65B - PROPOSED WATER AND SEWER RATE ADJ

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WATER 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 Water Enterprise. This is the first comprehensive evaluation of the City's capital and financial needs since 1995. 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 Water system; • Create a sound financial plan for the Water 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 (SBx7 -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 Water Enterprise serves residential, commercial, industrial, institutional and irrigation customers by providing potable and reclaimed water. To serve its customers, the Water Enterprise obtains water from two primary sources: local groundwater from the Orange County Water District (OCWD) and import water from the Metropolitan Water District of Southern California (MWD). Groundwater production accounts for roughly 65 to 70 percent of the water supply and MWD imported water supplies provide the remaining 30 to 35 percent. The City maintains about 500 miles of transmission and distribution mains, eight reservoirs with a storage capacity of 49.3 million gallons, seven pumping stations, nineteen wells, and seven import connections. The City also receives recycled water after advanced treatment from the Orange County Water District facility, Green Acres Project. PURPOSE The purpose of this report is to present the findings obtained from Black & Veatch Corporation's (Black & Veatch's) study of Water's rate structure and alternatives, financing, and capital needs. The capital needs were 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, 14 65B -26 T10047d74;iDFC!