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65B - PROPOSED WATER AND SEWER RATE ADJ
REQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: DECEMBER 2, 2014 TITLE: AUTHORIZE STAFF TO PREPARE DOCUMENTS FOR PROPOSED WATER AND SEWER RATE ADJUSTMENTS {STRATEGIC PLAN NO. 6, 1, H} 0 CITY MANAGE RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ❑ As Recommended ❑ As Amended ❑ Ordinance on 1" Reading ❑ Ordinance on 2nd Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER Authorize and direct staff to prepare all required documents necessary to proceed with notification of proposed water and sewer rate adjustments in compliance with Proposition 218 requirements, including, but not limited to, all of the following: a) Prepare and mail proposed rate adjustment notices to all Santa Ana property owners in compliance with Proposition 218 requirements; b) Schedule a public hearing at a future Council meeting; c) Prepare all other documents required to proceed with water and sewer rate adjustments. DISCUSSION Background The City owns and operates a water system and a sewer collection system that provides services to a population of over 330,000. The City water system currently consists of 500 miles of mains, 10 reservoirs, 7 pumping stations, and 19 active wells. The City sewer system consists of 390 miles of main, 19 miles of Orange County Sanitation District (OCSD) lines (some of which are maintained by the City), 8,000 manholes, and 2 lift stations. In June 2011, the City Council directed staff to perform a comprehensive examination of City assets, capital needs, and financial condition of both the water and sanitary sewer enterprises. At that time, the most recent rate study had been performed in 1995. On October 3, 2011, upon completion of a competitive bid process, the City awarded a contract to Black & Veatch Corporation (B &V) to perform the comprehensive analysis and develop a financial plan to address the City's long -term water and sewer infrastructure needs. 65B -1 Authorize Staff to Prepare Documents for Proposed Water and Sewer Rate Adjustments December 2, 2014 Page 2 Capital Improvement PrOgram During the review of available asset records and operational data to develop a comprehensive repair and replacement (R &R) program for the City, the following observations were made: • Average age of the water and sewer systems is 50 years • Life expectancy for water and sewer mains range from 40 to 60 years • More than 70% of the water system was installed pre -1980s • More than 85% of the sewer system was installed pre -1980s • Average age of water pipe breakage is 35 to 45 years • Current replacement rate for water /sewer lines is less than the industry standard of 1% of total system miles per year. A risk -based analysis to determine the risk of failure, the consequence of failure, and a business - risk exposure (BRE) rating for each asset was conducted. The analyses concluded the following: • Approximately 13 miles of water lines (5% of the system), costing $35.3 million, have a high probability of failure in the next 5 years • Approximately 62 miles of sewer lines (15% of the system), costing $29 million, has a high probability of failure in the next 5 years The proposed Capital Improvement Programs (CIP) for the water and sewer utilities incorporate the critical R &R projects identified by the risk assessment as well as a ramp -up of annual R &R replacements. (See Exhibit 1, Table 7; and Exhibit 2, Table 8.) The studies also examined the impact to the City in a scenario where CIP activities are deferred. Using a methodology developed by the American Society of Civil Engineers (ASCE), the cost impacts to Santa Ana households, businesses, and local economy were estimated. These potential costs would be in addition to the cost of replacing the asset and possible fines issued by oversight agencies. Included in the projections are items such as claim payments made for temporary relocation or property damage, impacts to businesses due to main failures /spills, and the economic loss due to lost water supply, loss of jobs, and business closures. (See Exhibit 1, Table ES -3; and Exhibit 2, Table ES -3.) Financial Plan To support the proposed water and sewer CIPs, the financial analysis recommends issuing revenue bonds. For the water CIP, an estimated $24 million in debt financing is needed; for the sewer CIP, the amount is $18.2 million. As part of the analysis, existing reserve levels were examined to determine if changes were required. To maintain the programs on a solid financial footing, it is recommended that the utilities maintain a working capital reserve of 90 days of operations and maintenance plus a $1 million emergency reserve. Staff also recommends that as the CIP backlogs are reduced and the systems regain financial stability, an R &R reserve be established for each utility. Annual funding of the reserves would gradually build to a level equal the depreciation of the system. 65B -2 Authorize Staff to Prepare Documents for Proposed Water and Sewer Rate Adjustments December 2, 2014 Page 3 The proposed rate adjustments outlined below support the recommended CIP plans and allow the utilities to meet all financial goals: Combined water & sewer rate increase of 3.2% per year (March 2015, July 2015, July 2016, July 2017, and July 2018), comprised of - Water Utility rate increase, 2.8 % per year - Sewer Utility rate increase, 8.8% per year Rate Design The City requested that B &V examine alternative rate structures to increase revenue stability. Currently, the City's water utility only recovers approximately 8% of revenues through the fixed base charge. For the sewer utility, there is no fixed base charge. However, an estimated 80% of the cost to run the utilities is fixed. Rate structures that are heavily dependent on usage levels cannot provide sufficient funds to cover fixed costs. Phasing in water rate adjustments over the next 5 years will help the City reach a 16% fixed cost recovery level by 2018. The consultant determined cost -of- service rates for FY 2018 and then phased in rates for each preceding year. The recommended water rate structure consists of an increasing fixed base service charge and a commodity rate (Exhibit 1, Tables ES -5 and ES -6). For the sewer utility, increased revenue stability will be achieved through the introduction of two fixed charges: a capital recovery charge and a lateral repair program charge. The capital recovery charge covers the capital needs of the utility. The lateral repair program charge funds sewer lateral repair work performed by the City. The sewer rate structure maintains a commodity charge and adds a new Fats, Oils, and Greases monthly charge applicable to food establishment services only (Exhibit 2, Table ES -5). Typical Bill Impact The financial impact of the proposed revenue adjustments and rate structure changes on the typical customer was evaluated. The overall increase in the combined typical bill of a single - family residential customer will be less than $0.07 per day (based on 1500 cubic feet of water used per month). When compared to neighboring cities, the typical Santa Ana customer pays significantly less for water and sewer services than more than half of its neighbors (Exhibit 1, Figure ES -7; Exhibit 2, Figure ES -6). STRATEGIC PLAN ALIGNMENT Approval of this item supports the City's efforts to meet Goal #6 Community Facilities & Infrastructure, Objective #1 (establish and maintain a Community Investment Plan for all City assets), Strategy H (complete waterlwaste water rate study to ensure adequate resources to capture critical long -term capital needs). ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. L• MW Authorize Staff to Prepare Documents for Proposed Water and Sewer Rate Adjustments December 2, 2014 Page 4 FISCAL IMPACT Funds for the costs to prepare and mail notices are available in the Water Enterprise Fund (Accounting Units 06017644 and 06017645). re Mousavipour Executive Director Public Works Agency FM /NS APPROVED AS TO FUNDS AND ACCOUNTS Fran \M f Francisco Gutierrez �N Executive Director Finance & Management Services Agency Exhibits: 1. Water Financial Plan Report 2. Sewer Financial Plan Report L• r R�, City of Santa Ana, CA i, ` 1 ''r Table of Contents Executive Summary Summary of Findings and Recommendations 1 GuidingPrinciples .......................................................................................................................... ..............................1 Water Enterprise Capital Program .......................................................................................... ..............................2 WaterEnterprise Financial Plan .............................................................................................. ..............................6 Water Utility Cost of Service Allocations .............................................................................. ..............................8 ProposedWater Rates .................................................................................................................. ..............................9 Introduction........................................................................................................................... .............................14 Background.......................................................................................................................................... .............................14 Purpose.................................................................................................................................................. .............................14 Scopeof Work ..................................................................................................................................... .............................15 Overview of Legal and Industry Best Practices for Cost -Of- Service Studies ............. .............................15 Proposition13 ................................................................................................................................ .............................15 Proposition218 ............................................................................................................................. .............................15 Proposition26 ................................................................................................................................ .............................16 GovernmentCode Section § 54999. 7 .................................................................................... .............................16 Generally Accepted Rate - Setting Standards ...................................................................... .............................16 Disclaimer............................................................................................................................................. .............................17 WaterRate Study .................................................................................................................. .............................18 Revenue and Revenue Requirements ........................................................................................ .............................18 Accounts and Customer Usage Projections ........................................................................ .............................18 RevenueProjections .................................................................................................................... .............................19 Operation and Maintenance Projections ............................................................................. .............................21 CapitalImprovement Program ............................................................................................. ............................... 23 CapitalFund Financing ............................................................................................................... .............................31 OperatingFund Financing ......................................................................................................... .............................33 Summary of Revenues, Expenditures, and Obligations ................................................ .............................36 Test Year Revenue Requirements .......................................................................................... .............................39 CostOf Service Allocations ............................................................................................................ .............................40 FunctionalCost Components ................................................................................................... .............................40 Allocation to Cost Components ............................................................................................... .............................41 Unitsof Service .............................................................................................................................. .............................46 Costof Service All ocations ........................................................................................................ .............................49 Proposed Rate Adjustments., Existing Rates ......................... BLACK & VEATCH I Table of Contents Lm � '� 53 53 WATER RATE STUDY I City of Santa Ana, CA ProposedRates .............................................................................................................................. .............................53 RevenueSufficiency ..................................................................................................................... .............................57 TypicalBill Impacts ...................................................................................................................... .............................58 Summary............................................................................................................................................. ............................... 60 Appendix A: Refurbishment & Replacement Program ........................................... .............................62 Capital Asset Valuation and Refurbishment and Replacement Needs Evaluation Methodology.. 63 Methodology................................................................................................................................. ............................... 