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Home My WebLink About2025-10-02 - Board of Directors Meeting Agenda Packet AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS SPECIAL MEETING Thursday, October 2, 2025, 8:00 AM 1717 E Miraloma Ave, Placentia CA 92870 1. PARTICIPATION INSTRUCTIONS This meeting will be held in person. For public convenience, the meeting can also be accessed via internet-based service or telephone as indicated below. For questions regarding participation, please call the Board Secretary at (714) 701-3020. Computer/Mobile Device: https://us06web.zoom.us/j/82360479284 Telephone: (669) 444-9171 or (669) 900-6833 Meeting ID: 823 6047 9284 2. CALL TO ORDER 3. PLEDGE OF ALLEGIANCE 4. ROLL CALL 5. AB 2449 TELECONFERENCE REQUESTS 6. PUBLIC COMMENTS Any individual wishing to address the Board (or Committee) is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Chair will recognize the individual for their comment when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited to three minutes and must be related to matters of public interest within the jurisdiction of the Water District. (GC 54954.3) 7. CLOSED SESSION The Board may hold a closed session on items related to personnel, labor relations and/or litigation. The public is excused during these discussions. 7.1. Public Employee Performance Evaluation Pursuant to Section 54957 of the California Government Code Title: General Manager 7.2. Conference with Labor Negotiators Pursuant to Section 54957.6 of the California Government Code Agency Designated Representative: Andrew Gagen, General Counsel Unrepresented Employee: General Manager 8. OPEN SESSION WILL BEGIN AT 9:30 AM 9. REPORT FROM CLOSED SESSION 10. PUBLIC COMMENTS CONTINUED 11. DISCUSSION ITEMS This portion of the agenda is for items that cannot reasonably be expected to be concluded by action of the Board (or Committee) at the meeting, such as technical presentations, drafts of proposed policies, or similar items for which staff is seeking advice and counsel. Time permitting, it is generally in the District’s interest to discuss these more complex matters at one meeting and consider formal action at another meeting. This portion of the agenda may also include items for information only. 11.1. Water and Sewer Rate Study Preliminary Rate Scenarios by Water Resources Economics Page 1 of 30 12. ADJOURNMENT 12.1. The next regular Board meeting is scheduled Thursday, October 9, 2025 at 8:30 AM. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Non-exempt materials related to open session agenda items that are distributed to a majority of the Board of Directors (or Committee Members) less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District’s Administrative building located at 1717 E Miraloma Ave, Placentia CA 92870 during regular business hours. When practical, these materials will also be posted on the District’s website at https://ylwd.com/. (GC 54957.5) Accommodations for the Disabled Requests for disability-related modifications or accommodations, including auxiliary aids or services, required for participation in the above-posted meeting should be directed to the Board Secretary at (714) 701-3020 at least 24 hours in advance. (GC 54954.2(a)) Page 2 of 30 ITEM NO. 11.1. AGENDA REPORT MEETING DATE: October 2, 2025 TO: Board of Directors FROM: Mark Toy, General Manager STAFF CONTACTS: Christine McIlrevey, Finance Manager SUBJECT: Water and Sewer Rate Study Preliminary Rate Scenarios by Water Resources Economics BACKGROUND: District staff has been working with Water Resources Economics (WRE) for the performance of the District’s 2026 Water and Sewer Rate Study, which will set the rates for all District customers effective July 1, 2026. Preliminary rate options and associated financial modeling were presented at the September 11th Board of Directors (BOD) Meeting by Sanjay Gaur, WRE founder and Project Manager. That presentation included an overview of the District's water and sewer financial plans, cost-of-service