility faces. The reserve
policies are similar to the previous policies; however, they better articulate the types and
uses of the reserves. In general, even with the rates increasing, reserve calculations are
below targets. The rates ramp up over the years, attempting to reach the target values by
the fifth year (the amount is similar to the existing policy).
Reserve Policy for the Water Enterprise Fund:
• O&M Reserve — to cover day-to-day expenses and maintain sufficient funds to
cover operating cash flows, periods of lower -than -expected water sales, or
unforeseen cost.
> 33% of operating expenses (or 4 months of expenses)
• Capital Reserve — to cover a portion of upcoming annual capital expenditures,
smooth out the amount of capital infusion needed each year, and help mitigate
unexpected capital costs.
> 75% of 5-year average CIP
• Rate Stabilization Reserve — to absorb lower -than -expected revenue due to
short-term decreases in water sales in order to avoid large swings in rates charged
to customers over time.
> 30% of water use reduction (approximately $3 million)
Reserve Policy for the Sewer Enterprise Fund:
• O&M Reserve — to cover day-to-day expenses and maintain sufficient funds to
cover operating cash flows, periods of lower -than -expected sewer sales, or
unforeseen cost increases.
> 25% of operating expenses (or 3 months of expenses)
• Capital Reserve — to cover a portion of upcoming annual capital expenditures,
smooth out the amount of capital infusion needed each year, and help mitigate
unexpected capital costs
> 100% of 5-year average CIP
Understanding the fees, the water and sewer bill. -
Water and sewer users are billed for two components; the size of the meter, known as
the fixed charge (or standby/ready-to-serve charge) and the commodity or water usage
charge. Most users are billed every two months via a Municipal Services Statement. This
statement also includes charges for the City's recycling program and the Fire Medics
program for those that are subscribed. Some users receive a monthly bill and the future
goal is to transition to monthly billing.
12-3
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 4
The rate studies looked at each of these charges, including their proportionality and
recommended structured rate levels consistent with industry standard, in order to fairly
and equitably recover the cost of providing water and sewer to the City's customers. The
Finance Committee concurred with the goal of moving fixed and variable rates to better
match actual costs. In order to accomplish this, most of the rate increases are reflected
in the fixed meter charges as compared to the commodity charges. This approach better
aligns with actual fixed expenditures, enhances the stability of the Enterprise Funds, and
continues to maintain affordability and water conservation goals.
Water System:
The Utilities Department oversees the water system to provide safe and reliable water for
drinking, irrigation and fire protection to Newport Beach residents, businesses and
visitors. These essential services are accomplished through a strategic combination of
dedicated in-house licensed staff operators (on -call 24 hours a day) and highly qualified
contractors. Behind the scenes, the department is responsible for all water
purchases/production, treatment, disinfection, water quality testing, regulatory
compliance, field customer service, and emergency response. The water system is
supported by the Public Works Department for the Capital Improvement Program projects
and the Finance Department for utility billing and customer service. The system includes
approximately 300 miles of water pipelines, 200 million gallons of water storage, 26,000
service connections (water meters), 17 water booster pumps, 42 pressure -reducing
stations, 2,700 fire hydrants, 8,100 water valves, 12 interconnects and 4 groundwater
wells.
There are four main expenditure categories of the water enterprise that are important to
providing water service: Purchasing/Pumping Water, Operations, Replacement and
Customer Service. The cost to purchase and pump water includes the direct cost for the
rights to pump groundwater and to buy imported surface water. The Operations category
includes day-to-day operations and maintenance and is comprised of salaries, contract
maintenance, repair materials, permits, outside agency fees, electricity, and professional
services. Replacement includes the annual capital replacement or rehabilitation of aging
infrastructure and recommended improvements per the Water Master Plan. Over
$40 million in total annual capital improvements are planned over the next five years.
Customer Service includes meter reading, invoicing, customer service, administration,
and internal service charges.
Water rates as shown in the table below and in the report, are proposed to be adjusted
proportionally and increased each year for the next five years. The average residential
customer, who uses approximately 10 billing units (7,480 gallons per month), is expected
to see a $4.77 per month increase starting in 2024. This was the previously approved rate
originally scheduled in 2019. In the following years, the monthly rate will increase monthly
by $5.50 in 2025, $6.00 in 2026, $6.00 in 2027 and $6.00 in 2028. A billing unit is
100 cubic feet (one HCF) or 748 gallons.
12-4
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 5
Proposed 5-year (Potable) Water Rates:
Effective
Date
Fixed Service Charges ($/Month)
Meter Size
0:
5/8", 3/4"
25.22
27.09
31.59
36.59
41.59
46.59
1 "
39.09
41.99
50.07
58.30
66.53
74.75
1-1/2"
73.69
79.15
96.29
112.59
128.88
145.16
2"
115.23
123.76
151.74
177.74
203.71
229.65
3"
305.61
328.23
405.92
476.32
546.65
616.89
4"
523.69
562.45
697.06
818.33
939.47
1,060.46
6"
1,112.15
1,194.45
1,482.68
1,741.22
1,999.48
2,257.39
8"
1,942.91
2,086.69
2,591.80
3,044.12
3,495.95
3,947.18
Usage Charge
Water Usage 3.87
4.16
1 4.26
4.36
4.46
4.56
Fire Service Water Rates:
The City's water system also has approximately 460 fire service customer connections.
These are typically the large, red, above -ground pipes and valves seen in front of
businesses or in parking lots. This pressurized water is supplied on a standby basis to
provide additional fire -fighting water if needed by the property beyond the fire hydrant.
The fire service water rates recover the proportional cost to provide fire protection
capacity, metering and billing. As seen in the table below, especially for the larger meter
sizes, rates have been increased and adjusted to be compliant with industry
"proportionality" standards, ensuring compliance with Proposition 218. Simply put, the
larger the pipe connection, the larger the burden on the system to meet peak demands.
Most fire services do not use water regularly. However, if water is used through the fire
service, the standard commodity potable water rate is used. Fire service water rates are
shown below:
Proposed 5-vear Fire Protection Service Water Rates:
Fire
Meter Size
arge ($/Monthly)
1 "
13.14
14.12
8.96
9.59
10.18
10.75
1-1/2"
13.72
14.74
10.15
10.86
11.55
12.23
2"
14.72
15.81
12.21
13.06
13.92
14.77
2-1/2"
16.23
17.44
15.31
16.36
17.48
18.60
3"
18.31
19.67
19.59
20.94
22.43
23.91
4"
24.52
26.34
32.33
34.53
37.10
39.68
6"
46.75
50.21
78.03
83.29
89.75
96.25
8"
85.13
91.43
156.85
167.41
180.56
193.84
10"
142.84
153.42
275.42
293.93
317.16
340.62
12-5
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 6
Recycled Water System Rates:
The City provides recycled (non -potable) water to irrigate parks, certain landscaping,
center medians, and golf courses, encompassing 3% of the City's total water use. The
City purchases recycled water from the Orange County Water District (OCWD) through a
project known as Green Acres Project. The recycled water rates recover the direct costs
to purchase the recycled water, and the proportional costs regarding capacity, metering
and billing. Proportionality standards also apply to these recycled meters and in this case,
the fixed rates are adjusted and reduced. Certain users also have exclusive pump stations
to increase the flow and pressure of the water to meet watering needs. Those users are
charged the direct charges associated with the pump stations. In general, recycled water
remains less expensive than potable water. Recycled water rates are shown below:
Current VI Approved I New New New New
Date
Fixed Service Charges ($/Month)
Meter Size
1.1 18.41
19.78
21.85
23.06
24.16
25.25
1-1 /2"
32.35
34.75
39.84
42.10
44.15
46.16
2"
49.09
52.73
61.43
64.95
68.13
71.25
3"
125.81
135.12
160.38
169.69
178.05
186.25
4"
213.68
229.50
273.72
289.66
303.96
317.97
6"
450.80
484.16
579.56
613.40
643.72
673.42
8"
785.55
843.69
1,011.34
1,070.43
1,123.38
1,175.23
Sewer (Wastewater) System:
The Utilities Department oversees the operation of the City's sanitary sewer system.
Hidden below the ground, a properly functioning system provides a crucial service to
Newport Beach residents, businesses and visitors, and protects the environment. This
essential service is also accomplished through a strategic combination of in-house,
licensed, staff operators (on -call 24 hours a day) and highly qualified contractors. Behind
the scenes, the department is responsible for cleaning, pumping and repairs of the
collection system. Sanitary sewer flows are collected from homes and businesses in
Newport Beach and transported through more than 25,000 laterals, 200 miles of gravity
sewer mains, and 5 miles of pressurized force sewer mains by way of 21 pump (lift)
stations to the Orange County Sanitation District. The sewer system is supported by the
Public Works Department for the Capital Improvement Program projects and the Finance
Department for utility billing and customer service.
12-6
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 7
There are four main expenditure categories of the sewer (wastewater) enterprise that are
important to providing sewer service: Cleaning Operations, Pump Station Operations,
Repairs/Capital Replacement, and Customer Service. Cleaning Operations include the
cost to regularly clean and video tape sewer lines. The public may be familiar with the
department's large, yellow vacuum trucks. Pump Station operations includes the
day-to-day operation, inspection and repairs of the City's 21 pump stations that lift and
pump wastewater from low-lying areas. Repairs include the scheduled and unscheduled
dig out spot repairs of the underground pipelines and laterals. Capital Replacement
includes the larger -scale replacements and rehabilitation of pipelines and pump stations
as recommended per the Wastewater Master Plan. More than $5 million in total annual
capital improvements are planned over the next five years. Customer Service includes
meter reading, invoicing, customer service, administration and internal service charges.
Sewer rates as shown in the table below and in the report, are proposed to be adjusted
proportionally and increased each year for the next five years. The average residential
customer, who uses approximately 10 billing units, (7,480 gallons per month), is expected
to see a $2.20 per month increase starting in 2024. In the following years, the monthly
rate will increase by $2.50 in 2025, $3.00 in 2026, $3.50 in 2027 and $3.50 in 2028. A
billing unit is 100 cubic feet (or 1 HCF) or 748 gallons.
Proposed 5-year Sewer Rates
Effective
Date
Fixed Service Charges ($/Month)
Meter Size
5/8", 3/4", 1 " 8.55 10.55 12.85 15.65 18.95 22.25
1-1 /2"
9.41
15.83
19.28
23.47
28.43
33.38
2"
12.83
21.11
25.71
31.30
37.90
44.51
3"
14.54
26.38
32.14
39.12
47.38
55.63
4"
17.11
31.66
38.56
46.95
56.85
66.76
6"
19.25
36.94
44.99
54.77
66.33
77.89
8"
21.39
42.22
51.42
62.60
75.81
89.01
Usage Charge
($/HCF)
Sewer Usage
0.51
0.53
0.55
0.57
0.59
0.61
Approximately 600 Newport Beach properties receive sewer service from the City, but are
supplied water by Mesa Water District or Irvine Ranch Water District. For those properties,
the City does not have immediate access to their water use for billing purposes. The best
practice is to estimate an average based on the meter size, as explained in the official
report. Hence, these users only receive a flat fee. As noted and approved by the City
Council on July 25, 2023, these properties, for the second year in a row, will be billed
through the property tax roll.
12-7
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 8
Proposed 5-vear Sewer Only Customer Rates
Sewer Only Customers, Fixed Service Charge, (no Use Charge) ($/Monthly)
Meter Size
5/8", 3/4"
13.10
15.86
18.36
21.35
24.85
28.36
1 "
15.34
18.51
21.11
24.20
27.80
31.41
1-1 /2"
46.14
53.99
58.88
64.52
70.91
77.30
2"
47.54
59.27
65.31
72.34
80.39
88.43
3"
122.10
137.68
147.63
158.83
171.29
183.74
4"
216.25
238.35
253.06
269.27
286.97
304.67
6"
381.07
413.21
435.48
459.51
485.26
511.00
8" 383.21
418.49
441.91
467.33
494.74
522.12
10" 389.20 423.77
448.33
475.15
504.21
533.25
Next Steps and Proposition 218 Requirements:
Upon incorporation of the City Council's recommendations and direction to send
Proposition 218 notices, pursuant to California Constitution Article XIII D, Section 6, staff
will prepare and send notices to all property owners (and as a courtesy to all customers,
i.e. tenants) that receive water and/or sewer service from the City. There will be a 45-day
public notice period at which time, property owners and customers may send written
protests for consideration of the City Council. Protests from property owners will be tallied
at the public hearing tentatively set for November 14, 2023. Notwithstanding a majority
protest, City Council can consider verbal testimony from anyone and written protests from
non -property owners and decide to approve the rates.
If the rates are approved, and the amended fee schedule adopted via resolution, the
proposed water and sewer rates would become effective on January 1, 2024, and for
every year thereafter with the final scheduled adjustments occurring January 1, 2028.
FISCAL IMPACT:
The current adopted budget includes sufficient funding for completion of the studies and
the public noticing. The cost of the studies is approximately $100,000 and the cost of the
public noticing (Proposition 218 mailed notice) is estimated at $15,000. As currently
budgeted, the Water Enterprise Fund and Wastewater Enterprise funds are now
operating at a structural deficit, drawing down on net working capital reserves. If the
proposed rate increases are approved, rates would be adjusted and generally increase
each year for five years, starting in January 2024. The rate increases will fund the
necessary Capital Improvement Program, the increased inflationary cost of maintenance
and operations, and the cost to purchase and pump water and stabilizing the enterprise
funds.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
12-8
Approval of 2023 Water and Sewer Rate Studies and
Setting of Public Hearing for Water and Sewer Rates
September 26, 2023
Page 9
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A
— 2023 Water Rate Study
Attachment B
— 2023 Sewer Rate Study
Attachment C
— Public Notice in compliance with Proposition 218
12-9
ATTACHMENT A
DRAFT FINAL
WATER RATE STUDY
BLACK & VEATCH PROJECT NO. 414264
PREPARED FOR
POR�
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V � 1
C"LIFOR��P
City of Newport Beach, CA
15 SEPTEMBER 2023
BLACK&VEATCH
12-10
City of Newport Beach, CA I Water Rate Study
Table of Contents
LegalNotice
.................................................................................................................................................1
1.0 Executive
Summary....................................................................................................................1-1
1.1
Financial Plan...................................................................................................................1-1
1.2
Rate Design.....................................................................................................................1-2
1.3
Proposed Water Rates.....................................................................................................1-3
1.4
Customer Impact..............................................................................................................
1-4
1.5
Summary..........................................................................................................................1-4
2.0 Introduction.................................................................................................................................2-1
2.1
Purpose............................................................................................................................2-1
2.2
Water System...................................................................................................................2-1
2.3
Methodology.....................................................................................................................2-1
2.3.1 Financial Plan...................................................................................................
2-1
2.3.2 Cost -of -Service Analysis..................................................................................
2-1
2.3.3 Rate Design......................................................................................................2-2
2.3.4 Rate Adoption...................................................................................................2-2
WaterUtility
..............................................................................................................................................2-1
3.0 Revenue
and Revenue Requirements.......................................................................................3-1
3.1
Customer and Water Consumption..................................................................................3-1
3.1.1 Number of Customers......................................................................................3-1
3.1.2 Billed Water Consumption................................................................................3-2
3.2
Revenue under Existing Rates........................................................................................3-2
3.3
Other Revenue.................................................................................................................3-3
3.4
Operating and Maintenance Expenses............................................................................3-4
3.5
Capital Improvement Program.........................................................................................
3-5
3.6
Transfers within the Fund................................................................................................3-6
3.7
Reserves..........................................................................................................................
3-6
3.8
Projected Operating Results............................................................................................
3-7
4.0 Cost -of -Service Analysis............................................................................................................4-1
4.1
Cost of Service.................................................................................................................4-1
4.2
Functional Cost Components...........................................................................................4-2
4.3
Allocation to Cost Components........................................................................................4-2
4.3.1 System Base, Max Day, and Max Hour Allocations.........................................4-2
4.3.2 Allocation of Operating and Maintenance Expenses.......................................4-3
4.3.3 Allocation of Capital Investments.....................................................................4-4
4.4
Units of Service................................................................................................................4-8
4.5
Cost of Service Allocations............................................................................................4-11
4.5.1 Units Costs of Service....................................................................................4-11
4.5.2 Distribution of Costs of Service to Customer Types.......................................4-11
5.0 Rate
Design.................................................................................................................................5-1
BLACK & VEATCH I Table of Contents
12-11
City of Newport Beach, CA I Water Rate Study
5.1
Existing Rates..................................................................................
5.2
Proposed Rates...............................................................................
5.2.1 Monthly Fixed Service Charge .........................................
5.2.2 Monthly Private Fire Service ............................................
5.2.3 Consumption Charge .......................................................
5.3
Typical Monthly Costs under Proposed Charges ............................
5.4
Summary of Rate Study...................................................................
6.0 Appendix
A — Cost of Service Analysis and Rate Tables .......................
6.1
Fiscal Year 2026..............................................................................
6.2
Fiscal Year 2027..............................................................................
6.3
Fiscal Year 2028..............................................................................
LIST OF TABLES
Table 1-1
Proposed Five -Year Water Rate Schedule ......................................
Table 1-2
Proposed Five -Year Recycled Water Rate Schedule ......................
Table 1-3
Typical Residential Customer Monthly Bill Impacts .........................
Table 3-1
Number of Customers by Meter Size ...............................................
Table 3-2
Annual Billed Water Consumption...................................................
Table 3-3
FY 2024 Water, Recycled Water, and Private Fire Rates ...............
Table 3-4
Projected Water Revenue under Existing Rates .............................
Table 3-5
Water O&M Escalation Factors........................................................
Table 3-6
Water O&M Expenses......................................................................
Table 3-7
Water Capital Improvement Projects ...............................................
Table 3-8
Water Enterprise Fund.....................................................................
Table 4-1
Cost of Service Revenue from Rates (FY 2025) .............................
Table 4-2
Allocation Basis for O&M Expenditures ...........................................
Table 4-3
Allocation of O&M Expenditures (FY 2025).....................................
Table 4-4
Allocation Basis for Capital Costs ....................................................
Table 4-5
Allocation of Capital Costs (FY 2025)..............................................
Table 4-7
Units of Service (FY 2025)...............................................................
Table 4-8
Units Cost of Service (FY 2025)......................................................
Table 4-9
Distribution of Costs to Customer Types (FY 2025) ........................
Table 5-1
Costs within the Water Monthly Fixed Charge (FY 2025)................
Table 5-2
Proposed Water Monthly Fixed Charge ...........................................
Table 5-3
Costs within the Recycled Water Monthly Fixed Charge (FY 2025)
Table 5-4
Proposed Recycled Water Monthly Fixed Charge ...........................
Table 5-5
Costs within the Fire Service Charge (FY 2025) .............................
Table 5-6
Proposed Fire Service Charge.........................................................
Table 5-7
Water Consumption Charge (FY 2025)...........................................
Table 5-8
Recycled Water Consumption Charge (FY 2025) ...........................
Table 5-9
Recycled Water Pump Charge (FY 2025).......................................
1-3
1-4
1-4
3-1
3-2
3-3
3-3
3-4
3-5
3-6
3-9
4-1
4-5
4-6
4-7
4-7
4-12
4-12
4-13
.. 5-6
.. 5-6
.. 5-7
BLACK & VEATCH I Table of Contents
12-12
City of Newport Beach, CA I Water Rate Study
Table 5-10
Proposed Consumption Charges.....................................................................................5-9
Table 5-11
Typical Water Monthly Bill (FY 2025).............................................................................5-10
Table 6-1
Allocation Basis for O&M Expenditures.........................................................................6-11
Table 6-2
Allocation of O&M Expenditures (FY 2026)...................................................................6-12
Table 6-3
Allocation Basis for Capital Costs..................................................................................6-13
Table 6-4
Allocation of Capital Costs (FY 2026)............................................................................6-13
Table 6-5
Units of Service (FY 2026).............................................................................................6-14
Table 6-6
Units Cost of Service (FY 2026)....................................................................................6-14
Table 6-7
Distribution of Costs to Customer Types (FY 2026)......................................................6-15
Table 6-8
Costs within the Water Monthly Fixed Charge (FY 2026)..............................................6-16
Table 6-9
Costs within the Recycled Water Monthly Fixed Charge (FY 2026)..............................6-16
Table 6-10
Costs within the Fire Service Charge (FY 2026)...........................................................6-17
Table 6-11
Water Consumption Charge (FY 2026).........................................................................6-17
Table 6-12
Recycled Water Consumption Charge (FY 2026).........................................................6-17
Table 6-13
Recycled Water Pump Charge (FY 2026).....................................................................6-18
Table 6-14
Allocation Basis for O&M Expenditures.........................................................................6-19
Table 6-15
Allocation of O&M Expenditures (FY 2027)...................................................................6-20
Table 6-16
Allocation Basis for Capital Costs..................................................................................6-21
Table 6-17
Allocation of Capital Costs (FY 2027)............................................................................6-21
Table 6-18
Units of Service (FY 2027).............................................................................................6-22
Table 6-19
Units Cost of Service (FY 2027)....................................................................................6-22
Table 6-20
Distribution of Costs to Customer Types (FY 2027)......................................................6-23
Table 6-21
Costs within the Water Monthly Fixed Charge (FY 2027)..............................................6-24
Table 6-22
Costs within the Recycled Water Monthly Fixed Charge (FY 2027)..............................6-24
Table 6-23
Costs within the Fire Service Charge (FY 2027)...........................................................6-25
Table 6-24
Water Consumption Charge (FY 2027).........................................................................6-25
Table 6-25
Recycled Water Consumption Charge (FY 2027).........................................................6-25
Table 6-26
Recycled Water Pump Charge (FY 2027).....................................................................6-26
Table 6-27
Allocation Basis for O&M Expenditures.........................................................................6-27
Table 6-28
Allocation of O&M Expenditures (FY 2028)...................................................................6-28
Table 6-29
Allocation Basis for Capital Costs..................................................................................
6-29
Table 6-30
Allocation of Capital Costs (FY 2028)............................................................................6-29
Table 6-31
Units of Service (FY 2028).............................................................................................6-30
Table 6-32
Units Cost of Service (FY 2028)....................................................................................6-30
Table 6-33
Distribution of Costs to Customer Types (FY 2028)......................................................6-31
Table 6-34
Costs within the Water Monthly Fixed Charge (FY 2028)..............................................6-32
Table 6-35
Costs within the Recycled Water Monthly Fixed Charge (FY 2028)..............................6-32
Table 6-36
Costs within the Fire Service Charge (FY 2028)...........................................................6-33
Table 6-37
Water Consumption Charge (FY 2028).........................................................................6-33
Table 6-38
Recycled Water Consumption Charge (FY 2028).........................................................6-33
Table 6-39
Recycled Water Pump Charge (FY 2028).....................................................................6-34
BLACK & VEATCH I Table of Contents
12-13
City of Newport Beach, CA I Water Rate Study
LIST OF FIGURES
Figure 1-1 Water Enterprise Fund Financial Plan.............................................................................1-2
Figure 3-1 Water Fund Ending Balances.......................................................................................... 3-7
Figure 3-2 Status Quo Water Enterprise Fund Cash Flow................................................................3-7
Figure 3-3 Water Enterprise Financial Plan....................................................................................3-10
Figure 4-1 Illustrative Example of Capacity Demands......................................................................4-3
BLACK & VEATCH I Table of Contents iv
12-14
City of Newport Beach, CA I Water Rate Study
Legal Notice
Black & Veatch Management Consulting, LLC (Black & Veatch) has prepared this report for the City of
Newport Beach (City), and it is based on information not within the control of Black & Veatch. The City
has not requested Black & Veatch to make an independent analysis, verify the information provided to us,
or render an independent judgment of the validity of the information provided by others. Because of this,
Black & Veatch cannot, and does not, guarantee the accuracy thereof to the extent that such information,
data, or opinions were based on information provided by others.
In conducting these analyses and in forming an opinion of the projection of future financial operations
summarized in this report, Black & Veatch made certain assumptions on the conditions, events, and
circumstances that may occur in the future. The methodology utilized in performing the analyses follows
generally accepted practices for such projections. Such assumptions and methodologies are reasonable
and appropriate for the purpose for which they are used. While we believe the assumptions are
reasonable and the projection methodology valid, actual results may differ materially from those
projected, as influenced by the conditions, events, and circumstances that occur. Such factors may
include the City's ability to execute the capital improvement program as scheduled and within budget,
regional climate and weather conditions affecting water demand, and adverse legislative, regulatory, or
legal decisions (including environmental laws and regulations) affecting the City's ability to manage the
system and meet water quality requirements.
BLACK & VEATCH I Legal Notice
LN-1
12-15
City of Newport Beach, CA I Water Rate Study
1.0 Executive Summary
The City of Newport Beach (City) commissioned Black & Veatch Management Consulting, LLC (Black &
Veatch) to perform a Water Rate Study (Study) for its Water Utility. The Study included the development
of a five-year financial plan, a cost -of -service analysis, and the design of rates. The specific objectives of
the Study were to:
Evaluate the adequacy of projected revenues under existing rates to meet projected revenue
requirements.
Develop a sound financial plan for the Water Utility covering five years for ongoing operations and
planned capital improvements.
Allocate the projected revenue requirements to the various customer types in accordance with their
respective service requirements.
Develop a suitable rate schedule that produces revenues adequate to meet financial needs while
recognizing customer costs of service and regulatory considerations such as Proposition 218 and
applicable judicial decisions.
1.1 Financial Plan
The City operates the utility as an individual self-supporting enterprise. As such, the utility develops a
financial plan that provides sufficient revenues to meet all operation and maintenance (O&M) expenses,
water purchases, debt service requirements, capital improvements from current revenues, and other
expenditures.
The Study develops a financial plan that projects operating revenue, expenses, and capital financing
costs for the utility over a five-year planning period beginning fiscal year (FY) July 1, 2023, and ending
June 30, 2028.
The financial plan projects future rate revenues under existing rates, O&M expenses, debt service
payments, payment to other City departments for services provided, and capital improvement program
(CIP) requirements. In the projection of rate revenues, annual projections of customers and water
consumption rely upon the City's historical data and estimates of growth. Additionally, the Water Utility's
forecast incorporates efforts to continue meeting the conservation goals established by the State and the
City's Water Shortage Contingency Plan.
Black & Veatch worked with the City to develop a proposed financial plan to support the Water Utility's
O&M and capital needs, while minimizing impacts to customers. The financial plan supports the following
activities:
Operation and Maintenance Expenses: The Water Utility anticipates O&M expenses to increase from
$30.4M in FY 2024 to $34.9M in FY 2028. Water production and purchases account for most of this
increase, averaging 46% of O&M expenses.
Debt Service: The Water Utility has no existing debt service, and no future debt is planned.
Capital Improvements: The Water Utility plans to execute an average of $8.OM annually in capital
projects from fiscal year (FY) 2024 to FY 2028.
Reserves: The Water Utility plans to continue funding the operating fund reserve, capital fund
reserve, and rate stabilization fund reserve.
BLACK & VEATCH I Executive Summary
12-16
City of Newport Beach, CA I Water Rate Study
The operating fund reserve is to help cover fluctuations in day-to-day expenses and to pay for
additional imported water purchases if groundwater becomes unavailable. The scheduled
target is 120 days of O&M expenses.
The capital fund reserve is to help maintain enough funds to cover a portion of upcoming
annual capital expenditures, smooth out the amount of capital infusion needed each year,
and help mitigate unexpected capital costs. The scheduled target is 75% of the annual CIP.
The rate stabilization fund reserve is to help mitigate future increases during revenue
shortfalls that might result from lower -than -expected water sales. The scheduled target was
established in FY 2019 to be equal to revenue loss due to a 30% of water use reduction,
which equates to Stage 3 in the City's Water Shortage Contingency Plan.
The Water Utility is proposing revenue adjustments to allow the enterprise to meet operating and capital
needs and reserve targets, as shown in Figure 1-1.
Figure 1-1 Water Enterprise Fund Financial Plan
Water Enterprise Financial Plan
2024 2025 2026 2027 2028
� O&M � [apial Projects —43�— Revenue 'Reserves
J
1.2 Rate Design
The Right to Vote on Taxes Act, also known as Proposition 218, was passed by California voters in 1996
and added Article XIIIC and Article XIIID to the California Constitution. These articles provide the
regulatory framework that guides and informs the rate -setting process. The cost -of -service analyses
provide the cost nexus for the proposed rate structures. The regulatory framework helps ensure cost
recovery is proportionate to the cost of providing the service.'
To minimize impacts, retain simplicity, and ensure the reasonable stability of revenue, Black & Veatch
recommends the following rate structure.
Monthly Fixed Charge: The Water Utility should retain the monthly fixed charge based on meter sizes
for all customer types. The monthly fixed charge recovers portions of fixed cost elements such as
' Black & Veatch is not a legal firm and interpretations of the legal requirements under Proposition 218 should be reviewed by legal
counsel.
BLACK & VEATCH I Executive Summary
12-17
City of Newport Beach, CA I Water Rate Study
operating and capital components, meter maintenance and services, meter reading, issuing bills, and
maintenance and capacity costs associated with public fire protection.
Consumption Charge: The Water Utility should maintain the uniform consumption charge for all
customer types. The consumption charge recovers costs associated with the base and extra capacity
demands.
Fire Service Charge: The Water Utility should continue to utilize the fire service charge based on
meter size for private fire service connections. The fire service charge will recover maintenance and
capacity costs associated with private fire protection costs.
.3 Proposed Water Rates
Table 1-1 summarizes the Water Utility's recommended five-year rate schedules for water and private fire
protection services. Table 1-2 presents the recommended recycled water rates. Rates are effective
January 1st of each calendar year. The rates developed in this study focused on FY 2025 through 2028 as
rates effective on January 1, 2024, were previously approved by City Council in the 2019 rate case2.
Table 1-1 Proposed Five -Year Water Rate Schedule
mop, DM
Calendar
CY 2024
CY 2025
CY 2026
CY 2027
Effective Oate 1/1/2024*
1/1/2025
1/1/2026
I/l/2O27
Monthly Fixed Service Charge
Water Wmo)
Wmo)
Wrrio)
Wmo)
5/8", 3/4" 27.09
31.59
36.59
41.59
1" 41-99
50-07
58 30
66-53
1-1/2" 79-15 96-29 112-59 128M
2" 123-76 151-74 177-74 203-71
CY 2028
1111202.9
Wmo)
46.59
74-75
145-16
229-65
3"
329-23
405-92
476-32
546-65
616-89
4"
562-45
697-06
818,33
939-47
1,060-46
6"
1,194-45
1,482-68
1,741-22
1,999-48
2,257,39
8"
2,086-69
2,591Z0
3,044-12
3,495-95
3,947-18
Private Fire Serv;iae
($/me)
($/me)
($/mo}
Wrm)
($/me)
5/8"
13-87
8-52
9-12
9-66
10-20
1"
14-12
8-96
9-59
10-18
10-75
1-1/2"
14-74
10-15
10-86
11-55
12 -23
2"
15.81
12 -21
13-46
13-92
14-77
2-1/2"
17 -44
15 -31
16-3 6
17 -48
18-60
3"
19-67
19-59
20-94
22-43
23-91
4"
26.34
32.33
34.53
37.10
39.68
6"
50-21
78-03
83-29
89-75
96-25
8"
91-43
156-85
167-41
180-56
193-84
10"
153-42
275-42
293-93
317-16
340-62
Usage Charges
Water
($/HCF)
($/HCF)
($/HCF}
($/HCF)
($/HCF}
All Customers
4-16
4-26
4 36
4-46
4-56
*Previosuly apprc ved in 2O19 Rate Case
2 City Council Meeting, November 19, 2019.
BLACK & VEATCH I Executive Summary
1-3
12-18
City of Newport Beach, CA I Water Rate Study
Table 1-2 Proposed Five -Year Recycled Water Rate Schedule
r .
CY 2024
CY 2025
CY 2026
CY 2027
CY 2029
Effective Date
1/1/2024*
1/1/2025
1/1/2026
1/1/2027
11112029
Monthly Fixed Service Charge
Recycled Water Services ($/month)
5/9", 3/4"
$13.79
$14.66
$=5.-'4
$16.17
$16.89
1"
$19.78
$21.85
$23.C6
$24.16
$25.25
1-1/2"
$34.75
$39.84
$zit.=C
$44.15
$46.16
2"
$52.73
$61.43
S6�1.95
$68.13
$71.25
3"
$135.12
$160.33
$' 69.69
$179-05
$196.25
4"
$229.50
$273.72
S289.66
$343.96
$317.97
6"
$434.16
$579.56
$6=3.C
$643.72
$673.42
8"
$343.69
$-,C7C.3
$1,123.38
$1.175.23
Usage Charges ($/HCF)
$2.29
$2.66
$2.74
$2.82
$2.91
Pump Charge ($/HCF)
$0.72
$C.50
SC.52
$0.55
$0.57
*Previosuly approved '.n 2"19 Rate 'Case
1.4 Customer Impact
If approved, water rate adjustments will commence on January 1, 2024, and adjust annually on January
1st of each subsequent year. Table 1-3 illustrates the bill change to a typical single-family residential
customer with a 5/8" metered connection and consuming 10 hundred cubic feet (HCF) per month.
Table 1-3 Typical Residential Customer Monthly Bill Impacts
Water Bill (5/8" meter, 10 HCF) $63.92 $68.69 $74.19 $80.19 $S6_19 $92.19
$ Increase $4.77 $5.50 $6.00 $6.00 $6.00
1.5 Summary
The financial plan described herein reflect a balanced approach by the City to operate the Water Utility in
a sustainable manner, while providing high quality services and minimizing customer bill impacts. Black &
Veatch used industry standard principles for equitable cost -of -service allocations to calculate the
proposed rates. Detailed explanations for these calculations are provided in the remainder of this report.