63 Development of Asset Class Library ..................................................................................... .............................63 Development of Refurbishment and Replacement Schedules and Costs ................... .............................65 Development of Valuation of Capital Assets ........................................................................... .............................66 Capital Asset Inventory, Asset Class Library and Replacement Schedule Database Development66 AssetInventory .............................................................................................................................. .............................66 InventoryData Sources .............................................................................................................. .............................66 Asset Class Library Contents .................................................................................................... .............................67 WaterInfrastructure System ................................................................................................... .............................67 Non - System- Specific Assets ..................................................................................................... .............................70 Refurbishment Intervals and Schedule ............................................................................... .............................71 Capital Asset Valuation and Schedule of R &R Needs and Estimated Costs ............... .............................72 Capital Asset Valuation Summary .......................................................................................... .............................72 Total System Capital Asset Schedule of R &R Needs ....................................................... .............................72 Appendix B: Water CIP Prioritization Process ........................................................... .............................76 Introduction....................................................................................................................................... ............................... 77 CIPfor Outside Plant Assets .......................................................................................................... .............................77 General Assumptions and Observations .................................................................................. .............................79 WaterCollection System CIP Analysis ...................................................................................... .............................80 WaterSystem Statistics ............................ ................. .......... ---- .... -- ............................................................. ..... 80 WaterMain Break Statistics ..................................................................................................... .............................89 Probability of Failure Analysis (PoF) .............................................................................. ............................... 107 Consequence of Failure Analysis (CoF) .......................................................................... ............................... 116 BusinessRisk Exposure ( BRE) ........................................................................................... ............................... 120 Appendix C: Replacement Cost Calculation - All Assets within City ServiceArea ........................................................................................... ............................... ............................123 Introduction........................................................................................................ ............................... ............................124 Water Distribution System R &R Prioritization ................................................................ ............................... 126 BRE Replacement Prioritization ............................................................................................. ............................... 127 R &R Strategy Groups and CIP Budgeting ................................................ ............................... ............................130 GIS Improvement Opportunities ....................................................................................... ............................... 134 Planning Recommendations ............................................................................................... ............................... 134 ii NOVEMBER 2014 65B -7 City of Santa Ana, CA I WATER RATE STUDY Assessment Recommendations....... ...... ......................................................................................................... . 134 Replacement /Rehabilitation Recommendations ....................................................... ............................... 135 Water System Capital Improvements Program ............................................................... ............................... 135 Appendix D: City -Owned Mains Analysis .................................... ............................... ............................136 RevisedAnalysis ................................................................................................ ............................... ............................137 BusinessRisk Exposure ( BRE) ........................................................................................... ............................... 137 Inspection and Replacement Cost Calculation ................................. ............................... ............................139 BRE Replacement Prioritization ............................................................ ............................... ............................140 R &R Strategy Groups and CIP Budgeting ........................................... ............................... ............................143 Water System Capital Improvements Program .............................. ............................... ............................146 BLACK & VEATCH I Table of Contents \m w • ff WATER RATE STUDY I City of Santa Ana, CA LIST OF TABLES Table ES - 1: Annual Inspection and Replacement Schedule Based on Risk Profile ..... ............................... 6 Table ES - 2: Economic Impact of Delaying Proposed CIP ....................................................... ............................... 7 Table ES - 3: Proposed Revenue Adjustments .............................................................................. ............................... 8 Table ES - 4: Proposed Rates for Scenario 1 - FY 14/15 and FY 15/ 16 ............................. ............................... 9 Table ES - 5: Proposed Rates for Scenario 1- FY 16/17 through FY 18/ 19 .................... .............................11 Table ES - 6: Typical Monthly Bills for City Customers (Rates Effective March 1, 2015) ........................12 Table - 1: Average Number of Accounts ......................................................................................... .............................19 Table - 2: Projected Billed Water Volumes ................................................................................... .............................19 Table - 3: Existing Rates (Effective July 1, 2010) ....................................................................... .............................20 Table - 4: Revenues under Existing Rates in Thousands of Dollars ................................... .............................21 Table - 5: Operation and Maintenance Expenses in Thousands of Dollars ..................... .............................22 Table - 6: Annual Inspection and Replacement Schedule Based on Risk Profile .......... .............................29 Table - 7: Capital Improvement Program based on System Risk Profile in Thousands of Dollars..... 31 Table - 8: CIP Financing Plan in Thousands of Dollars - Status Quo Scenario ............... .............................32 Table - 9: CIP Financing Plan in Thousands of Dollars - Scenario 1 ................................... .............................32 Table - 10: Operating Fund Financing Plan in Thousands of Dollars - Status Quo Scenario .................34 Table - 11: Operating Fund Financing Plan in Thousands of Dollars - Scenario 1 ......... .............................35 Table - 12: Economic Impacts of Delaying the Proposed CIP ................................................. .............................37 Table - 13: Proposed Rate Adjustments .......................................................................................... .............................38 Table - 14: Total Costs to be Recovered from Rates - Scenario 1 ........................................ .............................40 Table - 15: Cost of Service Allocation Table - 16: Allocation of 0 &M Expenses in Thousands of Dollars to Functional Cost Components... 44 Table - 17: Allocation of Net Capital Costs in Thousands of Dollars to Functional Cost Components46 Table - 18: Units of Service for TY 18/ 19 ....................................................................................... .............................47 Table - 19: Unit Costs of Services with Costs in Thousands of Dollars ............................... .............................49 Table - 20: Allocation of COS to Customer Classes ..................................................................... .............................50 Table - 21: Comparison of Adjusted COS with Revenues under Existing Rates ............. .............................52 Table - 22: Proposed Rates for Scenario 1 - FY 14/15 and FY 15/ 16 ................................ .............................54 Table - 23: Proposed Rates for Scenario 1- FY 16/17 through FY 18/ 19 ....................... .............................55 Table - 24: Volumetric Cost Recovery over Tiers for FY 18/ 19 ............................................ .............................57 Table - 25: Revenues under Proposed Rates for TY 18/19 (Effective March 1, 2015) - Scenario 1..57 Table - 26: Typical Bi- Monthly Bills - Scenario 1, FY 14/15 Proposed Rates ................. .............................58 Table A - 1: Water System Expected Useful Lives ....................................................................... .............................68 Table A - 2: Wells, Meters and Valves Replacement Costs ...................................................... .............................68 v om NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Table A - 3: Water Pumps and Hydro Generator Replacement Costs ................................. .............................69 Table A - 4: Tanks, Chemical Feed and Misc. Replacement Costs ......................................... .............................69 Table A - 5: Water Pipe Replacement Sizes and Costs .............................................................. .............................70 Table A - 6: Non System- Specific Expected Useful Lives .......................................................... .............................70 Table A - 7: Generator Replacement Costs - 2012 dollars ...................................................... .............................70 Table A - 8: Misc, Assets Replacement Costs - 2012 dollars .................................................. .............................71 Table A - 9: Assets Refurbishment Intervals and Costs - 2012 dollars .............................. .............................71 TableA - 10: Asset Valuation by System ......................................................................................... .............................72 TableA - 11: Total Modeled R &R 30 Year Costs .......................................................................... .............................74 Table B - 1: Pipe Vintages by Install Decade ........................................................... .......................... ......................... 84 Table B - 2: Water Mains Listed by Install Decade and Pipe Material ................................ .............................87 Table B - 3: Water Mains Listed by Pipe Diameter and Material .......................................... .............................88 Table B - 4: Water Main Breaks by Pipe Install Decade and Material ................................. .............................90 Table B - 5: Number of Breaks per Mile by Decade Pipe Installed and Material ............ .............................96 Table B- 6: Number of Breaks by Pipe Diameter and Material .............................................. .............................97 Table B - 7: Number of Breaks per Mile of Pipe by Diameter and Material ................... ............................100 Table B - 8: Impacts on Breaks /Mile by Material ....................................... ............................... ............................105 Table B - 9: Summary of PoF Criteria used in this Anal ysis ................... ............................... ............................113 Table B - 10: Summary of CoF Criteria used in this Study ...................... ............................... ............................118 Table C - 1: Water Pipe Replacement Costs (2012 dollars) ................... ............................... ............................124 Table C - 2: Partial List of Water Main Pipe Segments Ranked by BRE Score ............... ............................127 Table C - 3: Water System R &R Summarizations and Recommendations ...................... ............................133 Table C - 4: Water System Capital Improvements Program [*1 ............ ............................... ............................135 Table D - 1: Partial List of Water Mains Ranked by BRE Score with Non -City owned Mains Removed .................................................................................... ............................... ............................140 Table D - 2: City -owned Water System R &R Summarizations and Recommendations .........................145 Table D - 3: City -owned Water System Capital Improvements Program [ *] ................. ............................146 BLACK & VEATCH I Table of Contents 65B -10 V WATER RATE STUDYJ City of Santa Ana, CA LIST OF FIGURES Figure ES - 1: Distribution of Pipe Materials by Install Decade ............................................. ............................... 3 Figure ES - 2: Criticality Heat Map Graphic by Cost and R &R Strategy Groups .............. ............................... 5 Figure ES - 3: Projected Revenues and Revenue Requirements - Status Quo [*] .......... ............................... 7 Figure ES - 4: Monthly Single Family Residential Bills (5/8" meter and 15 HCF usage) - Rates as of October25, 2014 ............................................................................................................................. .............................13 Figure - 1: Distribution of Pipe Materials by Install Decade ................................................... .............................24 Figure - 2: Distribution of Breaks by Pipe Material and Install Decade ............................. .............................24 Figure - 3: Age of Pipe at Time of Break by Material ................................................................. .............................26 Figure - 4: Criticality Heat Map Graphic by Cost and R &R Strategy Groups .................... .............................28 Figure - 5: Map of City-owned Mains color -coded by Strategy Group ( A- Z) .................... .............................30 Figure - 5: Projected Revenues and Revenue Requirements - Status Quo: No Revenue Increases [ *] Figure - 6: Water Cost of Service Concepts .................................................................................... .............................42 Figure - 7: Monthly Single Family Residential Bills (5/8" meter and 15 HCF usage) - Rates as of October25, 2014 ............................................................................................................................. .............................61 Figure A - 1: Annual Capital Asset R &R Needs for Water and Sewer Assets over 30 -Yr Period ........... 