analysis, and initial rate structure considerations. Rate Study Schedule (Upcoming Milestones): Date Event Thu, 07/10 BOD Mtg – Preliminary Financial Plan Thu, 08/28 BOD Mtg – Public Engagement Mtg (4:30 – 5:30 PM) Thu, 09/11 BOD Mtg – Preliminary Rates Thu, 10/02 BOD Mtg – Preliminary Rate Scenarios (additional meeting scheduled) Sat, 10/04 Open House (9:00 AM – 12:00 PM) Thu, 11/13 BOD Mtg – Final Rates Thu, 01/22 BOD Mtg – Receive Report and Approve Proposition 218 Notice Thu, 04/09 BOD Mtg – Public Hearing to Adopt Rates Wed, 07/01 New Rates Implemented Upcoming Board Discussion Topics Mr. Gaur and District staff will continue discussions on the proposed rate structure, including an analysis of cost-of-service components, projected debt service coverage and days of cash on hand. A key focus will be on the balance between fixed and variable revenues, as well as the allocation of fixed charges between monthly bills and annual property tax bills. Two key policy questions will be discussed: 1. What portion of the District's fixed costs should be collected through fixed versus variable charges? Page 3 of 30 ▪ Fixed costs (e.g., debt service, staffing, infrastructure maintenance) remain constant regardless of how much water is used, whereas variable costs (e.g., water purchases, energy for pumping, treatment costs) fluctuate based on customer consumption. Ideally, fixed revenues should align with fixed costs, and variable revenues should align with variable costs, promoting financial stability and reducing revenue volatility. However, practical considerations, such as ratepayer impact, should also be taken into account. ▪ Currently, 62% of the District's total costs are fixed and 38% are variable. The District's current rate structure collects only 44% of revenues through fixed charges. This means that approximately 70% of all fixed costs are currently recovered via fixed charges; the remaining 30% are recovered through variable charges (commodity rates). We will be presenting scenarios that explore increasing the share of fixed revenues, with the goal of aligning more closely with actual fixed costs. 2. How should fixed charges be split between monthly bills and the annual property tax bill? ▪ Currently, the District recovers fixed costs through two mechanisms: 1) Monthly Water Bills; and 2) Annual Property Tax Bills. The fixed monthly (meter) charge on the monthly water bill covers costs to operate, maintain, repair and rehabilitate the water system. The annual property tax bill includes the Capital Finance Charges (CFC), which is used to fund annual debt service payments (principal and interest). ▪ Scenarios will be presented that consider covering 100% of annual debt service via the property tax bill and, in addition, placing future capital improvement plan (CIP) costs on the annual property tax bill versus the monthly bill. Water Rate Scenarios for Board Review Several water rate structure scenarios will be presented for Board discussion, building upon prior input and analysis. The following scenarios will be presented for discussion: ▪ Scenario 1: Increase fixed revenue, aligning fully with cost structure (62% of revenues from fixed charges); collect Debt Service and all CIP costs on property tax bill. ▪ Scenario 2: Increase fixed revenue (55% of revenues from fixed charges); collect Debt Service and all CIP costs on property tax bill. ▪ Scenario 3: Increase fixed revenue (47% of revenues from fixed charges); collect Debt Service Costs on property tax bill, plus an annual increase of 7.5% on property tax bill. Each scenario will be evaluated in terms of financial stability, ratepayer impacts, and alignment with policy objectives. Staff and the consulting team will facilitate discussion and solicit Board direction on preferred scenario and policy considerations. Final rate recommendations will be developed based on this feedback and presented at future meetings. STRATEGIC PLAN INITIATIVES: G2 3A – Perform cost of services analysis periodically