BLACK & VEATCH I Executive Summary
12-19
City of Newport Beach, CA I Water Rate Study
2.0 Introduction
2.1 Purpose
The purpose of this report is (1) to project the future revenues of the Water Utility under existing rates and
charges, project operating expenses and capital financing revenue requirements, and to examine the
adequacy of projected revenues to meet these revenue requirements through FY 2028; (2) to allocate
these revenue requirements, or costs of service, for a representative test year to the various customer
types in accordance with the respective service requirements that each class places on the systems; and
(3) to develop a suitable schedule of water rates that will produce revenues adequate to meet the
financial needs of the utility on the basis that recognizes customer costs of service and practical bill
impact considerations.
2.2 Water System
The Water Utility provides water services to over 26,000 residential and non-residential customers. The
City obtains potable water from three primary sources: local groundwater through Orange County Water
District (OCWD), imported water from the Colorado River and/or the State Water Project through the
Municipal Water District of Orange County (MWDOC), and recycled water purchased from OCWD. The
water system infrastructure consists of 302 miles of transmission and distribution mains, four wells, three
storage reservoirs with a total capacity of 202 million gallons, and five pump stations. The City relies on
approximately 75% groundwater, 22% imported water, and approximately 3% recycled water.
2.3 Methodology
The rate -setting methodology employed by Black & Veatch is consistent with industry guidelines
established by AWWA's Principles of Water Rates, Fees, and Charges, M1 manual (M1 Manual). The
manual is nationally recognized and provides recommendations and generally accepted practices in the
water industry. The M1 Manual is used by rate practitioners as guidance on rate -making practices that
can be used to address the unique circumstances of the communities served. An overview of the
methodology is outlined below.
2.3.1 Financial Plan
Financial planning compares the
projected revenues of the utility under
existing conditions to its projected
operating expenses and capital
expenditures. This step tests the
adequacy of the current rates to recover
the utility's forecasted costs. If shortfalls
occur, revenue increases are
recommended until the utility is
financially stable.
2.3.2 Cost -of -Service Analysis
The cost -of -service analysis builds a link
between the utility's cost of service and
Financial Planning
Establish operating and capital
financing plans that fullyfund
oil activities
Cost of Service Analysis
Perform a cast -of -service anakysis
to determine if cost allocations
are fair and equitable among
custorer classes
the proposed rates for each customer
type. This process takes individual budget cost items and allocates them based on their function.
Organizing the budget in terms of end function allows the creation of a nexus between the budget cost
item and the rate.
BLACK & VEATCH I Introduction
12-20
City of Newport Beach, CA I Water Rate Study
2.3.3 Rate Design
Rate design involves developing a rate
structure that equitably and
proportionately recovers costs from the
customers. The rate structure should
reflect a customer group's demand
profile and be resilient and flexible
enough to handle changing costs (i.e.,
operating and/or capital) and demand
scenarios (i.e., customers change their
demand on the system by contributing
less or more flow). Rate equity is
inherently built upon each customer's
Rate Design
Review the existing rate structure
+ - and design proposed rates that
provide adequate revenues
relative use of the system. By designing
different rate components, the utility can balance affordability and equity.
2.3.4 Rate Adoption
In California, public utilities must meet procedural requirements for adopting new or increased rates for
property -related fees under Proposition 218. Proposition 218 states that the utility must hold a public
hearing to consider the proposed rates and provide written notice to all customers at least 45 days before
the hearing. Any property owner or tenant directly liable to the public agency for payment of the property -
related fees may submit a written protest to the new or increased rates until the close of the public
hearing. The City Council may not adopt the proposed new or increased rates if property owners or
tenants directly liable for payment submit written protests on behalf of more than 50% of the properties
upon which the proposed rates may be imposed.
BLACK & VEATCH I Introduction
2-2
12-21
City of Newport Beach, CA I Water Rate Study
Water Utility
3.0 Revenue and Revenue Requirements
To meet the costs associated with providing water services to its customers, the Water Utility derive
revenue from a variety of sources, including water and recycled water user charges (rates),
reimbursements, establishment fee, connection charges, turn -on charges, penalties, interest earned from
the investment of available funds, and other miscellaneous revenues. The Water Utility is constantly
looking for other sources of revenue, such as grants, to fund infrastructure investments. Black & Veatch
has projected the future revenue generated in the Study by analyzing historical and future system growth
in terms of the number of accounts and billed water consumption. This section also projects the
expenses, or revenue requirements, necessary to operate and maintain the system, invest in capital
improvements, make debt service payments, and cover other water systems expenses.
3.1 Customer and Water Consumption
3.1.1 Number of Customers
The City provides potable water services to 26,000 residential and non-residential customers and
recycled water services to six customers. All customers connected to the water and recycled water
systems do so through metered connections. The City bills customers based on the size of the metered
connection and the consumption. Since the City bills customers based on the metered connection, the
analysis included a review of historical accounts for customers and anticipated growth within the City. The
City has seen a slight decline in population between 2020 and 2023 based on the State of California
Department of Finance, E-5 Population and Housing Estimates. The analysis herein projects the total
number of accounts to remain steady for the entire study period.
Table 3-1 summarizes the projected number of accounts for the Water Utility.
Table 3-1
1
2
3
4
5
6
7
8
Number of Customers by Meter Size
5 f 8°, 3/4"
1"
1-112"
2"
2-1J2°
3"
411
6"
10 10"
11 12"
12 Total
Water
(acits)
16,110
7,891
562
1,213
0
32
49
16
9
0
1
25,883
Recyded Private Fire
Water Service
(alcts) (acts)
0
0
0
0
0
2
1
0
1
2
0
6
0
10
D
11
3
1
176
157
76
2
0
436
BLACK & VEATCH I Water Utility
12-22
City of Newport Beach, CA I Water Rate Study
3.1.2 Billed Water Consumption
Table 3-2 shows the projected water and recycled water consumption for the Study period. In determining
the projected water consumption, Black & Veatch analyzed historical water consumption patterns in
conjunction with the 2020 Urban Water Management Plan, future water conservation requirements set by
the City's Water Shortage Contingency Plan, the continual requirement of Senate Bill (SB) 7x-7 and
mandatory water conservation mandates. In 2016, after years of drought conditions, the State of
California mandated cutbacks to all water purveyors to reduce water usage by 25%. This action led to a
significant decline in water consumption. In 2017, the State of California formally lifted the water
restrictions as it declared the drought over. Yet the mandatory cutback had a lasting effect on water
conservation habits, leading to a continued decrease in overall water consumption.
In 2020, California again entered a drought. In 2022, to conserve water, the State of California adopted
emergency regulations to increase water conservation and required urban water suppliers to implement
Level 2 of their Water Shortage Contingency Plans. Shortly thereafter, the City moved to Level 2. In 2023,
after record rainfall and snowpack levels, the State of California eased the drought restriction. Soon after,
the City repealed Level 2 resolutions, providing relief to the community while promoting the wise use of
water.
Many factors contribute to the City's annual consumption. The City's primary goal is to provide its
residents with safe and reliable drinking water and encourage water conservation. Providing recycled
water to existing and new customers is important for the City in supplementing potable water use. Overall,
customers have done well to increase efficiency in the use of water resources.
Recognizing all the various factors contributing to water demand patterns and understanding the state
requirements and water consumption has stabilized, the projected billed water consumption is expected
to remain steady for the Study period. The City currently bills water consumption in hundred cubic feet
(HCF).
Table 3-2 Annual Billed Water Consumption
Recycled
Water Water
1 All Customers (HCF) 5,439.576 244,511
2 Total (Acre -Feet) 12,488 561
3.2 Revenue under Existing Rates
Water user rates serve as the Water Utility's primary revenue source. Therefore, the level of future rate
revenue is important in developing a long-range financial plan. Future water rate revenues are calculated
using the system growth for the number of accounts and billed water consumption multiplied by the
applicable existing rates. Since accounts and billed water consumption have no growth, rate revenue is
expected to remain constant.
Table 3-3 presents the rates in effect for FY 2024 (effective January 1, 2024), which were approved by
City Council on November 19, 2019, as part of the City's 2019 Rate Study. The rates are composed of
monthly fixed and uniform consumption charges. The monthly fixed service charge differs for water,
recycled water, and private fire service. The consumption charge differs for water and recycled water. In
addition, one recycled water customer pays a pump station charge associated with energy costs from a
recycled water pump station that services them.
BLACK & VEATCH I Revenue and Revenue Requirements
12-23
City of Newport Beach, CA I Water Rate Study
Table 3-3 FY 2024 Water, Recycled Water, and Private Fire Rates
i
RecVded Private Fire
Water Water Servke
Monthly Fused Service Charge [$/month}
518".314" 525.22 512M S12.91
1" $39.09 $18.41 $13.14
1-1/2" $73.69 $32-35 $13.72
2" S115.23 S49.09 S14.72
2-1/2" $16.23
V $305.61 $125-81 $18,31
4" $523.69 $213.68 $24.52
6" $1,112.15
$450-80 $46.75
8" $1,942.91
$785.55 $85.13
loll $ 2,912.15
$142 Z4
12" 53.673.71
S222-82
Usage Charges [$/HCF}
All Customers
PumpStation Charge
$3�S7 $2.21
$0.67
For the period under consideration for this study, the revenues under existing rates reflect the FY 2024
rate schedule, and are calculated as follows for each service:
Monthly Fixed Service Charge = # Accounts by Meter Size (Table 3-1) x Current Rate (Table 3-3) x
12
Consumption Charge = Billed Usage (Table 3-2) x Current Rate (Table 3-3)
Table 3-4 summarizes projected water rate revenue under existing rates. The projected Water Utility
revenues under existing rates remains constant at $33.1 M for the study period.
Table 3-4 Projected Water Revenue under Existing Rates
Recycled Private Fire
F Water Water Servke
1 Fixed Charges 13,233,500 27,20D 237,200
2 Usage Charges 19,079,200 544,20D _
3 Pu m p Ch a rges 40D
4 Total $32,312,700 $571,800 $237,200
3.3 Other Revenue
Other sources of operating revenue include reimbursements, establishment fees, connection charges,
turn -on charges, penalties, interest earned from the investment of available funds, and other
miscellaneous revenues. Other operating revenues represent 1.8% of the Water Utility's total revenue.
The City anticipates these revenues will remain relatively constant for the Study period.
BLACK & VEATCH I Revenue and Revenue Requirements
12-24
City of Newport Beach, CA I Water Rate Study
3.4 Operating and Maintenance Expenses
Table 3-6 summarizes the Water Utility's projected O&M expense for the Study period. These expenses
include salaries and benefits, maintenance and operations, internal service charges, and capital
expenditures. The City anticipates that all O&M expenditures will escalate based on the factors identified
in Table 3-5.
Table 3-5 Water O&M Escalation Factors
2025
2026
2027
2028
Salaries
3.50%
3.50%
3.00%
3.09%
City MGU
Benefits
3.50%
3.50%
3.00%
3.09%
City mou
Contract Services
4.00%
4.00%
4.00%
4.013%
CPI Services, City Staff
Chemicals
15-00%
5-00%
5-00%
5-00%
PPIChemical Manufacturing,City Staff
Utilities
8-01k%
5-00%
5-00%
5-00%
Fuels&UtiIitiesCPI, CityStaff
Electricity
8.0D%
5.00%
5.00%
5.00%
Electricity CPI
Materials & Supplies
7.0u%
6.00%
5.00%
5.00%
All Items CPI, City Staff
MWDGCImport
5.50%
5.50%
5.50%
5.50%
City Staff
0CWDGW
6.20%
4.90%
4.601A
4.70%
City Staff
OCWDRW
3-01)%
3-01Y%
3-00%
3-00%
City Staff
Maintenance&Repair
7-00%
6-01Y%
5-00%
5-0D% CommercialRepair&Maint- PPI,CityStaff
Customer Bi I I i ng
4.00%
4.0D%
4.00%
4.00%
AIIItems CPl
Genera IAdmin
4.00%
4.0D%
4.DO%
4.OD%
AIIItems CPl
M i n or Ca pita I Gutl ay
4.0D%
4.00%
4.DO%
4.09%
ENRCCI(5-yearavg_},City staff
Internal Services
5.60%
5.60%
5.60%
5.59%
AIIltemsCPl
Insurance
5-60%
5-60%
5.60%
5-60%
City Staff
Weighted Escalatian
1.13%
4.45'8
4.23%
4-27%
Calculated
The following are subcategories that reside within the four main expense categories:
Salaries and Benefits: These costs represent salaries and benefits for water staff assigned to
operating and maintaining the water infrastructure system.
Maintenance and Operations: These costs represent contract services, utilities, supplies and
materials, maintenance and repairs, travel & training, and general expenses.
As part of supplies and materials, water supply costs represent an average of 46% of total costs. The
Water Utility has three main sources of water: groundwater through OCWD, recycled water through
OCWD, and imported water through MWDOC. The City targets approximately 75% groundwater,
22% imported water, and approximately 3% recycled water.
Internal Service Charges and General Expenses: These costs represent internal costs to the
Water Utility from other City departments for specific costs such as Finance Department customer
service and billing, capital project admin, vehicle replacement, IT charges, and insurance.
Capital Expenditures: These costs represent small capital expenditures for office equipment,
fixtures, and computers.
BLACK & VEATCH I Revenue and Revenue Requirements
12-25
City of Newport Beach, CA I Water Rate Study
Table 3-6 Water O&M Expenses
FY 202-4 FY 2025 FY 2026 FY 202-7 FY 2028
i51 (6) (6) I51 (6)
and Maintenance
1
Regular Salaries
3,316,355
3,432,400
3,552,500
3,659,100
3,768,900
2
Special Pays
1.8,120
18,800
19,500
20,100
20,700
3
Benefits
2,169,400
2,245,300
2,323,900
2,393,500
2,465,300
4
Other Pays
283,975
293,900
304,200
313,400
322,800
5
Contract Services
899,352
935,500
973,000
1,011,800
1,052,200
6
Utilities
80,654
87,100
91,500
96,100
100,900
7
Electricity
1,935,185
2,090,000
2,194,500
2,304,200
2,419,400
8
9
10
11
12
Supplies&Materials
CSChemi€als
MWDO-CImport
CCWDGW
OCWD RW
360,604
320.000
5,000,CCC,
8,5CC,CCC
480,726
385,900
368,000
4,635,500
8,342,500
490,500
409,000
386,400
4,887,700
8,666,700
505,300
429,500
405,700
5,153,800
8198610C?d
520,400
451,000
426,000
5,434,500
9,327,300
536,000
13
Maintenan€e& Repair
1,773,505
IA97AW
2,011,600
2,112,300
2,217,900
14
MRChemicals
73,000
84,000
88,200
92,600
97,200
15
Travel & Training
34,000
35,400
36,80U
38,300
39,800
16
General Expenses
1,329,782
1,383,000
1,439,200
1,495,700
1,555,500
17
Customer Billing
1,172,900
1,219,700
1,268,400
1,319,100
1.371,900
18
Internal Svc Charge
1,344,940
1,420,200
1,499,900
1,583,800
1,672,500
19
Insurance
1,238,950
1,308,400
1,381,700
1,459,100
1,540,800
20
21
Cap 1taI Expenditures
-cta 1
54,154
$ 30,385,502
56,300
$ 30,730,200
58,500
$ 32,097,500
6WM
$ 33,455,300
63,200
$ 34,883,800
As shown in Table 3-6, the Water Utility's O&M expenses increased from $30AM in FY 2024 to $34.9M in
FY 2028.
3.5 Capital Improvement Program
The Water Utility annually develops its five-year Capital Improvement Plan to identify water and recycled
water system needs, including assessments, inspections, maintenance, and rehabilitation and
replacement requirements. In 2019, the City completed its 30-year Water Master Plan, which identified
$165.2M in capital projects in 2018 costs. Incorporating cost escalation over the 30 years, the City had
planned to spend roughly $7.2M each year. Unfortunately, the City has had to readjust this annual
spending by 5% each year due to higher -than -expected inflation. Therefore, the City plans to spend
$40.2M over the Study period.
Table 3-7 summarizes the CIP for FY 2024 through FY 2028. The Water Utility is composed of many
functions, of which transmission and distribution pipelines are significant elements. Therefore, of the total
$40.2M, transmission and distribution pipelines account for 84.2% of the total projects. The City examines
the water infrastructure system annually; therefore, CIP might change based on the current need.
BLACK & VEATCH I Revenue and Revenue Requirements
12-26
City of Newport Beach, CA I Water Rate Study
Table 3-7 Water Capital Improvement Projects
Fiscal
Year Ending Jurie
30,
M F +
FY 2024
FY 2025
FY 2076
FY 2027
FY 2028
Capita[ Improvement Program
1 Source of Supply
0
0
579,800
607,800
639,100
2 Pumping
0
1,790,500
578,800
607,800
639,100
_ 3 Transmission & distrihution
6,250,000
5,643,700
7,111,100
6.980.400
7.939,900
4 General Plant
0
441,000
0
486,200
0
5 Total $
6,250,000
$ 7,975,200
$ 9.269.700
$ 9.692.200
$ 9.116,100
3.6 Transfers within the Fund
The Water Utility will conduct transfers from the operating account and other accounts over the Study
period. The other accounts are the Enterprise CIP, Capital, Operating Reserve, and Rate Stabilization
(See Section 3.7 for further explanation on Operating Reserve and Rate Stabilization Reserve.) The
Enterprise CIP and Capital account transfers represent money to cover planned CIP project expenditures.
These transfers do not represent direct operating expenses for either enterprise; therefore, they are
treated as "below -the -line" cash flow items and not included as O&M expenses.
3.7 Reserves
A utility typically establishes reserves for several reasons, such as to cover shortfalls in operating
revenues, maintain strong bond ratings, cover day-to-day operating costs, and ease the burden on
ratepayers associated with large rate increases. Per the reserve level recommendations, the Water Utility
will maintain the following three reserves:
Operating Reserve represents working capital maintained by the Enterprise Fund to cover day-to-day
expenses and maintain enough funds to cover accounts receivables, periods of lower -than -expected
water sales, or unforeseen cost increases such as to pay for additional imported water purchases if
groundwater becomes unavailable. The reserve will maintain a minimum balance of 120 days of
operating expenses once fully funded.
Capital Reserve represents funds to cover a portion of upcoming annual capital expenditures, smooth
out the amount of capital infusion needed each year, and help mitigate unexpected capital costs.
Once fully funded, this reserve will maintain a minimum balance of 75% of the annual planned CIP.
Rate Stabilization Reserve represents funds used to absorb lower -than -expected revenue due to
short-term decreases in water sales. This reserve stabilizes water rate revenue and is an effort to
avoid wide swings in rates charged to customers over time. When fully funded, the reserve will
maintain a minimum balance of 30% of water use reduction.
Appropriate reserve levels help the Water Utility with liquidity, provide operational flexibility, and
demonstrate fiscal responsibility to the rating agencies, which allows the City to access lower -cost funds if
needed. Figure 3-1 shows the fund balances for all accounts after the recommended rate increases
compared to the total target fund balance.
BLACK & VEATCH I Revenue and Revenue Requirements
12-27
City of Newport Beach, CA I Water Rate Study
Figure 3-1 Water Fund Ending Balances
Water Fund Ending Balances
2024 2025 2026 M27 2029
�WaterCapital Water Operations —0- •TargetFundBalances
3.8 Projected Operating Results
The revenue requirements of the Water Utility consist of O&M expenses, capital expenditures, and
reserve requirements. To fully understand the current condition of the Water Utility, it is important to
examine the cash flow projections under the status quo scenario. As shown in Figure 3-2, the status quo
conditions would project that the Water Utility would operate from an annual deficit position, thus requiring
the use of reserves to keep operating. In this scenario, the Water Utility would not impose any revenue
increases over the Study Period and continue to incur O&M expenses, pay for the execution of the
planned CIP, and transfer to reserves.
Figure 3-2 Status Quo Water Enterprise Fund Cash Flow
55U.0
,g SA4.0
53D.0
SZU.0
�1U.0
$O.0
-52U.0
Water Enterprise Fund - Financial Plan Status Quo
�O&M �Capital Projects Revenue Reserves
The analyses performed for the Study indicate that the City should implement the proposed revenue
increases shown in Table 3-8 if it wishes for the user rates to cover expenses and to keep the Water
Utility in a balanced financial condition. The revenue increases represent the total revenue adjustment
BLACK & VEATCH I Revenue and Revenue Requirements
12-28
City of Newport Beach, CA I Water Rate Study
needed to meet revenue requirements. The revenue adjustment does not represent adjustments to the
individual rates but reflects the overall level of revenue needed to meet the Water Utility's obligations.
The suggested revenue increases help the Water Utility meet the following goals:
Meet budgeted operating obligations in the five FYs.
Meet planned capital investments in the five FYs.
Build up the operating reserve, capital reserve, and rate stabilization to reach their targets.
Table 3-8 summarizes the proposed Enterprise Fund for the Study Period. The Enterprise Fund consists
of 1) Revenue and 2) Revenue Requirements.
Revenue
Line 1 is the revenue under existing rates.
Lines 2 through 6 are the additional revenues generated from the required annual increases. The
additional revenue generated directly reflects the number of months the increase is effective for;
therefore, the amount might be calculated at less than that stated amount.
Line 8 is the total revenue generated from user charges.
Line 11 represents other operating revenues.
Line 12 represents the total revenues for the enterprise.
Revenue Requirements
Line 14 represents O&M expenses. The O&M expenses include water production and water
purchase.
Lines 15 and 16 represent capital expenditures within the capital accounts.
Line 18 represents the total revenue requirements for the enterprise.
Line 21 represents the net cumulative reserve balance for the enterprise fund.
BLACK & VEATCH I Revenue and Revenue Requirements
3-8
12-29
City of Newport Beach, CA I Water Rate Study
Table 3-8 Water Enterprise Fund
F FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Revenue
Rate Revenue
1 Revenue from Existing Rates 33,121,700 33,121,700 33,121,700 33,121,700 33,121,700
Revenue from Rrosed Ad i ustments
Months
Year Effective
2
2024 5
1) 21,300 2,451,000
2,451,000
2,451,000
2,451,000
3
2025 5
1,525,200
3,660,400
3,660,400
3,660,400
4
2026 5
1,265,3017
1,265,3017
1,265,300
5
2027 5
1,215,000
1,215,000
6
2029 5
1,166,2013
7
8
Increased Rev Due toAdj's
SubtataI Rate Revenue
1,021,300 3,976,2013
$ 34,143,000 $ 37,097,90U
7,376,7013
$ 40,498,400
8,591,700
$ 41,713,400
9,757,90D
$ 42,879,600
Other Operating Revenue
9 Other Income 703,000 683,000 683,000 683,000 683,0410
10 Interest Income 427,000 555,300 570,000 595,900 6081900
11 Subtotal Other Operating Rev $ 1,130,000 $ 1,239,300 $ 1,253,000 $ 1,278,900 $ 1,291,900
12 TotalReveaue $35,273,000 ^$38,3,WOD $41,751,400 $42,992,3W $44,171T5W
Revenue RequrenneFd�s
0oeratinE & Maintenance
13 O&M Expenses 30,385,500 30,730,200 32,097,500 33,455,3017 34f883XM
14 Subtotal O&M $ 30,385,500 $ 30,730,200 $ 32,097,500 $ 33,455,3017 $ 34)8&3,EM
Capital Expenditures
15 Water Ent Fund CIR (701-01} 0 441,000 0 486,200 0
16 Water Cap Fund (702-01) 6,250,000 7,434,200 8,268,700 8,195,9017 9,116,200
17 Total Capital Expenditures $ 6,250,000 $ 7A75,200 $ 8,268,700 $ 8,682,100 $ 9,116,200
18 Total RevenueRequirenneFd�s $36,635,5W $38505,400 $40,3W200 $42,137,400 $44,000,000
19 Net An n ua I Cash Ba la nce (1,362,50Dl (269,2001 1,385,200 854,900 171,500
20 Beginning Fund Balance 19,242,400 17A79,900 17,610,700 18,995,900 19A50,800
21 Net Working Capital Balance $ 17A79,9017 $ 17,610,700 $ 18,995,900 $ 19A50,800 $ 20,022,300
BLACK & VEATCH I Revenue and Revenue Requirements 3-9
12-30
City of Newport Beach, CA I Water Rate Study
Figure 3-3 presents the proposed Water Enterprise Financial Plan.
Figure 3-3 Water Enterprise Financial Plan
$50.0
$35.0
$3U.0
$75.0
$ZU.0
$15.0
$1U.0
$5.0
$0.0
Water Enterprise Fund - Financial Plan
2024 2025 7026 2027 202B
� O&M � Capital Projects --0— Revenue --0— Reserves
BLACK & VEATCH I Revenue and Revenue Requirements
3-10
12-31
City of Newport Beach, CA I Water Rate Study
4.0 Cost -of -Service Analysis
4.1 Cost of Service
The cost -of -service analysis requires recovery of the City's needed revenues from water and recycled
water service rates, allocated to customer types according to the service rendered. An equitable rate
structure allocates the capture of revenue requirements to customer types based on the quantity of water
consumed, peak flows, the number of customer connections, and other relevant factors.
In analyzing the Water Utility's cost of service for allocation to its customer types, Black & Veatch selected
the annual revenue requirements for FY 2025 as the test year requirements to demonstrate the
development of cost -of -service water rates. FY 2024 rates were already approved in the last rate study.
Table 4-1 summarizes the total costs of service that need to be recovered from water user rates for FY
2025.
Table 4-1 Cost of Service Revenue from Rates (FY 2025)
Operating
i 1 i Expense
Reverme RequiremeF&s
1 G&M Expenses
2 Debt Service
3 Transfers for Capital Projects
4 Subtatal
5
6
7
8
10
11
12
13
14
($) ($) ($)
30,730,20d 0 30,730,20D
a 0 0
(593,200) 7A75,200 7,282,000
30,137,000 $ 7A75,200 $ 38,012,200
Less Revenue Requirements Met from Other Sources
Intergovernmental Revenues
50,000
0
50,000
Miscellaneous Revenues
70,0013
0
70,000
Other Service Fees & Charges
380,000
0
380,000
Fines & Penalties
1&31000
0
183,000
Investment Earnings
0
0
0
Non -Operating Source
0
0
0
Interest
Su htota I
Adjustments
Adj for Annual Cash Balance
Adj to Annua lize Rate Increase
15 Su htota I
0 0 0
$ 6831000 $ 0 $ 683,000
192,500 48�M 231,300
(1,694,7001 (450,500) (2,135,200)
(1,502,200) (401,700) $ (1,903,900)
16 COS to he Recovered from Rates $ 30.956.200 $ 3.276.900 $ 39.233.100
The total revenue requirement is shown in Line 4. As shown in Line 12, we deduct revenues from other
sources to derive the net revenue requirement recovered through rates. Line 13 represents the net
annual cash balance during the FY. This number is positive if the enterprise is drawing down funds
already in the Enterprise Fund. The number will be negative if the enterprise is replacing funds. In this
case, the $231 k figure indicates that the forecast is projecting a negative annual cash balance for the
year. Line 14 represents the additional revenues generated if the revenue increase was effective for a full
year versus only 5 months.
BLACK & VEATCH I Cost -of -Service Analysis
12-32
City of Newport Beach, CA I Water Rate Study
4.2 Functional Cost Components
The first step in conducting a cost -of -service analysis involves analyzing the cost of providing water and
recycled water service by system function to allocate the costs to the various customer types properly
and, subsequently, design rates. As a basis for allocating costs of service among customer types, the
study separates costs into the following five basic functional cost components: (1) Supply, (2) Base, (3)
Extra Capacity, (4) Customer, and (5) Direct Assignment, described as follows:
Supply costs are associated with paying OCWD and MWDOC for groundwater and import water,
respectively.
Base costs represent operating and capital costs of the system associated with service to customers
to the extent required under constant or average annual load conditions without the elements
necessary to meet water consumption variations or peak demands.
Extra Capacity costs represent operating and capital costs incurred to meet peaking demands.
Peaking demands represent water consumption more than the average rate of use.
Customer costs are those expenditures that tend to vary in proportion to the number of customers
connected to the system. These include meter reading, billing, collecting, accounting, maintenance,
and capital costs associated with meters and services.
Directly assigned costs are specifically identified as those incurred to serve specific customers. These
costs include conservation, recycled water supply and pump station, and fire protection.
4.3 Allocation to Cost Components
The next step of the cost -of -service process involves allocating each cost element to functional cost
components based on the parameter or parameters having the most significant influence on the
magnitude of that cost element. O&M expenses are allocated directly to appropriate cost components. A
detailed allocation of related capital investment is used as a proxy for allocating capital and replacement
costs. The separation of costs into functional components provides a means for distributing such costs to
the various types of customers based on their respective responsibilities for each type of service.
4.3.1 System Base, Max Day, and Max Hour Allocations
The water system consists of various facilities designed and operated to fulfill a given function. For the
system to provide adequate service to its customers, it must be capable of meeting the annual volume
requirements and the maximum demand rates placed on it. Because not all customers and types of
customers exert maximum demand simultaneously, the capacities of the various facilities must meet the
maximum coincidental demand of all customers. Each water service facility within the system has an
underlying average demand exerted by the customers to whom the base cost component applies. For
those facilities designed solely to meet average day demand, 100% of the costs go to the base cost
component. Extra capacity requirements associated with coincidental demands more than average use
consist of maximum daily and maximum hourly demand subcomponents.
The first step in determining the allocation percentages for volume -related cost allocations is to assign
system peaking factors. The base element equals the average daily demand (ADD) and is assigned a
value of 1.0. Based on the City's 2019 Water Master Plan, the Water Utility's maximum day (max day)
demand is 1.85 times the ADD. The maximum hourly (max hour) demand is 2.6 times the ADD.
The costs associated with facilities required to meet maximum day demand are allocable to base and
maximum day extra capacity, as shown below for the Water Utility.
Base = (1.0/1.85) x 100 = 54.1 %
BLACK & VEATCH I Cost -of -Service Analysis
12-33
City of Newport Beach, CA I Water Rate Study
Max Day = (1.85 — 1.0)/1.85 x 100 = 45.9%
These calculations indicate that the average or base use requires 54.1 % of the capacity of facilities
designed and generated to meet maximum day demand, and the remaining 45.9% meets maximum day
extra capacity requirements.
The costs associated with facilities required to meet maximum hour demand are allocable to base,
maximum day extra capacity, and maximum hour extra capacity as follows:
Base = (1.0/2.6) x 100 = 38.5%
Max Day = (2.6 — 1.0)/2.6 x 100 = 32.7%
Max Hour = (2.6 — 1.85)/2.6 x 100 = 28.8%
Figure 4-1 Illustrative Example of Capacity Demands
500
450
400
Maximum Hour
Extra Capacity
350
m
,a 300
Maximum Day
Extra Capacity
250
— — — — — — — — — — — -
0
200
150
Base Volume
(Average Day)
100
19
Dec Jan Mar May Jun Aug Oct Nov Jan
—Average Day —Maximum Day-Maxirrxni Hour
For this Study, the average day, max day, and max hour factors are based on an average of three years
of billing data. The calculated results, which followed the methodology outlined in Appendix A of the M1
Manual, indicate a max day factor of 1.90 (compared to the Master Plan value of 1.85) and a max hour
factor of 2.54 (compared to the Master Plan of 2.60).
4.3.2 Allocation of Operating and Maintenance Expenses
When allocating O&M expenses, the M1 Manual refers to functional cost components. Simply put, these
cost costs correspond to the activities that the Water Utility undertakes to provide its customers with
water: identify the water source, pump it, treat it, distribute it to customers, bill for services, and collect
revenues. Where possible, the O&M expenses for FY 2025 are directly allocated to the cost components
to the extent possible. For those costs that are not directly allocated to one cost center, Black & Veatch
identified cost elements specific to certain functions and assigned them based on the factors noted in
Section 4.1 to allocate the operating expenses to the cost components. Consider, for example, a storage
BLACK & VEATCH I Cost -of -Service Analysis
12-34
City of Newport Beach, CA I Water Rate Study
tank. Its purpose is to provide water during peak times. That is, when demand is greater than average,
such as on a very hot summer day. The design of the storage tank is based on meeting maximum day
needs. Therefore, the O&M costs for this tank are spread out between the base and max day elements.
The elements general to all operations were allocated based on the average of all other costs. The direct
assignment represents conservation, recycled water, and fire protection. Table 4-2 shows the allocation
basis for operating costs, and Table 4-3 shows the total allocation of operating costs serving water
customers.
4.3.3 Allocation of Capital Investments
In allocating the capital investment for FY 2025, the existing fixed assets (which serve as a proxy for the
capital investments) and proposed CIP are allocated directly to cost components to the extent possible.
The allocation of costs in this manner provides a basis for annual investment in water system facilities.
Using the existing fixed assets and CIP, the capital costs can be allocated using the total net system
investment distribution across the functional cost components.
Table 4-4 shows the allocation basis for capital expenditures, and Table 4-5 shows the allocation of
existing system investment serving water customers. The total net system investment of $116.3M shown
on Line 12 for the Water Utility represents the Test Year original cost less accumulated depreciation of
the system in service for existing fixed assets and proposed CIP. The total net system investment reflects
the Water Utility's fixed asset listing ending June 30, 2022. This value represents the original cost (book
value) of the assets.
BLACK & VEATCH I Cost -of -Service Analysis 4-4
12-35
City of Newport Beach, CA I Water Rate Study
Table 4-2 Allocation Basis for O&M Expenditures
1
2
Operating InWases
Salaries
Benefits
0.0%
0-0%
Base
46.2%
462%
Max. Day
27.6%
27-6%
Max. Hour
4.3%
43%
Meters
10.7%
10-7%
Cust/Bill.
