65B - PROPOSED WATER AND SEWER RATE ADJ

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SEWER RATE STUDY I City of Santa Ana, CA Introduction This report was prepared for the City of Santa Ana (City) to document a multi -year financial plan, the cost of service analysis and the design of a rate structure for the City's Sewer Enterprise. The specific goals of the study were to: • Review and evaluate existing policies and procedures affecting utility rates; • Evaluate the adequacy of projected revenues under existing rates to meet projected revenue requirements; • Develop a Rehabilitation and Replacement (R &R) Program that will identify major capital expenditures for the Sewer system; • Create a sound financial plan for the Sewer Enterprise covering a five -year study period for both ongoing operations and planned capital improvements; • Allocate projected Fiscal Year (FY) revenue requirements to the various customer class in accordance with the respective service requirements; and • Develop a suitable rate schedule that produces revenues adequate to meet financial needs while recognizing customer costs of service and local and state policy considerations such as Proposition 218 and Senate Bill x7 -7 (S130-7). BACKGROUND The City of Santa Ana is one of the oldest Cities in Orange County incorporated in 1886. It encompasses 27.5 square miles and is located approximately 35 miles southeast of downtown Los Angeles. The City is the governmental center of Orange County with a population of roughly 324,500 (2010 US Census). The City owns and operates through the Department of Public Works two self- supporting enterprises: Water and Sewer. The Sewer Enterprise serves its customers by providing wastewater collection only services. The Sewer Enterprise owns and maintains a citywide collection system to collect and transport all sanitary flow to the Orange County Sanitation District (OCSD) treatment facility, located in Fountain Valley. City customers pay for treatment services directly to OCSD on the property tax roll. The City wastewater collection system is composed of 390 mile of collection mains, including 20 miles of OCSD -owned but City maintained trunk sewer mains, 8,000 manholes, 2 lift stations and other miscellaneous structures. PURPOSE The purpose of this report is to present the findings obtained from Black & Veatch Corporation's (Black & Veatch's) study of Sewers rate structure and alternatives, financing, and capital needs. Black & Veatch assessed the system's capital needs based on the R &R Program evaluation as well as additional reviews of planned system improvements. The study develops a financial plan that projects operating revenue, expenses and capital financing costs for the City's Enterprise Funds over a five -year planning period ending June 30, 2019. As part of the plan, future revenues under existing rates, operation and maintenance expense, principal and interest expense on bonded debt, and capital improvement requirements are considered. Historical data trends served as the basis for annual projections of customers, water use, revenues, and expenditures for the next five years. 18 65B -177 NOVEMBER 2014