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Home My WebLink About2017-01-31 - Board of Directors Meeting Agenda Packetra Linda Water District AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS WORKSHOP MEETING Tuesday, January 31, 2017, 4:00 PM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL J. Wayne Miller, President Al Nederhood, Vice President Andrew J. Hall, Director Phil Hawkins, Director Brooke Jones, Director 4. PUBLIC COMMENTS Any individual wishing to address the Board is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Board 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 matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to three minutes. 5. DISCUSSION ITEMS This portion of the agenda is for matters that cannot reasonably be expected to be concluded by action of the Board of Directors at the meeting, such as technical presentations, drafts of proposed policies, or similar items for which staff is seeking the advice and counsel of the Board of Directors. 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. 5.1. Overview of Development Process for Water Rate Studies, Financial Policies and Plans, Water Rate Structures, and Cost of Service 6. ADJOURNMENT 6.1. The next Regular Board of Directors Meeting will be held Tuesday, February 14, 2017. Closed Session (if necessary) will begin at 5:30 p.m. and regular business will begin at 6:30 p.m. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA 92870, during regular business hours. When practical, these public records will also be made available on the District's internet website accessible at http://www.ylwd.com/. Accommodations for the Disabled Any person may make a request for a disability -related modification or accommodation needed for that person to be able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and the type of accommodation requested. A telephone number or other contact information should be included so the District staff may discuss appropriate arrangements. Persons requesting a disability -related accommodation should make the request with adequate time before the meeting for the District to provide the requested accommodation. Meeting Date Subject: ATTACHMENTS: AGENDA REPORT January 31, 2017 ITEM NO. 5.1 Overview of Development Process for Water Rate Studies, Financial Policies and Plans, Water Rate Structures, and Cost of Service Name. Rate Workshop Presentation.pdf Description: Backup Material Type: Backup Material Saniav Gaur Bio.pdf Backup Material Backup Material RATE 101 WORKSHOP Yorba Linda Water District January 31, 2017 Overview of Water Rate Study Overview of Financial Policy and Financial Plan Water Rate Structure Evolution Water Cost of Service and Nexus Development OVERVIEW OF WATER RATE STUDY OVERVIEW OF RATE STUDY Purpose of Rate Study Rate Study at a Glance Key Legislations Affecting Rate Study OBJECTIVES OF RATE STUDY Main Objective: Recovery of the full revenue requirement in a fair and equitable manner Other Typical Objectives: Effectiveness in yielding full cost recovery Stability and predictability of rates to deal with unexpected and adverse changes Defensibility and compliant with legal regulations Fairness in the apportionment of total costs of service amongst the different ratepayers Avoidance of undue discrimination (subsidies) within the rates Simple and easy to understand and administer Promotion of efficient water use RATE STUDY AT A GLANCE Financial Plan • Evaluation of CIP and financing options • Cash flow analysis for financial sufficiency Rate Setting Framework • Financial goals and policies • Pricing objectives Cost of Service & Rate Design I • Cost allocations • Rate design — Rate calculations — Customer impact analyses Final Rate Adoption • Report • Prop 218 Notice • Public Hearing FINANCIAL GOALS To ensure financial sufficiency To manage and mitigate risks To minimize rate fluctuations To achieve/maintain a certain credit rating KEY LEGISLATIONS IN CALIFORNIA AFFECTING WATER RATE STUDY » Cost of Service Requirements > Proposition 218 (Article XIIIC and XIIID of California Constitution) > Proposition 26 > California Government Code 54999 Pass -Through Provision AB 3030 — Section 53756 to the Government Code Water Conservation > Article X of California Constitution > CA Water Code Chapter 3.4 — Allocation -based Conservation Water Pricing (AB 2882) > SB X7-7 — 20% reduction by 2020 > New SWRCB regulations call for each agency to self certify that they have adequate supplies for three years assuming drought of 2012-2015 and set conservation standards equal to their projected supply shortage PROPOSITION 218 REQUIREMENTS An agency cannot collect revenue beyond what is necessary to provide service Revenues derived by the charge shall not be used for any other purpose other than that for which the charge was imposed » The amount of the fee may not exceed the proportional cost of service for the parcel » No charge may be imposed for a service unless that service is actually used or immediately available to the owner of property A written notice of the proposed charge shall be mailed to the record owner of each parcel at least 45 days prior to the public hearing, when the agency considers all written protests against the charge OVERVIEW OF FINANCIAL POLICY AND FINANCIAL PLAN FINANCIAL CHALLENGES OF MANAGING A WATER / WASTEWATER SYSTEM A FINANCIAL MODEL CAN BE A TOOL TO NAVIGATE THROUGH THESE CHALLENGES Properties of Utility System • Capital intensive • Highly fluctuating capital cost • Unknown liability • Increasing regulatory demand Political Acceptance on Rates • Rate stability • Affordability • Equity • Environmental stewardship RISK ASSESSMENT ACCORDING TO DONALD RUMSFELD Things you know Things you know you don't know Things you don't know you don't know WHY FINANCIAL PLANNING? Ensure Financial Sufficiency for the Short- and Long -Term Operating expenses Anticipated