4.0%
0-0%
�
5.6%
5-6%
Water Su ppN
3.0%
3-0%
PumpStation
0.3% 2.2% Average 0&M(IessCS+RWS}
03% 22% Average D&M(less CS+RWS}
3
ContractServices
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M( less WS,CS}
4
Water Conservation
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0% Conservation
5
Meter Reading
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0% Meters & Services
6
Utilities
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.8%
0.0%
0.3%
2.3% Average O&M (less WS,CS}
7
Electricity
0-0%
54-1%
45-9%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Pumping
8
Suopt ies&Materials
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M ( less WS,CS}
9
Chemicals
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Base
10
MWDDC I mport Water
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Water Supply
11
OCWD Groundwater
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Water Supply
12
OCWD RW
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0% Recycled Water
13
Water Conservation
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0% Conservation
14
Mai ntenance& Repair
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M (less WS,CS}
15
Sourceofsupply
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Base
16
Pump Station
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Pumping
17
Treatment
0-0%
54-1%
45-9%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Treatment
18
T&D
0-0%
36-5%
31-1%
27-4%
0-0%
0-0%
0-0%
0-0%
0-0%
5-0% T&D
19
Meters & Services
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0% Meters & Services
20
Hydrants
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0% Hydrants
21
RW Pu mp Station
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0% RW - PS
22
Travel &Training
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M (less WS,CS}
23
General Expenses
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M (less WS,CS}
24
Customer Billing
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0%
0-0% Customer
25
Internal Svc Charge
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M (less WS,CS}
26
Insurance
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.8%
0.0%
0.3%
2.3% Average O&M (less WS,CS}
27
Transfers
0-0%
47-6%
28-4%
4-5%
11-1%
0-0%
5-8%
0-0%
03%
23% Average O&M (less WS,CS}
BLACK & VEATCH I Cost -of -Service Analysis 4-5
12-36
City of Newport Beach, CA I Water Rate Study
Table 4-3 Allocation of O&M Expenditures (FY 2025)
Base
ISl I$} M
Operating Expenses
1 Salaries 3,745,100 0 1,72%600
Cum rn
Max. Day .
i$1
1,032,400
onto All Customers
. Max. Hour
M
162,900
Meters
ISl
402,100
cust/Bill.
M
0
Water Supply +Pump Station
M i$1 i$} I$}
209,❑DD 112,400 12,500 84,200
2
Benefits
2,245,3❑0
110M
1,037,000
619,000
97,600
241,100
0
125,3❑0
67,400
7,500
50,500
3
Contract Services
504,500
0
287,8❑0
171r800
27,100
66,900
0
34,8❑0
0
2,100
14,000
4
Water Conservation
227,000
0
0
❑
❑
0
0
227,❑DD
0
❑
❑
5
Meter Reading
104,000
0
0
❑
0
104,000
0
0
0
0
0
6
Utilities
87,100
0
41,500
24r800
319M
9,600
0
510D0
0
30D
2,ODD
7
Electricity
2,090,000
0
1,129,700
960,30D
0
0
0
0
0
0
0
8
Supplies&Materials
159,400
0
80,700
48,100
7,60D
18,800
0
9,700
0
60D
319M
9
Chemicals
358,000
0
358,❑00
❑
0
0
0
0
0
0
0
10
MWDDC Import Water
4,535,500
4,535,500
0
❑
0
0
0
0
0
0
0
11
OCWDGroundwater
8,342,500
8,342,500
0
❑
0
0
0
0
0
0
0
12
OCW D RW
490,500
0
0
❑
0
0
0
0
490,500
0
0
13
Water Conservation
215,500
0
0
0
0
0
0
215,500
0
0
0
14
Ma i ntena nce & Repa i r
881,000
0
419,500
250,400
39,500
97,500
0
50,700
0
3,ODD
20,400
15
Source of Supply
181,300
0
181,34D
0
0
0
0
0
0
0
0
16
Pump Station
74,300
0
40,200
34,100
0
0
0
0
0
0
0
17
Treatment
84,000
0
45,400
38,600
0
0
0
0
0
0
0
1s
storage
101,000
0
8,100
0
9019(M
0
0
0
0
0
2,ODD
19
T&D
242,600
0
88,700
75,300
66,500
0
0
0
0
0
12,100
20
Meters & Services
329,500
0
0
0
0
329,500
0
0
0
0
0
21
Hydrants
74,900
0
0
❑
0
0
0
0
0
0
74,900
22
RW PumpStation
13,200
0
0
❑
0
0
0
0
0
13,20D
0
23
Travel & Tra i n i ng
35,400
0
15,900
10,100
1,60D
3,900
0
2,000
0
10D
800
24
General Expenses
1,3831000
0
558,300
393,100
62,ODD
153,100
0
79,600
0
4)800
32,10D
25
Customer Billing
1,219,700
0
0
❑
0
0
1,219,700
0
0
0
0
26
Internal Svc Charge
1,420,200
0
575,200
403,60❑
63,70D
157,200
0
81,700
0
4,900
32,900
27
Insurance
1,3418,400
0
522,900
371,900
58,70D
144,800
0
75,300
0
4,50D
30,300
28
Capital Expenditures
56,300
0
17,40D
13,20D
19,50D
3,3❑0
0
❑
0
40D
2,50D
29
Transfers
1593,200}
0
1282,400}
1168,6014
126,600}
165.700}
0
134,100}
0
12,ODD}
1131sw
30
Total O&M Expenses
Less Other Revenue
$ 30,137,000
$ 12,977,900 $
7,166,800 $
4,278,100
$ 674,900 $
1,666,100 $
1,219,700
$ 1,082,500
$ 570,3❑0
$ 51,900 $
348,800
31
Miscellaneous Revenues
583,000
0
325,200
194,100
30,60D
75,600
0
39,300
0
2,400
15,800
32
Other Adjustments
11,502,2001
0
17151300}
1425,900}
(67,300}
1166,3001
0
185,40M
0
15,200}
(34,800}
33
Net operating Expenses
$ 30,955,200
$ 12,977,900 $
7,556,900 $
4,510,90❑
$ 711,600 $
1,756,8OD $
1,219,700
$ 1,129,600
$ 670,3M
$ 54,700 $
367,800
BLACK & VEATCH I Cost -of -Service Analysis 4-6
12-37
City of Newport Beach, CA I Water Rate Study
Table 4-4 Allocation Basis for Capital Costs
�-
Base
Max. Day
Max. Hour
Meters
Cust/Bill.
MI
Water Supply
Pu rnp Station
(%]
Plant Assets
1
Land
23%
29.8%
23.4%
34.6%
5.9%
0-0%
0-0%
0.0%
0-7% 4-4% Average Net Plant
2
Sou rce of Su pply
100.0%
0.0%
0-0%
0.0%
O.0%
0-0%
0-0%
O.0%
0-0% 0-0% Water Supply
3
Pumping
0.0°%
54.1%
45-9%
0.0%
O.0%
0-0%
0-0%
0.0%
0-0% 0-0% Pumping
4
Storage
0-0%
8.0%
0-0%
90.0%
0.0%
0-0%
0-0%
❑.D%
0-0% 2-0% Storage
5
Treatment
0-0%
54.1%
45-9%
❑.D%
0.0%
0-0%
0-0%
❑.D%
0-0% 0-0% Treatment
6 Transmission & Distribution 0-0% 36.5% 31-1% 27.4% 0.0% 0-0% 0-0% ❑.D% 0-0% 5-0% T&D
7 Meters&Services 0.0% 0.0% 0-0% 0.0% 1030% 0-0% 0-0% 0.0% 0-0% 0-0% Meters&Services
8
Hydrants
0.0% 0.0%
0-0%
0.0%
0.0%
0-0%
0-0%
0.0%
0-0% 100-0% Hydrants
9
Recycled Water
0.0% 0.0%
0-0%
0.0%
0.0%
0-0%
0-0%
100.0%
0-0%
0-0% Recycled Water
10
Recycled Water - PS
0-0% 0.0%
0-0%
0.0%
0.0%
0-0%
0-0%
0.0%
100-0%
0-0% RW - PS
11
General Plant
23% 29 9%
23-4%
34.6%
5.9%
0-(%
0-0%
0-0%
03%
4-4% Average Net Plant
Table
4-5 Allocation of Capital Costs (FY 2025)
r
� e
Common
Max. Day .
to All Customers
Max. Hour
Meters
Custf Bill.
Fire
Water Supply , Pump Station Protection
Plant Assets
1
Land
2,219,500 51,ODD
539,2011
518,500
767,0DD
3.31,701)
❑
0
0
15,1011 96,90D
2
SourceofSupply
2,594,201) 2,594,201)
D
0
0
0
0
0
0
D 0
3
Pumping
2,361,201) 0
1,276,300
1,084,900
0
0
0
0
0
0 0
4
Storage
18,550,000 0
1,484,000
0
16,695,000
0
0
0
0
0 371,000
5
Treatment
0 0
0
0
0
0
0
0
0
0 0
6
Transmission & Distribution
81,424,100 100
29,751,100
25,288,400
22,313,300
0
0
0
0
0 4,071,200
7
Meters & Services
6,700,200 0
0
0
0
6,700,20D
0
0
0
0 0
8
Hydrants
485,70D 0
0
0
0
0
0
0
0
0 485,700
9
Recycled Water
0 0
0
0
0
0
0
0
0
0 0
10
Recycled Water - PS
765,90D 0
0
0
0
0
0
0
0
755,9D0 0
11
General Plant
1,168,200 25,900
336,501)
272,900
403,700
69,30D
0
0
0
7,90D 51,0DD
12
Total Plant Assets
$116,269,000 $2,672,200
$33,487,100
$27,164,800
$40,179,000
$6,901,20D
$0
$0
$0
$788,900 $5,075)M0
13
Capital Costs
$7,975,200 $2,449,300
$2,269,200
$1,939,900
$2,721,400
$467,40D
$0
$0
$0
$53,40D $3432800
Less Other Revenue
14
Miscellaneous Revenues
0 ❑
0
0
0
0
0
0
0
D 0
15
Other Adjustments
1401,700} 19,3DD}
(115,700}
19319D❑)
(138180D)
123,800}
0
0
0
12,700} (17,SDD}
16
Net Capital Expenses
$8,276,900 $2,458.600
$2,383,900
$1,933,800
$2,860,200
$491,200
$0
$0
$0
$56,100 $361,300
BLACK & VEATCH I Cost -of -Service Analysis 4-7
12-38
City of Newport Beach, CA I Water Rate Study
4.4 Units of Service
After allocating O&M and capital costs to the functional cost categories, the next step is identifying the
billing determinants associated with the cost categories. The billing determinant for costs with a volume
component (e.g., purchased water) will be HCF or HCF/day. Billing costs will use the number of bills.
Meter costs use an equivalent meter basis, and fire protection is based on equivalent hydrants.
To properly recognize the cost of service, each customer class receives its share of base, maximum day,
peak hour, and customer costs. Following the allocation of costs, the total cost responsibility for each
customer class is developed using unit costs of service for each cost function and subsequently assigning
those costs to the customer types based on the respective service requirements of each. The number of
units of service required by each customer class provides a means for the proportionate distribution of
costs previously allocated to respective cost categories. The derivation of the units of service for FY 2025
is as follows:
Supply and base costs vary with the volume of water consumed and distributed to the customers on
that basis.
(HCF) (HCF/day)
[1] [2]=[1]/365
Water 5.439.576 14.903
Recycled Water 244,511 670
Extra Capacity costs are those associated with meeting peak demand rates of water use and
distributed to the customers based on the respective class capacity requirements more than average
rates of use. The analysis followed the capacity factor methodology outlined in Appendix A of the
AWWA M1 Manual to derive peak consumption information from the monthly consumption records in
the City's Customer Information System, which helps estimate the maximum day and peak hour
ratios.
[1]
FY 2025 Annual Consumption
5,439,576 HCF
[2]=[1]/365
Average Daily Consumption
14,903 HCF/day
[3]
Max Day Factor
1.9
[4]=[2]x[3]
Max Day Total Daily Capacity
29,316 HCF/day
[5]=[4]-[2]
Extra Max Day Capacity
13,413
[6]
Max Hour Factor
2.55
[7]=[2]x[6]
Max Hour Total Daily Capacity
39,003 HCF/day
[8]=[7]-[4]
Extra Max Hour Capacity
9,687 HCF/day
Note: The water max day factor of 1.90 and max hour factor of 2.55 are derived from historical consumption.
The methodology in AWWA M1 was used to determine the max day and max hour capacities for fire
services. It was assumed that fire protection requires flows for two simultaneous fires: (1) 3,000
gallons per minute (gpm) for a minimum of 3 hours for a commercial customer and (2) 1,000 gpm for
2 hours for a single-family residential customer. These are fire demand requirements put forth by the
2019 Water Master Plan.
BLACK & VEATCH I Cost -of -Service Analysis
12-39
City of Newport Beach, CA I Water Rate Study
[1]
[2]
[3]=[1]+[2]
Fire Flow (gl)rn)
3,000
1,000
0urat-on (hr)
3
2
Max Day Demand (HCFlda�,�)
722
160
HCF/day =gpm x hr x 60 min/hr/
882
748 ga I Ions/HCF _
HCF/day =gpm x 24 hr x 60 min/hr/
Max Hour demand (HCF/day)
5.775
1.925
7,700 748 gallons/HCF—less max day
demand
Note: The max day and max hour demand for public fire is 87.5% of [3], and for private fire is 12.5% of [3], as shown below in
private fire.
Meter & service costs are those associated with operating and maintaining the water meters. Meter &
service costs are distributed based on the estimated number of equivalent meters for each customer,
which relies on the total number of meters serving respective types and the hydraulic capacity ratio of
the meters to the 1/4" inch meter. The equivalent meter ratios adopted in this analysis are consistent
with City meter types and the AWWA M1 Manual.
Recycled
Water
(gpm)
Water
Recycled Water
water
[1]
[2]
[3]
[4]=[3]/30
[5]=[1]x[4]
[6]=[1]x[4]
51r,'4"
16,110
0
30
1
16,110
0
1"
7A91
0
50
1.67
13,152
0
1-1/2"
562
0
100
_ 3.33
IA73
0
2"
1,213
0
160
5.33
6,469
0
3"
32
2
435
14.5
464
11
4"
49
1
750
25
1,225
15
6"
16
0
1,600
53-33
853
0
r
9
1
2,800
93-33
940
53
10"
O
2
4,200
140
0
187
12"
1
0
5,300
176.67
177
0
Total
25, M
5
41,153
265
BLACK & VEATCH I Cost -of -Service Analysis
4-9
12-40
City of Newport Beach, CA I Water Rate Study
Customer billing costs are distributed based on the number of bills for each customer.
Recycled
Water Water Recycled Water
518',�4- 16,110 0
193,320 0
1' 7A91 0
94,692 0
1-112' 562 0
6,744 0
2' 1,213 0
14,556 0
r 32 2
394 24
4' 49 1
599 3-2
6" 16 0 _
192 0
S., 9 1
109 12
10" 0 2
0 24
12" 1 0
12 0
Total 25,993 6
310,546 72
Note: The City has monthly and bi-monthly customers;
therefore, the connections are multiplied by 12 or 6.
Conservation costs vary with the volume of water consumed and distributed to the customers on that
basis. The consumption is noted in the supply
and base section above.
Recycled water costs vary with the recycled
water consumed and distributed to the customers on that
basis.
(HCF) (HCFfday)
[11 [21=[11f365
Recycled Water 244.511 670
Recycled Waterthrough the Pump Station 222.559 610
Private fire -protection cost allocations use equivalent fire hydrants. A standard equivalent hydrant
represents the fire flow through a 6" fire hydrant. Fire demand factors are derived based on the
diameter of the connection raised to the 2.63 power.
Public Fire
Private Fire
Public Fire
Private Fire
Public Fire
Private Fire
[1]
[21
131
141
151
[61=[11x[51
[71=[1]x[51
4.29
O
10
120
1
14
1-1j2'
_
0
4
2.9
0
2'
_
11
132
6.19
68
2-1f2'
_
3 _
36
11.13
33
S _
12
17.99
18
_ 4
176
2,112
39-22
6,744
6.,
2,723
157
0
1,884
111.31
303,100
17,476
S.,
76
S12
237.21
19.029
1❑"
2
24
426.59
953
Total
2,723
436
0
5,232
303,1oo
43,230
Split
87.50%
12.5D%
Note: The City has monthly and bi-monthly customers; therefore, the connections are multiplied by 12 or 6
BLACK & VEATCH I Cost -of -Service Analysis
12-41
City of Newport Beach, CA I Water Rate Study
Table 4-6 summarizes the FY 2025 units of service for the various customer types.
4.5 Cost of Service Allocations
The Study applies the unit costs of service to each customer class's respective service requirements to
determine the cost of service for each customer class. The total unit costs of service applied to the
respective requirements for each customer class results in the total cost of service for each customer
class.
4.5.1 Units Costs of Service
The FY 2025 unit cost of service for each functional cost component is simply the total cost divided by the
applicable units of service, as shown in Table 4-7. On Line 3, the total costs represent the cost that rates
need to recover, as demonstrated in Table 4-1, Line 16. The net O&M cost includes O&M (including water
purchase) less revenue from other sources and adjustments. Line 5 represents the unit costs for the
entire water system regardless of customer type. After that, the unit costs are used to allocate the costs to
the specific customer types.
4.5.2 Distribution of Costs of Service to Customer Types
Applying the unit costs to the units for each customer class produces the customer class costs. This
process is illustrated in Table 4-8, in which unit costs are applied to the customer class units of service for
FY 2025. The costs attributable to each customer class reflect the functional cost components described
in Section 4.1. Each customer class places a burden on the system in different ways; thus, the allocation
of the units is representative of this burden.
An example of the application of unit costs is shown below for illustrative purposes.
Unit Cost (Table 4-7, Line 5) $2.42 per HCF
Total Consumption (Table 4-8, Line 1) 5.439.576 HCF
Total Allocated Cost $13.163.774
Note: The numbers in the tables are rounded to the nearest hundred, but calculations are performed
based on non -rounded values. Differences are due to rounding.
BLACK & VEATCH I Cost -of -Service Analysis
12-42
City of Newport Beach, CA I Water Rate Study
Table 4-6 Units of Service (FY 2025)
Annual
Avg. Day
Factor Total
Extra
Factor Total,
Extra
Column Reference
(1)
(2)
(3) (4)
(5)
(6) (7)
(8)
(9) (10) (11)
U nits of Measure
(HCF)
(HCF/day)
(HCF/day)
(HCF/day)
(HCF/day)
(HCF/day)
(EMs) (bills) (EHs)
Water
1 All Customers
5,439,575
14,903
190% 29,315
13,413
255% 38,003
9,687
41,163 310,596
2 Subtotal
5,439,575
14,903
28,316
13,413
38,003
9,687
41,153 310,596
Recycled Water
3 All Customers
244,511
570
265 72
4 Subtotal
244,511
570
255 72
-tire Service
5 Public Fire
772
772
6,739
5,957
303,100
6 Private Fire Service
110
110
961
851
435 5,232 43,230
7 Subtotal
892
882
7,700
5,818
435 5,232 346,330
8 Total Water System
5,594,099
15,573
29,199
14,295
45,703
15,505
41,965 315,900 346,330
Note- Recycled water consumption
is 222,559 HCFthrough
the PumpStation_
City recycled water does notgothrough the pumpstation_
Table 4-7 Units Cost of Service (FY 2025)
-- Base
CommontoAll
Max. Day
' Max. Hour
Meters
Cust/Byl.
Water Supply , Pump Station
Column Reference (1) (21 (3)
(4)
(5)
(5)
(71
(8) (9) (10) (11)
Water UtIlty
1 "Operating Expense 30,955,200 12,977,900 7,556,900
4,510,900
711,6M
117561800
1,219,7013
1,129,600 570,300 54,700 357,800
2 Capital Costs 8,275,900 190,404 2,383,900
1,933,800
2,860,200
491,200
0
0 0 56,100 361,300
3 Total Cost of Service $39,233,100 $13,168,304 $9,940,800
$6,444,700
$3,571AM
$2,248,000
$1,219,700
$1,129,600 $670,300 $110,800 $729,100
4 Units of Service (Total) 5,43%576 5,439,576
14,295
16,505
41,865
315,900
5,439,576 244,511 222,559 346,330
Units of Measure HCF HCF
HCF/day
HCF/day
EM
Bill
HCF HCF HCF EH
5 Cast per Unit $2.42 $1.83
$450.95
$216.41
$53.70
$3.86
$021 $2.74 $0.50 $2.11
Units of Measure per HCF per HCF
per HCF/day
per HCF/day
per EM
per Bill
per HCF per HCF per HCF per EH
BLACK & VEATCH I Cost -of -Service Analysis 4-12
12-43
City of Newport Beach, CA I Water Rate Study
Table 4-8 Distribution of Costs to Customer Types (FY 2025)
N� Base
Common
Max. Day .
to All Customers
Max. Hour
Meters custjBill.
� WaterSupply , PumpStation
Column Reference (1) (2) (3)
(4)
(5)
(5) (7)
(8) (9) (10) (11)
($) ($) ($)
($)
($)
($) ($)
($) ($) ($) ($)
1 Cost per Unit $ 2.42 $ 1.83
$ 450.85
$ 216.41
$ 53.70 $ 3.86
$ 021 $ 2.74 $ 0.50 $ 2.11
per HCF per HCF
per HCF/day
per HCFfday
per EM per Bill
per HCF per HCF per HCF per EH
Water
All Customers
2 Units 5,439,575 5,439,575 13,413 9,687 41,163 310,596 5,439,575
3 Allocation ofcostscfservice 35,791,700 13,158,300 9,940,800 6,047,100 2,096,300 2,210.400 1,199,200 1,129,600
Recycled Water
All Customers
4 Units 265 72 244,511 222,559
5 Allocation of costsofservice 795,600 14,200 300 670,300 110f800
Fire Service
Public Fire
6 Units
7 AI location of costs of service
Private Fire Service
8 Units
9 AI location of costs of service
10 TOTAL COSTS 4F SERVICE
772
110 851 436 5,232 43,230
368,40D 49,600 194,200 23,400 20,200 91,030
$ 39,233,100 $ 13,159,300 $ 9,940,800 $ 6,444,700 $ 3,571,800 $ 2,248,000 $ 1,219,700 $ 1,129,600 $ 670,300 $ 110,M $ 729,100
BLACK & VEATCH I Cost -of -Service Analysis
4-13
12-44
City of Newport Beach, CA I Water Rate Study
5.0 Rate Design
The initial consideration in deriving rate schedules for water service is establishing equitable charges to
the customers commensurate with the cost of providing that service. While the cost -of -service allocations
to customer types should not be construed as literal or exact determinations, they offer a guide to the
necessity and extent of rate adjustments. Practical considerations sometimes modify rate adjustments by
considering additional factors such as the extent of bill impacts, existing contracts, and historical local
policies and practices.
5.1 Existing Rates
The existing rates of the Water Utility consist of a fixed component in the form of a monthly fixed service
charge and a variable component in the form of a consumption charge. The monthly fixed service charge
is based on meter size and applied regardless of consumption. The consumption charge is based on
units of consumption (1 unit = 1 HCF = 748 gallons). The City has separate fixed charges for recycled
water and private fire services. Table 3-3, presented earlier in this report, summarizes the existing water
rates.
5.2 Proposed Rates
The cost -of -service analysis described in the preceding sections of this report provides a basis for the
design of water rates.
5.2.1 Monthly Fixed Service Charge
The Water Utility provides water service to approximately 25,800 water service accounts and six recycled
water accounts. These customers have dedicated water and recycled water line connections to the water
systems. Therefore, water charges include capacity, water supply, public fire service costs, meter
maintenance, and the cost of issuing bills. The following is a derivation of the different cost components
that comprise the total charge. The numbers within the tables are rounded, but the calculations are
based on non -rounded values. Differences are due to rounding.
5.2.1.1 Water Monthly Fixed Charge
■ Capacity Cost: The water system is designed to meet peak consumption demands plus fire demand
requirements. Therefore, the water system will have extra capacity when handling average flow
demands. To distribute the capacity costs, meter ratios based on maximum operating capacities by
meter size were used, as shown in AWWA M1, Table B-1. Using meter ratios, we recognize that as
meter size increases, so does the capacity. For example, customers with a 4" meter expect to be able
to use more water (at a higher flow capacity) than customers with a 1/4" meter. Consequently, the
City's water system must maintain assets sized accordingly and capable of providing customers the
level of service expected from their meter connection when the tap turns on.
[1] Total Capacity Costs $19,094,200 Table 4-8, Row 3, Column
3,4,5
[2] Capac-t,,, costs allocated to 50.90%
F-xed Charge
—ota Capac-t,,• Costs
[3] Recovered through F'xed $9,208,700 [3]=[1]x[2]
Charge
[4] Equ.va.ent Meters (EM) 41,153 [4] See Sectian 4.3
[5] Unit Cost (per EM) $18-64 [5]=[3]/[4]
BLACK & VEATCH I Rate Design
12-45
City of Newport Beach, CA I Water Rate Study
Meter & Services Cost: The water system incurs direct operating and maintenance costs associated
with meter servicing and maintenance of the entire water system. The total meter & service costs are
split by equivalent meters to determine the costs for water service.
® + Meters
+ + i
[a] [b] [€]
[1] Total Meter & Services Casts $2,249,000 Table 4-7, Row 3, Column 6
[2] Water 41,163 2,210,400 [b2]=[b1]x[a2]
(98,33%) [a 2] See Section 43
[3] Unit Cost (per EM) $4-47 [b3]=[b2]/[a2]/12
Public Fire Costs: The water system incurs annual direct operating and maintenance costs
associated with fire protection for items such as servicing fire laterals and fire hydrants. The total
direct fire protection costs are split between public and private based on equivalent hydrants. In
addition, the water system is also designed to meet peak consumption demands and fire demand
requirements. To determine fire protection demands for public fire service, the total demand is
determined and split between public and private based on equivalent hydrants.
Line No.
[b]
[1] Total Direct Fire Costs
[2] Public Fire Service 87.50%
[3] Total Ca pa€ityCosts
[4] PublicFire Service
$729,100 Table 4-7, Row 3, Col u mn 11
$638,100 [c2]-[c1]x[a2]
[a2] See Section 4.3
$10,016,500 Table 4-7, Row 3, Column 4,5
$1,639,300 Table 4-8, Row 7, Column 4,5
[5] Water 41,163 [b5] See Section 4.3
[6] Unit Cost (per EM) $4.61 [c61=([c21+[c411/[b5]
Customer Billing Cost: The water system incurs direct operating costs associated with customer
billing, such as meter reading, customer bills, customer service, etc. To determine the costs for water
service, the total customer costs are split by bills generated.
Line No.
[1] Total Customer Costs
[2] Water
[3] Unit Cost (per Bill)
[a] [b] [c]
$1,219,700 Table 4-7, Row 3, Column 7
310,596 [b2]=[b1]x[a2]
(98,32%} $1,199,200
[a 2] See Section 4,3
$3.86 [b3]=[b2]/[a2]
Table 5-1 and Table 5-3 demonstrate the cost elements incorporated into the monthly service charge for
FY 2025. Table 5-2 and Table 5-4 shows the five-year fixed service charge rate schedule. FYs 2026 to
2028 are derived using the same methodology described for FY 2025.
5.2.1.2 Recycled Water Monthly Fixed Charge
Recycled Water Supply Cost: The recycled water system purchases recycled water from OCWD. The
total recycled water supply costs are allocated by consumption.
BLACK & VEATCH I Rate Design
12-46
City of Newport Beach, CA I Water Rate Study
Total Recycled Water Supply
[1] �670,300 Table4-7,Row3,Column?
Costs.
[2] Allocated to Fixed Charge 3.00%
[3] Fixed Charge Recycled Water $20,100 [3]=[i]x[2]
Supply Costs
[4] Equivalent Meters (EM) 265 [4] See Section 4,3
[5] Unit Cost (per EM) $6.32 [5]=[3]/[4]f 12
Meter & Services Cost: The recycled water system incurs direct operating and maintenance costs
associated with meter servicing and maintenance of the entire water system. To determine the costs
for recycled water service, the total meter & service costs are split by equivalent meters.
[a]
[1] Total Meter €x Services Casts
[2] Recycled Water 265 (0.63%)
[3] Unit Cast (per EM)
[b] [r]
$2,249,000 Table 4-7, Raw 3, Column 6
$14,200 [b2]=[b1]x[a2]
[a2] See Section 4.3
$4.47 [b3]=[h2]/[a2]f12
Customer Billing Cost: The recycled water system incurs direct operating costs associated with
customer billing, such as meter reading, customer bills, customer service, etc. To determine the costs
for recycled water, the total customer costs are split by bills generated.
[1] Total Customer Costs
[2] Recycled Water
[3] Unit Cost (per Bill)
5.2.2 Monthly Private Fire Service
[a]
72 (0.02*
[b] [c]
$1,219,600 Table 4-7, Raw 3, Column 7
$30D [b2]=[bi]x[a2]
[a2] See Section 4.3
"3.86 [b3]=[h2]/[a2]
The Water Utility provides public fire protection services to everyone in the City of Newport Beach. In
addition, the Water Utility provides fire service to 436 private fire service accounts. These customers have
a dedicated water line connection to the water system specifically for fire protection. Circumstances
where a private fire service account may be requested include commercial buildings with insurance
requirements. The private fire service charge includes capacity costs, direct costs, the cost of meter
maintenance, and the cost of issuing bills. The following is a derivation of the different cost components
that comprise the total charge.
Capacity Cost: The water system is designed to meet peak consumption demands plus fire demand
requirements. To determine fire protection demands for private fire service, the total demand is
determined and split between public and private based on equivalent hydrants.
BLACK & VEATCH I Rate Design
12-4 7
City of Newport Beach, CA I Water Rate Study
[1] Total -Capacity Casts
[2] Private Fire Service
$10,016,500 Table4-7, Raw 3, Column 4,5
$233)M Tabled-3,Row 9,Col umn4,5
[3] Equivalent Hydrants (EH) 4-3,23D See Section 4,3
[4] Unit Cost (per EH) $0.45 [4]=[2]/[3]/12
Private Fire Cost: The water system incurs annual direct operating and maintenance costs associated
with fire protection, such as servicing fire laterals and fire hydrants. To determine direct fire protection
costs for private fire service, the total direct fire protection costs are split between public and private
based on equivalent hydrants.
Line No.
[1] Total Direct Fire Costs
[2] Private Fire Service
[3] Equivalent Hydrants (EH)
[4] Unit Cost (per EH)
[a] [b] [f] [d]
$729,100 Ta ble 4-7, Row 3, Col u m n 11
12.50% $91,000 [b2]=[bl]x[a2]
[a 2] See Section 4,3
43,230 [b3] See Section 43
$0.18 [€4]=[€2]/b3]/12
Meter & Services Cost: The water system incurs direct operating and maintenance costs associated
with meter servicing and maintenance of the entire water system. To determine direct fire protection
costs for private fire service, the total meter & service costs are split by equivalent meters.
[1] Tota I Meter & Services Costs
[2] Private Fire Service
[3] Total Bills
[4] Unit Cost (per Bill)
[a] [b] [c] [d]
$2,248,000 Table 4-7,Row3,Col umn6
[€2]=[€1]x[a2]
436 (1.0496) $23400
[a 2] See Section 4.3
5,232 (1.56%) [b3] See Section 4.3
$4.47 [c4]=[€2]/[b3]
Customer Billing Cost: The water system incurs direct operating costs associated with customer
billing, such as meter reading, customer bills, customer service, etc. To determine direct fire
protection costs for private fire service, the total customer costs are split by bills generated.
■ � I Ili r LiJ7 � Ulfl■ 7114� � lily I lRik3k.7
[a] [b] Id
[1] Total Customer Costs $1,219,600 Table 4-7, Row 3,Col umn 7
[2] Private Fire Service 5,232 (1.66%6 $20,200 [b2]=[b1]x[a2]
[a 2] See Section 4,3
[3] Unit Cost (per Bill) $3.86 [b3]=[b2]/[a2]
Table 5-5 demonstrates the costs incorporated into the private fire service charge for FY 2025, and Table
5-6 shows the five-year rate schedule based on unit costs in future years. FYs 2026 to 2028 are derived
using the same methodology described for FY 2025.