73 Figure A- 2: Annual Capital Asset R &R Needs for the Water System .................................. .............................74 Figure B - 1: Example Risk Heat Map Graph Relating PoF and CoF Scores ...................... .............................79 Figure B - 2: Water Mains Material by Miles and Percentages .............................................. .............................80 Figure B- 3: Map of Water Mains Color -Coded by Pipe Material .......................................... .............................81 Figure B -4: Water Pipe Diameters by Miles Installed .............................................................. .............................82 Figure B- 5: Map of Water Mains Color -Coded by Pipe Diameter ........................................ .............................83 Figure B - 6: Annual and Cumulative Miles of Installed Pipe by Year ................................. .............................85 Figure B - 7: Map of Water Mains Color -Coded by Pipe Install Decade ............................. .............................86 Figure B - 8: Water Mains by Install Decade and Pipe Material ............................................ .............................87 Figure B - 9: Water Mains by Mipe Diameter and Material ..................................................... .............................89 Figure B - 10: Water Main Breaks by Pipe Install Decade and Material ............................ .............................90 Figure B - 11: Map Showing the Distribution of Water Mains and Breaks based on Pipe Installation Decade................................................................................................................................................. .............................91 Figure B - 12: Map Showing Water Mains and Breaks based on Pipe Material (All Pipe Materials)..93 Figure B - 13: Map Showing Water Mains and Breaks based on Pipe Material (Asbestos Concrete only) ..................................................................................................................................................... .............................94 Figure B - 14: Map Showing Water Mains and Breaks based on Pipe Material (Cast Iron only) .......... 95 Figure B- 15: Number of Breaks per Mile by Decade Pipe Installed and Material ........ .............................96 NOVEMBER 2014 65B -11 City of Santa Ana, CA I WATER RATE STUDY Figure B - 16: Number of Breaks by Pipe Diameter and Material ........................................ .............................98 Figure B - 17: Map Showing the Distribution of Water Mains and Breaks based on Main Diameter.99 Figure B - 18: Number of Breaks per Mile of Pipe by Diameter and Material ............... ............................100 Figure B - 19: Number of Breaks per Year per 100 Miles of Installed Pipe .................... ............................101 Figure B - 20: Map Showing the Location of Breaks Color -Coded by Break Year Since 1990............102 Figure B - 21: Map Showing Water Mains by the Number of Breaks per Segment ..... ............................104 Figure B - 22: Several Maps Showing Selective Soil characteristics and Main Breaks by Main BRE Heat Map Graphic by Main Replacement Cost (2012 dollars) .......... ............................126 Material............................................................................................................................................ .............................10 6 Figure B - 23: Breaks per 100 miles per Year by Cohort Group ........... ............................... ............................108 Figure B - 24: Percentage of Water System Pipelines by Cohort Group .......................... ............................109 Map of Mains Color -Coded by Strategy Group ( A- Z) ....... ............................... ............................132 Figure B - 25: Map of Water Mains Color -coded by Cohort Rank ........ ............................... ............................110 Figure D - 1: Figure B - 26: Water Pipeline Historical Break Rate by Installation Decade ................. ............................111 137 Figure B - 27: Distribution of Water Pipeline PoF Scores ....................... ............................... ............................114 Map of City - Wwned Water Mains Color Coded by BRE Scores ................. ............................138 Figure B - 28: Map of Water Mains Color -coded by Total PoF Score . ............................... ............................115 Figure D - 3: Figure B - 29: Water System Pipelines CoF Scores by Diameter .......... ............................... ............................116 Figure B - 30: Distribution of Water Pipeline CoF Scores ....................... ............................... ............................118 Figure B - 31: Map of Water Mains Color -Coded by CoF Scores .......... ............................... ............................119 Figure B - 32: Distribution of Water Pipeline BRE Scores ...................... ............................... ............................120 Figure B - 33: Water System BRE Heat Map Graphic by Miles of Main ............................ ............................121 Figure B - 34: Map of Water Mains Color -Coded by BRE Scores .......... ............................... ............................122 Figure C - 1: BRE Scores and Costs for Water Distribution System .... ............................... ............................125 Figure C- 2: BRE Heat Map Graphic by Main Replacement Cost (2012 dollars) .......... ............................126 Figure C - 3: BRE Heat Map Graphic by Cost and R &R Strategy Groups .......................... ............................131 Figure C - 4: Map of Mains Color -Coded by Strategy Group ( A- Z) ....... ............................... ............................132 Figure D - 1: Water System BRE Heat Map Graphic by Miles of City -owned Water Mains... ............... 137 Figure D - 2: Map of City - Wwned Water Mains Color Coded by BRE Scores ................. ............................138 Figure D - 3: BRE Scores and Costs for City -Owned Water Distribution System ......... ............................139 Figure D - 4: BRE Heat Map Graphic by City -Owned Main Replacement Cost (2012 dollars) ...........140 Figure D - 5: BRE Heat Map Graphic by Cost and R &R Strategy Groups for City -owned Mains........ 143 Figure D - 6: Map of City -Owned Mains Color -Coded by Strategy Group (A- Z) ............ ............................144 BLACK & VEATCH ( Table of Contents 65B -12 vii City of Santa Ana, CA I WATER RATE STUDY Executive Summary 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. 