capital expenditures Prepare for the Future Identify known facts and variables Anticipate unknowns and evaluate associated risks Enhance Rate Stability Minimize rate fluctuations from year to year 13 OVERVIEW OF FINANCIAL POLICIES Importance of Financial Policies: To maintain financial solvency Provide a basis for coping with fiscal emergencies (revenue short -falls, asset failure, emergency etc ...) To provide guidelines for sound financial management with an overall long-range perspective To enhance financial management transparency Improve public's confidence and elected officials' credibility OVERVIEW OF FINANCIAL POLICIES Goals of Financial/Reserve Policies: )) To mitigate financial risk Rate /revenue instability Emergency with asset failure Volatility in working capital To achieve/maintain a certain credit rating To determine most opportune time to issue debt 15 FINACIAL HEALTH INDICATORS Healthy Reserves Operating Reserve — results from positive cash flow CIP Reserves — Can award contracts quickly and speed up projects if necessary Rate Stabilization — funds used during periods of revenue shortages Such as a drought Emergency — funds available in case of asset failure Critical asset replacement analysis used to set reserve level Debt Coverage Ratio Exceed Official Statement requirements Achieve /Maintain good credit ratings 16 Yorba Linda Water District Reserve Policy Operating $3.13M $6.53M (% of Operating Budget) (12%) (90 days) Rate Stabilization Emergency Capital Reserve COP/Debt Service Employee Benefit Liability n/a $1M $2.02M $4.86M (100% of Annual Debt Service) $455K $2.81M (15% of commodity revenues) $10M (-2% of RC of water asset) $7.33M (2% of asset value replacement cost) $4.86M (100% of Annual Debt Service) $455K Total Minimum Target $11.47M $31.99M for FY 2017 17 DEBT FUNDED CIP ADVANTAGES Cheaper short-term option relative to rate -funded financing Provides intergenerational equity Far less impactful on current ratepayers Historically low interest rate environment DISADVANTAGES k More costly (in absolute dollars) in the long term, relative to rate -funded financing Obliges the agency to maintain minimum revenue/ liquidity levels for debt coverage requirements FINANCIAL PLANNING REVENUE - Operating - Non -Operating Multi- FINANCIAL POLICIES -Reserve - Debt EXPENSES - O&M Capital (CIP & Debt) WATER RATE STRUCTURE EVOLUTION BALANCING COMPETING PRICING OBJECTIVES Revenue Stability Financial Stability Administrative Ease Defensibility Affordability Conservation Equity Customer Understanding COMMON PRICING OBJECTIVES • Reducing total annual demand • Reducing water waste • Reducing peak demand • Reducing outdoor water usage 010 I:jb: • Enhancing • Minimizing revenue customer stability impacts • Ensuring financial sufficiency • Providing funding mechanisms for alternative water supply, conservation program • Maintaining low average customer bills • Crafting rates that provide affordable water for essential uses • Allocating water supply equitably • Providing a drought management tool • Allocating capital costs equitably • Complying with government regulations and guidelines • Allowing cost- effective administeration • Allowing easy implementation • Enhancing customer understanding From Water and Wastewater Finance and Pricina: The Chanaina Landscaae, 4th Edition 22 WATER RATE STRUCTURE EVOLUTION Revenue Mechanism Flat Rate Quantity Flat Rate: $xx / month regardless of usage Pros: Revenue stability, easy to understand Cons: Inequitable, no conservation signal, not affordable for essential use 23 WATER RATE STRUCTURE EVOLUTION Uniform Rate ,w Flat Rate $3.50 Revenue $3.00 Mechanism $2.50 $2.00 $1.50 Uniform Rate $1.00 Price $0.50 Information $0 0 100 200 300 400 500 im Quantity JIM WATER RATE STRUCTURE EVOLUTION Revenue Mechanism Price Information Behavior Change WATER RATE STRUCTURE EVOLUTION Flat Rate Uniform Rate Seasonal Rate $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.500 $00 1 2 Seasonal Rate 7 8 Month _ WATER RATE STRUCTURE EVOLUTION Inclining Tiered Rate Flat Rate $b Revenue Mechanism $5 $4 m $3 Uniform Rate $z Price Information A Seasonal Rate 20 30 Quantity Behavior Inclining Tiered Rate Change 40 50 WATER RATE STRUCTURE EVOLUTION Seasonal Rate Behavior Inclining Tiered Rate Change k Customer 1 Customer 2 Excess Use Rate 20 30 Quantity Flat Rate $6 Revenue Mechanism $5 $4 N fr Uniform Rate Price $2 Information A Seasonal Rate Behavior Inclining Tiered Rate Change k Customer 1 Customer 2 Excess Use Rate 20 30 Quantity WATER RATE STRUCTURE EVOLUTION Water Budget Tiered Rate 1w $5 Revenue Flat Rate $5 Customer 1 Mechanism $4 Customer2 $3 Uniform Rate $2 = Price Information I Seasonal Rate 20 30 Quantity Behavior Inclining Tiered Rate Change k Conservation vs. Efficiency Reducing water usage > Total usage > Peak usage Outdoor usage Restricting water use Lifestyle adjustments Traditional Tiers Reducing water waste Appropriate water use No change in lifestyle » Focused on water reduction as a whole » Typically will occur in higher tiers Budget -Based Tiers Focused on identifying and mitigating wasteful water use Drought management tool 29 Conservation Rate Structures Pros +Easy to administer +Sends clear conservation signal +Addresses affordability for basic needs Cons - Targets larger water users and doesn't focus on efficient use of water ■ High water use = wasteful water use - Equity concerns ■ Penalizes large families / lots ■ Exacerbated during drought pricing Pros + Provides water efficiency targets ■ Addresses equity concerns for large families / lots + Properly allocates drought penalty rates + Addresses affordability for basic needs Cons - Higher administrative costs ■ How is efficiency defined? ■ Billing system update required? ■ Proactive Public outreach ■ Requires increased staffing for customer service DEFINING EFFICIENCY INDOOR WATER BUDGET Two options in defining indoor