BLACK & VEATCH I Rate Design
12-48
City of Newport Beach, CA I Water Rate Study
BLACK & VEATCH I Rate Design
5-5
12-49
City of Newport Beach, CA I Water Rate Study
Table 5-1 Costs within the Water Monthly Fixed Charge (FY 2025)
Adjusted
Capm ty
Mrs &Svcs
Ru blic Fire Service
Public Fire Meter
Adjusted
Cust Billing
Unit Cost
unit Cost
Unit Cast Ratio
Unit Cost
Unit Cost
m Ratio Unit Cast
per EM
per EM
per EM
$
per Rill
$
$/Month
5/8",3/4" 18-64
4-47
4-61 1-00
27.73
3-86
1-00 3,86
31-59
1" 18-64
4-47
4-61 1.67
46.21
3-96
1-00 3186
50-07
1-1/2" 18-64 4-47 4-61 3.33 92.43 3-96 1-00 3.96 96-29
2" 18-64 4-47 4-61 5.33 147,98 3-86 1-00 3J86 151-74
3" 18-64 4-47 4-61 14.50 402.05 3-86 1-011 3J86 405-92
4"
18-64
4-47
4-61
25.011 693.20 3-86
1-011 3J86 697-06
6"
18-64
4-47
4-61
53.33 1,478.82 3-86
1-011 3186 1,482-58
8"
1964
4.47
4.61
9333 2,587.94 3A6
1.01) 3,86 2,59180
*EM = Equivalent Meter
Fixed Svc Charge Revenue $
9,208,700 $
2,210,400 $
2,277,400
$ 11199,340
$ MA95f800
Table 5-2 Proposed Water
Monthly Fixed Charge
Calendar
CY 2024
CY 2025
-CY 2025
CY 2027 CY 2029
Effective Date
1/1/2024*
1/1/2025
1/1/2026
11112027 11112028
M 3inthly Fboed Service Charge
Water
Wrno)
Wrnl))
Wrrio)
Wrm) Wrno)
5/9", 3/4"
27-09
31-59 36-59
41-59 46-59
1"
41-99
50-07
58-30
66-53
74-7 5
1-1/2"
79-15
96-29
112-59
129M
145-16
2"
123.76
151.74
177.74
203.71
229.65
3" 328-23 405-92 476,32 546-65 616-89
4" 562-45 697-06 818 33 939-47 1,060-46
6" 1,194-45 1,482-68 1,741-22 1,999-48 2,257.39
8" 2,096-69 2,591-80 3,044-12 3,495-95 3,947-18
*Previosulyapproved in 2019 Rate Case -
BLACK & VEATCH I Rate Design
5-6
12-50
City of Newport Beach, CA I Water Rate Study
Table 5-3 Costs within the Recycled Water Monthly Fixed Charge (FY 2025)
Warter Supply,i
Water Supply Mtrs & Svcs Meter Adjusted Cust Killing Adjusted Total Service
Unit Cost U nit Cost Ratio tilt first U nit Cast m Ratio U nit Cast Charge
per EM per EM $ per Bill $ $/Month _
5/8", 3/4" 6-32 4-47 1-00 10.79 3-86 1-00 3-86 14-66
1" 6-32 4-47 1-67 17-99 3-86 1-00 3-86 21-85
1-1/2" 6-32 4-47 3,33 35-98 3,96 1-00 3-96 39-94
2" 6-32 4-47 5-33 57-57 3-86 1-00 3-86 61.43
3" 6-32 4-47 14-50 156-52 3-86 1-00 3-86 160,38
4" 6.32 4.47 25.00 269.86 3,96 1.00 3.86 273.72
6"
6-32
4-47
53-33
575-70
3,96 1-00 3-96 579-56
S"
6-32
4-47
93-33
1,007-47
3,96 1-00 3-96 1,011-34
*EM = Equivalent Meter
Fixed Svc Charge Revenue
S 20,100
14,200
30D $ 34,600
Table 5-4 Proposed Recycled Water Monthly Fixed Charge
ft..
Ca lendar Year
En d i rig r
ago, m.
CV 2024
CY 2025
CY 2026
CY 2027
Of 2028
Effectiwe Date
1/1/2024*
1/1/2025
11112026
1/1/2027
11112028
Monthly Fixed Service Charge
RecVded Water
Wrno)
($/mo)
($/mo)
Wrno)
($/ma)
5/811, 3/4"
13-78
14-66
15-44
16-17
16A9
1"
2°
19-79 21-85 23-06 24-16 25-25
34.75 39Z4 42.10 44.15 46.16
52-73 61-43 64-95 68-13 71-25
3" 135 -12 160-39 169-69 178-05 186-2 5
4" 229-50 273-72 289-66 303-96 317-97
6" 484-16 579-56 613-40 643-72 673-42
S" 843-69 1,011-34 1,070-43 1,123,3S 1,175-23
*Previmulyapproved in 2019Rate Case -
BLACK & VEATCH I Rate Design
5-7
12-51
City of Newport Beach, CA I Water Rate Study
Table 5-5 Costs within the Fire Service Charge (FY 2025)
Capacity,
Capacity Private Fire Meter
Adjusted
Mtrs&Svcs
CustBilling
Adjusted
. .
Unit Cast Unit Cost Ratio
Unit Cost
U nit Cost
Unit Cost
Bill Ratio
Unit Cost
per EH
per EH
$
per Bill
per Bill
5/8"
0-45
0-18
0-29
0.18
4.47
3-86
1-00
8.34
8-52
1"
0-45
0-18
1-00
0.63
4.47
3-86
1-00
8.34
8-96
1-1/2"
0-45
0-18
2-90
1Z2
4.47
3-86
1-00
8.34
10-15
2"
0-45
0-18
6-19
318B
4.47
3-86
1-00
8.34
1-221
2-1/2"
0-45
0-18
11-13
6.97
4.47
3-86
1-00
8.34
15-31
3"
0-45
0-18
17-98
11.26
4.47
3-86
1-00
8.34
19-59
4"
0-45
0-18
38,32
23.99
4.47
3-86
1-00
8.34
32-33
6"
0-45
0-18
111,31
69.69
4.47
3-96
1-00
9 34
78-03
8"
0-45
0-18
237-21
149.52
4.47
3-96
1-00
9 34
156-95
10"
0-45
0-18
426-58
267.08
4.47
3-86
1-00
8.34
275-42
12"
0-45
0-18
699-04
431.41
4.47
3-86
1- 0
8.34
439-75
*EH = Equivalent Hydrant
Fixed Svc Charge Revenue 5
233.SDD S
91,000
$ 23,400
$ 20,200
$ 368,400
Table 5-6 Proposed Fire
Service Charge
F-alerk«.
CY 2024
CY 2025
CY 2026 CY
2027
CY 2029
Effective Date
1/1/2024*
1/1/2025
11112026 I/l/2027
11112028
Mont:Wy Fixed Service Charge
Private Fire Service
Wnno)
Wnne)
($/mo) Wino)
($/rno)
5/S"
13-87
9-52
9-12
9-66
10-20
1"
14-12
9-96
9-59
10-18
10-75
1-1/2"
14-74
10-15
10-86
11-55
12-23
2"
15-91
1221
13-06
13-92
14-77
2-1/2"
17 -44
15-31
16-36
17 -48
18-60
3"
19.67
19.59
20.94
22.43
23.91
4"
26-34
32-33
34-53
37-10
39-68
6"
50-21
78-03
83-29
89-75
96-25
S"
91-43
15 6-85
167 -41
180-5 6
193-84
10"
153-42
275-42
293-93
317-16
340-62
12"
239,31
439-75
469-29
506-48
544-06
*Previosulyapproved in 2C19 Rate Case.
BLACK & VEATCH I Rate Design
5-8
12-52
City of Newport Beach, CA I Water Rate Study
5.2.3 Consumption Charge
This consumption charge is designed to recover costs associated with water supply, base, and extra
capacity demands. These include fixed and variable costs incurred by the water system while providing
the average annual usage and peaking demands. While most costs are fixed, such as personnel and
direct and indirect charges, variable costs represent most of the costs through water production and
purchase.
Table 5-7 Water Consumption Charge (FY 2025)
Capacity Cost
Allocated to
i F iCons Chargei
1 Water Supply Casts 13r168,300 Table 4 8, Linea, Col 2�
2 CapacityCosts 49_1% SA75r500 �Table4-8,Line 3,Col3A5)
4
5
6
Table 5-8
Conservation Costs 1,12 r600 (Table 4-8, Line 3, Col S)
Total Water Costs $ 23,173,400
Units of Service (HCF) _ 5.439,576 (Table 4-6, Line 1, Coll)
U nit Cost of Service S 4.26
Recycled Water Consumption Charge (FY 2025)
1 Recycled W ater Supply Casts 97.0% 650,191 (Table 4-9, Line 5, Cal 9)
2 Units of Service (HCF) 244,511 (Table 4-6, Line 3, Cal 1)
3 Unit Cost of Service $ 2.66
Table 5-9 Recycled Water Pump Charge (FY 2025)
1 RW Pump Costs 110,800 (Table4-8,Line 5,Col10)
2 Units of Service (HCF) 222.559 (Table 4-6, Note)
3 Unit Cost of Service $ 0.50
Table 5-10 shows the five-year rate schedule for both water and recycled water. FYs 2026 to 2028 are
derived using the same methodology described for FY 2025.
Table 5-10 Proposed Consumption Charges
CY 2025
CY 2026
CY 2027
CY 2028
CY 2029
Eff ectiwe Date
1J1f2024*
1f1f2025
11112026
1f1J2027
11112028
Usage Charges
Water
($/HCF)
($/HCF)
($/HCF)
($/HCF)
($/HCF)
All Customers
4.16
4.26
4.36
4.46
4.56
Recycled Water
All Customers
2.24
2.66
2.74
2.92
2_91
PumpCharge
0.72
0.50
0.52
0.55
0.57
*Previosuly approved in 2019 Rate Case.
BLACK & VEATCH i Rate Design
5-9
12-53
City of Newport Beach, CA I Water Rate Study
5.3 Typical Monthly Costs under Proposed Charges
Table 5-11 compares typical monthly costs under approved rates in FY 2024 and the proposed schedule
of water user rates in FY 2025 derived in this study for residential customers. The typical single-family
residential uses 10 units of water.
Table 5-11 Typical Water Monthly Bill (FY 2025)
Existing Proposed
Rates Rates
(HCF)
($)
($)
($)
Typical Bill Single Family
Residential
by Consumption
Meter Size 519"F 3/4"
O
$27.C9
$31.59
$4.50
5
$47.89
$52.89
$5.00
10
$68.69 _
$74.19
$5.50
15
$89.44
$95.49
$6.00
20
$110.2-9
$116.79
$6.50
5.4 Summary of Rate Study
This rate study proposes adjustments to the City's water rates. A summary of actions and projections are
as follows:
Maintain the fixed service charge to reflect the nature of fixed costs associated with providing 24/7
water service and investments in infrastructure through the capital improvement program.
Maintain the consumption charge to reflect the variable costs associated with operating costs, such
as purchased water from wholesalers.
Project water sales to remain flat in accordance with historical water demands and compliance with
state water conservation targets.
Operating Reserve. Strive to meet the fiscal policy of maintaining 33% of operating costs.
Capital Reserves. Strive to maintain the minimum level of 75% of $7.5M capital costs.
Rate Stabilization Reserve. Strive to meet the 30% of water use reduction target.
Increase the annual investment in Capital Improvements from $7.5M to $10.2M by the end of the 5-
year study period to reflect increased capital costs due to inflation.
Maintain a comparable cost of delivering potable drinking water amongst neighboring water providers.
BLACK & VEATCH I Rate Design
12-54
City of Newport Beach, CA I Water Rate Study
6.0 Appendix A - Cost of Service Analysis and Rate Tables
The following tables represent the cost -of -service analysis and rate design tables for FY 2026 to FY 2028 using the methodology described in
Sections 4.0 and 5.0.
6.1 u-,,,,-ai Year 2026
Table 6-1 Allocation Basis for O&M Expenditures
� Base
I%I
Operating Expenses
1 Salaries 0.0% 46.2%
2 Benefits 0.0% 46.2%
3 Contract Services 0.0% 47.6%
Max. Day •'
(%)
27.6%
27.6%
28.4%
n.to All Customers
Mao[. Hour
4.4%
4.41A
4.5%
Meters
109%
10.8%
11.1%
CUWBM.
0.0%
0.0%
0.0%
Water SuPPIy • PurnP Station
5.5% 3.0% 03% 23% Average O&M (less CS RWS}
5.5% 3.0% 03% 23% Average O&M ( less CS 4 RWSk
5.7% 0.0% 0.3% 2.3% Average O&M (less WS,CS}
4
Water Conservation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0% Conservation
5
Meter Reading
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0% Meters & Services
6
Utilities
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M(less WS,CS}
7
Electricity
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Pumping
8
Supplies & Materials
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M l less WS,CS}
9
Chemicals
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Base
10
MWDOC Import Water
100.0%
0.0%
0.03E
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Water Supply
11
OCWDGroundwater
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Water Supply
12
❑CWD RW
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0% Recycled Water
13
Water Conservation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0% Conservation
14
Maintenance& Repair
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M Iless WS,CS}
15
Source of Supply
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Base
16
Pump Station
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Pumping
17
Treatment
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Treatment
18
T&D
0.0%
36.5%
31.1%
27.4%
0.0%
0.0%
0.0%
0.0%
0.0%
5.0% T&D
19
Meters & Services
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0% Meters & Services
20
Hydrants
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0% Hydrants
21
RW Pump Station
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0% RW - PS
22
Travel &Training
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M Iless WS,CS}
23
General Expenses
0.0%
47.6%
28.4%
4.51A
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M (less WS,CS}
24
Customer Bi I I i ng
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0% Customer
25
I nterna l Svc Cha rge
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M (less WS,CS}
26
Insurance
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M {less WS,CS}
27
Transfers
0.0%
47.6%
28.4%
4.5%
11.1%
0.0%
5.7%
0.0%
03%
23% Average O&M less WS,CS}
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-11
12-55
City of Newport Beach, CA I Water Rate Study
Table 6-2 Allocation of O&M Expenditures (FY 2026)
- -
Base
ISl M M
Operating Expenses
1 Salaries 3,875,200 ion 1,790,400
Cum rn
Max. Day .
i$)
1,068,200
, nto All Customers
. Max. Hour
M
169,100
Meters
M
417,400
cust/Bill.
M
0
Water Supply +Pump Station
M i$1 i$i M
213,900 116,300 131000 87,80❑
2
Benefits
2,323,90❑
0
1,073,400
640,400
101,400
250,3❑0
0
128,3M
69,70❑
7,800
52,600
3
Contract Services
528,700
0
299,300
179,600
28,3❑❑
69,800
0
35,8❑0
0
2,200
14,700
4
Water Conservation
235,100
0
0
❑
❑
❑
0
235,100
0
❑
❑
5
Meter Reading
108,200
0
0
❑
0
108,200
0
0
0
0
0
6
Utilities
91,500
0
43,600
26,000
4,100
10,200
0
5,200
0
300
2,100
7
Electricity
2,194,500
0
1,186,200
1,008,300
0
0
0
0
0
0
0
8
Supplies & Materials
179,500
0
85,500
51,000
8,100
19,900
0
10,200
0
600
4,200
9
Chemicals
385,400
0
385,400
❑
0
0
0
0
0
0
0
10
MWDDC Import Water
4,887,700
4,887,700
0
❑
0
0
0
0
0
0
0
11
OCWDGroundwater
8,666,700
8,666,700
0
❑
0
0
0
0
0
0
0
12
OCW D RW
505,300
0
0
❑
0
0
0
0
505,300
0
0
13
Water Conservation
229,500
0
0
0
0
0
0
229,500
0
0
0
14
Ma i ntena nce & Repa i r
933,700
0
444,600
265,30D
42,ODD
143,7DD
0
53,100
0
3,200
21,80D
15
Source of Supply
192,200
0
192,200
0
0
0
D
0
0
0
0
16
Pump Station
78,8DD
0
42,600
36,200
0
0
D
0
0
0
0
17
Treatment
88,200
0
47,700
40,500
0
0
D
0
0
0
0
is
storage
107,100
0
8,6DD
0
96,400
0
D
0
0
0
2,100
19
T&D
257,200
0
93,90D
79,90D
70,500
D
D
0
0
0
12,900
20
Meters & Services
349,200
0
0
0
0
349,200
0
0
0
0
0
21
Hydrants
79,400
0
0
❑
0
0
0
0
0
0
79,400
22
RW PumpStation
14,000
0
0
❑
0
0
0
0
0
14,000
0
23
Travel & Tra i n i ng
36,800
0
17,400
10,500
1,700
4,100
0
2,100
0
100
900
24
General Expenses
1,439,200
0
684,800
409,600
64,700
159,700
0
81,800
0
51000
33,600
25
Customer Billing
1,258,400
0
0
❑
0
0
1,268,400
0
0
0
0
26
Internal Svc Charge
1,499,900
0
714,400
425,100
67,400
166,500
0
85,300
0
5,200
35,000
27
Insurance
1,381,700
0
557,900
392,600
62,100
153,400
0
78,600
0
4)M
32,300
28
Capital Expenditures
58,500
0
18,5❑0
14,100
19,701)
3_1tM
0
❑
0
401)
2,501)
29
Transfers
451,700
0
215,200
128,300
20,3❑❑
50,100
0
25,700
0
1,600
10,500
30
Total O&M Expenses
Less Other Revenue
$ 32,549,200
$ 13,554,500 $
8,002,600 $
4,774,600
$ 755)M $
1,865,800 $
1,268,400
$ 1,185,600
$ 591,3❑0
$ 58,200 $
392,400
31
Miscellaneous Revenues
583,000
0
325,300
194,000
30,700
75,800
0
38,900
0
2,400
15,90❑
32
Other Adjustments
11,695,1001
0
1807,200}
1481,600}
l76,200}
1188,2001
0
195,40M
0
1519W
(391600}
33
Net operating Expenses
$ 33,551,3DD
$ 13,554,500 $
8,484,5D0 $
5,062,200
$ 801,30D $
1,979,200 $
1,269,400
$ 1,243,100
$ 691,34D
$ 61,700 $
416,100
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-12
12-56
City of Newport Beach, CA I Water Rate Study
Table 6-3 Allocation Basis for Capital Costs
Common to All Cugtorners
- Base Max. Day . Max. Hour Meters CustJBill.
M (%} (%) (%)
Plant Assets
1 Land 2.2% 29.5% 24.1% 33.7% 5.6% 0.0%
2 SourceofSupply
3 Pumping
4 Storage
5 Treatment
100.0%
0-0%
0.0%
54-1%
0.0%
45-9%
0.0%
0-0%
0.0%
0-0%
0.0%
0-0%
0-0%
8-0%
0-0%
90-0%
0-0%
0-0%
0-0%
54-1%
45-9%
0-0%
0-0%
0-0%
Water Supply Pump Station llllll - '4",
0.0% 0.0% 0.6%
0.0% 0.0% 0.0%
o-❑% 0-0% 0-0%
0-0% 0-0% 0-0%
0-0% 0-0% 0-0%
4.3% Average Net Plant
0.0% Water Supply
0-01A Pumping
2-0% Storage
0-0% Treatment
6 Transmission & Distribution 0-0% 36-5% 31-1% 27-4% 0-0% 0-0% 0-0% 0-0% 0-0% 5-0% T&D
7 Meters & Services 0-0% 0-0% 0-0% 0-0% 100-0% 0-0% 0-0% 0-0% 0-0% 0-0% Meters & Services
8 Hydrants 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 100-0% Hydrants
9 Recycled Water 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Recycled Water
10 Recycled Water - PS 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 0-0% 100-0% 0-0% RW - PS
11 General Plant 22% 29-5% 24-1% 33-7% 5-6% 0-0% 0-0% 0-0% 0-6% 4-3% Average Net Plant
Table 6-4 Allocation of Capital Costs (FY 2026)
Base
Max. Day
Max. Hour
Meters
Cus iBill.
�
Water Supply
PumpStation
($1
($}
(S1
($1
I$1
($1
I$}
M
M
M M
Plant Assets
1
Land
2,219,500
48,000
555,800
534,200
747,000
124,3430
0
0
0
14,000 96,200
2
Source of Supply
2,554,900
2,554,900
0
❑
0
0
0
0
0
0 0
3
Pumping
4,109,900
0
2,221,600
1f888,300
0
0
0
0
0
0 0
4
Storage
18,191,700
ion
1,455,300
0
16,372,500
0
0
0
0
0 363,8❑0
5
Treatment
0
0
0
❑
❑
0
0
0
0
❑ ❑
6
Transmission & Distribution
85,713,9❑0
0
31,318,500
26,620,800
23,488,900
0
0
0
0
❑
4,285,700
7
Meters & Services
6,531,6❑0
0
0
❑
❑
6,631,600
0
0
0
❑
❑
8
Hydrants
483,8❑0
0
0
❑
❑
0
0
0
0
❑
483,8❑0
9
Recycled Water
0
0
0
❑
0
0
0
0
0
0
0
10
Recycled Water- PS
747,300
0
0
0
0
0
0
0
0
747,300
0
11
General Plant
1,457,300
31,700
433,500
353,200
493fM
82,200
0
0
0
9,300
63,600
12
Total Plant Assets
$122,129,900 $
2,544,700
$ 35,094,700
$ 29,396,500
$ 41,102,200 $
6,838,100 $
0 $
0 $
0 $
770,600 $
5,293,100
13
Capital Casts
$ 9,259,700 $
2,522,000
$ 2,443,100
$ 1,990,300
$ 2,792,300 $
463,001) $
0 $
0 $
0 $
52,200 $
358,400
Less other Revenue
14
Miscellaneous Revenues
a
❑
❑
0
❑
0
0
0
0
❑
❑
15
other Adjustments
(439, M)
(915❑0}
(129,900}
(105,900}
(148,000}
(24,60❑}
0
0
0
(2AO14
(19,1❑0}
16
Net Capital Expenses
$ 8,708,500 $
2,531,500
$ 2,573,0130
$ 2,096,200
$ 2,930,800 $
487,600 $
0 $
0 $
0 $
55,000 $
377,500
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables 6-13
12-57
City of Newport Beach, CA I Water Rate Study
Table 6-5 Units of Service (FY 2026)
Annual
Avg. Day
Factor Total
Extra
Factor Total.
Extra
Column Reference
(1)
(2)
(3) (4)
(5)
(6) (7)
(8)
(9) (10) (11)
U nits of Measure
(HCF)
(HCF/day)
(HCF/day)
(HCFfday)
(HCF/day)
(HCF/day)
(EMs) (bills) (EHs)
Water
1 All Customers
5,439,575
14,903
190% 29,315
13,413
255% 38,003
9,687
41,163 310,596
2 Subtotal
5,439,575
14,903
28,316
13,413
38,003
9,687
41,153 310,596
Recycled Water
3 All Customers
244,511
570
265 72
4 Subtotal
244,511
570
255 72
-tire Service
5 Public Fire
772
772
6,739
5,957
303,100
6 Private Fire Service
110
110
961
851
435 5,232 43,230
7 Subtotal
892
882
7,700
5,818
435 5,232 346,330
8 Total Water System
5,594,099
15,573
29,199
14,295
45,703
15,505
41,965 315,900 346,330
Note- Recycled water consumption
is 222,559 HCFthrough
the PumpStation-
City recycled water does notgothrough the pumpstation-
Table 6-6 Units Cost of Service (FY 2026)
MIMI
Base
Max. Day
Max. Hour
Meters
Cust/Bill.
Water Supply
PumpStation
Column Reference
F (1)
F (2)
F (3)
F (4)
F (5) F
(6)
r (7)
F (9)
F (9)
F (10) '
(11)
(S)
(S)
(S)
(S)
(S)
(S}
IS1
(S)
(S)
(S)
fS1
Water utility
1
Net operating Expense
33,551,300
13,554,500
8,484,500
5,062,200
801,3DD
1,978,20D
1,269,4013
1,243,100
691,3m
61,700
416,100
2
Capital Costs
9,709,500
188,400
2,573,000
2,096,200
2,930,800
497,600
D
0
0
55,ODD
377,500
3
Total Cost of service
$ 42,259,SO0
$ 13,742,900
$ 11,057,500
$ 7,158,400
$ 3,732,100 $
2,465,800
$ 1,268,4013
$ 1,243,100
$ 691,300
$ 116,700 $
793,600
4
Units of Service (Total)
5,439,575
5,43%576
14,295
16,505
41,865
315,900
5,439,575
244,511
222,559
346,330
HCF
HCF
HCF/day
HCF/day
EM
Bill
HCF
HCF
HCF
EH
5
Cost per Unit
$ 2-53
$ 2-03
$ 500-77
$ 226-12 $
58.90
$ 4-02
$ 023
$ 2-93
$ 0-52 $
2-29
per HCF
per HCF
per HCF/day
per HCFfday
per EM
per Bill
per HCF
per HCF
per HCF
per EH
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-14
12-58
City of Newport Beach, CA I Water Rate Study
Table 6-7 Distribution of Costs to Customer Types (FY 2026)
r �se
Com
Max. Day.
n to All Customers
• Max. Hour
Meters Cust/Bill.
WaterSupply'PumpStatian
Column Reference (1) (2) (3)
(4)
(5)
(6) (7)
(9) (9) (10) (11)
1 Cost per Unit $ 2.53 $ 2.03
$ 500.77
$ 226.12
$ 58.9C $ 4.02
$ 0.23 $ 2.93 $ 0.52 $ 2.29
per HCF per HCF
per HCF/day
per HCF/day
per EM per Bill
per HCF per HCF per HCF per EH
Water
All Customers
2 Units 5,439,575 5,439,576 13,413 9,687 41,163 310,596 5,439,575
3 Allocation of costs of service 38,522,100 13,742,900 11,057,5410 6,716,600 2,190,500 2,424,500 1,247,000 1,243,100
9,729,853
Recycled water
All Customers
4 Units 265 72 244,511 222,559
5 Allocation of costs ofservice 823,900 15,600 300 691,300 116,700
-tire Service
Public Fire
6 Units 772 5,967 303,100
7 AI location of costs cf service 2,430.300 386,600 13,49.200 694,500
Private Fire Service
8 Units
9 Allocation of costs cf service
10 TOTAL COSTS OF SERVICE
110 851 436 5,232 43,230
393,400 55,200 192,400 25,700 21,100 99,000
$ 42,259,800 $ 13,742,900 $ 11,057,500 $ 7,159,4430 $ 3,732,100 $ 2,465,800 $ 1,268,400 $ 1,243,100 $ 691,300 $ 116,700 $ 793,600
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-15
12-59
City of Newport Beach, CA I Water Rate Study
Table 6-8 Costs within the Water Monthly Fixed Charge (FY 2026)
Capacity, Meters & Svcs, Public Fire Service
Capadty Mtrs&Svcs PublicFire Meter Adjusted Oust Billing Adjusted . .
Uirt Cast Unit Cyst Urrt Cast Ratio U nit Cost Unit Cast m Ratio Unit Cast
per EM per EM per EM $ per Bill $ $/Month
5/8", 3/4" 22-74 4-91 4-92 1.00 32.57 4-02 1-00 4.02 36-59
1" 22-74 4-91 4-92 1.67 54.29 4-02 1-00 4.02 58-30
1-1/2" 22-74 4-91 4-92 3.33 108.58 4-02 1-00 4.02 112-59
2" 22-74 4-91 4-92 5,33 173.72 4-02 1-00 4.02 177-74
3" 22-74 4-91 4-92 14.50 472.30 4-02 1-00 4.02 476-32
4" 22-74 4-91 4-92 25.00 814.31 4-02 1-00 4.02 918-33
6" 22-74 4-91 4-92 53,33 1,737.20 4-02 1-00 4.02 1,741-22
8" 22-74 4-91 4-92 93,33 3,040.11 4-02 1-00 4.02 3,044-12
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 11,234,700 $ 2,424,500 $ 2,430.300 $ 1,247,100 $ 17,336,600
Table 6-9 Costs within the Recycled Water Monthly Fixed Charge (FY 2026)
Water Supply, Meters & Svcs Customer Billing
Water Supply Mtrs & Svcs Meter Adjusted Oust Baling Adjusted Total
Unit cost Unit Cost Ratio Unit cost Unit Cost Bill Ratio Unit Cost Charge
per EM per EM $ per Bill $/Month
5/9", 3/4" 6-52 4-91 1-00 11-43 4-02 1-00 4-02 15-44
1" 6-52 4-91 1-67 19-04 4-02 1-00 4-02 23-06
1-1/2" 6.52 4.91 3.33 38.09 4.02 1.00 4.02 42.10
2" 6-52 4-91 5-33 60-94 4-02 1-00 4-02 64-95
3" 6-52 4-91 14-50 165-69 4-02 1-00 4-02 169-69
4" 6-52 4-91 25-00 285-65 4-02 1-00 4-02 289-66
6" 6.52 4.91 53.33 609 38 4.02 1.00 4.02 613.40
8" 6-52 4-91 93-33 1,066-42 4-02 1-00 4-02 1,070- 3
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 20,700 $ 15,600 $ 301) $ 36,600
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-16
12-60
City of Newport Beach, CA I Water Rate Study
Table 6-10 Costs within the Fire Service Charge (FY 2026)
Capacity,
Capacity Private Fire Meter
Unit Cost Unit Cost Ratio
per EH per EH
5/8" 0.48 0.19 0.29
1" 0.48 0.19 1.00
Adjusted
Unit Cost
$
0.19
0.67
Mtrs&Svcs
Unit Cost
per Bill
4.91
4.91
Oust Billing
Unit Cost
per Bill
4.02
4.02
Bil Ratio
1.00
1.00
Adjusted
Unit Cost
8.92
8.92
. .
9.12
9.59
1-1/2"
0.48
0.19
2.90
1.94
4.91
4.02
1.00
8.92
10-86
2"
0.48
0.19
6.19
4.14
4.91
4.02
1.00
8.92
13.06
2-1/2"
0.48
0.19
11.113
7.44
4.91
4.02
1.00
8.92
16-36
3"
0.48
0.19
17.98
12.01
4.91
4.02
1.00
8.92
20.94
4"
0.48
0.19
38,32
25.60
4.91
4.02
1.00
8.92
34.53
6"
0.48
0.19
111,31
74.37
4.91
4.02
1.00
8.92
83.29
8"
0.48
0.19
237.21
159.49
4.91
4.02
1.00
8.92
167.41
10"
0.48
0-19
426.58
285.01
4.91
4.02
1.00
8.92
293.93
12"
0.48
0.19
699.04
460.37
4.91
4.02
1- 0
8.92
459.29
*EH = Equivalent Hydrant
Fixed Svc Charge Revenue
$ 247,600
$ 991000
$ 25,700
$ 21,100
$ 393,4011
Table 6-11 Water Consumption Charge (FY 2026)
1
Water Supply Costs
13,742,900
(Table 6-7, Line 3,Coll 21
2
Capacity Casts
43.7% 8,729,900
(Table 6-7, Line 3,Coll 3,4,5)
3
Conservation Casts
1,243,100
(Ta ble 6-7, Line 3, Cal 8)
4
Total Water Costs
$ 23,715,900
5
Units of Service (HCF)
5,439,576
(Table 6-5, Line 1, Col 1)
6
U nit Cost of Service
436
Table 6-12 Recycled Water Consumption Charge (FY 2026)
1 Recycled WaterSupply Costs 97.0% 670,561 (Table 6-7, Line 5,Cal 9)
2 Units ofService(HCF) 244,511 (Table &-5, Line 3,Col 1)
3 Unit Cost ofService " 2.74
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables
6-17
12-61
City of Newport Beach, CA I Water Rate Study
Table 6-13 Recycled Water Pump Charge (FY 2026)
E
1 RW Rump Costs 116,74C (Table Er7, Line 5, Cal 1aJ
2 Units of Service (HCF) 222,559 (Table &-5, Note)
3 Unit Cost of Service 0.52
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-18
12-62
City of Newport Beach, CA I Water Rate Study
6.2 Fiscal Year 2027
Table 6-14 Allocation Basis for O&M Expenditures
Comm
r -
mh�® Max. Day
operating Expenses
1 Salaries 0.0% 462% 27.6%
2 Benefits 0.0% 462% 27.6%
nto All
,, Max. Hour Customers
4.4%
4.41A
Meters
103%
103%
Cust/B€ll.
0.0%
0.0%
Water SuPPly • PumpStatian
55% 3.0% 03% 23% Average O&M Iless CS+RWS)
5.5% 3.0% 03% 23% Average O&M (less CS+RWS}
3
Contract Services
0.0%
47.7%
29.4%
4.5%
11.1%
0.0%
5.6%
0.0%
0.3%
2.3% Average O&M liessWS,CS}
4
Water Conservation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0% Conservation
5
Meter Reading
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0% Meters & Services
6
Utilities
0.0%
47.7%
28.4%
4.5%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M liess WS,CS}
7
Electricity
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Pumping
8
Supplies& Materials
0.0%
47.7%
28.4%
45%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M Iless WS,CS}
9
Chemicals
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Base
10
MW Doc I mport Water
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Water Supply
11
OCWDGroundwater
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Water Supply
12
OCWD RW
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0% Recycled Water
13
Water Conservation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0% Conservation
14
Maintenance& Repair
0.0%
47.7%
28.4%
45%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M Iless WS,CS}
15
Sourceof Supply
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Base
16
Pump Station
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Pumping
17
Treatment
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Treatment
18
T&D
0.0%
36.5%
31.1%
27.41A
0.0%
0.0%
0.0%
0.0%
0.0%
5.0% T&D
19
Meters & Services
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0% Meters & Services
20
Hydrants
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0% Hydrants
21
RW Pump Station
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0% RW - PS
22
Travel & Training
0.0%
47.7%
28.4%
4.51A
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M {less WS,CS}
23
General Expenses
0.0%
47.7%
28.4%
45%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M Iless WS,CS}
24
Customer Billing
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0% Customer
25
Internal Svc Charge
0.0%
47.7%
28.4%
4.51A
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M l less WS,CSk
26
Insurance
0.0%
47.7%
28.4%
45%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M Iless WS,CS)
27
Transfers
0.0%
47.7%
28.4%
45%
11.1%
0.0%
5.6%
0.0%
03%
23% Average O&M (less WS.CS)
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-19
12-63
City of Newport Beach, CA I Water Rate Study
Table 6-15 Allocation of O&M Expenditures (FY 2027)
- -
Base
ISl M M
Operating Expenses
1 Salaries 3,992,600 0 1,846,100
Cum rn
Max. Day .
i$1
1,101,400
, nto All Customers
. Max. Hour
M
173,700
Meters
M
429,200
cust/Bill.