and appropriately to ensure rates and charges are fair and equitable, including compliance with Proposition 218 requirements. ATTACHMENTS: 1. Slide Deck - Rate Study Preliminary Rate Scenarios Page 4 of 30 Yorba Linda Water District Water and Sewer Rate Study Board Meeting – Rate Updates October 2, 2025 1Page 5 of 30 Agenda •Rate Study Overview •Water Financial Plan •Water Cost-of-Service •Water Rate Scenarios •Proposed Water Rates and Impacts •Sewer Financial Plan •Proposed Sewer Rates •Board Direction •Schedule 2Page 6 of 30 Rate Study Overview •xx 3 Financial Plan Determine annual rate revenue needs to maintain financial sufficiency Develop funding plan for CIP Cost-of- Service Allocate costs of water and sewer systems Determine cost to serve each customer class Rate Design Develop water and sewer rate structure most suitable to meet District’s goals and objectives Evaluate fixed revenue ratio Rate Adoption Document rate study in report Adopt rates according to Proposition 218 process We are here Page 7 of 30 4 Water Page 8 of 30 • • Water Financial Plan ( Proposed 7.5% revenue adjustments from FY 2027 to FY 2031 AOL F1ITId F Debt Coverage n S100.0M 600%` S�aM c 467K aY/K S80 OM _ 5�� O d:M► � --________�� S835M 400% 174.OM $60 OM ses 2M 300% 360 7M S62 1M S59 9M $40 OM 100Kt25K ...................................................................................... $ OM so SO UM 6. FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Calculated Debt Coverage ......Required Debt Coverage Ending Balance ———Reserve Target • Alert Balance ———Target Debt Coverage • Alert Coverage Days Cash on Hand Capital Projects 600 ^ S18.OM :1s.� 500 �dm e70 days.. din 475dM a S16.OM 422 days $14 OM 400 $12.DM f11.1M 365 d.ys — — — — — — — — — — — — — — — — — — — — — — — — - >tY.4M $10 OM 300 S8.OM S&2M !l.7M 200 S6.OM SCOM 100 S2.0M 0 so OM FY 2026 F Y 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 —Calculated Days Cash —Days Cash on Hand Target a Alert Balance ■Grant Funded CIP ■Debt Funded CIP ■Rate Funded CIP Unfunded CIP Page 9 of 30 Projected Water Reserves FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Total Projected Reserves $60.7 M $62.1 M $59.9 M $65.2 M $74.6 M $83.5 M Reserves over/(under) Policy Target Level $(13.3 M)$(23.2 M)$(25.9 M)$(13.5 M)$(5.9 M)$3.6 M 6 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 $0.0 M $20.0 M $40.0 M $60.0 M $80.0 M $100.0 M $44.9 M $48.3 M $51.8 M $55.6 M $59.7 M $64.2 M $15.8 M $13.8 M $8.1 M $9.6 M $14.8 M $19.3 M $74.0 M $85.4 M $85.8 M $78.7 M $80.5 M $79.9 M Reserves 365 Days of Cash on Hand Projected Reserves greater than 365 Days Cash Reserves Policy Target Level Page 10 of 30 Water Cost-of-Service •The costs of the water utility includes four major components: •Variable operating costs (variable water, power, materials) •Fixed operating costs (all other) •Capital costs •Debt service payments •The current water rate structure includes three components: •Fixed service charge •Variable charge •Fixed capital finance charge (currently collects debt service) 7Page 11 of 30 Cost vs. Revenue Structure 8 Fixed Costs = 62%Fixed Revenues = 44% Page 12 of 30 Water Rate Scenarios •Scenario 1: All fixed costs recovered on fixed charges (62% fixed revenue) •Capital finance charges collect all CIP + debt service costs •Remaining increase on fixed monthly service charges •Scenario 2: Increase fixed capital and operating (55% fixed revenue)* •Capital finance charges collect all CIP + debt service costs •Minor increases on fixed monthly service charges •Scenario 3: Increase fixed capital and operating (47% fixed revenue) •Increase capital finance charges up to 47% total fixed revenues •Financial plan increase of 7.5% for fixed monthly service charges 9 *Scenario 2 is a new scenario Page 13 of 30 Proposed Rates Scenario : : All fixed costs recovered on fixed charges (62% fixed revenue) Proposed RAtes Current Proposed Proposed Proposed Proposed Proposed Revenue Adjustment 7.5% 7.5% 7.5% 7.5% 7.5% Fixed Monthly Service Charge, 1" $60.61 $76.67 $82.43 $88.62 $95.27 $102.42 Fixed Annual Capital Finance Charge. 