allocation 1. Household size: Assume a certain household size * gallons per capita per day (GPCD) 4 persons per household * 60 GPCD * days of service Average winter use: Suitable for cold winter climates DEFINING EFFICIENCY: OUTDOOR WATER BUDGET A* t1rill a I F-I.Al ESTIMATED LANDSCAPE AREA OPTIONS Customer Class? Meter Size? Parcel Size? of Parcel? Lot Size - Footprint? GIS? 33 WATER DATA OPTIONS 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 46 Weather Data Options (Illustrative Purpose) • v.v Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Average 3.51 3.51 3.51 3.51 3.51 3.51 3.51 3.51 3.51 3.51 3.51 3.51 10 -yr Hist Avg 2.21 2.37 3.79 4.18 5.22 5.51 6.73 6.30 4.99 3.36 2.45 1.86 -Actual 2.00 2.11 2.74 4.08 4.98 5.15 5.74 5.85 4.01 j 1.91 1 2.25 1 1.29 - - Seasonal 2.22 2.22 4.08 4.08 5.94 5.94 5.94 5.94 4.08 1 4.08 1 2.22 1 2.22 34 INCORPORATING SEASONALITY AND WEATHER IMPACTS ON BLOCKS WIDTHS Annual Average Weather: Block widths are stationary Historical Season: Block widths adjusted based on historical seasonal conditions Typically four seasons Historical Weather: Block widths adjusted based on historical seasonal and weather conditions Historical daily average of a weather station Actual Weather: Real-time weather conditions Tied to a weather station CONSERVATION RATE STRUCTURE SPHERE OF POSSIBILITY Inclining Tiered Rate Seasonal Inclining Tiered Rate Inclining Tiered Rate by meter size Cucamonga Valley Water District .7 City of San Clemente, CA Elsinore Valley Water District, CA Western Municipal Water District, CA Eastern Municipal Water District, CA City of Boulder, CO Irvine Ranch Water District, CA Rancho California Water District, CA,,,l 36 OTHER FACTORS TO BE CONSIDERED Billing System Capability Can the billing system accommodate the new water rate structure? How much does it cost to have such a billing system? Cost and Benefit Analysis What are the implementation costs? : How much water cost savings are projected under the new rate structure? » Savings > costs? Customer Impact Analysis Who will be impacted under new rate structure? On what magnitude? WATER COST OF SERVICE & NEXUS DEKIELOPMENT WATER IS COST OF SERVICE? Revenue Cost of Service!1 Requirements by Customer Class The attempt to recover costs from users in proportion to their use of the system, recognizing the impact of each class on system facilities and operations A cost -based process of converting revenue requirements into unit costs Allocation of cost of service to customer classes is based on customer usage characteristics Cost of service is the fundamental benchmark used for establishing utility rates in the United States WATER SYSTEM COSTS AND PEAKING DEMAND Acre Feet 1,800 1,600 1,400 1,200 1,000 •ff 200 0 Usage Characteristics Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Both water systems have annual demand of approximately 10,500 AF/ year. vvnicn water system requires larger tacilities/intrastructure? WATER SYSTEM COSTS AND PEAKING DEMAND 114:: :V1 F4410 [ Con I I =111 01 P Usage Characteristics by Customer Class for System 1 1,200 1,000 800 600 400 200 Jan Feb Mar Apr —7May Jun Jul Aug—TSep Oct FNov7 Dec Residential 270 I 254 I 268 257 279 I 343 350 363 361 I 336 1 282 256 Irrigation 406 372 426 417 463 498 527 523 474 537 496 252 Commercial 122 113 125 121 134 138 139 138 123 138 140 I 91 Total 798 739 819 796 876 979 1,016 1,024 959 1,012 919 I 599 rw"09% Average Demand Max Month- • Peaking • Commercial 134 140 1.10 Irrigation 389 537 1.38 Residential 264 363 1.37 MW ■ ■ WATER SYSTEM COSTS AND PEAKING DEMAND Commercial Usage Characteristics by Customer Class for System 2 Irrigation 1,800 Residential 292 396 1.35 ■i iii :: ■ • 1,600 1,400 1,200 1,000 800 600 400 2000 M N M M w M Jan Feb Mar Apr May Jun Jul 7u7g Sep Oct Nov Dec Residential 224 231 245 234 279 343 396 386 361 336 282 187 Irrigation 157 55 73 32 258 809 1,153 997 976 676 234 35 Commercial' 122 113 125 121 134 149 L 155 156 146 1 154 140 91 —Total 504 398 444 387 671 1,302 1,703 1,539_ 1,4831,166 656 314 Commercial 134 156 1.17 Irrigation 455 1,153 2.54 Residential 292 396 1.35 ■i iii :: ■ • WHAT IS COST OF SERVICE? Rationale: Different types of customers generate different costs because their patterns of use or characteristics are different Cost of service allows the matching of rates charged to each group with the costs of serving them Each group will "pay its own way"; no subsidies CASE STUDY: SAN JUAN CAPISTRANO )) Recent Litigation: CTA vs. City of SJC Rate payers (Capistrano Taxpayer Association, CTA) sued the City of San Juan Capistrano over its water budget rate structure The Orange County Superior court ruled that the rates did not meet the nexus requirement in August 2013 Key Factors• Lack of administrative record City used multipliers to justify the tiered rates without any administrative record of an underlying rationale PRICE RATIOS & JUSTIFICATIONS Nexus between tier prices & cost of service: )) Cost of water supplies Peaking cost of capital Conservation program costs Potential new sources of supply Urban runoff CASE STUDY: LAS VIRGENES MWD Tier 1 x Blended MWD Tier x x 1 & Reservoir Tier 2 Tier 3 x x Blended MWD Tier 1 & Reservoir Blended MWD Tier 1 & Reservoir Tier 4 x MWD Tier 2 x M x EN CASE STUDY: LAS VIRGENES MWD Tier 1 $0.06 $2.08 $0.41 $0.00 $0.00 -$0.13 $2.42 /ccf Tier 2 $0.06 $2.08 $0.41 $0.81 $0.00 -$0.13 $3.23 /ccf Tier 3 $0.06 $2.08 $0.41 $1.34 $0.10 $0.00 $3.99 /ccf Tier 4 $0.06 $2.60 $0.41 $1.83 $0.10 $0.00 $5.00 /ccf 47 LAST STEPS OF WATER RATE STUDY Report Development Document the support /justifications for the rates Convey the "story" behind the rates to customers in layman's terms Connects the budget with the rates and shows the math on how the rates are developed Public Outreach Prepare proactive outreach and messaging to educate key stakeholders about the new rates Implementation Develop phase-in implementation