M
0
Water Supply +Pump Station
M i$1 i$i M
219,400 119,8o0 13,401) 90,600
2
Benefits
2,393,500
110M
1,105,700
660,300
104,200
257,3❑0
0
130,900
71,8❑0
8,100
54,3410
3
Contract Services
553,8❑0
0
311,600
185,900
29,3❑0
72,500
0
35,900
0
2,3❑0
15,3410
4
Water Conservation
245,500
0
0
❑
❑
0
0
245,5❑❑
0
❑
❑
5
Meter Reading
112,500
0
0
❑
0
112,500
0
0
0
0
0
6
Utilities
95,100
0
46,000
27,300
4,300
10,600
0
5,400
0
300
2,200
7
Electricity
2,304,200
0
1,245,500
1,059,700
0
0
0
0
0
0
0
8
Supplies&Materials
188,500
0
89,800
53,600
8,500
20,900
0
10,600
0
700
4,400
9
Chemicals
405,700
0
405,700
❑
0
0
0
0
0
0
0
10
MWDOC Import Water
5,153,SO0
51153)M
0
❑
0
0
0
0
0
0
0
11
OCWDGroundwater
819861000
819861000
0
❑
0
0
0
0
0
0
0
12
OCW D RW
520,400
0
0
❑
0
0
0
0
520,400
0
0
13
Water Conservation
241,000
0
0
0
0
0
0
241,000
0
0
0
14
Ma i ntena nce & Repa i r
98D,400
0
467,400
278,80D
44,ODD
108,600
0
55,300
0
3,400
22,900
15
Source of Supply
201,90D
0
201,90D
0
0
D
D
0
0
0
0
16
Pump Station
92,700
0
44,700
38,ODD
0
D
D
0
0
0
0
17
Treatment
92,60D
0
50,100
42,500
0
D
D
0
0
0
0
1s
storage
112,500
0
81900
0
1❑1,30D
D
D
0
0
0
2,300
19
T&D
270,000
0
98,64o
83,90D
74,ODD
D
D
0
0
0
13,500
20
Meters & Services
366,700
0
0
0
0
366,700
0
0
0
0
0
21
Hydrants
93,400
0
0
❑
0
0
0
0
0
0
93,400
22
RW PumpStation
14,700
0
0
❑
0
0
0
0
0
14,700
0
23
Travel & Tra i n i ng
38,300
0
181300
10,9M
1,700
4,200
0
2,200
0
100
900
24
General Expenses
1,495,700
0
712,900
425,400
67,100
165,700
0
84,400
0
5,200
35,000
25
Customer Billing
1,319,100
0
0
❑
0
0
1,319,100
0
0
0
0
26
Internal Svc Charge
1,583,800
0
755,0(30
450,400
71,100
175,500
0
89,300
0
5,500
37,000
27
Insurance
1,459,100
0
695,400
415,000
65,500
161,700
0
82,300
0
5,100
34,100
28
Capital Expenditures
50)M
0
19,70❑
14,900
20,000
3,201)
0
0
0
401)
2,601)
29
Transfers
105,900
0
50,400
30,100
4)M
11,700
0
61000
0
400
2,500
30
Total O&M Expenses
Less Other Revenue
$ 33,551,200
$ 14,139,700 $
8,174,700 $
4,877,100
$ 769,500 $
1,900,300 $
1,319,100
$ 1,209,200
$ 712,000
$ 59,600 $
401,000
31
Miscellaneous Revenues
583,000
0
325,600
194,200
30,600
75,700
0
38,500
0
2,400
16,000
32
Other Adjustments
12,958,900}
0
11,415,300}
1844,300}
1133,200}
1329,0001
0
1157,40M
0
110,30❑}
(69,4001
33
Net Operating Expenses
$ 35,847,100
$ 14,139,700 $
9,264,400 $
5,527,200
$ 872,100 $
2,153,600 $
1,319,100
$ 1,337,100
$ 712,ODD
$ 67,500 $
454,400
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-20
12-64
City of Newport Beach, CA I Water Rate Study
Table 6-16 Allocation Basis for Capital Costs
r - � e
Comm
Max. Day
n to All Customers
•' Max. Hour
Meters
CuWBill.
Water SuPPly • PumPStation
Plant Assets
_
1 Land 2-5% 29-9%
24-5%
33-0%
5.3%
0-0%
0-0% 0-0% 0-6% 4-3% Average Net Plant
2 Source of Supply 100-0% 0-0%
0-0%
0-0%
0-0%
0-0%
0-0% 0-0% 0-0% 0-0% water Supply
3 Pumping 0-0% 54-1%
45-9%
0-0%
0-0%
0-0%
0-0% 0-0% 0-0% 0-0% Pumping
4 Storage 0-0% 8-0%
0-0%
90-0%
0-0%
0-0%
0-0% 0-0% 0-0% 2-0% Storage
5 Treatment 0.0% 54.1%
45.9%
0.0%
0.0%
0.0%
0.0% 0.0% 0.0% 0.0% Treatment
6 Transmission & Distribution ❑-U% 36-5%
31-1%
27-4%
0-0%
0-0%
0-0% 0-0% 0-0% 5-0% T&D
7 Meters & Services 0-0% 0-0%
0-0%
0-0%
100-0%
0-0%
0-0% 0-0% 0-0% 0-0% Meters & Services
8 Hydrants 0-0% 0-0%
0-0%
0-0%
0-0%
0-0%
0-0% 0-0% 0-0% 100-0% Hydrants
9 Recycled Water 0-0% 0-0%
0-0%
0-0%
0-0%
0-0%
0-0% 100-0% 0-0% 0-0% Recycled water
10 Recycled Water - PS 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0% 0.0% 100.0% 0.0% RW - PS
11 General Plant 2.5?� 29.9%
24-5%
33-0%
53%
0-0%
0-0% 0-0% 0-6% 4-3% Average Net Plant
Table 6-17 Allocation of Capital Costs (FY 2027)
®
r
EFrFWCMM
Base
Max. Day
Max. Hour
Meters
Cust/Bill. KRUMETTIMi
Water Supply
PumpStation
fSl
fSl
iSi
fSl
ISl
f$1
f$1
fSl
M
M M
Plant Assets
1
Land
2,219,500
55,500
663,900
542,800
731,300
116,800
0
0
0
131000 96,200
2
Source of supply
3,114,400
3,114,400
0
0
0
0
0
0
0
0 0
3
Pumping
4,511,100
0
2,492,500
2,119,600
0
0
0
0
0
0 0
4
Storage
17,833,400
I1001
1,425,700
0
16,050,100
0
0
0
0
0 356,700
5
Treatment
0
0
❑
❑
0
0
0
0
❑
0 0
6
Transmission & Distribution
91,352,200
0
33,378,7DD
28,371,900
25,034,000
0
0
0
0
0
4,567,600
7
Meters & Services
6,563,000
0
0
0
0
6,563,01313
0
0
0
0
0
8
Hydrants
481,90D
0
0
0
0
0
0
0
0
0
481,900
9
Recycled Water
0
0
0
0
0
0
0
0
0
0
0
10
Recycled Water- PS
728,700
0
0
0
0
0
0
0
0
728,700
0
it
General Plant
1,303,400
32,60D
389,900
318,700
429,500
68,600
0
0
0
7,600
56,500
12
13
14
Total Plant Assets
Capital Costs
Less other Revenue
Miscellaneous Revenues
$129,207,500 $
$ 8,682,100 $
0
3,202,400
2,814,100
0
$ 38,351,700
$ 2,597,100
0
$ 31,352,000
$ 2,123,100
0
$ 42,244,900
$ 2,860,800
0
$ 6,748,400 $
$ 457,000 $
0
0 $
0 $
0
0 $
0 $
0
0 $
0 $
0
749,300 $
50,700 $
0
5,558,900
376,400
0
16 Net Capital'Fxpenses $ 9,466,100 $ 2,833,700 $ 2,931,600 $ 2,314,900 $ 3,119,100 $ 498,300 $ 0 $ 0 $ 0 $ 55,300 $ 410,400
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables 6-21
12-65
City of Newport Beach, CA I Water Rate Study
Table 6-18 Units of Service (FY 2027)
Annual
Avg. Day
Factor Total
Extra
Factor Total,
Extra
Column Reference
(1)
(2)
(3) (4)
(5)
(6) (7)
(8)
(9) (10) (11)
U nits of Measure
(HCF)
(HCF/day)
(HCF/day)
(HCFfday)
(HCF/day)
(HCF/day)
(EMs) (bills) (EHs)
Water
1 All Customers
5,439,575
14,903
190% 29,315
13,413
255% 38,003
9,687
41,163 310,596
2 Subtotal
5,439,575
14,903
28,316
13,413
38,003
9,687
41,153 310,596
Recycled Water
3 All Customers
244,511
570
265 72
4 Subtotal
244,511
570
255 72
-tire Service
5 Public Fire
772
772
6,739
5,957
303,100
6 Private Fire Service
110
110
961
851
435 5,232 43,230
7 Subtotal
892
882
7,700
5,818
435 5,232 346,330
8 Total Water System
5,594,099
15,573
29,199
14,295
45,703
15,505
41,965 315,900 346,330
Note- Recycled water consumption
is 222,559 HCFthrough
the PumpStation-
City recycled water does notgothrough the pumpstation-
Table 6-19 Units Cost of Service (FY 2027)
MIMI
Base
Max. Day
Max. Hour
Meters
Cust/Bill.
Water Supply
PumpStation
Column Reference
F (1)
F (2�
F (3)
F (4)
F (5) F
(6)
r (7)
F (9)
F (9)
F (10) '
(11)
(S)
(S1
(S)
(S)
(S)
(S)
IS1
(S)
(S1
(S)
fS1
Water utility
1
Net operating Expense
35,947,100
14,139,700
9,264,400
5,527,200
872,100
2,153,60D
1.319,1013
1,337,100
712,000
67,500
454,400
2
Capital Costs
9,455,100
235,600
2,831,600
2,314,800
3,119,100
498,300
D
0
0
55,300
410,400
3
Tota I cost of Se ry i ce
$ 45,313,200
$ 14,375,300
$12,096,000
$ 72842,000
$ 3,991,200 $
2,651,900
$ 1,319,1013
$ 1,337,100
$ 712,000
$ 122,800 $
864AM
4
Units of Service (Total)
5,439,575
5,43%576
14,295
16,505
41,865
315,900
5,439,575
244,511
222,559
346,330
HCF
HCF
HCF/day
HCF/day
EM
Bill
HCF
HCF
HCF
EH
5
Cost per Unit
$ 2-54
$ 222
$ 548-60
$ 241-82 $
63-34
$ 4-19
$ 025
$ 2-91
$ o-55 $
2-50
per HCF
per HCF
per HCF/day
per HCF/day
per EM
per Bill
per HCF
per HCF
per HCF
per EH
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-22
12-66
City of Newport Beach, CA I Water Rate Study
Table 6-20 Distribution of Costs to Customer Types (FY 2027)
r �se
Com
Max. Day.
n to All Customers
• Max. Hour
Meters Cust/Bill.
WaterSupply'PumpStatian
Column Reference (1) (2) (3)
(4)
(5)
(6) (7)
(9) (9) (10) (11)
1 Cost per Unit $ 2.64 $ 2.22
$ 549.60
$ 241.82
$ 63.34 $ 4.18
$ 0.25 $ 2.91 $ 0.55 $ 2.50
per HCF per HCF
per HCF/day
per HCF/day
per EM per Bill
per HCF per HCF per HCF per EH
Water
All Customers
2 Units 5,439,575 5,439,576 13,413 9,687 41,163 310,596 5,439,575
3 Allocation of costs of service 41,414,400 14,376,300 12,096,000 7,358,100 2,342,500 2,607,500 1,296,900 1,337,100
8,547,420
Recycled water
All Customers
4
Units
265
72 244,511
222,559
5
Allocation of costs ofservice
851,900
16,800
300 712,000
122)M
-tire Service
Public Fire
6
Units
772
5,967
303,100
7
AI location of costscfservice
2,623,300
423,500
1,442,900
756,900
Private Fire Service
8
Units
110
951
436
5,232
43,230
9
Allocation of costs of service
423,700
60,400
205,900
27,600
21,900
1081000
10
TOTAL COSTS OF SERVICE
$ 45,313,200
$ 14,375,300 $12,096,000 $ 7,842,000 $
3,991,200
$ 2,651,900
$ 1,319,100 $ 1,337,100 $ 712,000 $
122f800 $ 864,800
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-23
12-67
City of Newport Beach, CA I Water Rate Study
Table 6-21 Costs within the Water Monthly Fixed Charge (FY 2027)
Capadty
Capacity, Meters
Mtrs&Svcs
& Svcs, Public Fire Service
PublicFire Meter
Adjusted
Oust Billing
Adjusted
. .
Uirt Cast
Unit Cyst
Unit Cast Ratio
U rrt Cost
Unit Cast
M Ratio Unit Cost
per EM
per EM
per EM
$
per Bill
$
$/Month
5/8",3/4" 26-82
5-28
5,31 1.00
37A1
4-18
1-00 4.18
41-59
1" 26-82
5-28
5-31 1.67
62,35
4-18
1-00 4.18
56-53
1-1/2" 26-82 5-28 5-31 3.33 124.71 4-18 1-00 4.18 128-9B
2" 26-82 5-28 5-31 5,33 199.53 4-18 1-00 4.18 203-71
3" 26-82 5-28 5-31 14.50 542.47 4-18 1-00 4.18 546-65
4" 26-82 5-28 5-31 25.00 935.30 4-18 1-00 4.18 939-47
6" 26-82 5-28 5-31 53,33 1,995.30 4-18 1-00 4.18 1,999-48
8" 26-92 5-29 5-31 93,33 3,491.77 4-18 1-00 4.18 3,495-95
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 13,249,200 $ 2,607,500 $ 2,623.300 $ 1,296,900 $ 19,776,900
Table 6-22 Costs within the Recycled Water Monthly Fixed Charge (FY 2027)
� Water Supply,
Water Supply Mtrs & Svcs Meter Adjusted Oust Baling Adjusted Total
Unit Cost Unit Cost Ratio Unit Cost Unit Cast Bill Ratio unit cost Charge
per EM per EM per Bill $ $/Month
5/9", 3/4" 6-71 5-28 1-00 11-99 4-18 1-00 4-18 16-17
1" 6-71 5-28 1-67 19-99 4-18 1-00 4-18 24-16
1-1/2" 6.71 5.28 3.33 39.97 4.18 1.00 4.18 44.15
2" 6-71 5-29 5-33 63-95 4-18 1-00 4-19 68-13
3" 6-71 5-28 14-50 173,88 4-18 1-00 4-19 178-05
4" 6-71 5-28 25-00 299-79 4-18 1-00 4-18 303-96
6" 6.71 5.28 53.33 639.55 4.18 1.00 4.18 643.72
all 6-71 5-29 93-33 1,119-21 4-19 1-00 4-19 1,123,38
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 21,400 $ 16f800 $ 301) $ 38,50U
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-24
12-68
City of Newport Beach, CA I Water Rate Study
Table 6-23 Costs within the Fire Service Charge (FY 2027)
Capacity,
Capacity Private Fire Meter
Adjusted
Mtrs&Svcs
Cust Billing
Adjusted
. .
Uirt Cast Unit Cost Ratio
Unit Cost
U nit Cost
Unit Cost
Bill Ratio Unit Cost
per EH per EH
$
per Bill
per Bill
_ $
$/Month
5/8" 0.51 021 029
0.21
5.28
4.18
1.00 9.45
9.56
1" 0.51 0.21 1.00
0.72
5.28
4.18
1.00 9.45
10.1E
1-1/2"
0.51
0.21
2.90
2.10
5.28
4.18
1.00
9.45
11.55
2"
0.51
0.21
6.19
4.47
5.28
4.18
1.00
9.45
13.92
2-1/2"
0.51
0.21
11.113
8.03
5.28
4.18
1.00
9.45
17.48
3"
0.51
0.21
17.98
12.97
5.28
4.18
1.00
9.45
22.43
4"
0.51
0.21
38,32
27.64
5.28
4.18
1.00
9.45
37.10
6"
0.51
0.21
111,31
80.29
5.28
4.18
1.00
9.45
89.75
8"
0.51
021
237.21
171.10
5.28
4.18
1.00
9.45
180.56
10"
0.51
021
426.58
307.70
5.28
4.18
1.00
9.45
317.16
12"
0.51
021
689.04
497.03
5.28
4.18
1.00
9.45
506.48
*EH = Equivalent Hydrant
Fixed Svc Charge Revenue
$ 265,200 $
108,000
$
27,500 $
21,900
$
423,700
Table 6-24 Water Consumption Charge (FY 2027)
1
Water Supply Costs
14,376,300
(Table 6-20, Line 3,Coll 21
2
Capacity Costs
39.2% 8,547,400
(Table 6-20, Line 3,Coll 3,4,5)
3
Conservation Costs
1,337,100
(Ta ble 6-20, Line 3, Col 8)
4
Total Water Costs
$ 24,260,800
5
Units of Service (HCF)
5,439,576
(Table 6-18, Line 1, Col 1)
6
U nit Cost of Service
4.46
Table 6-25 Recycled Water Consumption Charge (FY 2027)
1 Recycled W ater Supply Costs 97.0% 690,640 (Table 6-20, Line 5, Cal 9)
2 Units ofService(HCF) 244,511 (Table &-18,Line 3,Coll)
3 Unit Cost of Service " 2-92
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables
6-25
12-69
City of Newport Beach, CA I Water Rate Study
Table 6-26 Recycled Water Pump Charge (FY 2027)
1 RW Rump Costs 122,800 (Table Er20, Line 5, Cal 10J
2 Units of Service (HCF) 222,559 (Table &-18, Note)
3 Unit Cost of Service 0.55
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-26
12- 70
City of Newport Beach, CA I Water Rate Study
6.3 Fiscal Year 2028
Table 6-27 Allocation Basis for O&M Expenditures
Common to All Customers
Water base Extra Capacity I Customer Recycled Water Fire Allocation
Line Ha. Description I Supply Base Max. D. Conservation Protection Basis
1
2
Operating Expenses
Salaries
Benefits
0.0%
0-0%
46.3%
463%
27.6%
27-6%
4.3%
4-3%
10.7%
103%
0.0%
0-0%
5.4%
5-4%
3.0%
3-0%
0.3%
03%
2.3% Average O&M (less CS+RWS�
2-3% Average O&M (less CS+RWS}
3
Contract Services
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
0-3%
2-3% Average O&M ( less WS,CS}
4
Water Conservation
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0% Conservation
5
Meter Reading
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0% Meters & Services
6
Utilities
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&M l less WS,CS}
7
Electricity
0-0%
54-1%
45-9%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Pumping
8
Supplies & Materials
0-0%
47-7%
28-5%
4-51A
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&Mlless WS,CS}
9
Chemicals
0.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Base
10
MW DOC I m port Water
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Watersupply
11
OCWDGroundwater
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Watersupply
12
OCWD RW
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
1030%
0-0%
0-0% Recycled Water
13
Water Conservation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0%
0.0%
0.0% Conservation
14
Ma i ntena nce & Repa i r
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&M l less WS,CS}
15
Sourceofsupply
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Base
16
Pump Station
0-0%
54-1%
45-9%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0% Pumping
17
Treatment
0.0%
54.1%
45.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0% Treatment
18
T&D
0-0%
36-5%
31-1%
27-4%
0-0%
0-0%
0-0%
0-0%
0-0%
5-0% T&D
19
Meters & Services
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0%
0-0%
0-0% Meters & Services
20
Hydrants
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
0-0%
100-0% Hydrants
21
RW Pump Station
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
0.0% RW-PS
22
Travel & Training
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&M l less WS,CS}
23
General Expenses
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&M Iless WS,CS}
24
Customer Bi l l i ng
0-0%
0-0%
0-0%
0-0%
0-0%
100-0%
0-0%
0-0%
0-0%
0-0% Customer
25
I nterna l Svc Charge
0.0%
47.7%
28.5%
4.5%
11.1%
0.0%
5.6%
0.0%
0.3%
2.3% Average4&M l less WS,CS}
26
Insurance
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O,&M l less WS,CS}
27
Transfers
0-0%
47-7%
28-5%
4-5%
11-1%
0-0%
5-6%
0-0%
03%
23% Average O&M l less WS,CS}
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-27
12-71
City of Newport Beach, CA I Water Rate Study
Table 6-28 Allocation of O&M Expenditures (FY 2028)
- -
Base
ISl M M
Operating Expenses
1 Salaries 4,112,400 0 1,903,600
Cum rn
Max. Day .
M
1,135,500
, nto All Customers
. Max. Hour
M
178,600
Meters
M
441,200
cust/Bill.
M
0
Water Supply +Pump Station
M i$1 i$i M
223,O❑0 123,400 13,700 93,400
2
Benefits
2,455,3❑0
0
1,141,200
690,700
107,000
264,500
0
133,700
74,000
8,200
56,01)0
3
Contract Services
579,900
0
324,600
193,500
30,400
75,200
0
38,000
0
2,3❑0
15,9❑0
4
Water Conservation
255,3M
0
0
❑
❑
0
0
255,3M
0
❑
❑
5
Meter Reading
117,000
0
0
❑
0
117,000
0
0
0
0
0
6
Utilities
100,900
0
48,200
28,700
4,500
11,200
0
5,600
0
300
2,400
7
Electricity
2,419,400
0
1,307,800
1,111,600
0
0
0
0
0
0
0
8
Supplies&Materials
197,900
0
94,400
56,300
81900
21,900
0
11,100
0
700
4,600
9
Chemicals
425,000
0
425,000
❑
0
0
0
0
0
0
0
10
MWD❑C Import Water
5,434,500
5,434,500
0
❑
0
0
0
0
0
0
0
11
OCWDGroundwater
9,327,300
9,327,300
0
❑
0
0
0
0
0
0
0
12
OCW D RW
535,000
0
0
❑
0
0
0
0
536,000
0
0
13
Water Conservation
253,100
0
0
0
0
0
0
253,100
0
0
0
14
Ma i ntena nce & Repa i r
1,029,500
0
491,200
293,100
46,100
113,9OD
0
57,600
0
3,500
24,100
15
Source of Supply
212,000
0
212,ODD
0
0
0
0
0
0
0
0
16
Pump Station
86,8DD
0
46,900
39,900
0
0
0
0
0
0
0
17
Treatment
97,200
0
52,500
44,700
0
0
0
0
0
0
0
1s
storage
118,100
0
9,400
0
106,300
0
0
0
0
0
2,400
19
T&D
283,5D4
0
103,600
88,0DD
77,700
0
0
0
0
0
14,200
20
Meters & Services
385,000
0
0
0
0
385,ODD
0
0
0
0
0
21
Hydrants
97,600
0
0
❑
0
0
0
0
0
0
87,600
22
RW PumpStation
15,400
0
0
❑
0
0
0
0
0
15,400
0
23
Travel & Tra i n i ng
39,800
0
19,100
11,300
1,800
4,400
0
2,200
0
100
900
24
General Expenses
1,555,500
0
742,300
442,800
69,600
172,100
0
87,000
0
5,300
36,400
25
Customer Billing
1,371,900
0
0
❑
0
0
1,371,900
0
0
0
0
26
Internal Svc Charge
1,572,500
0
798,000
475,100
74,900
185,000
0
93,500
0
5,800
39,200
27
Insurance
1,540,800
0
735,300
438,600
69,000
170,400
0
85,100
0
5,300
36,100
28
Capital Expenditures
53,200
0
21,000
15,700
20,401)
3,101)
0
0
0
301)
2,701)
29
Transfers
1435AW
0
1207,9❑0}
1124,100}
1191500}
148,200}
0
124,4010
0
11,500}
110,200}
30
Total O&M Expenses
Less Other Revenue
$ 34,448,000
$ 14,751,800 $
8,269,200 $
4,932,400
$ 775,700 $
1,916,700 $
1,371,900
$ 1,221,800
$ 733,400
$ 59,400 $
405,700
31
Miscellaneous Revenues
583,000
0
325,000
194,400
30,600
75,500
0
38,200
0
2,300
16,000
32
Other Adjustments
14,309,1001
0
12,055,40M
11,225,600}
1192,900}
1476,6001
0
1240,900}
0
114,800}
1100,9001
33
Net operating Expenses
$ 38,074,100
$ 14,751AM $
9,999,600 $
5,954,600
$ 938,ODD $
2,317,8OD $
1,371,9OD
$ 1,424,500
$ 733,400
$ 71,900 $
490,600
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-28
12-72
City of Newport Beach, CA I Water Rate Study
Table 6-29 Allocation Basis for Capital Costs
r - � e
Comm
Max. Day •'
n to All Customers
Max. Hour
Meters
CuWBill. Water SuPPly • PumPStation
Plant Assets
_
1 Land 2-8% 30.2%
24.8%
32.3%
5-0%
0-0%
0-(% 0-0% 0-5% 43% Average Net Plant
2 Source of Supply 100-0% 0-0%
0.0%
0-0%
0-0%
0-0%
0-0% 0-0% 0-0% 0-0% water Supply
3 Pumping 0-0% 54-1%
45.9%
0-0%
0-0%
0-0%
0-0% 0-0% 0-0% 0-0% Pumping
4 Storage 0-0% 8-0%
0-0%
90-0%
0-0%
0-0%
0-0% 0-0% 0-0% 2-0% Storage
5 Treatment 0.0% 54.1%
45.9%
0.0%
0.0%
0.0%
0.0% 0.0% 0.0% 0.0% Treatment
6 Transmission & Distribution ❑-0% 365%
31-1%
27-4%
0-0%
0-0%
0-0% 0-0% 0-0% 5-0% T&D
7 Meters & Services 0-0% 0-0%
0-0%
0-0%
100-0%
0-0%
0-0% 0-0% 0-0% 0-0% Meters & Services
8 Hydrants 0-0% 0-0%
0-0%
0-0%
0-0%
0-0%
0-0% 011% 0-0% 100-0% Hydrants
9 Recycled Water 0-a% 0-0%
0-0%
0-0%
0-0%
0-0%
0-0% 100-0% 0-0% 0-0% Recycled water
10 Recycled Water - PS 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0% 0.0% 100.0% 0.0% RW - PS
11 General Plant 2.8'� 302%
24-8%
32.3%
5-0%
0-0%
0-0% 0-0% 0-5% 4-3% Average Net Plant
Table 6-30 Allocation of Capital Costs (FY 2028)
a
Max. Day
. ,Customers Max. Hour
Meters
Cust/Bill. ®Water SuPPly , PumPstation
fSl fSl
1Si
fSl
ISl
f$1
1S1 1$1 M i$1 M
Plant Assets
1 Land 2,219,500 52,700
570)M
550,000
717,400
110,396
0 0 0 12,106 96,200
2 Source of supply 3,587,100 3,687,100
0
0
0
0
0 0 0 0 0
3 Pumping 5109319M 0
2,753,500
2,340,400
0
0
0 0 0 0 0
4 Storage 17,475,100 0
1,398,000
0
15,727,600
0
0 0 0 0 349,500
5 Treatment 0 0
❑
❑
0
0
0 0 ❑ 0 0
6 Transmission & Distribution 95,732,200 0
35,344,500
30,042,800
26,508,3D0
0
0 0 0 0 4,936,600
7 Meters & Services 5,494,400 0
0
0
0
6,494,400
0 0 0 0 0
8 Hydrants 480,000 0
0
0
0
0
0 0 0 0 480,ODD
9 Recycled Water 0 0
0
0
0
0
0 0 0 0 0
10 RecycledWater - PS 710,100 0
0
0
0
0
0 0 0 710,100 0
it General Plant 1,503,600 45,300
494,700
397,400
513,300
79,700
0 0 0 8,700 69,500
12 Total Plant Assets $134,495,900 $ 3,795,100
$ 40,551,500
$ -13,330,600
$ 43,471,600
$ 6,684,400
$ 0 $ 0 $ 0 $ 730,900 $ 5,831,800
13 Capital Costs $ 9,115,200 $ 3,912,600
$ 2,755,400
$ 2,25%200
$ 2,946,500
$ 453,100
$ 0 $ 0 $ 0 $ 49,500 $ 395,300
Less Other Revenue
14 Miscellaneous Revenues 0 0
0
0
0
0
0 0 0 0 0
15 Other Adj ustments 11,163,4001 133,0001
1351,600}
1288,3❑D}
l376,OD04
l57,800}
0 0 0 16,3❑0} 150,4001
16 Net Capital Expenses $ 10,279,600 $ 3,045,600
$ 3,107,000
$ 2,547,500
$ 3,322,500
$ 510,900
$ 0 $ 0 $ 0 $ 55,8D0 $ 445,700
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables 6-29
12- 73
City of Newport Beach, CA I Water Rate Study
Table 6-31 Units of Service (FY 2028)
Annual
Avg. Day
Factor Total
Extra
Factor Total.
Extra
Column Reference
(1)
(2)
(3) (4)
(5)
(6) (7)
(8)
(9) (10) (11)
U nits of Measure
(HCF)
(HCF/day)
(HCF/day)
(HCFfday)
(HCF/day)
(HCF/day)
(EMs) (bills) (EHs)
Water
1 All Customers
5,439,575
14,903
190% 29,315
13,413
255% 38,003
9,687
41,163 310,596
2 Subtotal
5,439,575
14,903
28,316
13,413
38,003
9,687
41,153 310,596
Recycled Water
3 All Customers
244,511
570
265 72
4 Subtotal
244,511
570
255 72
-tire Service
5 Public Fire
772
772
6,739
5,957
303,100
6 Private Fire Service
110
110
961
851
435 5,232 43,230
7 Subtotal
892
882
7,700
5,818
435 5,232 346,330
8 Total Water System
5,594,099
15,573
29,199
14,295
45,703
15,505
41,965 315,900 346,330
Note- Recycled water consumption
is 222,559 HCFthrough
the PumpStation-
City recycled water does notgothrough the pumpstation-
Table 6-32 Units Cost of Service (FY 2028)
MIMI
Base
Max. Day
Max. Hour
Meters
Cust/Bill.
Water Supply
PumpStation 11119TNTM"Ir MI
Column Reference
F (1)
F (2�
F (3)
F (4)
F (5) F
(6)
r (7)
F (9)
F (9)
F (10) '
(11)
(S)
(S1
(S)
(S)
(S)
(S1
(S1
(S)
(S)
(S)
fS1
Water utility
1
Net Operating Expense
39,074,100
14,751,800
9,999,600
5,964,600
938,000
2,317,800
1,371,900
1,424,500
733,400
71,900
490,600
2
Capital Costs
10,279,600
290,200
3,107,000
2,547,500
3,322,500
510,900
0
0
0
55,800
445,700
3
Total Cost of service
$ 48,353,700
$ 15,052,000
$ 13,106,600
$ 8,512,100
$ 4,264,544 $
2A28,700
$ 1,371,900
$ 1,424,500
$ 733,400
$ 127,744 $
936,3Q0
4
Units of Service (Total)
5,439,575
5,439,575
14,295
16,505
41,865
315,900
5,439,575
244,511
222,559
346,330
HCF
HCF
HCF/day
HCF/day
EM
Bill
HCF
HCF
HCF
EH
5
Cost per Unit
$ 2-77
$ 2-41
$ 595-47
$ 258-14 $
67.57
$ 434
$ 025
$ 3-00
$ 0-57 $
2-70
per HCF
per HCF
per HCF/day
per HCF/day
per EM
per Bill
per HCF
per HCF
per HCF
per EH
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables 6-30
12-74
City of Newport Beach, CA I Water Rate Study
Table 6-33 Distribution of Costs to Customer Types (FY 2028)
�se
Com
Max. Day .
n to All Customers
.•,Max. Hour
Meters Cust/Bill.
Water Supply'PumpSt:atian
Column Reference (1) (2) (3)
(4)
(5)
(6) (7)
(9) (9) (10) (11)
1 Cost per Unit $ 2.77 $ 2.41
$ 595.47
$ 258.14
$ 67.57 $ 4.34
$ 0.26 $ 3.00 $ 0.57 $ 2.70
per HCF per HCF
per HCF/day
per HCF/day
per EM per Bill
per HCF per HCF per HCF per EH
Water
All Customers _
2 Units 5,439,575 5,439,576 13,413 9,687 41,163 310,596 5,439,575
3 Al location of costs of service 44,200,800 15,052,000 13,105,600 7,997,000 2,500,500 2,781,300 1,348,900 1,424,500
9,327,559
Recycled water
All Customers
4 Units 265 72 244,511 222,559
5 Allocation of costs ofservice 879,300 17,900 300 733,400 127,700
-tire Service
Public Fire
6 Units 772 5,967 303,100
7 AI location of costs cf service 2,819,300 459,600 1,540,300 819,400
Private Fire Service
8 Units
9 Allocation of costs cf service
10 TOTAL COSTS OF SERVICE
110 851 436 5,232 43,230
454,300 65,500 219,700 29,500 22,700 116,900
$ 49,353,700 $ 15,052,000 $ 13,106,600 $ 9,512,100 $ 4,260,500 $ 2A28,700 $ 1,371,900 $ 1,424,500 $ 733,400 $ 127,700 $ 936,300
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-31
12-75
City of Newport Beach, CA I Water Rate Study
Table 6-34 Costs within the Water Monthly Fixed Charge (FY 2028)
Capadty
Capacity, Meters
Mtrs&Svcs
& Svcs, Public Fire Service
PublicFire Meter
Adjusted
Oust Billing
Adjusted
. .