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). SUMMARY OF FINDINGS AND RECOMMENDATIONS A number of factors influence the financial condition of the Water Enterprise. Rates charged for service at a minimum should be adequate to cover operating and repair and replacement costs and to meet outstanding debt covenant requirements. Sound financial operations also include maintaining a capital reserve to address unplanned and emergency capital requirements. Financing major capital expenditures is dependent upon the policies and practices of the City. Cash financing capital expenditures minimizes the cost of the improvements. While debt financing increases the cost, it spreads those costs over the life of the facility, allocating the costs to the actual users of the facility. Changes in the financing of capital expenditures may affect the financial condition of the Water Enterprise and any necessary rate adjustments. The City of Santa Ana has engaged Black & Veatch to review the financial condition of the Water Enterprise, to conduct a cost of service analysis, and to design water rate schedules that address cost -of- service and revenue stability issues. This is the City's first comprehensive review of needs since 1995. Summarized herein are the principal findings and recommendations of the study. Guiding Principles It is the intent of the City to operate its Water Utility as business enterprises. As part of this philosophy, the City asked Black & Veatch to provide comments and recommendations on the following guiding principles: • Should the Water Utility be operated as a "neutral" enterprise? In general, enterprise funds are defined as self- supporting entities. These funds have separate revenue streams based on provided services, which allows them to have the capacity to issue revenue - backed bonds and generate sufficient revenues to cover operational and capital costs. Although city enterprises BLACK & VEATCH I Executive Summary 65B -13 WATER RATE STUDY I City of Santa Ana, CA provide distinct services to its rate - payers, they are also dependent on services provided by General Fund operations. For example, most water departments share human resources, finance, and legal services with other city departments. As such, it is a common practice to allocate shared General Fund costs to all benefiting departments. With respect to the City, the Water Enterprise Fund currently pays its proportionate portion of allocated General Fund costs as determined through the City's indirect cost allocation model. These General Fund costs are business costs that allow the utilities to provide services to the City's residents. • What is a prudent level of operating reserves? The City is formulating a formal operating reserve policy. In light of this, Black & Veatch recommends that the City establish a 90 -days target for an operating reserve. This benchmark is a typical one used by many utilities, including many of the City's surrounding communities. The recent collapse of the nation's financial markets, coupled with the uncertainty of Southern California's water supply situation has led to a change in this benchmark level. Ratings agencies such as Moody's and Standard's & Poor's are now suggesting that utilities have operating reserves between 180 and 360 days' worth of operating expenses. An alternative reserve policy approach is to maintain approximately 90 days of operating expenses together with a $500,000 to $1,000,000 emergency reserve. Higher reserve levels helps the City attain better bond ratings, which in turn, leads to lower borrowing costs. Black & Veatch's proposed long -term financial plan provides a path for meeting the 90 -day operational level and establishing a $1,000,000 emergency reserve. • What is an appropriate level for capital reserves? Capital reserves, such as those for rehabilitation and replacement (R &R) are typically not well- funded in the industry. It has only been within the last decade or so that agencies are seeing the ramifications of not having adequate R &R reserves on hand to address aging infrastructure needs. In the absence of a depreciation study or condition assessment, a general guideline is for utilities to set aside an amount equivalent to one year of depreciation expense. This reserve amount calls for a physical transfer of cash to a reserve account — it is not the same as the depreciation expense recorded on the Income Statement. The latter is not a cash requirement, unlike the former situation. Black & Veatch recommends that as the Water Utility becomes financial stable, R &R reserve funds should be established and funded. As cash is available, the annual funding level should eventually equal one -year of depreciation expense (approximately $2.3 million). Water Enterprise Capital Program Figure ES 1 illustrates the distribution of the City's water mains by installation decade and pipe material. The mains included in the analysis are for "potable" use and do not include the Metropolitan Water District lines that serve the City and are within the City's boundaries. Of the approximately 508 miles of mains in the system, over 70 percent was installed pre 1980 and the average age of the pipes in the system is 50 years. From Figure ES 1 it is clear that the City will soon face a major reinvestment period as water mains reach the end of their useful life. In the absence of any condition assessments, the industry standard for main replacement is 1 percent of the system per year. If we apply this approach to the City's system, the result is an annual replacement rate of 5 miles of mains. The City is currently replacing at a rate of 0.5 percent. 2 65B -14 01161V MUMV40FB1 City of Santa Ana, CA I WATER RATE STUDY Figure ES - 1: Distribution of Pipe Materials by Install Decade 700 a v LL `0 600 a c 500 0 0 400 1930Pre 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s LINK MAC MCI MCMLC ECYL MIDI MPVC WSTL PUNK AC= Asbestos Concrete CYL = Pre-stressed Concrete STL — Steel Cl = Cast Iron DI = Ductile Iron LINK = Unknown CMLC = Cement Mortar -Lined & Coated Steel PVC= Poly Vinyl Chloride A natural next step in evaluating the condition of assets is to examine break history. The City has only maintained records on break history since the 1990s in the Geographic Information System (GIS). Records from 1990 to 2012 show that the City averages 45 to 50 breaks per year. Black & Veatch examined the number of breaks per mile per decade of pipe installation and by material in order to gain a better understanding of the trends in break history. Figure ES 2 shows that almost 68 percent of the breaks have occurred in Cast Iron pipe, 19 percent in Asbestos Cement (AC) and 7 percent in Ductile Iron (DI). Additionally, 58 percent of the breaks have occurred in pipe installed in the 1950 -60s; however, the City only installed 43 percent of all pipes during these two decades. BLACK & VEATCH I Executwe iuni mary 65B -15 3 rr 1 1 171 r= �r 1930Pre 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s LINK MAC MCI MCMLC ECYL MIDI MPVC WSTL PUNK AC= Asbestos Concrete CYL = Pre-stressed Concrete STL — Steel Cl = Cast Iron DI = Ductile Iron LINK = Unknown CMLC = Cement Mortar -Lined & Coated Steel PVC= Poly Vinyl Chloride A natural next step in evaluating the condition of assets is to examine break history. The City has only maintained records on break history since the 1990s in the Geographic Information System (GIS). Records from 1990 to 2012 show that the City averages 45 to 50 breaks per year. Black & Veatch examined the number of breaks per mile per decade of pipe installation and by material in order to gain a better understanding of the trends in break history. Figure ES 2 shows that almost 68 percent of the breaks have occurred in Cast Iron pipe, 19 percent in Asbestos Cement (AC) and 7 percent in Ductile Iron (DI). Additionally, 58 percent of the breaks have occurred in pipe installed in the 1950 -60s; however, the City only installed 43 percent of all pipes during these two decades. BLACK & VEATCH I Executwe iuni mary 65B -15 3 WAFER RAI"E Si JOYS City of Santa Ana, CA Figure ES - 2: Number of Breaks per Mile of Pipe by Installed Decade and Material mAc ■CI it YCYL ■DI ■PVC HSTL HUNK AC= Asbestos Concrete CYL = Pre-stressed Concrete STL — Steel Cl = Cast Iron DI = Ductile Iron LINK = Unknown CMLC = Cement Mortar -Lined & Coated Steel PVC = Poly Vinyl Chloride In order to produce an R &R program, Black & Veatch conducted a high -level asset condition review using City - provided Geographic Information System (GIS) data and available condition reports for the water system. Black & Veatch evaluated the available data and held two workshops with engineering and maintenance staff to develop weighting factors for the asset assessment. Combining the condition reports and workshop results, Black & Veatch determined the Probability of Failure (PoF) and the Consequence of Failure (CoF). The PoF is a measurement of the likelihood that a particular asset will fail. The PoF score is arrived at by weighing factors such as the physical properties of the asset (material, age, etc.), the conditions of the surrounding environment (soil conditions, earthquake faults, etc.), and operational history. The CoF assesses the relative importance of each pipe in terms of delivery levels of service, economics, and health and safety. Criteria weighed in determining a CoF score include, but are not limited to, pipe size, critical customer impacts, and proximity to major roads. The product of the PoF and the CoF results in the Business Risk Exposure (BRE) — the higher the BRE score, the higher the likelihood that the asset requires attention. Without detailed condition assessment information, Black & Veatch cannot quantify the absolute risk of failure; instead, the analysis conducted herein provides a picture of the relative risk of failure. In other words, the analysis indicates which assets are more likely to fail in relation to other system assets. On its own, the BRE score is not sufficient to develop a Capital Improvement Program (CIP). Consequently, Black & Veatch developed R &R strategies reflecting how public agencies tend to conduct work — 4 65B -16 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY grouping projects by area. Based on criticality criteria (PoF and CoF), Black & Veatch developed a list of projects to address immediate system needs over the next 5 years. As shown in Figure ES 3 and explained in more detail in Appendices A through D, the City's water system has approximately 0.08 miles ($0.2 million, 2012 dollars) of mains that are in extremely critical condition (red zone - highest risk of failure). Examining the next tiers of criticality, the City has another 1.35 miles ($3.2 million, 2012 dollars) of mains in highly critical condition (gold zone), and 3.30 miles ($7.2 million, 2012 dollars) of mains that are danger of imminent failure (yellow and green zones). Figure ES - 3: Criticality Heat Map Graphic by Cost (2012 dollars) and R &R Strategy Groups 10 L 9 M 8 LL 4- 7 O 6 v = 5 0) 3 4 41 3 h C 2 O V 1 Probability of Failure 1 2 3 4 5 6 7 8 9 10 MPFO.3 $0.7 $0.1 $0.1 $0.0 $0.0 $0.0 $0.3 $1.3 $6.1 $0.2 $0.0 $0.0 $0.2 $0.6 $1.2 $2.8 $0.0 $0.0 $1.9 $0.0 $0.7 $0.3 $2.3 $6.1 $6.4 $0.1 $0.0 $0.0 $0.0 $0.0 $3.3 $1.1 $4.6 $16.4 $9.2 $0.2 $2.3 $0.0 $0.9 $0.0 $0.5 $4.3 $3.0 $2.1 $16.9 $2.5 $14.8 $10.9 .4 $0.0 $0.8 $20.9 $17.5 $11.7 $55.7 $6.7 $44.8 $21.3 0.9 $0.9 $5.4 $4.1 $1.9 $3.9 $22.0 $1.2 $4.8 $3.1 ` $4.2 $0.9 $0.9 $38.7 $25.1 $15.3 $91.4 $12.8 $35.5 $18.9 $11.5 $3.4 $4.9 $1.7 $6.01 $9.2 $75.2 1 $24.5 1 $54.3 $47.4 $26.8 $4.0 $3.0 Millions of Dollars Extremely High Probabi l ity and Consequence Very High Probability and Consequence C High Probability and Consequence D Moderate Probability and Consequence E Extremely High Probability and Lowto Moderate Consequence F High Probability and Lowto Moderate Consequence Lowto Moderate Probability and Extremely High Consequence Lowto Moderate Probability and High Consequence y Unknown Z Low Criticality Total Cost: $888.8 Table ES 1 summarizes the results of the preliminary asset condition evaluation and indicates that over the next 5 years, the City should invest approximately $11.2 million (2012 dollars) in its water system to catch -up with deferred activities (replacement of assets prioritized as "critical', "very high likelihood of failure ", "high likelihood ", "very high consequence of failure' and "high consequence'). The $888.8 BLACK & VEATCH I Executive Summary 5 6513-17 vv,KfsF f2aiF SYUUYI City of Santa Ana, CA million value in Figure ES 3 represents the cost of repairing or replacing the portion of main impacted. It does not represent the replacement cost of the entire system. Black & Veatch has spread out the critical projects identified for the CIP over five years. Table ES -1: Annual Inspection and Replacement Schedule Based on Risk Profile (2012 Dollars) Years $213,400 $213,400 $213,400 Year2 $1,624,500 $1,624,500 $1,837,900 Year3 $831,000 $2,189,800 $3,020,800 $4,858,700 Year4 $2,189,800 $2,189,800 $7,048,500 Year 5 $4,190,500 $4,190,500 $11,239,000 Total $1,044,400 $6,498,000 $11,239,000 $1,752,000 After the 5 -year period, Black & Veatch recommends that the CIP include annual R &R distribution system projects and addressing non - distribution system (booster stations, reservoirs, etc.) assets. Table ES 2 summarizes a proposed CIP for the next 5 -year period. At a minimum, Black & Veatch suggests that the City invest approximately $10 million annually into infrastructure needs. Table ES - 2: Annual R &R Schedule for FY 19/20 through FY 23/24 (2014 Dollars) Yearl $5,000,000 $1,007,300 $1,153,300 $717,100 $7,877,700 $7,877,700 Year2 $5,000,000 $1,430,200 $1,223,100 $1,376,900 $9,030,200 $16,907,900 Year3 $5,000,000 $1,470,500 $1,703,000 $1,471,800 $9,645,300 $26,553,200 Year4 $5,000,000. $1,752,000 $4,439,100 $1,520;100 $12,711,200. $39,264;400 Year $5,000,000 $1,809,500 $1,596,800 $2,227,800 $10,634,100 $49,898,500 Total $25,000,000 $7,469,500 $10,115,300 $7,313,700 $49,898,500 Water Enterprise Financial Plan In developing the financial plan for the Water Enterprise, Black & Veatch analyzed the level of revenue adjustments needed to support the operational and capital needs of the utility. As a point of comparison, Black & Veatch also analyzed the impact on the utility should the City elect to forego rate increases and maintain the same level of infrastructure investment. As seen in Figure ES 4, the Water Enterprise does have sufficient cash reserves on hand to meet ongoing 0 &M obligations and address baseline infrastructure needs. By FY 15/16, the Water Enterprise's revenue requirements will exceed revenues and will require the Enterprise to dip into its working capital reserve. The annual deficit cash position continues through the study period, ending with a ($9.1 million) balance. 3 M \I • A001yP414WOM City of Santa Ana, CA Figure ES -4: Projected Revenues and Revenue Requirements — Status Quo [ *] Status Quo: Projected Revenue and ROVue Requirements $80,000 in $000's $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 - $10,000 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 ® O &M Expenses o Water Purchase V-J Annual Capital Outlay -- Debt service to Capital Projects -qb--Revenue Target Cash Balance Cash Balance [ *] FY 14/15 revenues include one -time receipt of funds from water bond refinancing activities. Delaying CIP activities does stretch out available cash; however, continued deferral of needed CIP projects also increases the probability, consequence and cost of asset failure. As a rough approximation, Black & Veatch estimated the cost of continuing to defer CIP projects using the methodology set forth in the American Society of Civil Engineers' (ASCE's) 2012 Failure to Act Economic Report for Water (FAC Report). The FAC Report notes that in addition to the actual repair /replacement costs, there are costs associated with payment of claims to impacted households and businesses. Additionally, if projects are deferred by several years, there is an economic loss due to lost water supply, loss of jobs, lost work days, business closures, traffic delays, street repairs, etc. Table ES 3 summarizes the cost of not executing the proposed CIP using the FAC Report methodology. Note that Table ES 3 does not include the cost of replacing the asset or the cost of regulatory fines. Table ES -3: Economic Impact of Delaying Proposed CIP Households $366,000 - $1,314,600 Businesses $917,100- $3,286,500 Local Economy $4,463,100 - $15,994,300 Total $5,747,000 - $20,595,400 BLACK & VEATCH I Executive Summary Total household claim payments. Total business claim. payments. Range