strategy Test billing system Train customer support staff about new rates RECAP OF KEY STEPS Understand what are the goals of the rate study What are the critical items that needs to be accomplished What can be delayed? » Develop a sound financial plan Understand the relationship between water sales and your cost structure » Develop a rate structure that achieves the goals your Agency cares about Have internal dialogue on the short and long term cost structure of your agency How can we develop a rate structure that mirrors this? Develop extensive administrative record that clearly shows the steps taken to develop your rate structure Connect the financial budget to your rates Q&A CONTACT INFO Sanjay Gaur Vice President P: (213) 327-4405 E: sgaur@raftelis.com MSRB REGISTERED MUNICIPAL ADVISOR RFC IS A REGISTERED MUNICIPAL ADVISOR WITH THE MSRB AND SEC UNDER THE DODD-FRANK ACT AND IS FULLY QUALIFIED AND CAPABLE OF PROVIDING ADVICE RELATED TO ALL ASPECTS OF UTILITY FINANCIAL AND CAPITAL PLANNING, INCLUDING THE SIZE, TIMING, AND TERMS OF FUTURE DEBT ISSUEF Any opinion, information, or recommendation included in this presentation, related to the size, timing, and terms of a future debt issue may be relied upon only for its intended purpose. This information is not intended as a recommendation to undertake a specific course of action related to the issuance of debt, or to indicate that a particular set of assumptions for the size, timing and terms of issuing debt will be available at the time debt is actually issued. TECHNICAL SPECIALTIES • Model development • Financial analysis • Cost of service studies • Conservation rate structure design • Connection/development fee studies • Economic analysis • Cost benefit analysis • Demand forecasting • Econometric analysis PROFESSIONAL HISTORY • Raftelis Financial Consultants, Inc.: Vice President (2015 -present); Senior Man- ager (2012-2014); Manager (2009-2012) • Red Oak Consulting, Division of Malcolm Pirnie (2007-2009) • MuniFinancial (2005-2006) • A & N Technical Services (1999-2003) • United States Peace Corps, Bulgaria (1995-1997) EDUCATION • Master of Public Administration, Public Administration/International Development, Kennedy School of Government - Harvard University (2003) • Master of Science, Applied Economics - University of California, Santa Cruz (1994) • Bachelor of Arts, Economics and Environmental Studies - University of California, Santa Cruz (1992) PROFESSIONAL REGISTRATION • Who's Who in America, 63rd Edition (2009) • Finalist, National Venture Competition (2003); Goldman Sachs Foundation • Roy Environmental Fellowship (2002), Kennedy School of Government, Harvard University • Academic Scholarship (2001-2003), Kennedy School of Government, Harvard University • Certificate of Outstanding Service (1997), United States Peace Corps PROFESSIONAL MEMBERSHIP • American Water Works Association - Rates and Charges Committee • California Society of Municipal Finance Officers SANJAY GAUR Vice President PROFILE Mr. Gaur has 19 years of public -sector consulting experience, primarily focusing on providing financial and rate consulting services to water and wastewater utilities. His experience includes providing rate structure design, cost of service studies, financial analysis, cost benefit analysis, connection/development fee studies, conservation studies, and demand forecasting for utilities spanning the west coast. His project experience includes engagements with the Metropolitan Water District of Southern California, San Diego County Water Authority, Eastern Municipal Water District, Alameda County Water District, and East Bay Municipal Water District, among many others. Mr. Gaur is considered one of the leading experts in the development of conservation rate structures. He has often provided his insight into utility rate and conservation - related matters for various publications and industry forums, including: authoring articles in Journal AWWA; being quoted in various newspaper articles including the Los Angeles Times and the New York Times; participating in a forum regarding the future of water in Southern California sponsored by the Milken Institute; being quoted on National Public Radio; speaking at various industry conferences including American Water Works Association (AWWA), the Utility Management Conference, Association of California Water Agencies, and California Society of Municipal Finance Officers; and, co-authoring several industry guide books including AWWA's Manual M1 Principles of Water Rates, Fees and Charges, 6th Edition as well as AWWA's Water Rates, Fees, and the Legal Environment Second Edition. Mr. Gaur co-authored a chapter entitled, "Understanding Conservation and Efficiency Rate Structures," for the Fourth Edition of the industry guidebook, Water and Wastewater Finance and Pricing: The Changing Landscape. Mr. Gaur is also active in a number of utility -related associations, including serving as a member of AWWA's Rates and Charges Committee. RELEVANT PROJECT EXPERIENCE ALAMEDA COUNTY WATER DISTRICT (CA) Alameda County Water District (District) currently has a uniform rate structure and is interested in developing a conservation rate structure that will assist them in promoting water efficiency, comply with regulatory requirements of SBx7-7, achieve revenue stability and is equitable. Mr. Gaur served as the Project Manager and led a series of workshop with the Executive Management and the Board of Directors in evaluating and identifying the proper rate structure that meets their objectives. Based on this outcome, RFC developed a conservation rate structure that can compare different types of inclining and water budget rate structure and evaluate the customer impacts associated with these rate structures. Since 2011, Mr. Gaur has been engaged with the District as Project Manager in other studies including long-term financial plan study and subsequent