Uirt Cast
Unit Cyst
UHit Cast Ratio
Uri it Cast
U nit Cast
M Ratio Unit Cost
per EM
per EM
per EM
$
per Bill
$
$/Month
5/8", 3/4" 30-91
5-63
5-71 1.00
42.24
4-34
1-00 4.34
46-59
1" 30-91
5-63
5-71 1.67
70.41
4-34
1-00 4.34
74-75
1-1/2" 30-91 5-63 5-71 3,33 140.82 4-34 1-00 4.34 145-16
2" 30-91 5-63 5-71 5,33 225,30 4-34 1-00 4.34 229-55
3" 30-91 5-63 5-71 14.50 612.55 4-34 1-00 4.34 616-89
4" 30-91 5-63 5-71 25.00 1,056.12 4-34 1-00 4.34 1,060-46
6" 30-91 5-63 5-71 53,33 2,253.05 4-34 1-00 4.34 2,257.39
8" 30-91 5-63 5-71 93,33 3,942.83 4-34 1-00 4,34 3,947-19
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 15,266,600 $ 2,781,400 .$ 2rS19.300 $ 1,349,900 $ 22,216,200
Table 6-35 Costs within the Recycled Water Monthly Fixed Charge (FY 2028)
Water Supply, Meters & Svcs Customer Billing
Water Supply Mtrs & Svcs Meter Adjusted Oust Baling Adjusted Total
Unit Cost Unit Cost Ratio Unit Cost Unit Cast Bill Ratio unit cost Charge
per EM per EM $ per Bill $ $/Month
5/9", 3/4" 6-91 5-63 1-00 12-55 4-34 1-00 4-34 16-99
1" 6-91 5-63 1-67 20-91 4-34 1-00 4-34 25-25
1-1/2" 6.91 5.63 3.33 41.82 4.34 1.00 4.34 46.16
2" 6-91 5-63 5-33 66-91 4-34 1-00 4-34 71-25
3" 6-91 5-63 14-50 181-91 4-34 1-00 4-34 186-25
4" 6-91 5-63 25-00 313-63 4-34 1-00 4-34 317-97
6" 6.91 5.63 53.33 669.08 4,34 1.00 4,34 673.42
all 6-91 5-63 93-33 1,170M 4-34 1-00 4,34 1,175-23
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 22,000 17,900 $ 300 $ 40,200
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables 6-32
12-76
City of Newport Beach, CA I Water Rate Study
Table 6-36 Costs within the Fire Service Charge (FY 2028)
Capacity,
Capacity Private Fire Meter
Adjusted
Mtrs&Svcs
Oust Billing
Adjusted
. .
Unit Cost unit Cost Ratio
Unit Cost
U nit Cost
Unit Cast
Bill Ratio Unit Cost
per EH per EH
$
per Bill
per Bill
_ $
$/Month
5/8" 0.55 0.23 0.29
0.23
5.63
4-34
1.00 9.97
10.20
1" 0.55 0.23 1.00
0.78
5.63
4-34
1.00 9.97
10.75
1-1/2"
0.55
0.23
2.90
2.25
5.63
4-34
1.00
9.97
12.23
2"
0.55
0.23
6.19
4Z0
5.63
4-34
1.00
9.97
14.77
2-1/2"
0.55
0.23
11.113
8.63
5.63
4-34
1.00
9.97
18.60
3"
0.55
0.23
17.98
13.94
5.63
4-34
1.00
9.97
23.91
4"
0.55
0.23
38,32
29.70
5.63
4-34
1.00
9.97
39.68
6"
0.55
0.23
111,31
86.28
5.63
4-34
1.00
9.97
96.25
8"
0.55
0.23
237.21
183Z6
5.63
4-34
1.00
9.97
193,94
10"
0.55
0.23
426.58
330.65
5.63
4-34
1.00
9.97
340.62
12"
0.55
0.23
699.04
534.09
5.63
4.34
1- 0
9.97
544.06
*EH = Equivalent Hydrant
Fixed Svc Charge Revenue
$ 285,200 $
116,90U
$
29,5011 $
22,700
$
454,30U
Table 6-37 Water Consumption Charge (FY 2028)
1
Water Supply Costs
$ 15,052,000
(Table 6-33, Line 3,Coll 21
2
Capacity Costs
35,3% 8,327,60D
(Table 6-33, Line 3,Coll 3,4,5)
3
Conservation Costs
1,424,50D
(Ta ble 6-33, Line 3, Col 8)
4
Total Water Costs
$ 24,804,101)
5
Units of Service (HCF)
_ 5,439,576
(Table 6-31, Line 1, Col 1)
6
Unit Cost of Service
4.56
Table 6-38 Recycled Water Consumption Charge (FY 2028)
1 Recycled W ater Supply Costs 97.0% 711,399 (Table 6-33, Line 5, Cal 9)
2 Units ofService(HCF) 244,511 (Table &-31,Line 3,Coll)
3 Unit Cost ofService " 2.91
BLACK & VEATCH I Appendix A - Cost of Service Analysis and Rate Tables
6-33
12-77
City of Newport Beach, CA I Water Rate Study
Table 6-39 Recycled Water Pump Charge (FY 2028)
1 RW Rump Costs 127,74C (Table Er33, Line 5, Cal 10J
2 Units of Service (HCF) 222,559 (Table &-31, Note)
3 Unit Cost of Service 0-57
BLACK & VEATCH I Appendix A — Cost of Service Analysis and Rate Tables
6-34
12-78
ATTACHMENT B
DRAFT FINAL
SEWER RATE STUDY
BLACK & VEATCH PROJECT NO. 414264
PREPARED FOR
POR�
O�
� � n
V � 1
C"LIFOR��P
City of Newport Beach, CA
18 SEPTEMBER 2023
BLACK & VEATCH
12-79
City of Newport Beach, CA I Sewer Rate Study
Table of Contents
LegalNotice
.................................................................................................................................................1
1.0 Executive Summary....................................................................................................................1-1
1.1
Financial Plan...................................................................................................................1-1
1.2
Cost of Service Analysis..................................................................................................1-2
1.3
Rate Design.....................................................................................................................
1-2
2.0 Introduction.................................................................................................................................2-1
2.1
Purpose............................................................................................................................2-1
2.2
Sewer System..................................................................................................................
2-1
2.3
Methodology.....................................................................................................................2-1
2.3.1 Financial Plan...................................................................................................
2-1
2.3.2 Cost -of -Service Analysis..................................................................................
2-1
2.3.3 Rate Design......................................................................................................2-2
2.3.4 Rate Adoption...................................................................................................2-2
SewerUtility
..............................................................................................................................................2-1
3.0 Revenue and Revenue Requirements.......................................................................................3-1
3.1
Customer and Water Consumption Projections...............................................................3-1
3.1.1 No. of Customers..............................................................................................3-1
3.1.2 Contributed Sewage Flow................................................................................
3-2
3.2
Revenue under Existing Rates........................................................................................3-2
3.3
Other Revenue.................................................................................................................3-3
3.4
Operating and Maintenance Expenses............................................................................3-3
3.5
Capital Improvement Program.........................................................................................
3-5
3.6
Transfers within the Fund................................................................................................3-5
3.7
Reserves..........................................................................................................................
3-5
3.8
Projected Operating Results............................................................................................
3-6
4.0 Cost -of
-Service Analysis............................................................................................................4-1
4.1
Functional Cost Components...........................................................................................4-1
4.2
Allocation to Cost Components........................................................................................4-2
4.2.1 Volume Allocations...........................................................................................4-2
4.2.2 Allocation of Operating and Maintenance Expenses.......................................4-2
4.2.3 Allocation of Capital Investments.....................................................................
4-3
4.3
Units of Service................................................................................................................4-4
4.4
Cost of Service Allocations..............................................................................................
4-5
4.4.1 Units Costs of Service......................................................................................4-5
4.4.2 Distribution of Costs of Service to Customer types..........................................4-5
5.0 Rate Design.................................................................................................................................5-1
5.1
Existing Rates..................................................................................................................
5-1
5.2
Proposed Rates...............................................................................................................5-1
5.2.1 Monthly Fixed Service Charge.........................................................................
5-1
BLACK & VEATCH I Table of Contents
12-80
City of Newport Beach, CA I Sewer Rate Study
5.2.2 Consumption Charge.......................................................................................5-2
5.2.3 Sewer Only Charge..........................................................................................
5-4
Typical Monthly Costs under Proposed Charges.........................................................................5-5
5.3 Summary of Rate Study...................................................................................................5-5
6.0 Appendix A — Cost of Service and Rate Design......................................................................6-1
6.1 Fiscal Year 2025..............................................................................................................6-1
6.2 Fiscal Year 2026..............................................................................................................
6-4
6.3 Fiscal Year 2027..............................................................................................................
6-7
6.4 Fiscal Year 2028............................................................................................................6-10
LIST OF TABLES
Table 1-1
Proposed Five -Year Sewer Rate Schedules ....................
Table 3-1
Number of Sewer Customers ............................................
Table 3-2
Contributed Sewage Flow .................................................
Table 3-3
Existing Sewer Rates ........................................................
Table 3-4
Projected Sewer Revenue under Existing Rates ..............
Table 3-5
Sewer O&M Escalation Factors ........................................
Table 3-6
Sewer O&M Expenses......................................................
Table 3-7
Sewer Capital Improvement Projects ................................
Table 3-8
Sewer Enterprise Fund .....................................................
Table 4-1
Cost of Service Revenue from Rates (FY 2024) ..............
Table 4-2
Allocation Basis for O&M Expenditures (FY 2024) ...........
Table 4-3
Allocation of O&M Expenditures (FY 2024) ......................
Table 4-4
Allocation Basis for Capital Costs (FY 2024)....................
Table 4-5
Allocation of Capital Costs (FY 2024) ...............................
Table 4-6
Units of Service (FY 2024)................................................
Table 4-7
Units Cost of Service (FY 2024).......................................
Table 4-8
Distribution of Costs to Customer Types (FY 2024) .........
Table 5-1
Costs within the Sewer Monthly Fixed Charge (FY 2024)
Table 5-2
Proposed Sewer Monthly Fixed Charge ...........................
Table 5-3
Sewer Consumption Charge (FY 2024)............................
Table 5-4
Proposed Consumption Charges ......................................
Table 5-5
Proposed Sewer -Only Charges ........................................
Table 5-6
Typical Monthly Bill...........................................................
Table 6-1
Allocation Basis for O&M Expenditures (FY 2025) ...........
Table 6-2
Allocation of O&M Expenditures (FY 2025) ......................
Table 6-3
Allocation Basis for Capital Costs (FY 2025)....................
Table 6-4
Allocation of Capital Costs (FY 2025) ...............................
Table 6-5
Units of Service (FY 2025)................................................
Table 6-6
Units Cost of Service (FY 2025).......................................
Table 6-7
Distribution of Costs to Customer Types (FY 2025) .........
1-3
3-1
3-2
3-3
3-3
3-4
3-4
3-5
3-8
4-1
4-2
4-2
4-3
4-3
4-6
4-6
4-6
5-2
5-2
5-3
5-4
BLACK & VEATCH I Table of Contents
12-81
City of Newport Beach, CA I Sewer Rate Study
Table 6-8
Costs within the Sewer Monthly Fixed Charge (FY 2025)...............................................6-3
Table 6-9
Sewer Consumption Charge (FY 2025)...........................................................................6-3
Table 6-10
Allocation Basis for O&M Expenditures (FY 2026)..........................................................
6-4
Table 6-11
Allocation of O&M Expenditures (FY 2026).....................................................................
6-4
Table 6-12
Allocation Basis for Capital Costs (FY 2026)...................................................................6-5
Table 6-13
Allocation of Capital Costs (FY 2026)..............................................................................6-5
Table 6-14
Units of Service (FY 2026)...............................................................................................6-5
Table 6-15
Units Cost of Service (FY 2026)......................................................................................6-5
Table 6-16
Distribution of Costs to Customer Types (FY 2026)........................................................
6-6
Table 6-17
Costs within the Sewer Monthly Fixed Charge (FY 2026)...............................................6-6
Table 6-18
Sewer Consumption Charge (FY 2026)...........................................................................6-6
Table 6-19
Allocation Basis for O&M Expenditures (FY 2027)..........................................................
6-7
Table 6-20
Allocation of O&M Expenditures (FY 2027).....................................................................
6-7
Table 6-21
Allocation Basis for Capital Costs (FY 2027)...................................................................6-8
Table 6-22
Allocation of Capital Costs (FY 2027)..............................................................................6-8
Table 6-23
Units of Service (FY 2027)...............................................................................................6-8
Table 6-24
Units Cost of Service (FY 2027)......................................................................................6-8
Table 6-25
Distribution of Costs to Customer Types (FY 2027)........................................................
6-9
Table 6-26
Costs within the Sewer Monthly Fixed Charge (FY 2027)...............................................6-9
Table 6-27
Sewer Consumption Charge (FY 2027)...........................................................................6-9
Table 6-28
Allocation Basis for O&M Expenditures (FY 2028)........................................................6-10
Table 6-29
Allocation of O&M Expenditures (FY 2028)...................................................................6-10
Table 6-30
Allocation Basis for Capital Costs (FY 2028).................................................................6-11
Table 6-31
Allocation of Capital Costs (FY 2028)............................................................................6-11
Table 6-32
Units of Service (FY 2028).............................................................................................6-11
Table 6-33
Units Cost of Service (FY 2028)....................................................................................6-11
Table 6-34
Distribution of Costs to Customer Types (FY 2028)......................................................6-12
Table 6-35
Costs within the Sewer Monthly Fixed Charge (FY 2028).............................................6-12
Table 6-36
Sewer Consumption Charge (FY 2028).........................................................................6-12
11 Rill due] 0a[ell]ZI*•
Figure 1-1
Sewer Enterprise Fund Financial Plan.............................................................................1-2
Figure 3-1
Sewer Fund Projected Ending Balances.........................................................................3-6
Figure 3-2
Status Quo Sewer Enterprise Cash Flow........................................................................
3-7
Figure 3-3
Sewer Enterprise Fund Financial Plan.............................................................................3-9
Figure 5-1
Temperature and Precipitation Trends in Newport Beach...............................................5-3
BLACK & VEATCH I Table of Contents
12-82
City of Newport Beach, CA I Sewer Rate Study
Legal Notice
Black & Veatch Management Consulting, LLC (Black & Veatch) has prepared this report for the City of
Newport Beach (City), and it is based on information not within the control of Black & Veatch. The City
has not requested Black & Veatch to make an independent analysis, verify the information provided to us,
or render an independent judgment of the validity of the information provided by others. Because of this,
Black & Veatch cannot, and does not, guarantee the accuracy thereof to the extent that such information,
data, or opinions were based on information provided by others.
In conducting these analyses and in forming an opinion of the projection of future financial operations
summarized in this report, Black & Veatch made certain assumptions on the conditions, events, and
circumstances that may occur in the future. The methodology utilized in performing the analyses follows
generally accepted practices for such projections. Such assumptions and methodologies are reasonable
and appropriate for the purpose for which they are used. While we believe the assumptions are
reasonable and the projection methodology valid, actual results may differ materially from those
projected, as influenced by the conditions, events, and circumstances that occur. Such factors may
include the City's ability to execute the capital improvement program as scheduled and within budget,
regional climate and weather conditions affecting the demand for water, discharge of sewage flow, and
adverse legislative, regulatory, or legal decisions (including environmental laws and regulations) affecting
the City's ability to manage the system and meet water quality requirements.
BLACK & VEATCH I Legal Notice LN-1
12-83
City of Newport Beach, CA I Sewer Rate Study
1.0 Executive Summary
The City of Newport Beach (City) commissioned Black & Veatch Management Consulting, LLC (Black &
Veatch) to perform a Sewer Rate Study (Study) for its Sewer Utility. The Study included the development
of a five-year financial plan, a cost -of -service analysis, and the design of rates. The specific objectives of
the Study were to:
Evaluate the adequacy of projected revenues under existing rates to meet projected revenue
requirements.
Develop a sound financial plan for the Sewer Utility covering five years for ongoing operations
and planned capital improvements.
Allocate the projected revenue requirements to the various customer types in accordance with
their respective service requirements.
Develop a suitable rate schedule that produces revenues adequate to meet financial needs while
recognizing customer costs of service and regulatory considerations such as Proposition 218 and
applicable judicial decisions.
1.1 Financial Plan
The City operates the utility as an individual self-supporting enterprise. As such, the utility develops a
financial plan that provides sufficient revenues to meet all operation and maintenance (O&M) expenses,
debt service requirements, capital improvements funded from current revenues, and other expenditures
The Study develops a financial plan that projects operating revenue, expenses, and capital financing
costs for the utility over a five-year planning period beginning July 1, 2023, and ending June 30, 2028.
The financial plan projects future rate revenues under existing rates, O&M expenses, principal and
interest expenses on debt, payment to other City departments for services provided, and capital
improvement program (CIP) requirements. In the projection of rate revenues, annual projections of
customers and contributed sewage flow rely upon the City's historical data and estimates of growth.
The Sewer Utility's revenue requirements are summarized below:
Operation and Maintenance Expenses: The Sewer Utility anticipates O&M expenses to increase
from $5.1 M in FY 2024 to $6.1 M in FY 2028. The Sewer Utility is a collection -only system; City
customers pay for treatment services to OC Sanitation District through their property tax bills.
Debt Service: The Sewer Utility has no existing debt service, and no future debt is planned.
Capital Improvements: The Sewer Utility plans to execute an average of $1.1 M annually in capital
projects from FY 2024 to FY 2028.
Reserves: The Sewer Utility plans to continue funding the operating fund reserve, capital fund
reserve, and rate stabilization fund reserve.
The operating fund reserve is to help cover fluctuations in day-to-day expenses. The
scheduled target is 90 days of O&M expenses.
The capital fund reserve is to help maintain enough funds to cover a portion of upcoming
annual capital expenditures, smooth out the amount of capital infusion needed each year,
and help mitigate unexpected capital costs. The scheduled target is 100% of the annual
CIP.
BLACK & VEATCH I Executive Summary
12-84
City of Newport Beach, CA I Sewer Rate Study
The Sewer Utility is proposing revenue adjustments and drawing down on reserves to allow the enterprise
to meet operating and capital needs and reserve targets, as shown in Figure 1-1.
Figure 1-1 Sewer Enterprise Fund Financial Plan
Sewer Enterprise Fund
2W4 2025 2M6 2M 2M
�O&M �Capital Projebts --o—Revenue Reserves
1.2 Cost of Service Analysis
The cost -of -service analysis allocates the costs to the various customer types of service fairly and
equitably. The methodology used in the Study is specific to the sewer utility operations. The following is a
brief description of the methodology.
The sewer cost -of -service allocation performed in this Study follows the Functional Cost Allocation
Method endorsed by the Water Environment Federation (W EF) Financing and Charges for Wastewater
Systems, Manual of Practice 27 (MoP27) manual. Like the methodology used for water systems, the
sewer cost of service analysis allocates costs to the different customer types in proportion to their use of
the sewer system. As recommended by WEF, Black & Veatch distributed functional costs to volume,
strength, and customer -related parameters. This allocation methodology produces unit costs for allocation
to individual customer types based on the projected customer service requirements.
1.3 Rate Design
The Right to Vote on Taxes Act, also known as Proposition 218, was passed by California voters in 1996
and added Article XIIIC and Article XIIID to the California Constitution. These articles provide the
regulatory framework that guides and informs the rate -setting process. The cost -of -service analyses
provide the cost nexus for the proposed rate structures. The regulatory framework helps ensure cost
recovery is proportionate to the cost of providing the service.'
To minimize impacts, retain simplicity, and ensure the reasonable stability of revenue, Black & Veatch
recommends the following rate structure.
Monthly Fixed Charge: The Sewer Utility should retain the monthly fixed charge based on meter
sizes for all customer types. The monthly fixed charge recovers portions of fixed cost elements
such as operating and capital components, maintenance and services, and customer billing.
' Black & Veatch is not a legal firm and interpretations of the legal requirements under Proposition 218 should be reviewed by legal
counsel.
BLACK & VEATCH I Executive Summary
12-85
City of Newport Beach, CA I Sewer Rate Study
Consumption Charge: The Sewer Utility should retain its uniform consumption charges for all
customer types. The consumption charge recovers costs associated with volume demands.
Table 1-1 summarizes all Sewer Utility components recommended five-year rate schedules. Rates will
become effective January 1st of each calendar year.
Table 1-1 Proposed Five -Year Sewer Rate Schedules
,
Effective Date
Monthly Faxed Service Charge
5/8", 3/4"
1"
CY 2024
1/1/2024
Wrno-)
10-55
10-55
Ca I en ..r Yea
CY 2.025
1/1/2025
Wrno-)
12-95
12-85
r EndirkgDecern
CY 2026
1/1/2026
Wrno }
15-65
15-65
F
CY 2027
11112027
Wrno-)
18-95
18-95
CY 2028
11112029
WrrHI }
22-25
22-25
1-1/2"
15M
19-29
23-47
28-43
33,39
2"
21.11
25.71
3130
37.90
44.51
3"
26 38
32-14
39-12
47-38
55-63
4"
31-66
38-56
46-95
56-85
66-76
6"
36-94
44-99
54-77
66-33
77-89
S"
42-22
51-42
62-60
75-81
89-01
Sewer Only Fixed Service Charge
($/rnoJ
($/mo-)
($/rno-)
($/rno-)
($/rno-)
5/8", 3/4"
15S6
19-36
21-35
24-85
29 36
1"
18-51
21-11
24-20
27-80
31-41
1-1/2"
53.99
5aza
64.52
70.91
77.30
2"
59-27
65-31
72 34
80-39
88-43
3 "
1,37 -68
147 -63
158-83
171-29
183 -74
4"
238-35
253-06
269-27
286-97
304-67
6"
413-21
435-48
459-51
485-26
511-00
8"
418-49
441-91
467,33
494-74
522-12
Usage Charge
($/HCF)
($/HCF)
($/HCF}
($/HCF}
($/HCF)
Al Usage
0.53
0.55
0.57
0.59
0.61
BLACK & VEATCH I Executive Summary
1-3
12-86
City of Newport Beach, CA I Sewer Rate Study
2.0 Introduction
2.1 Purpose
The purpose of this report is (1) to project the future revenues of the Sewer Utility under existing rates
and charges, project operating expenses and capital financing revenue requirements, and to examine the
adequacy of projected revenues to meet these revenue requirements through FY 2028; (2) to allocate
these revenue requirements, or costs of service, for a representative test year to the various customer
types in accordance with the respective service requirements that each category places on the system;
and (3) to develop a suitable schedule of sewer rates that will produce revenues adequate to meet the
financial needs of the utility on the basis that recognizes customer costs of service and practical bill
impact considerations.
2.2 Sewer System
The Sewer Utility provides collection sewer services to over 23,500 residential and non-residential
customers. Services include constructing and maintaining the sewer system and reducing sanitary sewer
overflows. Sanitary sewer flows in the City are collected and transported through more than 203 miles of
gravity and 5 miles of forced sewer mains by way of 21 lift stations to the Orange County Sanitation
District (OC San) Plant No. 1 and No. 2. OC Sanitation District's regional treatment plants receive waste
from 25 agencies in Orange County and can treat 179 million gallons a day (MGD) of liquid waste.
2.3 Methodology
The rate -setting methodology employed by Black & Veatch is consistent with industry guidelines
established by WEF's Financing and Charges for Wastewater Systems, Manual of Practice 27 manual.
The manual is nationally recognized and provides recommendations and generally accepted practices in
the sewer industry. The intent of the manuals is to provide rate -making practices that can be used to
address the unique circumstances of the communities served. An overview of the methodology is outlined
below.
2.3.1 Financial Plan
Financial planning compares the
projected revenues of the utility under
existing conditions to its projected
operating expenses and capital
expenditures. This step tests the
adequacy of the current rates to recover
the utility's forecasted costs. If shortfalls
occur, revenue increases are
recommended until the utility is
financially stable.
2.3.2 Cost -of -Service Analysis
Financial Planning
Establish operating and capital
financing plans that fullyfund
activities
L_
The cost -of -service analysis builds a link customer classes
between the utility's cost of service and
IN -
the proposed rates for each customer
type. This process takes individual budget cost items and allocates them based on their function.
Organizing the budget in terms of end function allows the creation of a nexus between the budget cost
item and the rate.
BLACK & VEATCH I Introduction
12-87
City of Newport Beach, CA I Sewer Rate Study
2.3.3 Rate Design
Rate design involves developing a rate
structure that equitably and
proportionately recovers costs from the
customers. The rate structure should
reflect a customer group's demand
profile and be resilient and flexible
enough to handle changing costs (i.e.,
operating and/or capital) and demand
scenarios (i.e., customers change their
demand on the system by contributing
less or more flow). Rate equity is
inherently built upon each customer's
Rate Design
Review the existing rate structure
+ - and design proposed rates that
provide adequate revenues
relative use of the system. By designing
different rate components, the utility can balance affordability and equity.
2.3.4 Rate Adoption
In California, public utilities must meet procedural requirements for adopting new or increased rates for
property -related fees under Proposition 218. Proposition 218 states that the utility must hold a public
hearing to consider the proposed rates and provide written notice to all customers at least 45 days before
the hearing. Any property owner or tenant directly liable to the public agency for payment of the property -
related fees may submit a written protest to the new or increased rates until the close of the public
hearing. The City Council may not adopt the proposed new or increased rates if property owners or
tenants directly liable for payment submit written protests on behalf of more than 50% of the properties
upon which the proposed rates may be imposed.
BLACK & VEATCH I Introduction
2-2
12-88
City of Newport Beach, CA I Sewer Rate Study
Sewer Utility
3.0 Revenue and Revenue Requirements
To meet the costs associated with providing sewer services to its customers, the Sewer Utility derives
revenue from various sources, including sewer user charges (rates), collections, penalties, interest
earned from the investment of available funds, and other miscellaneous revenues. The Sewer Utility is
constantly looking for other sources of revenue, such as grants, to help mitigate ratepayer impacts. The
level of future revenues is estimated via an analysis of historical and future system growth in terms of the
number of accounts and contributed sewage flow. This section also projects the expenses, or revenue
requirements, necessary to operate and maintain the system, invest in capital improvements, make debt
service payments, and cover other sewer system expenses.
3.1 Customer and Water Consumption Projections
3.1.1 No. of Customers
The City provides sewer collection services to 23,500 residential and non-residential customers. Most
customers connected to the sewer system are water customers and, therefore, are connected through
metered connections. The City also provides sewer -only service to over 500 City customers who receive
water from Mesa Water District or Irvine Ranch Water District. The City bills customers based on the size
of the water -metered connection and the contributed sewage flow. Since the City bills customers based
on the metered connection, the analysis included a review of historical accounts for customers and
anticipated growth within the City. The City has seen three straight years of decline in population between
2020 and 2023 based on the State of California, Department of Finance, E-5 Population and Housing
Estimates. The projected number of accounts will remain steady for the entire study period.
Table 3-1 summarizes the projected number of accounts for the Sewer Utility.
Table 3-1 Number of Sewer Customers
Mcal Year
Ending June
EM,
1
FY 2024
FY 2025
FY 2026
FY 2027
FY 2029
(accts)
(accts)
(alits)
(alits)
(accts)
Sewer
All Customers
1 5f8",3f4"
0
0
0
C
C
2 1"
21.777
21.777
21,777
21.777
21.777
3 1-1 f 2"
431
431
431
431
431
4 2"
762
762
762
762
762
5 3"
26
26
26
26
26
6 4"
42
42
42
42
42
7 6"
16
16
16
16
16
8 8"
5
5
5
5
5
9 10"
0
0
0
C
C
10 Subtotal
23,059
23.059
23,059
23.059
23.059
BLACK & VEATCH I Sewer Utility
12-89
City of Newport Beach, CA I Sewer Rate Study
FiwAl Year Ending June Em,
MMEMPEL FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
(alits)
(accts)
(alits)
(alits)
(arts}
Sewer
Sewer Only
11
5f8,3/4"
466
574
574
574
574
12
1"
109
108
108
109
109
13
1-112"
23
23
23
23
23
14
2"
71
71
71
71
71
15
3"
2
2
2
2
2
15
4"
1
1
1
1
1
17
6"
2
2
2
2
2
18 S" 1 1 1 1 1
19 10" 1 1 1 1 1
20 Subtotal 575 783 783 783 783
21 Total 23.734 23.842 23.842 23.842 23.842
3.1.2 Contributed Sewage Flow
Table 3-2 shows the projected contributed sewage flow for the Study period. In determining the projected
contributed sewage flow, Black & Veatch analyzed historical sewage flow patterns in conjunction with the
water projections for the Water Utility. Contributed sewage flows equal water consumption; therefore, it is
important to understand water consumption patterns. In examining water consumption patterns, it was
noted that water consumption depends on California's weather conditions. Water consumption has
stabilized over the past few years due to water conservation incentives and messaging.
Recognizing that water consumption has stabilized, the projected contributed sewage flow is expected to
remain steady for the Study period. The City currently bills contributed sewage flow in hundred cubic feet
(HCF).
Table 3-2 Contributed Sewage Flow
M FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
(HCF) (HCF) (HCF) (HCF) (HCF)
Contributed Sewage Flow
1 All Customers 4,030,872 4,030,972 4,030,872 4,030f872 4,030f872
2 Sewer Only 200.376 200.376 200,376 200,376 200,376
3 Total 4,231,248 4,231,248 4,231,249 4,231,249 4,231,248
3.2 Revenue under Existing Rates
Sewer user rates serve as the primary source of revenue for the Sewer Utility. Therefore, the level of
future rate revenue is important in developing a long-range financial plan. Future sewer rate revenues are
calculated using the number of accounts and billed sewage flow multiplied by the applicable existing
rates.
Table 3-3 shows the Sewer Utility's current schedule of charges. The rates are composed of monthly
fixed and uniform consumption charges. The monthly fixed service charge is the same for all customers
except sewer -only customers. The difference is that the monthly fixed service charge for sewer -only
customers includes a contributed sewage flow based on the average water consumption for that meter
size. The consumption charge is the same for all customers based on water flow.
BLACK & VEATCH I Revenue and Revenue Requirements
12-90
City of Newport Beach, CA I Sewer Rate Study
Table 3-3 Existing Sewer Rates
2023
2023
All
Sewer Only
Monthly Foxed Servke Charge ($/rno.}
_
5f8", 3/4"
8.55
13.10
1"
8.55
15.34
1-1/2"
9_41
46.14
2"
12.83
4754
3"
14.54
122.10
4" 17_11 216.25
6" 19-25 381.07
S" 21-39 383.21
_ 10" 27-37 389_20
Sewer Use Charge I;$/HCF)
All Usage 0.51 NA
Table 3-4 summarizes projected sewer rate revenue under existing rates. The projected Sewer Utility
revenues remain constant at $4.6M between FY 2024 and FY 2028.
Table 3-4 Projected Sewer Revenue under Existing Rates
F FY 202-4 FY 2025 FY 2026 FY 2027 FY 2028
MEWe Mee
1 All Customers
2 Sewer Only
3 Total
3.3 Other Revenue
4,474,700 4,474,700 4,474,700 4,474,700 4,474,700
170,300 170,300 170,300 170,300 170,300
$ 4,645,000 $ 4,645,000 $ 4, 645,04D $ 4,645,000 $ 4,645,000
Other sources of operating revenue include collections, penalties, interest earned from the investment of
available funds, and other miscellaneous revenues. Other operating revenues represent 1.8% of the
Sewer Utility's total revenue. The City anticipates these revenues will remain relatively constant for the
Study period.
3.4 Operating and Maintenance Expenses
Table 3-6 summarizes the Sewer Utility's projected O&M expense for the Study period. These expenses
include salaries and benefits, maintenance and operations, internal service charges, and capital
expenditures. The City anticipates that all O&M expenditures will escalate based on the factors identified
in Table 3-5.
BLACK & VEATCH I Revenue and Revenue Requirements
12-91
City of Newport Beach, CA I Sewer Rate Study
Table 3-5 Sewer O&M Escalation Factors
F +
2025
2026
2027
2028
Salaries
4.20%
4.20%
3.00%
3.013%
City MOU
Benefits
4.20%
4.20%
3.00%
3.DD%
City MOU
contract Services
4.00%
4.0[ %
4.00%
4.DD%
CPI Services, City Staff
Utilities
8.00%
5. 0%
5.00%
5.00%
Fuels&UtiIitiesCPI, CityStaff
Electricity
8.00%
5. 0%
5.00%
5.00%
Electricity CPI
Materials & Supplies
7.00%
6.00%
5.00%
5.00%
Al Items CPI, City Staff
Maintenance& Repair
7.00%
6.00%
5.00%
5.00%
Commercial Repair & Maint_ PPI, City Staff
Genera IAdmin
4.DD%
4.00%
4.00%
4.00%
AlIItems CPl
M i nor Ca pita I Outl ay
5.DD%
5.D0%
5.00%
5.00%
AlIItems CPl
Internal Services
5.60%
5.60%
5.60%
5.50%
ENRCCI(5-yearavg.},CityStaff
Insurance
5.60%
5.60%
5.60%
5.60%
City Staff
Weighted Average
5.11%
48996
4.26%
calculated
The following are subcategories that reside within the four main expense categories:
Salaries and Benefits: These costs represent salaries and benefits for sewer staff assigned with
operating and maintaining the sewer infrastructure system.
Maintenance and Operations: These costs represent contract services, utilities, supplies and
materials, maintenance and repairs, travel & training, and general expenses.
Internal Service Charge and General Expenses: These costs represent internal costs to the
Sewer Utility from other City departments for specific costs
such as the Finance Department,
customer service and billing, capital projects administration, vehicle replacement, IT
charges, and
insurance.
Capital Expenditures: These costs represent small capital expenditures for items such as office
equipment, fixtures, and computers.