1" $160.56 $417.55 $448.87 $482.54 $518.74 $557.65 Fixed Monthly Capital Finance Charge, 1" $13.38 $34.80 $37.41 $40.21 $43.23 $46.47 Variable Commodity Rates, per ccf $4.11 $3.01 $3.24 $3.49 $3.76 $4.05 ImpactsYear 1 Rate Current Proposed ' FY 2026 FY 2027 Fixed Monthly Service Charge, 1" $60.61 $76.67 $16.06 26.5% Fixed Annual Capital Finance Charge, 1" $160.56 $417.55 $256.99 160.1 % Fixed Monthly Capital Finance Charge, 1" $13.38 $34.80 $21 .42 160.1 % Variable Commodity Rates, per ccf $4.11 $3.01 ($1 .10) -26.8% Page 14 of 30 Monthly Water Bill Impacts Capital ) Scenario . : All fixed costs recovered on fixed charges (62% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/ Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $86.32 $98.65 $123.31 $143.86 $160.30 $217.84 Proposed Bill $120.50 $129.53 $147.59 $162.64 $174.68 $216.82 Difference ($) $34.18 $30.88 $24.28 $18.78 $14.38 ($1 .02) Difference (%) 39.6% 31 .3% 19.7% 13.1% 9.0% -0.5% Page 15 of 30 Monthly Water Bill Impacts Capital ) Scenario : : All fixed costs recovered on fixed charges (62% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/o Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 - $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $72.94 $85.27 $109.93 $130.48 $146.92 $204.46 Proposed Bill $85.70 $94.73 $112.79 $127.84 $139.88 $182.02 Difference ($) $12.76 $9.46 $2.86 ($2.64) ($7.04) ($22.44) Difference (%) 17.5% 11 .1% 2.6% -2.0% -4.8% -11 .00/0 Page 16 of 30 Proposed Rates Scenario . : Increase fixed capital and operating (55% fixed revenue) Proposed Rates Current Proposed Proposed Proposed Proposed Proposed FY 2026 FY 202709 FY 2030 FY 2031 Revenue Adjustment 7.5% 7.5% 7.5% 7.5% 7.5% Fixed Monthly Service Charge, 1" $60.61 $63.25 $68.00 $73.10 $78.59 $84.49 Fixed Annual Capital Finance Charge. 1" S160.56 $417.55 $448.87 $482.54 $518.74 $557.65 Fixed Monthly Capital Finance Charge. 1" $13.38 $34.80 $37.41 $40.21 $43.23 $46.47 Variable Commodity Rates, per ccf $4.1 1 $3.61 $3.89 $4.19 $4.51 $4.85 ImpactsYear 1 Rate Current Proposed ' FY 2026 FY 2027 Fixed Monthly Service Charge, 1" $60.61 $63.25 $2.64 4.4% Fixed Annual Capital Finance Charge, 1" $160.56 $417.55 $256.99 160.1 % Fixed Monthly Capital Finance Charge, 1" $13.38 $34.80 $21 .42 160.1 % Variable Commodity Rates, per ccf $4.11 $3.61 ($0.50) -12.2% Page 17 of 30 Monthly Water Bill Impacts Capital ) scenario . : Increase fixed capital and operating (55% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/ Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $86.32 $98.65 $123.31 $143.86 $160.30 $217.84 Proposed Bill $108.88 $119.71 $141 .37 $159.42 $173.86 $224.40 Difference ($) $22.56 $21 .06 $18.06 $15.56 $13.56 $6.56 Difference (%) 26.1% 21 .3% 14.60/6 10.8% 8.50/6 3.0% Page 18 of 30 Monthly Water Bill Impacts Capital ) scenario . : Increase fixed capital and operating (55% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/o Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 - $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $72.94 $85.27 $109.93 $130.48 $146.92 $204.46 Proposed Bill $74.08 $84.91 $106.57 $124.62 $139.06 $189.60 Difference ($) $1 .14 ($0.36) ($3.36) ($5.86) ($7.86) ($14.86) Difference (%) 1 .6% -0.4% -3.1% -4.5% -5.3% -7.3% Page 19 of 30 Proposed Rates Scenario 3: Increase fixed capital and operating (47% fixed revenue) Proposed Rates Current Proposed Proposed Proposed Proposed Proposed FY 2026 FY 202709 FY 2030 FY 2031 Revenue Adjustment 7.5% 7.5% 7.5% 7.5% 7.5% Fixed Monthly Service Charge, 1" $60.61 $65.16 $70.05 $75.31 $80.96 $87.04 Fixed Annual Capital Finance Charge. 1" S160.56 $221.85 $238.49 $256.38 $275.61 $296.29 Fixed Monthly Capital Finance Charge. 