update studies, drought rate study, tiered rate feasibility analyses and cost of service analysis study. As part of the Cost of Service Study in 2015, RFC developed the 2015 Water Rate Study Report (Report) to be used as an administrative record. The Report highlighted the major issues and decisions made during the course of the Study, provided an overview of operations, CIP, and the financial plan, and discussed and explained the cost of service analysis and methodology used to develop the final rates. The explanation of the methodology found within the Report demonstrates that the rates are equitable, reflect the District's policies and values, and are driven by the District's revenue requirements. The Final Report was submitted to the District in March 2015 for the Public Hearing in April 2015. Rates are expected to be adopted on May 1, 2015. EAST BAY MUNICIPAL UTILITY DISTRICT (CA) Mr. Gaur is currently serving as Project Manager for a comprehensive wastewater cost of service study for East Bay Municipal Utility District (District). The last comprehensive cost of service study was done in 2000 for the wastewater treatment charges. As part of the study, RFC thoroughly examined the District's cost structure, analyzed wastewater flow and customer data, and evaluated alternative rate structures to develop an equitable rate structure that meets Proposition 218 requirements and the District's goals and objectives. While the proposed treatment rates retain the current rate structure, which includes a fixed monthly service and strength charge and a variable flow charge with a cap at 10 hundred cubic feet (hcf) per dwelling unit per month for residential customers, and a fixed monthly service charge and a variable flow charge per hcf based on customer classification for apartment buildings and non-residential customers, the individual rates are realigned to reflect the cost of service. The District's current rate structure also includes a fixed annual charge per dwelling units (up to five dwelling units) for single- and multi -family customers and per parcel for non-residential customers for wet weather facilities. This rate structure was developed in late 1980s. RFC and District staff evaluated various alternatives for the wet weather facilities charge to ensure equity amongst customer classes. The proposed wet weather facilities charge will be based on the average parcel size for each customer class, which has a stronger cost of service basis than the current rate structure. EAST ORANGE COUNTY WATER DISTRICT (CA) Mr. Gaur served as the Project Manager in assisting East Orange County Water District in evaluating a water budget rate structure. Mr. Gaur educated the Board of Directors on the benefits of water budget rate structure; developed a water budget model to determine the associated rates and customer impacts. EASTERN MUNICIPAL WATER DISTRICT (CA) Mr. Gaur served as Project Manager for rate structure evaluation study by assisting Eastern Municipal Water District (EMWD) managers and Board in the evaluation and assessment of the feasibility of implementing a water budget rate structure. Mr. Gaur also moderated a series of three interactive workshops to examine a water budget rate structure and its ability to meet EMWD policy goals such as equity, conservation and revenue stability. EMWD was successfully able to implement a water budget rate structure in April 2009. EL TORO WATER DISTRICT (CA) Mr. Gaur assisted EI Toro Water District in the development and implementation of a water budget rate structure. This included facilitating the discussion on the policy options associated with the allocation factors for indoor and outdoor needs with staff and the Board, the development of a water budget model, and ensuring the billing system is compatible with the new requirements associated with the water budget rate structure. The new rate structure was adopted in June 2010. CITY OF HUNTINGTON BEACH (CA) Mr. Gaur served as Project Manager for a sewer cost -of - service and rate design study. The engagement called for the redesign of rates to achieve City's policy goals associated with improving inter -class equity, reducing administrative burden, and maintaining revenue stability, while adhering to cost -of -service principles. Mr. Gaur also served as the Project Manager in evaluating a water budget rate structure for the City. This included workshop with staff on developing a water budget framework that is consistent with City policy and the RAFTELIS FINANCIAL CONSULTANTS, INC. 2 development of a water budget model that can calculate the associated rates and estimate customer impacts. INLAND EMPIRE UTILITIES AGENCY (CA) Mr. Gaur conducted a series of workshops for Inland Empire Utilities Agency on the different types of conservation rate structure and how they can assist them in meeting the requirements of SBx7-7, achieving revenue stability and promoting equity. INDIO WATER AUTHORITY (CA) Mr. Gaur served as Project Manager for user fee study to evaluate current user fees and their ability to recover associated administrative and other operational costs. He developed a new schedule of user fees to meet City's policy objectives of fairness and defensibility. Mr. Gaur also conducted a water rate study and presented results to City Council. The Council adopted the recommended water rates, which provided an equitable allocation of cost between fixed and variable rates. LA HABRA HEIGHTS COUNTY WATER DISTRICT (CA) Mr. Gaur assisted the District in calculating a wheeling rate for a neighboring District. Mr. Gaur presented his finding to the Board of Director. CITY OF LOMITA (CA) Mr. Gaur conducted a water rate workshop with concerned citizens to explain how rates were assessed and calculated, using laymen's terminology to foster understanding among community members. City Council adopted the recommended rates. LOS ANGELES