Table 3-6 Sewer O&M Expenses
Fiscal Year
Ending June 30,
M FY 2024 FY 2025
FY 2026 FY 2027
FY 228
Operation and Maintenance
1
Regu la r Sa la ries 1,111,750 1,158,50D
1,207,20D 1,243,40D
1,280,700
2
Special Pays 7,125 7,400
7,700 7,9M
3,100
3
Benefits 707,658 737,50D
768,30D 791,40D
815,100
4
Other Pays 159,441 166,200
173,200 178,400
183 ,SOD
5
Contract Services 144,000 149,70D
155,60D 161,800
168,100
6
Utilities 15,700 17,000
17,9W 18fM
19f80D
7
Electricity 64,040 69,20D
72,70D 76,30D
80,100
8
Supplies&Materials 19A50 21,300
22,600 23,700
24,90D
9
Ma i ntena nce & Repa i r 85OAl2 910,30D
964,900 11013,100
1,063f800
10
Travel & Training 10,260 10,60D
11,000 11,400
11,80D
11
General Expenses 377,181 392,10D
407,70D 424,000
440f800
12
Customer Billing 181,135 188,40D
195,9W 203,700
211f80D
13
InternaISvc Charge 810,318 855,8m
903,800 954,30D
1,007,700
14
Insurance 605,647 639,60D
675,400 713,20D
753,100
15
Capital Expenditures 33,000 34,8M
36,600 38,50D
40,500
16
Total $ 5,097,917 $ 5,358,40D $
5,620,5W $ 5,959,900
$ 6,110,100
BLACK & VEATCH I Revenue and Revenue Requirements 3-4
12-92
City of Newport Beach, CA I Sewer Rate Study
As shown in Table 3-6, the Sewer Utility's O&M expenses increased from $5.1 M in FY 2024 to $6.1 M in
FY 2028.
3.5 Capital Improvement Program
The Sewer Utility annually develops its five-year Capital Improvement Plan to identify sewer system
needs, including assessments, inspections, maintenance, and rehabilitation and replacement
requirements. In 2008, the City completed its Wastewater Master Plan, which identified $29.OM in capital
projects in 2008 costs. Incorporating cost escalation over the 30 years, the City had planned to spend
roughly $1.1 M each year. Unfortunately, due to higher -than -expected inflation, the City has readjusted the
capital spend by escalating the annual $1.1 M by 5% each year except for FY 2024. The total CIP over the
Study period totals $5.5M.
Table 3-7 summarizes the CIP for FY 2024 through FY 2028. The Sewer Utility's main activities are
related to the collection system. As such, of the total $5.5M CIP, collection mains account for 64.2% of
the total projects. The City examines the sewer infrastructure system annually; therefore, CIP might
change based on the current need.
Table 3-7 Sewer Capital Improvement Projects
® FY 2024 FY 2025
M M
Capital Improvement Program
1 Collection System
2 Lift Station
3 Manholes
4 Total
105,000 92,300
5 44,000 0
105,000 110,300
FY 2025
FY 2027
M
M
636,700
1,044,000
405,200
0
115,800
121,600
FY 2029
M
702.000
446.700
127,600
$ 750,000 $ 1.102.6130 $ 1.157.7130 $ 1.215.6130 $ 1,276,300
3.6 Transfers within the Fund
The Sewer Utility will conduct transfers from the operating account and other accounts over the Study
period. The other funds are the Enterprise CIP, Capital, and Operating Reserve. See Section 3.7 for
further explanation on Operating Reserve and Rate Stabilization Funds. The Enterprise CIP and Capital
transfers represent money to cover planned CIP project expenditures. These transfers do not represent
direct operating expenses for either enterprise; therefore, Black & Veatch includes these costs as "below -
the -line" cash flow items and does not include them as O&M expenses.
3.7 Reserves
A utility typically establishes reserves for several reasons, such as to cover shortfalls in operating
revenues, maintain strong bond ratings, cover day-to-day operating costs, and ease the burden on
ratepayers associated with large rate increases. Per the reserve level recommendations, the Sewer Utility
will maintain the following two reserves:
Operating Reserve represents the working capital the Enterprise Fund maintains to cover day-to-
day expenses and maintain enough funds to cover accounts receivables if there are supplier
issues, periods of lower -than -expected sewer sales, or unforeseen cost increases. The reserve
will maintain a minimum balance of 90 days of operating expenses once fully funded.
Capital Reserve represents funds to cover a portion of upcoming annual capital expenditures,
smooth out the amount of capital infusion needed each year, and help mitigate unexpected
capital costs. Once fully funded, this reserve will maintain a minimum balance of 100% of the
annual planned CIP.
BLACK & VEATCH I Revenue and Revenue Requirements
12-93
City of Newport Beach, CA I Sewer Rate Study
Appropriate reserve levels help the Sewer Utility with liquidity, provide operational flexibility, and
demonstrate fiscal responsibility to the rating agencies, which allows the City to access lower -cost funds.
Figure 3-1 shows the fund balances for all funds compared to the total target fund balance.
Figure 3-1 Sewer Fund Projected Ending Balances
$1.0
$0.0
-$1.0
-$2.0
-$3.0
Sewer Fund Balances
2024 2025 2026 2027 2028
� Wasterlater-0perations � WastewaterCapital — 0- -Target Fund Balances
3.8 Projected Operating Results
The revenue requirements of the Sewer Utility consist of O&M expenses, capital expenditures, and
reserve requirements. To fully understand the current condition of the Sewer Utility, it is important to
examine the cash flow projections under the status quo scenario. As shown in Figure 3-2, the status quo
conditions indicate that the Sewer Utility would operate from an annual deficit position, requiring the
drawdown of reserves to keep operating. In this scenario, the Sewer Utility would not impose any revenue
increases over the Study Period and continue to incur O&M expenses and pay for the execution of the
planned CIP.
(Left Intentionally Blank)
BLACK & VEATCH I Revenue and Revenue Requirements
3-6
12-94
City of Newport Beach, CA I Sewer Rate Study
Figure 3-2 Status Quo Sewer Enterprise Cash Flow
Sewer Enterprise Fund
�O&M � Capital P rojects --C�--Reyenue Reserves
The analyses performed for the Study indicate that the City should implement the proposed revenue
increases shown in Table 3-8 if it wishes to keep the Sewer Utility in a balanced financial condition. The
revenue increases represent the total revenue adjustment needed to meet revenue requirements. The
revenue adjustment does not represent adjustments to the individual rates but reflects the overall level of
revenue needed to meet the Sewer Utility's obligations.
The recommended revenue increases help the Sewer Utility meet the following goals:
Meet budgeted operating obligations in the five FYs.
Meet planned capital investments in the five FYs.
Build up the operating reserve and capital reserve to get closer to their target.
Table 3-8 summarizes the proposed Enterprise Fund for the Study Period. The Enterprise Fund consists
of 1) Revenue and 2) Revenue Requirements.
Ravani is
Line 1 is the revenue under existing rates.
Lines 2 through 6 are the additional revenues generated from the required annual increases. The
additional revenue generated directly reflects the number of months the increase is effective for;
therefore, the amount might be calculated at less than that stated amount.
Line 8 is the total revenue generated from user charges.
Line 11 represents other operating revenues.
Line 12 represents the total revenues for the enterprise.
BLACK & VEATCH I Revenue and Revenue Requirements
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City of Newport Beach, CA I Sewer Rate Study
Revenue Reauirements
Line 14 represents O&M expenses.
Lines 15 to 16 represent capital expenditures within the capital accounts.
Line 18 represents the total revenue requirements for the enterprise.
Line 21 represents the net cumulative cash reserve balance for the Enterprise Fund.
Table 3-8 Sewer Enterprise Fund
M • FY 2024 FY 2025 FY 2026 FY 2027 FY 2C28
Rate Revenue
Revenue from Existing Rates 4,645,001) 4,645,000 4,645,000 4,645,000 4,645,000
Months
Year Effective
2
2024 5 317,6013
762,2013
762,200
762,2013
762,200
3
2025 5
322,6013
774,300
774,30U
774,30d
4
2026 5
384,500
922,9W
922,90d
5
2027 5
447,94D
1,074,900
6
2029 5
447,800
7
8
Inc reased Revenue Due to Adj 317,6013
Subtotal Rate Revenue $ 4,962,6013
1,084,800
$ 5,729,800
1,921,000
$ 6,566,0130
2,907,34d
$ 7,552,3W
3,982,100
$ 8,627,100
Other OperatinE Revenue
9 Other Income 66,900 66,9W 66,90d 66,9W 66,900
10 Interest Income 43,54D 65,2013 71,9W 85,400 97,900
11 Su btota I Other Operating Rev $ 110,40D $ 132,1013 $ 138,80d $ 152,300 164,800
12 Total Revenue $ 5,073,000 $ 5,951,900 $ 5,704,800 $ 7,704,600 $ 9,791,900
Revenue Requirements
Operating & Maintenance
13 O&M Expenses 510971900 5,358,400 5,620,5M 5,859,90D 6,110,100
14 Subtotal D&M $ 5.097.900 $ 5,358,400 $ 5,620,500 $ 5,859,90D $ 5,110,100
Capital Projects
15 WW Ent Fund CIP (711-01} 210,000 220,500 231,500 243,100 255,30d
16 WW Cap Fund (712-01} 540,000 882,00D 926,100 972,40D 1,021,000
17 Total Capital Projects $ 750,000 $ 1,102,500 $ 1,157,600 $ 1,215,500 $ 1,276,30d
18 Tot RevenueRegdrements S 5,847,900 6^0,900 5,778,100 $ 7,475AW 7,386,40d
19 Net Annual Cash Balance (774,900} (599,0001 (73,300) 629,200 1,405,500
20 Beginning Fund Balance 1,708,700 933, M 334)800 261,500 890,700
21 Net Worki ng Ca pita I Balance $ 933,800 $ 334,800 $ 261,50d $ 890,700 $ 2,295,200
BLACK & VEATCH I Revenue and Revenue Requirements 3-8
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City of Newport Beach, CA I Sewer Rate Study
Figure 3-3 presents the proposed Sewer Enterprise Fund financial plan.
Figure 3-3 Sewer Enterprise Fund Financial Plan
510.0
,g 59.0
$7.0
36.0
$5.0
$4.0
Ss.o
$2.4
$1.0
$0.0
Sewer Enterprise Fund
2024 2025 2026 M7 2028
�O&M � Capital Rrcjects --O—Relenue Reserves
BLACK & VEATCH i Revenue and Revenue Requirements
3-9
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City of Newport Beach, CA I Sewer Rate Study
4.0 Cost -of -Service Analysis
The cost -of -service analysis requires recovery of the City's needed revenues from sewer service rates,
allocated to customer types according to the service rendered. An equitable rate structure allocates the
capture of revenue requirements to customer types based on the contributed sewage flow and the
number of customer connections.
In analyzing the Sewer Utility's cost of service for allocation to its customer types, Black & Veatch
selected the annual revenue requirements for FY 2024 as the test year requirements to demonstrate the
development of cost -of -service sewer rates. Table 4-1 summarizes the total costs of service that need to
be recovered from sewer user rates for FY 2024.
Table 4-1 Cost of Service Revenue from Rates (FY 2024)
®Operatin
Expense
Revenue Requirements
1
D&M Expense
5,097,900
0
5,097,900
2
Debt Service Requirements
0
0
0
3
Transfers far Capital Projects
(3,132,600)
750,000
(2,3S2,600)
4
Subtotal
1,965,300
750,000
2.715.300
Less Revenue Requirements Met from Other Sources
5
Miscellaneous
0
0
0
,6
I nterfund Tra nsFers
16,500
0
16,500
7
Dther Income
10,000
0
10.000
8
Interest
40,400
0
40.400
9
Capital Financing
0
0
0
10
Subtotal
$ 66,900 $
0
66.900
Adjustments
11
Adj for Annual Cash Balance
{115581WO)
{555,40D)
(2,314,200)
12
Adj to Annualize Rate Increase
(318,700)
(125,90D)
(444,600)
13
Subtotal
$ (1,977,500) $
(791,300)
(2,758,&00)
14 COS to be Recovered from Rates $ 3,S75,900 $ 1,531,300 $ 5.407.200
The total revenue requirement is shown in Line 4. As shown in Line 10, we deduct revenues from other
sources to derive the net revenue requirement recovered through rates. Line 11 represents the net
annual cash balance during the FY. This number is positive if the enterprise is drawing down funds
already in the Enterprise Fund. The number will be negative if the enterprise is replacing funds. In this
case, the $(2.3M) figure indicates that the forecast is projecting a positive annual cash balance for the
year. Line 14 represents the additional revenues generated if the revenue increase was effective for a full
year versus only 5 months.
4.1 Functional Cost Components
The first step in conducting a cost -of -service analysis involves analyzing the cost of providing sewer
service by system function to allocate the costs to the various customer types properly and, subsequently,
design rates. As a basis for allocating costs of service among customer types, costs are separated into
the following two basic functional cost components: (1) Volume and (2) Customer, described as follows:
BLACK & VEATCH I Cost -of -Service Analysis
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City of Newport Beach, CA I Sewer Rate Study
Volume costs represent the operating and capital costs of the system associated with collection.
The collection costs vary directly with the quantity of contributed sewage flow.
Customer costs are those expenditures that tend to vary in proportion to the number of customers
and capacity needed to serve these customers. These include meter reading, billing, collecting,
accounting, maintenance, and capital costs associated with meters and services.
4.2 Allocation to Cost Components
The next step of the cost -of -service process involves allocating each cost element to functional cost
components based on the parameter or parameters having the most significant influence on the
magnitude of that cost element. O&M expenses are allocated directly to appropriate cost components. A
detailed allocation of related capital investment is used as a proxy for allocating capital and replacement
costs. The separation of costs into functional components provides a means for distributing such costs to
the various categories of customers based on their respective responsibilities for each type of service.
4.2.1 Volume Allocations
The sewer system consists of various facilities designed and operated to fulfill a given function. For the
system to provide adequate service to its customers, it must be capable of meeting the annual volume
requirements. Because not all customers and types of customers exert volume demands similarly, the
capacities of the various facilities must be designed to accommodate the demands of all categories of
customers. Each sewer service facility within the system has an underlying volume demand exerted by all
customers for whom the volume cost component applies. For those facilities designed solely to meet
volume demand, 100% of the costs go to the volume cost component.
4.2.2 Allocation of Operating and Maintenance Expenses
In allocating O&M expenses for FY 2024, costs are directly allocated to the cost components to the extent
possible. The Sewer Utility does not categorize operating costs by functional categories such as
collection, lift stations, treatment, etc. Therefore, the analysis identified cost elements specific to certain
functions and assigned them based on the factors noted in Section 4.1 to allocate the operating expenses
to the cost components. Table 4-2 shows the allocation basis for operating costs, and Table 4-3 shows
the total allocation of operating costs serving sewer customers.
Table 4-2 Allocation Basis for O&M Expenditures (FY 2024)
F F
Common
Volume
+
Customer
i
N
N
Operation & Maintenance
1 Regular Salaries -Special Pays
100.E
0%
Collection
2 Benefits
100.E
0%
Collection
3 Contra ct Servi ces
100%
0%
Collection
4 Utilities
100%
0%
Collection
5 Supplies & Materials
100%
0%
Average O&M (less CS)
6 Maintenance & Repair
100%
0%
Collection
7 Travel & Training
100%
0%
Average O&M (less CS)
S General Expenses
100%
0%
Average O&M (less CS)
9 Internal Svc Charge
0
10096
Customer
Table 4-3 Allocation of O&M Expenditures (FY 2024)
BLACK & VEATCH I Cost -of -Service Analysis
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City of Newport Beach, CA I Sewer Rate Study
Line Total I Common to All Customers
No. I Description I Cost
Operation & Maintenance
1
Salaries
1,279,300
1,279,300
0
2
Benefits _
707,700
707,700
0
3
Contract Services
144,000
144,000
0
4
Utilities
15,700
15,700
0
5
Electricity
64,000
64,000
0
6
Supplies& Materials
19,900
19,900
0
7
Maintenance& Repair
850,80o
850,800
0
S
Travel &Training
10,300
10,300
0
9
General Expenses
377,200
377,200
0
10
Customer Billing
181,100
0
181,100
_
11
Internal Svc Charge
810,300
0
810,30D
12
Insurance
605,600
0
605,600
13
Routine Capita I Outlay
33,000
33,000
0
14
Transfers
13,132,60a)
(3,132,600)
0
15
Total O&M Expenses
$ 1,965,30a
$ 368,300
1,597,000
_ Less Other Revenue
_16 Miscellaneous Revenues
17 Other Adjustments
18 Net Operating Expenses
66,900 52,700 14,200
(1,977,500) (1,556,6013) (420,900)
$ 3,875,900 $ 1,872,200 $ 2,003,700
t.2.3 Allocation of Capital Investments
In allocating the capital investment for FY 2024, the existing fixed assets (which serve as a proxy for the
capital investments) and proposed CIP are allocated directly to cost components to the extent possible.
The allocation of costs in this manner provides a basis for annual investment in sewer system facilities.
Using the existing fixed assets and CIP, the capital costs can be allocated using the total net system
investment distribution across the functional cost components.
Table 4-4 shows the allocation basis for capital expenditures, and Table 4-5 shows the allocation of
existing system investment serving sewer customers. The total net system investment of $28.2M shown
on Line 5 for the Sewer Utility represents the test year original cost less accumulated depreciation of the
system in service for existing fixed assets and proposed CIP. The total net system investment reflects the
Sewer Utility's fixed asset listing ending June 30, 2022. This value represents the original cost (book
value) of the assets.
Table 4-4 Allocation Basis for Capital Costs (FY 2024)
® Com rn on + ers
Volume Customer
Plant Assets
1 Collection 100% 0% Collection
2 Lift Station 1013% 0% Pumping
3 Equipment 1013% 0% Average Net Plant
Genera F ant 101Y% 0% Average Net Plant
Table 4-5 Allocation of Capital Costs (FY 2024)
BLACK & VEATCH I Cost -of -Service Analysis
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City of Newport Beach, CA I Sewer Rate Study
Line
No.
Plant Assets
1
Collection
2
Lift Station
3
Equipment
4
Genera Plant
5
Total Plant Assets
6
Capital Costs
_ Less Other Revenue
_ 7 Miscellaneous Revenues
_ 8 Other Adjustments
9 Net PIant Assets
4.3 Units of Service
volume
Customer
21,320,100
21,320,100
0
6,895,300
6,8S5,300
0
0
0
0
2,300
2,300
0
$ 29.217.700
$ 28.217.700
$ 0
750.000
750.000
0
0
0
0
(781,300)
(781,300)
0
$ 1.531.300
$ 1.531.300
$ 0
After allocating O&M and capital costs to the functional cost categories, the next step is determining the
billing determinants associated with the cost categories. The billing determinant for costs with a volume
component will be HCF or HCFf/day. Customer costs will use equivalent meters.
To properly recognize the cost of service, each customer class receives its share of volume and customer
costs. Following the allocation of costs, the total cost responsibility for each customer class is developed
using unit costs of service for each cost function and subsequently assigning those costs to the customer
types based on the respective service requirements of each. The number of units of service required by
each customer class provides a means for the proportionate distribution of costs previously allocated to
respective cost categories.
Volume costs vary with the volume of contributed sewage flow produced and distributed to customer
types on that basis. Contributed sewage flow information comes from the monthly water consumption
records in the City's customer billing system.
(HCF)
All Customers 4,030,872
Sew er On ly 200,376
Customer billing costs are distributed on an equivalent meter basis for each customer. The estimated
number of equivalent meters for each customer relies on the number of meters serving respective
categories and the capacity ratio of the meters to the 1-inch meter. The equivalent meter ratios
adopted in this analysis are lower than those used for water, as wastewater system peaking is less
widespread than water. The range for equivalent meters ranges from 1.0 to 5.0.
BLACK & VEATCH l Cost -of -Service Analysis
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All Customers
Sewer Only
All Customers
Sewer Dnly
_
[1]
[2]
131
[4]=[1]x[3]
[5]=[2]x[3]
5 f 8",'4"
0
466
1
0
466
r
21,777
108
1
21,777
108
1-112'
431
23
1.5
647
35
Z
762
71
2
1,524
142
3'
26
2
2.5
65
5
4'
42
1
3
125
3
6'
16
2
3.5
56
7
S"
5
1
4
2 0
4
10"
—0
1
4.5
0
5
To#a1
23,054
675
24,215
774
Table 4-6 summarizes the FY 2024 units of service for the various customer types.
4.4 Cost of Service Allocations
The Study applies the unit costs of service to each customer class's respective service requirements to
determine the cost of service for each customer class. The total unit costs of service applied to the
respective requirements for each customer class results in the total cost of service for each customer
class.
4.4.1 Units Costs of Service
The FY 2024 unit cost of service for each functional cost component is simply the total cost divided by the
applicable units of service, as shown in Table 4-7. On Line 3, the total costs represent the cost that rates
need to recover, as demonstrated in Table 4-1, Line 14. The net O&M cost includes O&M less revenue
from other sources and adjustments. Line 5 represents the unit costs for the entire sewer system
regardless of customer type. After that, the unit costs are used to allocate the costs to the specific
customer types.
4.4.2 Distribution of Costs of Service to Customer types
Applying the unit costs to the units for each customer class produces the customer class costs. This
process is illustrated in Table 4-8, in which unit costs are applied to the customer class units of service for
FY 2024. The costs attributable to each customer class reflect the functional cost components described
in Section 4.1. Each customer class places a burden on the system in different ways; thus, the allocation
of the units is representative of this burden.
BLACK & VEATCH I Cost -of -Service Analysis
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Table 4-6 Units of Service (FY 2024)
MContributed
Column reference (1) (2)
Units of Measure (HCF) (EM)
1 All Customers 4,030,872
24,215
2 4ewerOnly 200,376
774
3 Total 4,231,249
24,989
Table 4-7 Units Cost of Service (FY 2024)
M .
Volume
Customer
1 Net Operating Expense 3,875,900
1,872,200
2,003,700
2 Capital Costs 1,531,300
1,531,300
0
3 Tota I Cost of Service 5,407,200
$ 3,403,500
2,003,700
4 Units of Service
4,231,248
24,989
HCF
EM
5 Cast per Unit
0.8.0
80-18
per HCF
per EM
Table 4-8 Distribution of Costs to Customer Types (FY 2024)
® F
+ + +
Volume
+
Customer
Column reference (1)
(2)
(3)
1 C4st per Unit
$ 0-80
80.18
per HCF
per EM
All Customers
2
Units
4,030,872
24,215
3
AI location of costs of service
5,183,900 3,242,300
1,941,600
Sewer On ly
4
Units
200,376
774
5
of costs of service
223,300 161,200
62,100
6
-Allocation
Tata I Cost of Service
$ 5,407,200 $ 3,403,500
$ 2,003,700
BLACK & VEATCH I Cost -of -Service Analysis
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City of Newport Beach, CA I Sewer Rate Study
5.0 Rate Design
The initial consideration in deriving rate schedules for sewer service is establishing equitable charges to
the customers commensurate with the cost of providing that service. While the cost -of -service allocations
to customer types should not be construed as literal or exact determinations, they offer a guide to the
necessity and extent of rate adjustments. Practical considerations sometimes modify rate adjustments by
considering additional factors such as the extent of bill impacts, existing contracts, and historical local
policies and practices.
5.1 Existing Rates
The existing rates of the Sewer Utility consist of a fixed component in the form of a monthly fixed service
charge and a variable component in the form of a consumption charge. The monthly fixed service charge
is based on meter size and applied regardless of consumption. The consumption charge is based on
units of consumption (1 unit = 1 HCF = 748 gallons). Table 3-3, presented earlier in this report,
summarizes the existing sewer rates.
5.2 Proposed Rates
The costs of service analysis described in the preceding sections of this report provide a basis for
designing sewer rates.
5.2.1 Monthly Fixed Service Charge
The Sewer Utility provides sewer service to approximately 23,500 sewer service accounts. These
customers have a dedicated sewer line connection to the wastewater system. Therefore, sewer charges
include capacity and cost of issuing bills. The following is a derivation of the different cost components
that comprise the total charge. The numbers within the tables are rounded, but the calculations are
based on non -rounded values. Differences are due to roundin_p.
5.2.1.1 Sewer Monthly Fixed Charge
■ Capacity Cost: The sewer system is designed to meet peak wet wastewater flow demand
requirements. Therefore, the sewer system will have extra capacity when handling average
contributed sewage flow demands. Meter ratios based on operating capacities derived in the 2017
rate study were used to distribute the capacity costs. Using meter ratios, we recognize that as meter
size increases, so does the capacity. For example, customers with a 4" meter expect to be able to
use more water (and generate more contributed sewage flow) than customers with a %" meter.
Consequently, the City's sewer system must maintain assets sized accordingly and capable of
providing customers the level of service expected from their sewer connection when they flush the
toilet.
[1] Total Ca p a c ity Costs
[2] Capacity costs allocated to Fixed Charge
[3] TotaI Capacity Casts Recovered through Fixed
[4] Equ iva lent Meters (EM)
[5] Unit Cost (per EM)
$ 3,403,500 Ta ble 4-9, Raw 6, Cal u m n 2
3 4.10%
$1,161,000 [3]=[1]x[2]
24,999 [4] See Section 4.3
$3.87 [5]=[3]f[4]/12
Customer Billing Cost: The sewer system incurs direct operating costs associated with customer
billing, such as meter reading, customer bills, customer service, etc. The unit cost for this category is
total customer costs divided by the number of issued bills.
BLACK & VEATCH I Rate Design
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City of Newport Beach, CA I Sewer Rate Study
Equivalent
Meters
[a] _ [b]
Id
[1] Total Customer Costs $2,003,700
Table4-S, Row 6,Column 3
[2] Equivalent Meters (EM) 24,989
[2] See Section 4-3
[3] Unit Cost (per EM) $6-68
[h3]=[bl]/[a2]/12
Table 5-1 demonstrates the cost elements incorporated into the monthly service charge for FY 2024.
Table 5-2 shows the five-year fixed service charge rate schedule. FYs 2025 to 2028 are derived using the
same methodology described for FY 2024.
Table 5-1 Costs within the Sewer Monthly Fixed Charge (FY 2024)
Cult MrIg Meter
Adjusted Total
MW=Capacity
UnitC40st Unit C YA Ratio
Unit Cost Charge
per EM per EM
$ $/Month
5/8", 3/4" 3-87 6-69 1JD0
10-55 10-55
1" 3-87 6-69 1JD0
10-55 10-55
1-1/2 r 3,87 6-69 1-50
15-93 15183
2" 3,97 6-69 2 jDD
21-11 21-11
3" 3,87 6-69 2-50
26,38 26,35
4" 3,87 6-69 3-00
31-66 31-66
6" 3.87 6.69 3.50
36.94 36.94
8" 3-87 6-69 4-00
42-22 42-22
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 1,161r10D $ 2,003,700
$ 3,164,&W
Table 5-2 Proposed Sewer Monthly Fixed Charge
Effectiwe Date
Monthly Foxed Service Charge
5/8", 3/4"
CY 2024
1/1/2024
($Imo-)
10-55
CY 2025
1/1/2025
($/ma-)
12-85
CY 2925
1/1/2026
($/mol
15-65
CY 202-7
1/1/2027
($/mo-)
18-95
CY 2U2.8
1/112028
($/mo-)
22-25
V.,
10-55
12-85
15-65
18-95
22-25
1-1/2"
15183
19-29
23-47
28-43
3338
2"
21-11
25-71
31,30
37-90
44-51
3"
26,39
32-14
39-12
47-38
55-63
4"
31-66
38-56
46-95
56-95
66-76
6"
36.94
44.99
54.77
66.33
77,99
8"
42-22
51-42
62-60
75-81
89-01
5.2.2 Consumption Charg,
The consumption charge is designed to recover costs associated with volume that has not been
recovered through the monthly fixed charge. The consumption charges are the same for all customers
regardless of the metered size connection. The consumption charge is billed per HCF and is uniform for
all customer types, as the City's contributed sewage flow is only related to conveyance and not treatment.
OC Sanitation handles treatment services. Based on the analysis for FY 2024, the proposed consumption
rate of $0.53 per HCF is paid by all customers. The rate is based on metered water use and recognizes
BLACK & VEATCH I Rate Design
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City of Newport Beach, CA I Sewer Rate Study
that irrigation flow is inherently incorporated. Any customer types with significant irrigation water use have
a dedicated irrigation metered connection and thus are not charged sewer consumption charges.
The use of metered water use will unavoidably include some irrigation water. Figure 5-1 summarizes the
Newport Beach area's average high temperature and precipitation between 2012 and 2022. Over the past
10 years, the average high temperature is 68.6°F, with a standard deviation of 4.3°. Over this period, the
average daily precipitation is 0.02 inches. Data from the National Oceanic and Atmospheric
Administration and similar weather sites shows that these trends were similarly exhibited for the past 32
years: the Newport Beach area experiences consistent temperatures year-round and little rainfall. Since
there is not a large variance in temperature year-round, it is reasonable to assume that summer
consumptive behavior will be consistent with winter consumptive behavior. The historically dry winters
experienced by the Newport Beach area also mean that winter -time irrigation also occurs. Therefore,
using a winter average consumption to determine contributed sewage flow will provide the same results
as using water consumption, and thus, using water usage as a basis for sewer consumption charges is a
reasonable proxy.
Figure 5-1 Temperature and Precipitation Trends in Newport Beach
10-YearAverage Monthly High Temperatures and daily Precipitation Levels
75.0
74.0 .........
72
0
70
66
66
54
62
Fre .pitation (i c
Aver cgeHigh rFj
A64.754.2
Precipitation (inches) (Average High (F)
Source: Newport Beach Weather Records (extremeweatherwatch.com)
4A6
OA4
0M
0.02
OAl
0M
Error! Not a valid bookmark self -reference. demonstrates the cost elements incorporated into the
consumption charge for FY 2024. Table 5-4 shows the five-year consumption charge rate schedule. FYs
2025 to 2028 are derived using the same methodology described for FY 2024.
Table 5-3 Sewer Consumption Charge (FY 2024)
Allocated to
Cons Charge +
1 Valume Casts 65_ % $ 2,242,500 (Table 4 S, Row 6, Cal 2)
2 Units of Service (HCF) 4,231,248 (Table 4-6, Line 3, Col 11
3 Unit Cast of Service S 0-53
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City of Newport Beach, CA I Sewer Rate Study
Table 5-4 Proposed Consumption Charges
CY 2024
CY 202-5
CY 2026
CY 2027
CY 2029
Effective Date 1/1/2024
1/1/2025
11112026
1/1/2027
11112029
M.W Charge ($/HCF)
($/HCF)
($/HCF)
($/HCF)
($/HCF I
All Us.aae 0.53
0.55
0.57
v.59
v.v_
5.2.3 Sewer Only Charge
The sewer -only fixed charges are a combination of the monthly fixed service charge and consumption
charge. Since the City does not meter the water consumption for these customers, the average water
consumption by meter size was used to assign an allowance for contributed sewage flow. The average
water consumption by meter size is identified in Table 5-5, along with the five-year sewer -only charges.
The following is an example of the calculation performed for sewer -only customers for 1-inch meters.
F
[1] Metered Connection r
[2] Monthly Fixed Service Charge ($/Month) $10.55 Table 5-2, CY 2024 rate
[3] Sewage Flow Allowance (HCF) 15 Table 5-5, Column 2
Al lowance
[4] Usage Charge ($/HCF) $0.53 Table 5-4, CY 2024 rate
[5] Total Charge ($/Month) $18.51 [5]=[2]4[3]x[4]
The monthly contributed sewage flow allowance was determined in the 2017 rate study based on
consumption by meter size for customers that receive water from the City. The updated customer billing
data provided for this rate study had disparities concerning the meter sizes. Therefore, the analysis kept
the results of the previous rate study.
Table 5-5 Proposed Sewer -Only Charges
Ca I en ..
CY 2024 CY 2025 CY 2026 CY 2027 CY 2028
Effective Date 1/1/2024 1/1/2025 11112026 1/1/2027 1/1/2028
(HCF) Wrno) Wrno) WrnG) Wrino) ($/mol
Sewer Odyr Fixed Charge
5/8%3/4" 10 15-86 19-36 21-35 24-95 28-36
1" 15 18.51 21_11 24.20 27ZO 31.41
1-1/2" 72 53.99 5.91M 64.52 70.91 77-30
2" 72 59.27 65-31 72-34 90-39 89_43
3" 210 137.68 147.63 158Z3 171.29 183.74
4" 390 238-35 253.06 269.27 286.97 304.67
6" 710 413.21 435.48 459.51 485.26 511.013
8" 710 418.49 441.91 467-33 494.74 522.12
BLACK & VEATCH I Rate Design
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City of Newport Beach, CA I Sewer Rate Study
Typical Monthly Costs under Proposed Charges
Table 5-6 compares typical monthly costs under existing rates in FY 2023 and the proposed schedule of
sewer user rates in FY 2024 derived in this study for residential customers.
Table 5-6 Typical Monthly Bill
Eag
Proposed
Rates
Rats
�
(HCF)
($)
($)
($)
Typical Rill Single Family Residential by Consumption
Meter Size 519"F
3/4"
0
$9.55
$10.55
$2.00
5
$11.10
$13.20
$2.10
10
$13.65
$15.95
$2.20
15
$16.20
$19.50
$2.30
20
$18.75
$21.15
$2.40
5.3 Summary of Rate Study
This rate study proposes adjustments to the City's sewer rates. A summary of actions and projections are
as follows:
Maintain the fixed service charge to reflect the nature of fixed costs associated with providing 24/7
sewer service and investments in infrastructure through the capital improvement program.
Maintain the consumption charge to reflect the variable costs associated with operating costs such as
utilities.
Project sewer sales to remain flat in accordance with historically contributed sewage flow and
compliance with state water conservation targets. State water conservation target impact contributed
sewer flow.
Operating Reserve. Strive to meet the fiscal policy of maintaining 25% of operating costs.
Capital Reserves. Strive to maintain the minimum 75% of $1.1 M capital costs.
Increase the annual investment in Capital Improvements from $1.1 M to $1.3M by the end of the 5-
year study period to reflect the increase in capital costs due to inflation.
Maintain a comparable cost of collecting contributed sewage flow amongst neighboring sewer
collection -only providers.
BLACK & VEATCH I Rate Design
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6.0 Appendix A — Cost of Service and Rate Design
The following tables represent the cost -of -service analysis and rate design tables for FY 2025 to FY 2028
using the methodology described in Sections 4.0 and 5.0.