1" $13.38 $18.49 $19.87 $21.37 $22.97 $24.69 Variable Commodity Rates, per ccf $4.1 1 $4.24 $4.56 $4.91 $5.28 $5.68 ImpactsYear 1 Rate Current Proposed ' FY 2026 FY 2027 Fixed Monthly Service Charge, 1" $60.61 $65.16 $4.55 7.5% Fixed Annual Capital Finance Charge, 1" $160.56 $221 .85 $61 .29 38.2% Fixed Monthly Capital Finance Charge, 1" $13.38 $18.49 $5.11 38.2% Variable Commodity Rates, per ccf $4.11 $4.24 $0.13 3.2% Page 20 of 30 Monthly Water Bill Impacts Capital ) Scenario 3: Increase fixed capital and operating (47% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/ Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $86.32 $98.65 $123.31 $143.86 $160.30 $217.84 Proposed Bill $96.37 $109.09 $134.53 $155.73 $172.69 $232.05 Difference ($) $10.05 $10.44 $11 .22 $11 .87 $12.39 $14.21 Difference (%) 11 .60/6 10.60/6 9.10/0 8.2% 7.7% 6.50/6 Page 21 of 30 Monthly Water Bill Impacts Capital ) Scenario 3: Increase fixed capital and operating (47% fixed revenue) Monthly Bill Impacts (Single Family, 1 " meter) w/o Capital Finance Charges $250.00 $200.00 $150.00 $100.00 $50.00 - $0.00 Very Low Usage Low Usage Median Usage Average Usage High Usage Very High Usage (3 ccf) (6 ccf) (12 ccf) (17 ccf) (21 ccf) (35 ccf) ■ Current Bill $72.94 $85.27 $109.93 $130.48 $146.92 $204.46 Proposed Bill $77.88 $90.60 $116.04 $137.24 $154.20 $213.56 Difference ($) $4.94 $5.33 $6.11 $6.76 $7.28 $9.10 Difference (%) 6.80/6 6.3% 5.6% 5.2% 5.0% 4.5% Page 22 of 30 MonthlyWater Bill Impacts by Scenario Very Low Low Median Average Monthly Bill Monthly Bill Impacts w/ Capital Charge Scenario 1 (62%fixed revenue) $34.18 $30.88 $24.28 $18.78 $14.38 ($1 .02) Scenario 2 (55%fixed revenue) $22.56 $21 .06 $18.06 $15.56 $13.56 $6.56 Scenario 3 (47/fixed revenue) $10.05 $10.44 $11 .22 $11 .87 $12.39 $14.21 Monthly Bill Impacts w/o Capital Charge Scenario 1 (62%fixed revenue) $12.76 $9.46 $2.86 ($2.64) ($7.04) ($22.44) Scenario 2 (55%fixed revenue) $1 .14 ($0.36) ($3.36) ($5.86) ($7.86) ($14.86) Scenario 3 (47%fixed revenue) $4.94 $5.33 $6.11 $6.76 $7.28 $9.10 Page 23 of 30 20 Sewer Page 24 of 30 Sewer Financial Plan (Proposed) 9.5% revenue adjustments from FY 2027 to FY 2031 •xx 21 No existing debt Page 25 of 30 Proposed Rates Current Proposed Rates FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 7FY 2031 Revenue Adjustments 9.5% 9.5% 9.5% 9.5% 9.5% Monthly Sewer Service Charges Single Family $15.05 $15.56 $17.04 $18.66 $20.44 $22.39 Multi Family $14.48 $14.15 $15.50 $16.98 $18.60 $20.37 Commercial $15.05 $15.77 $17.27 $18.92 $20.72 $22.69 Sewer Commercial Usage Rates Tier 1 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Tier 2 $0.61 $1.33 $1 .46 $1.60 $1.76 $1.93 Page 26 of 30 Monthly B *11 Impacts Single Family Bill Impacts Usage (ccf) Current Bill Proposed Bill Difference ($) Difference Single Family all usage $15.05 $15.56 $0.51 3.4% �Commercial Bill Impacts Usage (ccf) Current Bill Proposed Bill Difference ($) Difference (%) Very Low Usage (1 ccf) 1 $15.05 $15.77 $0.72 4.8% Low Usage (3 ccf) 3 $15.05 $15.77 $0.72 4.8% Median Usage (15 ccf) 15 $19.93 $27.74 $7.81 39.2% Average Usage (51 ccf) 51 $41 .89 $75.62 $33.73 80.5% High Usage (46 ccf) 46 $38.84 $68.97 $30.13 77.6% Very High Usage (122 ccf) 122 $85.20 $170.05 $84.85 99.6% Page 27 of 30 Board Direction •YLWD Board to provide direction on water rate scenarios: •Scenario 1: All fixed costs recovered on fixed charges (62% fixed) •Scenario 2: Increase fixed capital and operating (55% fixed) •Scenario 3: Increase fixed capital and operating (47% fixed) •Which fixed revenue recovery scenario is most appropriate to meet the District’s goals? 24Page 28 of 30 Schedule •Board meeting (preliminary financial plan) – July 10, 2025 •Board meeting (preliminary rates) – September 11, 2025 •Board meeting (water rates) – October 2, 2025 •Board meeting (final rates) – November 13, 2025 •Board meeting (receive report, approve Prop 218 notice) – January 22, 2026 •Public hearing to adopt rates – April 9, 2026 •New rates implemented – July 1, 2026 25Page 29 of 30 Contact Information Sanjay Gaur Founder / President sgaur@water-economics.com Nancy Phan Principal Consultant nphan@water-economics.com Grace Hunzicker Project Analyst ghunzicker@water-economics.com 26 Page 30 of 30