DEPARTMENT OF WATER AND POWER (CA) Mr. Gaur performed a econometric analyses on daily demand based on deviation from mean temperature. Results from the study helped redesign engineer estimates on sizing of water lines. CITY OF LYNWOOD (CA) Mr. Gaur developed a cost allocation model to determine the appropriate amount of transfer ($3 million) between the Water Enterprise Fund and the City General Fund. The report met the requirements associated with Proposition 218. CITY OF MERCED (CA) Mr. Gaur completed a water and sewer rate and impact fee study, including examination of financing options associated with a $200 million treatment plant. The engagement included the development of a rate and impact fee model that explored and assessed different capital project scenarios. He also conducted a workshop and presented final results to City Council. The council adopted the recommended impact fees for water and sewer. METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA (CA) Mr. Gaur developed a drought allocation model for Metropolitan Water District of Southern California member agencies. The allocation is based on severity of drought, historical usage, and demand -hardening factor. The model served as a tool to guide decision making process in determining fair and equitable allocations. Mr. Gaur also served as project manager for long-range financial plan study and facilitated workshops with management, member agencies, and stakeholders to assess the economic, political, and technical feasibility of a growth - related infrastructure charge. He also led seminars to inform participants of the prevailing industry standards for adhering to cost -of -service principles and navigating California's complex legal environment. Lastly, Mr. Gaur served as the project manager to evaluate Metropolitan Water District of Southern California cost of service methodology to confirm it is consistent with industry standards, policy objectives that the Board of Directors has adopted and is being implemented as intended. MUNICIPAL WATER DISTRICT OF ORANGE COUNTY (CA) Mr. Gaur developed an optimization model for conservation programs. The results guided the District in developing a master plan for conservation programs. RAFTELIS FINANCIAL CONSULTANTS, INC. 3 CITY OF NEWPORT BEACH (CA) Serving as Project Manager for this study, Mr. Gaur assisted the City of Newport Beach to develop a long-range financial plan, and to evaluate and implement a conservation rate structure that adheres to cost -of -service principles and the provisions of California Proposition 218. Mr. Gaur also worked with Newport Beach staff to identify policy objectives for prospective rate design alternatives. PASADENA WATER AND POWER (CA) Mr. Gaur served as Project Manager for comprehensive water cost -of -service and rate design study. Developed long- range financial plan with evaluation of recycled water program, rate stabilization fund, and drought scenarios. He also performed a cost -of -service analysis and redesigned rates to adhere to cost -of -service principles and the legal requirements of California Proposition 218. CITY OF PORT HUENEME (CA) For this engagement, Mr. Gaur performed a water and solid waste study and workshop for City Council. The Council immediately adopted solid waste rate recommendations and water rates are under consideration. RANCHO CALIFORNIA WATER DISTRICT (CA) Mr. Gaur assisted Rancho California Water District (District) in the development of a water budget rate structure. The project required the consultant to develop a flexible water budget model that could do multiply block with allocation and determine the appropriate revenue within a month. The team was successfully able to accomplish this task and assisted the District in implementing the new water budget rate structure. The rates where successfully adopted in November 2009. Mr. Gaur also assisted the District in the development of a New Water Demand Offset Fee. The New Water Demand Offset Program is a form of funding of conservation measures that will help to create sustainable, zero water footprint development. New developments will pay fees called New Water Demand Offset Fees to create potable water savings in the existing system to support water demand generated by new developments. Water savings can be achieved by converting irrigation accounts to recycled water or installing high efficiency retrofits to replace inefficient fixtures for existing accounts in RCWD. This fee is expected to be adopted in February 2010. CITY OF RENO (NV) Mr. Gaur served as Project Manager for sewer rate and connection fee study and included the development of a long-range financial plan for sewer fund with evaluation of several different capital improvement program scenarios, debt/cash funding combinations and reserve funds. As part of the study, Mr. Gaur also performed a cost -of -service analysis and developed sewer rates and connection fees to meet policy goals of revenue stability and fairness. SAN DIEGO COUNTY WATER AUTHORITY (CA) Mr. Gaur examined SDCWA's prior practices, made recommendations, and developed an index model that determined the appropriate inflation and escalation factor for capital projects. A Monte Carlo simulation was used with the escalation factor of the index model to develop distribution estimates. Mr. Gaur also developed a rate model for the water authority which allocated resources and costs to member agencies. The model was used to develop different allocation scenarios based on historical and spatial factors and served as a tool to guide decision making process in determining fair and equitable allocations. SANTA CLARA VALLEY WATER DISTRICT (CA) Mr Gaur evaluated the effect of a water softener pilot program on conservation. He also conducted billing analysis to estimate savings, using a control group to account for exogenous factors. The results confirmed engineering estimates