6.1 ria,.dl Year 202:,
Table 6-1 Allocation Basis for O&M Expenditures (FY 2025)
ComrnontoAll Customen
+ M Volume Customer
Operation & Maintenance
1 Regular Salaries -Special Pays 100% 0% Collection
2 Benefits 100% 0°6 Collection
3 Contract Services 100% 0% Collection
4 Utilities IOI % 0% Collection
5 Supplies&Materials 1013%
0%
AverageO&M(IessCS)
6 Ma i ntena nce & Repa i r 1013%
0%
Collection
7 Travel & Tra i n i ng 1013%
0%
Average O&M (IessCS)
8 General Expenses IOQ
0%
Average O&M (IessCS)
9 Internal Svc Charge 0%
100%
Customer
Table 6-2 Allocation of O&M Expenditures (FY 2025)
® +Corn
r -
rn on +
Volume
Customer
1
2
3
Operation & Maintenance
Salaries
Benefits
Contract Services
1,332,100
737,500
149,700
1,332,100
737,500
149,700
0
0
0
4
Utilities
17,000
17,000
0
5
Electric ity
69,200
69,20D
0
6
Supplies& Materials
21,300
21,300
0
7
Maintenance& Repair
910,300
910,300
0
8
Travel &Training
10,600
10,600
0
9
General Expenses
392,100
392,100
0
10
Customer Bi I I i ng
188,400
0
188,400
11
Internal Svc Charge
855,800
0
855,80a
12
Insurance
639,600
0
639,601)
13
Routine Capita I Outlay
34,800
34,E00
0_
14
15
16
17
Transfers
Total O&M Expenses
Less Ether Revenue
Miscellaneous Revenues
Other Adjustments
(491,600)
4,866,800
66,90a
(227,01)01
(491,600)
3,183,000
52,600
(178,500)
0
1,683,800
14,300
(48,500)
1S
Net Operating Expenses
$ 5,026,9M $
3,308,900 $
1,718,000
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
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City of Newport Beach, CA I Sewer Rate Study
Table 6-3 Allocation Basis for Capital Costs (FY 2025)
M Volume Customer
X X
1
2
3
4
Table 6-4
P i ant Assets
Collection
100% 0% Collection
Lift Station 100% 0% Pumping
Equipment 100% 0% Average Net Plant
General Plant 100% 0% Average Net Plant
Allocation of Capital Costs (FY 2025)
volume
Customer
+. YY
Plant Assets
1
Collection
21,320,100
21,320,100
0
2
Lift Station
6,835,300
6,895,300
0
3
Equipment
0
0
0
4
General Plant
2,300
2,300
0
5
Total Plant Assets
$ 28,217,700
$ 28,217,700
$ 0
6
Capital Costs
$ 1,102,500
$ 1,102,500
$ 0
Less Other Revenue
7 Miscellaneous Revenues 0 0 0
8 Other Adjustments 152,200)
(52,200)
0
9 Net Plant Assets $ 1,154,700"
1,154,700
0
Table 6-5 Units of Service (FY 2025)
M Contributed Equivalent
Vol'ume Meters
Column reference (1)
(2)
Units of Measure (HCF)
(EM)
1 All Customers _ 4,030,872
24,215
2 Sewer Only 200,376
774
3 Total 4,231,248
24,999
Table 6-6 Units Cost of Service (FY 2025)
® ..
M '
+ + +•
Volume
+
Customer
1 Net Operating Expense 5,026,900
31308,9100
1,719.000
2 Capital Costs 1,154,700
1,154,700
0
3 Total Cost of Service 6,181,600
4,463,600
1,718,000
4 Units of Service
4,231,248
24,989
HCF
EM
5 Cast per Unit
1.05
68.75
per HCF
per EM
BLACK & VEATCH I Appendix A — Cost of Service and Rate Design
12-110
City of Newport Beach, CA I Sewer Rate Study
Table 6-7 Distribution of Costs to Customer Types (FY 2025)
Volume Customer
Column reference (1J (2) (3)
1 Cast per Unit 1.05 68.75
per HCF per EM
All Customers _
2 Units 4,030A7 2 24,215
3 Allocation of costs of service 5,917,000 4,252,200 1,664)M
Sewer Only
4 U n its 200,376 774
5 Allocation of costs of service 264,600 211,400 53,200
6 Tota I Cost of Service 6,181,600 $ 4,463,600 1,719,000
Table 6-8 Costs within the Sewer Monthly Fixed Charge (FY 2025)
CapaeitY Cust BAng Meter Adjusted Total
Unit Cost Unit Cost Ratio Unit Cost Charge
per EM per EM $ $ f Month
5/9", 3/4" 7.12 5.73 1JDd 12.95 12-95
1" 7.12 5.73 1JD0 12Z5 12.85
1-1/2" 7.12 5.73 1.50 19.28 19.28
2" 7.12 5.73 21D0 25.71 25.71
3" 7.12 5.73 2.50 32.14 32.14
4" 7.12 5.73 3.00 38.56 38.56
6" 7.12 5.73 3.50 44.99 44.99
8" 7.12 5.73 4.00 51.42 51.42
*EM = Equivalent Meter
Fixed Svc Charge Revenue 2,136,500 $ 1,717,900 $ 3,954,400
Table 6-9 Sewer Consumption Charge (FY 2025)
Allocat• + to
Cons Charge
1 Volume Costs 52.196 $ 2,327,100 (Table 6 7, Row 6,Col 2)
2 Units of Service (HCF} 4,231,248 (Table 6-5, Line 3, Col 1)
3 U nit Cost of Service $ 0.55
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
City of Newport Beach, CA I Sewer Rate Study
6.2 Fiscal Year 2026
Table 6-10 Allocation Basis for O&M Expenditures (FY 2026)
sh I
Dewripfition
CommontoAll
Volume
Customers
Customer
Operation & Maintenance
1 Regular Salaries -Special Pays
10D%
0%
Collection
2 Benefits
100%
0%
Collection
3 Contract Services
101 %
0%
Collection
4 Utilities
101%
0%
Collection
5 Supplies&Materials
100
0%
Average O&M (less CS}
6 Ma i ntena nce & Repa i r
100%
0%
Collection
7 Travel & Tra i n i ng
100%
0%
Average O&M (less CS)
S General Expenses
100%
0%
Average O&M (less CS)
9 Internal Svc Charge
0%
100%
Customer
Table 6-11 Allocation of O&M Expenditures (FY 2026)
Corn rn on to All Cu storn ers
M - F Volume Cuskorner
1
2
3
Operation & Maintenance
Salaries
Benefits
Contract Services
_
1,388,100
768,300
155,600
1,388,100
768,300
155,600
0
0
0
4
Utilities
17,900
17,900
0
5
Electricity
72,700
72,700
0
6
Supplies& Materials
22,600
22,600
0
7
Maintenance& Repair
964,9M
964,900
0
8
Travel &Training
11,000
11,000
0
9
General Expenses
407,700
407,700
0
10
Customer Billing
195,900
0
195,9W
11
Internal Svc Charge
903,800
0
903)M
12
Insurance
675,400
0
675,400
13
Routine Capita I Outlay
36,600
36,600
0
14 Transfers (235,600) (235,600) 0
15 Total O&M Expenses $ 5,384,900 $ 3,609,800 $ 1,775,100
Less Other Revenue
16 Miscellaneous Revenues
66,9W
52,500
14,400
17 Other Adjustments
(341,700)
(268,100)
(73,600)
18 Net Operating Expenses
$ 5,659,700
$ 3,825,400 $
1,834,300
BLACK & VEATCH I Appendix A — Cost of Service and Rate Design
12-112
City of Newport Beach, CA I Sewer Rate Study
Table 6-12 Allocation Basis for Capital Costs (FY 2026)
M Volume Customer
X X
1
2
3
4
P i ant Asset-,
Collection
Table 6-13
0`
100% 0% Collection
Lift Station 100% 0% Pumping
Equipment 100% 0% Average Net Plant
General Plant 100% 0% Average Net Plant
Allocation of Capital Costs (FY 2026)
Volume Customer
1
Plant Assets
Collection
21,320,100
21,320,100
0
2
Lift Station
6,835,300
6,895,300
0
3
Equipment
0
0
0
4
General Plant
2,300
2,300
0
5
6
Total Plant Assets
Capital Costs
Less Other Revenue
$ 28,217,700
$ 1,357,600
$ 28,217,700 $
.$ 1,357,600 $
0
0
7
Miscellaneous Revenues
0
0
0
8
9
Other Adjustments
Net Plant Assets
(87,200)
$ 1,444RZO
(87,200)
$ 1,444,900 $
0
0
Table 6-14 Units of Service (FY 2026)
M Contributed Equivalent
Vol'ume Meters
Column reference (1) (2)
Units of Measure (HCF) (EM)
1 All Customers _ 4,030,872 24,215
2 Sewer Only 200,376 774
3 Total 4,231,248 24,989
Table 6-15 Units Cost of Service (FY 2026)
®I
Volume Customer
1 Net Operating Expense 5,659,700 3,825,400 1,834,300
2 Capital Costs 1,444,800 1,444,800 0
3 Total Cost of Service $ 7,104,500 $ 5,270,200 $ 1,834,300
4 Units of Service 4,231,248 24,989
HCF EM
5 Cast per Unit $ 1-25 $ 73AI
per HCF per EM
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
12-113
City of Newport Beach, CA I Sewer Rate Study
Table 6-16 Distribution of Costs to Customer Types (FY 2026)
M Volume Customer
Column reference (1) (2) (3)
1 Cast per Unit 1.25 73.41
per HCF per EM
All Customers _
2 Units 4,030A72 24,215
3 Allocation of costs of service 6,798,100 5,020,600 1,777,500
Sewer Only
4 Units 200,376 774
5 All I ovation of costs of service 306,400 249,600 56,300
6 Total Cost of Service 7,104,500 $ 5,270,200 1,834,300
Table 6-17 Costs within the Sewer Monthly Fixed Charge (FY 2026)
Capacity Cust BMng Meter Adjusted Total
Unit Cost UHit cost Ratio Unit Cost Charge
per EM per EM $ f Month
5/9", 3/4" 9.53 6.12 1JD0 15.65 15.65
1" 9.53 6.12 1JD0 15.65 15.65
1-1/2" 9.53 6.12 1.50 23.47 23.47
2" 9.53 6.12 21D0 31-30 3130
3" 9.53 6.12 250 39.12 39.12
4" 9.53 6.12 3.00 46.95 46.95
6" 9.53 6.12 3.50 54.77 54.77
8" 9.53 6.12 4.00 62.60 62.60
*EM = Equivalent Meter
Fixed Svc Charge Revenue $ 2,959,200 $ 1,8.34,3O0 $ 4,692,500
Table 6-18 Sewer Consumption Charge (FY 2026)
Allocated
ChargeCons *-
1 Volume Costs 45.896 $ 2,412,000 (Table Er1&, Row &, Cal 2)
2 Units ofService (HCF} 4,231,248 (Table &-14, Line 3, Coll)
3 U nit Cost of Service $ 0.57
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
City of Newport Beach, CA I Sewer Rate Study
6.3 Fiscal Year 2027
Table 6-19 Allocation Basis for O&M Expenditures (FY 2027)
M
Comm onto All
Volume
Customers.
Customer
Operation & Maintenance
1 Regular Salaries -Special Pays
lOD%
0%
Collection
2 Benefits
101 %
0%
Collection
3 Contract Services
101 %
0%
Collection
4 Utilities
10D%
0%
Collection
5 Supplies&Materials
100%
0%
Average O&M (less CS}
6 Ma i ntena nce & Repa i r
100%
0%
Collection
7 Travel & Tra i n i ng
100%
0%
Average O&M (less CS)
S General Expenses
100%
0%
Average O&M (less CS)
9 Internal Svc Charge
0%
100%
Customer
Table 6-20 Allocation of O&M Expenditures (FY 2027)
Corn rn on to All Cu storn ers
M - F Volume Customer
1
2
3
Operation & Maintenance
Salaries
Benefits
Contract Services
1,429,700
791,400
161f&W
1,429,700
791,400
161. &gw
_
0
0
0
4
Utilities
18)m
18)M
0
5
Electric itV
76,300
76,300
0
6
Supplies& Materials
23,700
23,700
0
7
Maintenance& Repair
1,013,100
1,013,100
0
8
Travel &Training
11,400
11,400
0
.9
General Expenses
424,000
424,000
0
10
Customer Billing
203,700
0
203,700
11
Internal Svc Charge
954,300
0
954,300
12
Insurance
713,200
0
713,200
13
Routine Capita I Outlay
38,500
38,500
0
14 Transfers 341,600 341,600 0
15 Total O&M Expenses $ 6,201,50D $ 4,330,300 $ 1,971,200
Less Other Revenue
16 Miscellaneous Revenues
66,900
52,300
14,600
17 Other Adjustments
(511,300)
1399,600)
(111,700)
18 Net Operating Expenses
$ 6,645,900
$ 4,677,600 $
1,969,300
BLACK & VEATCH I Appendix A — Cost of Service and Rate Design
12-115
City of Newport Beach, CA I Sewer Rate Study
Table 6-21 Allocation Basis for Capital Costs (FY 2027)
M Volume Customer
X X
P i ant Assets
1
Collection
100%
2
Lift Station
100%
3
Equipment
100%
4
General Plant
100%
Table 6-22 Allocation of Capital Costs (FY 2027)
0% Collection
0% Pumping
0% Average Net Plant
0% Average Net Plant
Corn mon to All
volume
Custom
Customer
+. YY
Plant Assets
1 Collection 21,320,100
21,320,100
0
2 Lift Station 6,895,300
6,895,300
0
3 Equipment 0
0
0
4 General Plant 2,300
2,300
0
5 Total Plant Assets $ 28,217,700
$ 28,217,700
$ 0
6 Capital Costs $ 1,415,500
$ 1,415,500
$ 0
Less Other Revenue
7 Miscellaneous Revenues 0
0
0
8 Other Adjustments (1181000)
MUM
0
9 Net Plant Assets $ 1,533,500"
1,533,500
$ 0
Table 6-23 Units of Service (FY 2027)
M Contributed Equivalent
Vol'ume Meters
Column reference (1)
(2)
Units of Measure (HCF)
(EM)
1 All Customers _ 4,030,872
24,215
2 Sewer Only 200,376
774
3 Total 4,231,248
24,989
Table 6-24 Units Cost of Service (FY 2027)
® ..
M '
+ + +•
Volume
+
Customer
1 Net Operating Expense 6,645,900
4,677,600
1,968,300
2 Capital Casts 1,533,500
1,533,500
0
3 Total Cost of Service $ 8,179,400
$ 6,211,100
$ 1,968,300
4 Units of Service
4,231,249
24,999
HCF
EM
5 Cast per Unit
1-47
$ 78-77
per HCF
per EM
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
12-116
City of Newport Beach, CA I Sewer Rate Study
Table 6-25 Distribution of Costs to Customer Types (FY 2027)
Volume Customer
Column reference (1J (2) (3)
1 Cast per Unit 1.47 78.77
per HCF per EM
All Customers
2 Units 4,030A72 24,215
3 Allocation of costs of service 7A24,300 5,917,000 1,907,300
Sewer Only
4 Units 200,376 774
5 Al I ovation of costs of service 355,100 294,100 61,000
6 Total Cost of Service $ 9,179,400 $ 6,211,100 1,968,300
Table 6-26 Costs within the Sewer Monthly Fixed Charge (FY 2027)
Capacity Cust Bing Meter Adjusted Total
Unit Cost Unit Cost Ratio Unit Cast Charge
per EM per EM $ $f Month
5f8",3f4" 12-39 6.56 1JDd 18.95 18.95
1" 12,39 6.56 1JD0 18.95 18.95
1-1/2" 12-39 6.56 1.50 28.43 28.43
2" 12,39 6.56 2JDO 37.90 37.90
3" 1239 6.56 2.50 47-38 47-38
4" 1239 6.56 3.00 56-85 56-85
6" 12-39 6.56 3.50 66-33 66-33
8" 12-39 6.56 4.00 75-91 75BI
*EM = Equivalent Meter
Fixed Svc Charge Revenue 3,714,600 $ 1,968,300 $ 5,682,9D0
Table 6-27 Sewer Consumption Charge (FY 2027)
Allocated
ChargeCons *-
1 VolurneCosts. 40.296 $ 2,496,600 (Table Er25, Row 6, Cal 2J
2 Units of Service (HCF} 4,231,248 (Table &-23, Line 3, Cal 1)
3 U nit Cost of Service $ 0.59
BLACK & VEATCH I Appendix A — Cost of Service and Rate Design
6-9
City of Newport Beach, CA I Sewer Rate Study
6.4 Fiscal Year 2028
Table 6-28 Allocation Basis for O&M Expenditures (FY 2028)
sh I
Dewripfition
CommontoAll
Volume
Customers
Customer
Operation & Maintenance
1 Regular Salaries -Special Pays
10D%
0%
Collection
2 Benefits
100%
0%
Collection
3 Contract Services
101y%
0%
Collection
4 Utilities
101y%
0%
Collection
5 Supplies&Materials
100
0%
Average O&M (less CS}
6 Ma i ntena nce & Repa i r
100%
0%
Collection
7 Travel & Tra i n i ng
100%
0%
Average O&M (less CS)
S General Expenses
100%
0%
Average O&M (less CS)
9 Internal Svc Charge
0%
100%
Customer
Table 6-29 Allocation of O&M Expenditures (FY 2028)
Corn rn on to All Cu storn ers
M - F Volume Cuskorner
Operation & Maintenance
_
1
Salaries
1,472,600
1,472,600
0
2
Benefits
815,100
815,100
0
3
Contract Services
168,100
168,100
0
4
Utilities
19,800
19,800
0
5
Electric itV
80,10C
80,100
0
6
Supplies& Materials
24,900
24,900
0
7
Ma i ntena nce & Repa i r
1,063fM
1,063)M
0
8
Travel &Training
1if80D
11,800
0
'9
General Expenses
440YOD
440,800
0
10
Customer Billing
211,800
0
211,8M
11
Internal Svc Charge
1,007,700
0
1,0117,700
12
Insurance
753,100
0
753,100
13
Routine Capita I Outlay
40,500
40,500
0
14 Transfers 1,019,700 1,019,700 0
15 Total O&M Expenses $ 7,129f80D $ 5,157,200 $ 1,972,600
Less Other Revenue
16 Miscellaneous Revenues
66,900
52,100
14f800
17 Other Adjustments
1591,300)
(460,300)
(131,OD0)
18 Net Operating Expenses
$ 7,654,200 $
5,565,400 $
2,088,800
BLACK & VEATCH I Appendix A — Cost of Service and Rate Design
12-118
City of Newport Beach, CA I Sewer Rate Study
Table 6-30 Allocation Basis for Capital Costs (FY 2028)
M Volume Customer
X X
1
P i ant Asset-,
Collection 100% 0% Collection
2 Lift Station
100%
0%
Pumping
3 Equipment
100%
0%
Average Net Plant
4 General Punt
1CC'_�
0%
Average Net Plant
Table 6-31 Allocation of Capital Costs (FY 2028)
Corn mon to All
volume
Customers
Customer
+. YY
Plant Assets
1 Collection
21,320,100
21,320,100
0
2 Lift Station
6,895,300
6,895,300
0
3 Equipment
0
0
0
4 General Plant
2,300
2,300
0
5 Total Plant Assets
$ 28,217,700
$ 28,217,700
$ 0
6 Capital Costs
$ 1,476,300
$ 1,476,300
$ 0
Less Other Revenue
7 Miscellaneous Revenues 0
0
0
8 Other Adjustments 1123,6001
(123,600)
0
9 Net Plant Assets $ 115941900
" 11599,900
$ 0
Table 6-32 Units of Service (FY 2028)
M Contributed Equivalent
Volume Meters
Column reference (1)
(2)
Units of Measure (HCF)
(EM)
_ 1 All Customers _ 4,030,872
24,215
2 Sewer Only 200,376
774
3 Total 4,231,248
24,989
Table 6-33 Units Cost of Service (FY 2028)
r -
® M+
+ +•
Volume
+
Customer
1 Net Operating Expense 7,654,200
5,565,400
2,0&8,&00
2 Capital Costs 1,593,900
115991900
0
3 Total Cost of Service $ 9,254,100
7,165,300
$ 2,099,900
4 Units of Service
4,231,248
24,999
HCF
EM
5 Cast per Unit
1.69
$ 83.59
per HCF
per EM
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
12-119
City of Newport Beach, CA I Sewer Rate Study
Table 6-34 Distribution of Costs to Customer Types (FY 2028)
M Volume Customer
Column reference (1J (2) (3)
1 Cast per Unit 1.69 83.59
per HCF per EM
All Customers
2 Units 4,030A72 24,215
3 Allocation of costs of service 8A50,100 6A2 6,000 2,024,100
Sewer On IV
4 U n its 200,376 774
5 Al l ocation of costs of service 404,000 339,300 64,700
6 Total Cost of Service 9,254,100 $ 7,165,300 2,088,800
Table 6-35 Costs within the Sewer Monthly Fixed Charge (FY 2028)
Capacity Cust Bing Meter Adjusted Total
Unit Cost Unit Cost Ratio Unit Cost Charge
per EM per EM $ $ f Month
5/9", 3/4" 15.29 6.97 1JDd 22.25 22.25
1" 15.29 6.97 1JD0 22.25 22.25
1-1/2"
15.29
6.97
1.50
33-39
33 3.8
2"
15.29
6.97
2JD0
44.51
44.51
3"
15.29
6.97
2.50
55.63
55.63
4"
15.29
6.97
3.00
66.76
66.76
6"
15.29
6.97
3.50
77-89
77B9
8"
15.29
6.97
4.00
89.01
89-01
*EM = Equivalent Meter
Fixed Svc Charge Revenue
4,594,201)
$ 2,088,8W
6,673,000
Table 6-36 Sewer Consumption Charge (FY 2028)
1 Volume Costs 36.0% $ 2,581,100 (Table 6-34, Row 6, Cal 2)
2 Units of Service (HCF} 4,231,248 (Table 6-32, Line 3, Coll)_
3 U nit Cost of Service $ 0.61
BLACK & VEATCH I Appendix A - Cost of Service and Rate Design
12-120
CITY OF NEWPORT BEACH
UTILITIES DEPARTMENT
100 CIVIC CENTER DRIVE, NEWPORT BEACH, CA 92660
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2023 Proposition 218 Notice
UTILITIES DEPARTMENT
WATER, SEWER, STORM DRAINS, AND STREET LIGHTS
NOTICE OF PUBLIC HEARING ON PROPOSED
PUBLIC HEARING
Tuesday, November 14, 2023
at 4 P.M.
ATTEND IN PERSON
Council Chambers
100 Civic Center Drive,
Newport Beach, CA 92660
The Utilities Department invites you
to attend and participate in this
public hearing. The City Council will
consider adopting the proposed
water and sewer rate increases.
WATER AND SEWER RATE INCREASE
KEEPING PACE WITH RISING COSTS
rroposea Kate Increase
In compliance with Proposition 218, the City
is notifying all customers about proposed
changes to the City`s water and sewer rate
charges. You are receiving this notice
because you are a customer of the City of
Newport Beach.
Of utmost importance is the effort to
minimize costs, including rates, while
maintaining the integrity and reliability of the
City`s infrastructure and its financial stability.
To assist the City in this endeavor, an
independent outside financial consultant who
specializes in cost of service analysis and rate
setting was retained by the City.
r ;
R
ADDITIONAL INFORMATION
Please Visit Oui- WebwLV.
www.newportbeachca.gov/trending
under "Projects"
The Utilities Department has created
a comprehensive website that houses
all the relevant information along with
the detailed rate studies.
apu
UTILITIES DEFT
NEWPORT BEACH
NOTICE OF PUBLIC HEARING
SUMMARY
The City is writing to inform you of proposed changes to the rates we
charge for your water and sewer services. If approved by City Council,
these changes will take effect on your billing statements beginning
January 1, 2024. These proposed increases are the result of detailed
budget analysis and the findings of recent City Water and Sewer Rate
Study Reports (Rate Study). The reports were prepared by an independent
financial firm to determine a fair and equitable cost allocation among
water and sewer customer categories.
Typical monthly increases for the most common customers will be:
(Example: with a 5/8-inch meter using10 HCF Hundred Cubic Feet, i.e. 7,480 gallons per month)
For water, $4.77 in 2024, $5.50 in 2025, $6.00 in 2026, $6.00 in 2027, $6.00 in 2028
For sewer, $2.20 in 2024, $2.50 in 2025, $3.00 in 2026, $3.50 in 2027, $3.50 in 2028
The net impact of the proposed changes in the rates for water customers will vary based upon actual water consumption
and meter size.
BACKGROUND
Every few years, as the current rate schedules expire, separate financial plan and rate studies are necessary to evaluate
the water and sewer rates, determining the charge for customers. Rate studies were previously completed in 2017 for
sewer and in 2019 for water. These studies represent a best practice for determining utility rates that are fair, equitable
and reflective of the demand placed on the systems by the customers. The goal was to ensure the City's plans for critical
infrastructure maintenance, accounting for inflation, and funding capital improvement projects with cash, were in
alignment with proposed rates. Our mission is to continue providing high -quality and local control water and sewer
services at the best value for Newport Beach.
These water and sewer services are separately tracked and are funded through the revenue collected from your municipal
services statement, i.e. water and sewer bill. No taxes or property taxes are received for your water and sewer services,
and there is no debt on the system, so the City must align rates with the cost to deliver services. Costs include (1) the cost
to supply and treat water, (2) compliance with governing regulations, (3) the repair, replacement, and update of aging
systems, and (4) ongoing maintenance of this critical infrastructure.
Like any asset, regular maintenance and replacement are critical to operate the City's water and sewer systems. Over the
past four years, we have invested in tens of millions of dollars in pipeline and pump station replacements and upgrades.
Over the next five years, we are continuing that ongoing investment with over $45 million in water and sewer capital
replacements and upgrades. Among other projects, we'll continue to rehabilitate our water storage reservoirs,
groundwater wells, pump stations and replace/rehabilitate miles of pipelines. This will include complex underwater work
for lines that run beneath Newport Harbor.
We take seriously the maintenance and replacement of the systems, as
well as the trust you've placed in us to deliver high quality water and
sewer services, and we adjust rates only when necessary. Should you
have any questions about the proposed changes, please visit our
website or newportbeachca.gov/trending under "Projects" or contact
the Utilities Department at 949-644-3011.
Thank you for your support and understanding.
Mark Vukojevic, Utilities Director
THE WATER SYSTEM
The City of Newport Beach Utilities Department
manages the City's water system. Our water is
sourced by a blend of up to 85% ground water and
15% imported surface water. Newport's
groundwater comes from four ground water wells
Located in the City of Fountain Valley, then pumped
to a reservoir in Newport Beach. The groundwater
basin is actively managed by Orange County Water
District (OCWD, www.ocwd.com). Ground water
comes from a natural under ground aquifer,
Layered with sand and gravel, that works as a
natural water filter. The water is replenished with
water from the Santa Ana River, local rainfall,
imported water and the Ground Water
Replenishment System (GWRS). The imported
surface water is primarily from the Colorado
Aqueduct (Colorado River) and sometimes water
from the California Aqueduct (Northern California).
The Utilities Department maintains and operates
the City's water system which includes 4
groundwater wells, 3 water storage reservoirs, 17
pumps and 42 pressure reduction stations.
Additionally, the department oversees recycled
water services, manages over 300 miles of water
distribution pipelines, maintains over 25,000
service lines, and over 2,500 fire hydrants to
distribute water to the homes and businesses of
Newport Beach.
THE SEWER SYSTEM
The City of Newport Beach Utilities Department
also manages the sewer system, providing service
to residential and commercial customers. The
City's system is a collection and transportation
system; the Orange County Sanitation District (OC
San) Huntington Beach plant provides treatment
services. Sanitary sewer flows are collected from
Newport Beach residences and businesses and
transported through more than 25,000 laterals,
200 miles of gravity sewer mains and 5 miles of
pressurized force sewer mains by way of 21 pump
(lift) stations to OC San.
PROPOSED 5-YEAR WATER RATES
Fixed Service Charges l$fMonth)
Meter Size
5f8" 3/4" 25.22: 27.09; 31.59: 36.59; 41.59 45.591
................. .....
1"
.....................................................................................
,................. . a...............
3909
.................z.,..........................115:z3°...............
73.69
..................... ....................:............................:................
3"
...................................................................
305.61a...............
4"
.........................................
523.69
:............................ .................
6"
........................................,...........................>................
1,112.15 11
8"
1,942.91 2,
I Serwiue
Charge {$ jllAonth ,
.Meter She
1"
........................................;...........................>................
13.14
1-1/2"
..............................14.72
13.72 ................
2..................
......................
,........................... ,...............
2-1/2"
.......................................................................................
16.23
3"
.................4...................,
18.31
.......................
..................5. ..................,............46.7
24.52 °...............,
........................................,...........................>................
5 !................
8"
......................................................................:................
85.13
10"
142.84
Usage Charge ($/HCF)
Water Usage
3.87:
41:99 ......................50-07
.......................................................
...................................
79.15
.................... .... .....
96.29
...........................
:
123.76
................... ,...................................
151.74
32823
..................:
405.92
562.45
...................
697.06
194.45
1,482.68
58:30°....................................-°....................74.7
...................-0....................................,....................................
5
112.59
......................................................4...................................
128�B8
145.15
177.74
................... ,....................................:....................................
203.71:
229.55
475-32.
.................... :....................................
545-55'
;...................................
615.99
818.33
................... ,........................................................................
939.47
1,060.45
741.22
1,999.48
2,257.39
14.12
........................................................>........................................................................-0....................................
8.96:
9.59
10.18
10.75
14.74
10.15 ....................................
10.86 -0.......................................................................
11.55
1223
15 81:
.........................................................
1221.13.06
....................................
1392;
14.77
17.44
................... ¢....................................
,....................................
15.31 .............................................................................................................
16.36
,...................................
17.48
18.60
19.67
........................................................
;
19.59 a....................................,..
20.94 .... ..............
22.43
................ ,...................................
2391
26.34
...................>........................................................................-0.......................................................................
32.33
34.53
37.10
39.56
5021
........................................................>.......................................................................-0....................................
78.03:
8329
89.75
9525
91.43.
.................,.........................................................................
156 85:
167.41;
,....................................:.......
180.56 ....
193,64
..... ....................
153.42
275.42
293.93
317.16.
340.52
4.16 426 4.36
z•� z•�-� a •�.� � �_� :a :� xy cy � a •racy r a :a ;�_� r �y
4.46 4.55
� � � r��+rrr��r+r
a+r ■r�+ram sr+r
a+r �r�+r��nr
■t+r ■r�+raanr
a+r ■r�+r�anr
rt+r rr�+r�:�
i Fixed Service Charges l$/Month)
Meter Sae
1" 18.41;
...................... :............................ :....................................
19.78 a....................................:....................................,....................................;....................................
21.85
23.06
24.15;
25.25
32,35
....................,...........49.09 ....................52.73
34.75: .....................61:438....................54:95'.....................68.13a....................71.2
39.94
42.10
44.15
46.16
2
.........................................:...........................:....................................>....................................:....................................-0....................................:....................................
5
3" 125 81
.................................................................... a....................................:....................................;....................................:....................................
135.12 i
16058
169.69:
178.05 a....................................
186.25
4" 213.68:
.....................................................................:....................................¢....................................:....................................i....................................:....................................
229.50
273.72
289.66°
303.961
317.97
6" 450,SO
......................................... d........................... a........................................................................
494.16
579.56 a........................................................................
613.40
&43.7 2:i
a....................................
673.42
8" 795.55
943.69
1,011.34:
1,070.43
1,123,38
1,175.23
`-ce Charge ($IHClr)
RW Usage 2.21'
.........................................................................................................,....................................:....................................,....................................,....................................
229
2.66'
2.74;
2 82
2.91
PumoChame 0.67
0.72
0.50
0.52
0.55
0.57
PROPOSED 5-YEAR SEWER RATES
Fixed Service Charges ($/Month)
Meter Size
5/g",3/4^, 1" 8.55:
10.55
12.95:
15.65:
18.95
1-1/2"...........................9.41................
..................................................................................................................................................................................................................
15.83..................
19.28.................
23.47..................
28.43
........
2" 12.83
..............................................................:..........................................:..........................................:...............................:..........................................
21.11
25.71.31.30.37.90
3" 14.54
..................................:...........................:.........................................:.........................................:...................
26.38
32.14
39.12
...:..........................................
47.38
4" 17.11
................................ i............................
31.66
:.......................................... :..........................................
39.56 :...........................
45.95
._...........:..........................................
56.85
6" 19.25
.............................. i..........................................................................................................................................................:..........................................
36.94
44.99
54.77
66.33
8" 21.39
42.22
51.42
62.60
75.31
Usage Charge ($/HCF)
Sewer Usage 0.51
0.53'
0.55'
0.57'
0.59
Sewer Only Customers-
Fixed Service Charge
($/Month),
No Usage Charge
Meter Size
5/8", 3f4" 13.14
..................................
15.36.18.36.21.35.24.35
.......................:.......
......................:..........................................:........
1" 15.34
18.51.21.11.24.20.27.80
1-1J2" 46
...............................................
2" 47
................................:...................
3- 122
................................:...................
4" 216
................................:...................
6" M1
.............................. _:...................
8" 383
.............................. ........
10" 389
..............................................................
53.99 58.38
....................:.........................................
59.27. 65.31
.................... :.........................................
137.68. 147.63
.................... :.........................................
238.35. 253.06
.................... :.........................................
413.21 435.48
....................:.........................................
418.49 441.91
....................:.........................................
423.77.448.33
64.52
72.34
159.83
269.27
467.
...........
475.
22.25
33.39
66.
28.36
31.41
77.30
99.43
193.74
3 D4.57
22