on savings potential. SOUTH COAST WATER DISTRICT (CA) Mr. Gaur assisted the District in evaluating a water budget rate structure. Currently the District has a five tiered inclining rate structure. RFC developed a model that compared the usage pattern between the current rate structure and a water budget, to determine how equitable the current rate structure is, given lot size. Mr. Gaur presented the finding to the Board of Directors. RAFTELIS FINANCIAL CONSULTANTS, INC. 4 WALNUT VALLEY WATER DISTRICT (CA) Mr. Gaur developed a water rate model for the District as well as examined indexing practices and determined appropriate rates for meter and variable charges. WESTERN MUNICIPAL WATER DISTRICT (CA) Mr. Gaur served as Project Manager for the implementation of a water budget rate study, which included facilitating and leading a discussion on the policy options associated with the development of a water budget rate study. Based on these policy options, a water budget model was developed that can evaluate different allocation factors for indoor and outdoor water use, determine price ratios for the corresponding tiers, and develop the corresponding rates and customer impacts. Mr. Gaur served as the Project Manager for the development of a financial model for the District. The model has the ability to examine the 14 different fund centers of the District, develop and save different Capital Improvement Plan scenarios, examine the financial consequences of these scenarios and compare the results. In addition, the model has the ability aggregate the fund centers by water, wastewater or by the whole District. The model is currently being utilized by the District to examine long term health of the District. YORBA LINDA WATER DISTRICT (CA) Mr. Gaur served as the Project Manager for conducting a water rate study for Yorba Linda Water District. This study included the development of a financial plan that examined different CIP scenarios, cost of service study and development of a conservation rate structure. RFC developed a conservation rate model that evaluated inclining tiered rates and water budget tiered rates and the associated customer impacts. Mr. Gaur presented the findings of the study and the associated recommendations to the Board. Since 2010, the District has been commissioning RFC, with Mr. Gaur as Project Manager, in many subsequent studies including water financial plan updates and sewer financial plan study. In 2015, California experience one of the most severe drought and the Governor Brown declared State wide drought and issued the Executive Order, which mandated 25 percent reduction in water demand state-wide. The District was mandated to reduce 36 percent water use District -wide by the State Water Resource Control Board. In early 2015, RFC conducted Water and Sewer Rate Study (Study) to develop sustainable financial plan, conduct cost of service analysis for water and sewer services for Proposition 218 compliance and develop fair and equitable 5 -year water and sewer rates. Among the top pricing objectives for the water rates were to enhance revenue stability to lessen the impact of water sales volatility and to improve the parity of water fixed costs and fixed revenues while in compliance with Proposition 218 requirements. Mr. Gaur conducted a series of financial plan and rate design workshops with the District Board in interactive format using the Rate Model to facilitate the District Board to evaluate various policy options and associated financial and customer impacts. As part of the Study, RFC developed the 2015 Rate Study Report (Report) to be used as an administrative record. The Report highlighted the major issues and decisions made during the course of the Study, provided an overview of operations, CIP, and the financial plan, and discussed and explained the cost of service analysis and methodology used to develop the final water and sewer rates. The explanation of the methodology found within the Report demonstrates that the rates are equitable, reflect the District's policies and values, and are driven by the District's revenue requirements. The Final Report was submitted to the District in August 2015 for the Public Hearing in September 17, 2015. Mr. Gaur presented the results of the Study at the Public Hearing when the proposed rates were approved. The proposed rates were adopted on October 11 2015. TOWN OF CLARKDALE (AZ) Mr. Gaur identified and examined facility types for impact fee and discussed policy implications of impact fees. TOWN OF GILBERT (AZ) Mr. Gaur was engaged by the Town of Gilbert to determine the true cost of providing fire services for the town. He also examined the economic impact of potential legislation on expanding service to a county island. He served as expert witness and presented findings on behalf of the city which assisted in the Town's winning case. RAFTELIS FINANCIAL CONSULTANTS, INC. 5 PUBLICATIONS AND PRESENTATIONS • Gaur, S., Giardina, R.D., Kiger, M.H., Zieburtz, W., "Committee Report: Ripples From the San Juan Capistrano Decision," Journal — American Water Works Association, September 2016, Volume 108, Number 9. • Gaur, S., "Adelman and Morris Factor Analysis of Developing Countries," The Journal of Policy Modeling, Vol. 19, Issue 4, pp. 407-415, August 1997. • Gaur, S., "Water Rate Setting," presented at the Annual 2006 Conference of the California Society of Municipal Finance Officers, Palm Springs, California. • Gaur, S., "Water Rate Setting," presented at the following: California Society of Municipal Finance Officers Chapters: Central Los Angeles, Channel Counties, Imperial County, San Gabriel Valley, South Bay and Twenty — Nine Palms 2006. • Gaur, S., "Designing Water Rate Structures," presented at a workshop for Urban Water Institute, San Jose, California. February 17, 2006. • Gaur, S. "How Much Should Water Cost? Theoretical and Practical Approach in Developing Water Rates." Guest lecturer at University of California, Santa Barbara, Course: Water Policy, Bren School of Environmental Science and Management. November, 7, 2006. • Gaur, S. "Designing Water Rates," All day seminar at the Center for Water Education. Hemet, California. January 12, 2007. • Gaur, S. "Policy Objectives in Designing Water Rates", Journal of American Water Works, 99:5 May 2007 p.112- 116. • Gaur, S. Corssmit, K. and Hotchkiss, D. "Water Rates Defining Cost of Service — Proposition 218 Implications," presented at the Association of California Water Agencies, May 7 , 2008 Spring Conference, Monterey, California. • Gaur, S. "Moving Beyond the Public Workshop," presented at the Municipal Management Association of Southern California, July 1, 2008 Summer Conference, La Jolla, California. • Gaur, S. "Evolution of Water Rates," presented at the Association of California Water Agencies, December 3, 2008 Fall Conference, Long Beach, California. • Gaur, S. "Managing Drought Scenarios," presented at the Association of California Water Agencies, December 4, 2008 Fall Conference, Long Beach, California. • Gaur, S. "Rates 101," 4 hour training course conducted at the Annual 2009 California Society of Municipal Finance Officers, San Francisco, California. • Gaur, S. Corssmit, K., Hildebrand, M. and Hotchkiss, D. "Defining Latest Trends in Conservation Rate Design," presented at the Utility Management Conference, February 18, 2009, New Orleans, Louisiana. • Gaur, S. "Conservation Rate Structures," presented at the International Water Efficiency Conference, April 1, 2009 Newport Beach, CA • Gaur, S. "Developing a Water Budget Rate Structure: Eastern MWD Experience," presented at the CA/NV AWWA Section, April 9, 2009, Santa Clara, CA • Gaur, S. "Rates and Equity Issue" presented at Managing the Crisis: Essential Tools for Urban Water Managers, sponsored by Water Education Foundation and Association of California Water Agencies, April 16, 2009 (San Francisco) and April 23, 2009 (Irvine) • Hildebrand, M. Gaur, S. and Salt, K. "Water Conservation Made Legal: Water Budgets and California Law" Journal of American Water Works, 101:4 April 2009 p.85-89. • Gaur, S. "Whiskey's for Drinking, Water is for Fighting: Allocating Water During a Shortage" presented at the Association of California Water Agencies, May 21, 2009 Spring Conference, Sacramento, CA. • Gaur, S. "Policy Issues and Challenges with Water Budgets: Eastern MWD Experience" presented at American Water Works Association, Annual Conference and Exposition 09, June 15, 2009, San Diego, CA • Gaur, S. "Economics of Desalination" presented at the Association of California Water Agencies, December 2, 2009 Fall Conference, San Diego, CA. • Gaur, S. "Achieving Water Conservation, Revenue Stability and Equitable Rates" presented at the Annual 2010 (February 17, 2010) Conference of the California Society of Municipal Finance Officers, Los Angeles, California. • Gaur, S. and Summers, L. "New M1 Chapter: Water Budget Rates" presented at American Water Works RAFTELIS FINANCIAL CONSULTANTS, INC. 6 Association, Annual Conference and Exposition 10, June 23, 2010, Chicago, IL • Contributing Author to "Water Rates, Fees and the Legal Environment" 2nd Edition American Water Works Association 2010 Editor: C.(Kees) W. Corssmit • Gaur, S. "Developing a Rate Structure that Addresses the Financial Consequences of SBx7-7" presented at the Association of California Water Agencies, December 1, 2010 Fall Conference, Indian Wells, CA • Gaur, S "The Verdict is out on Water Budget" presented at the Utility Management Conference, February 9, 2011, Denver, CO • Gaur, S "What in the world can we learn from California? Water budget rates successfully achieve water efficiency and revenue stability" presented at AWWA Water Conservation Symposium March 15, 2011, Orlando FL • Gaur, S "You Can Have the Best of Both Worlds: Promoting Water Use Efficiency While Enhancing Revenue Stability" presented at Council of Water Utilities April 19, 2011 Poway, CA • Gaur, S. "Water Budget Alternatives: How Do We Define Efficiency?" presented at the Association of California Water Agencies, May 12, 2011 Spring Conference, Sacramento, CA • Gaur, S. 'Inclining Block Rates versus Water Budget Rates: How do You Define Equity?" presented at American Water Works Association Annual Conference, June 15, 2011 Washington D.C. • Gaur, S. 'Innovative Rate Designs: Balancing Conservation Objectives with Revenue Stability" presented at the Association of California Water Agencies 2011 Regulatory Summit, August 17, 2011 Pasadena, CA • Gaur, S. "Cutting -Edge Financial Planning Tool to Facilitate Communications" presented at the Water Environment Federation Annual Conference October 19, 2011 Los Angeles, CA • Gaur, S., Lim, B., Phan, K., "California Water Rate Trends," Journal — American Water Works Association, March 2013, Volume 105, Number 3 • Gaur, S., Atwater, D., Lee, J., "Conservation Rates Offer Options," CA/NV Section of American Water Works Association, April 2014 • Gaur, S., Cavanaugh, P., Kightlinger, J., Mantle, L., McDaniel, J., Poole, K., "The Future of Water in Southern California" presented at the Milken Institute Forum, August 21, 2014, Santa Monica, CA • Gaur, S., Leal, S., Lipkis, A., Smith, R., Spivey WeberMas Masumoto, F., "The Water Challenge: Doing More with Less" presented at the Milken Institute California Summit, November 21, 2014, Santa Monica, CA • Gaur, S., Atwater, D., Cruz, J., "Why do Water Agencies need Reserves?," Journal — American Water Works Association, November 2014, Volume 106, Number 11 • Gaur, S., Atwater, D., "California Water Rate Trends," Journal — American Water Works Association, January 2015, Volume 107, Number 1 • Gaur, S. "California Water Rate Trends," Journal — American Water Works Association, September 2016, Volume 108, Number 9 RAFTELIS FINANCIAL CONSULTANTS, INC. 7