depends on the severity of breaks. Includes impacts such as road closures, cost of sinkhole repairs, addressing health & safety issues, etc. 65B -19 7 a i °_ i P2,11 i City of Santa Ana, CA Black & Veatch recommends that the Water Enterprise initiate a program that will help establish recommended reserve balances for both its operational and capital needs over the planning period, as well as a $1 million emergency fund. Given the current level of R &R activity, establishing an emergency fund to address unexpected main breaks would be prudent. For the analyses conducted herein, forecasted operations and maintenance (0 &M) expenses are based on an inflation rate of 2 percent for personnel, 4 percent for benefits, 3 percent for maintenance, 2 percent for general and administrative (G &A), and 5 percent for utilities. • Status Quo Scenario. Under the Status Quo Scenario, implementing no revenue increases over the planning period results in the Water Enterprise running an annual deficit starting in FY 15/16. By the end of the planning period, the annual deficit position grows to ($9.8 million) and the ending fund balance is ($9.1 million). • Scenario 1. The implementation of annual revenue increases allows the Water Enterprise to maintain a positive balance in the Operating Fund while still executing the proposed CIP. The City last raised rates for the Water Enterprise in 2011. Since that time, the cost of purchased water has increased almost 25 percent. The Water Enterprise has been able to absorb these increases by deferring CIP activities; however, this is no longer a viable or sustainable option. Table ES 3 summarizes the proposed revenue adjustments for the proposed scenario examined. All increases are effective July 1 of the fiscal year, except for FY 14/15, which has a March 1, 2015 effective date. Table ES -4: Proposed Revenue Adjustments FY 14/15 March 1 2.8% FY 15/16 July 1 2.8% FY 16/17 July 1 2.8% FY 17/18 July 1 2.8% FY 18/19 July 1 2.8% The above revenue adjustments assume that purchased water costs will remain at current levels. Black & Veatch recommends that the City handle pricing increases from Metropolitan Water District of Southern California (MWD) and the Orange County Water District (OCWD) and /or changes in the basin pumping percentage via a pass- through charge. Water Utility Cost of Service Allocations 8 • The revenue requirements for a selected Test Year (TY) are allocated to customer classes utilizing a cost causative approach endorsed by the American Water Works Association (AW WA). • Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. 65B -20 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY In this analysis, there are six primary cost components: (1) base flow, or volume costs, (2) maximum day cost, (3) peak hour costs, (4) customer billing costs, (5) fire protection, and (6) reclaimed water. Proposed Water Rates At the request of the City, Black & Veatch has examined alternative rate schedules based on the proposed CIP. In addition, the City asked Black & Veatch to examine the level of cost recovery through the basic service charge. Under the current rate schedule, the City recovers approximately 8 percent of its revenues through the basic service charge. According to Best Management Practice (BMP) 11 as set forth by the California Urban Water Conservation Council (CUWCC), utilities should strive to have no more than 30 percent of its user charge revenues from the meter charge. Using this guideline, the City requested Black & Veatch to propose a set of rate schedules that would gradually increase the fixed component recovery over a 5 -year period. Black & Veatch conducted its cost -of- service (COS) analysis and determined that the level of costs recovered through the basic service charge is closer to 17 percent. To minimize ratepayer impacts, the proposed rate schedules illustrated a phased approach to reaching the COS levels by FY 18/19. To maintain a rate structure that encourages conservation, Black & Veatch examined the incremental costs associated with Tier 2 levels of service. We are recommending that the City move from a 15 percent rate differential to a 20 percent differential between Tier 1 and Tier 2 rates. The rate schedule shown in Tables ES 4 and ES 5 is for Scenario 1 and reflects the rates for the entire study period. Cost recovery for each year using the proposed rate structure achieves essentially 100 percent for each customer class. BLACK & VEATCH I Executive Summary [INTENTIONALLY LEFT BLANK] 65B -21 7 WATER RATE STUDYI City of Santa Ana, CA Table ES - 5: Proposed Rates for Scenario 1- FY 14/15 and FY 15/16 5/8" $7.00 $7.40 $0.40 $9.05 $1.65 3/4" $11.00 $16.05 $5.05 $19.65 $3.60 1" $16.40 $30.50 $14.10 $37.30 $6.80 1.5" $23.40 $47.85 $24.45 $58.50 $10.65 2" $46.40 $88.25 $41.85 $107.95 $19.70 T. $116.60 $146.05 $29.45 $178.60 $32.55 4" $186.60 $290.45 $103.85 $355.20 $64.75 6" $280.00 $463.70 $183.70 $567.10 $103.40 [ *]Multi - Family per unit charge $4.20 $4.45 $0.25 $5.45 $1.00 Tier 1 (0 -44 HCF) $2.73 $2.78 $0.05 $2.79 $0.01 Tier 2 (> 45 HCF) $3.15 $3.35 $0.20 $336 $0.01 Recycled Water $2.18 $2.22 $0.04 $2.23 $0.01 10 <4" $14.00 $18.20 $4.20 $18.75 $0.55 4" $18.00 $23.40 $5.40 $24.10 $0.70 6" $24.00 $31.20 $7.20 $33.80 $2.60 8" $32.00 $41.60 $9.60 $42.90 $1.30 10" $38.00 $49.40 $11.40 $50.90 $1.50 12" $44.00 $57.20 $13.20 $58.95 $1.75 65B -22 NOVEMBER 2914 City of Santa Ana, CAI WATER RATE STUDY Table ES - 6: Proposed Rates for Scenario i - FY 16/17 through FY 18/19 5/8" $10.70 $1.65 $12.35 $1.65 $13.90 $1.55 3/4" $23.25 $3.60 $26.80 $3.55 $30.20 $3.40 1" $44.10 $6.80 $50.90 $6.80 $57.30 $6.40 1.5" $69.15 $10.65 $79.85 $10.70 $89.85 $10.00 2" $127.65 $19.70 $147.30 $19.65 $165.80 $18.50 3" $211.15 $32.55 $243.70 $32.55 $274.30 $30.60 4" $419.95 $64.75 $484.70 $64.75 $545.55 $60.85 6" $670.50 $103.40 $773.90 $103.40 $871.05 $97.15 [* ] M u Iti- Family per unit charge $6.40 $0.95 $7.40 $1.00 $9.50 $2.10 Ter 1 (0 -44 HCF) $2.81 $0.01 $2.82 $0.01 $2.83 $0.01 Tier 2 (> 45 HCF) $3.37 $0.01 $3.38 $0.02 $3.40 $0.01 Recycled Water $2.24 $0.01 $2.25 $0.01 $2.26 $0.01 <4" $19.30 $0.55 $19.85 $0.55 $21.00 $1.15 4" $24.80 $0.70 $25.50 $0.70 $27.00 $1.50 6" $36.40 $2.60 $39.00 $2.60 $41.50 $2.50 8" $44.20 $1.30 $45.50 $1.30 $48.00 $2.50 10" $52.40 $1.50 $53.90 $1.50 $57.00 $3.10 12" $60.70 $1.75 $62.45 $1.75 $66.00 $3.55 BLACK & VEATCH t.,: I 65B -23 WATER RATE STUDYI City of Santa Ana, CA Finally, Table ES 6 presents typical monthly bills for different customers in hundred cubic feet (hcf) per month. A comparison to surrounding cities for a single - family residential customer using 15 hcf (monthly) is shown in Figure ES 5. Table ES - 7: Typical Monthly Bills for City Customers (Rates Effective March 1, 2015) Single Family Residential 76.7% 5/8" 15 $4441 $45.40 $0.99 2.2% Commercial 9.60% 2" 50 $171.51 $199.94 28.43 16.6% Industrial 0.18% 6" 500 $1,707.61 $1,899.11 $191.50 11.2% 12 [INTENTIONALLY LEFT BLANK] 65B -24 NOVE City of Santa Ana, CA I WA 1; R RA T r 1 ;lUD', Figure ES - 5: Monthly Single Family Residential Bills (5/8" meter and 15 HCF usage) — Rates as of October 25, 2014 Water Bill City of Stanton South Coast WD East Orange CWD Retail Zone ._. City of Placentia City of Cypress Laguna Beach CWD City of San Clemente - •..+...� -• City of Newport Beach Serrano WD •-- .a-- .- .v..�- Mesa WD -. City of San Juan Capistrano _ City of Brea .......... .. .. _ City of Fullerton City of Long Beach City of La Habra '•,,. - Yorba Linda WD City of Santa Ana (Proposed) City of Seal Beach - City of Garden Grove City of Fountain Valley City of Santa Ana (Existing) Moulton Niguel WD City of Westminster -- - - - - -- -- -- - - -- -_- - - - -- City of Buena Park City of La Palma L Santa Margarita WD City of Huntington Beach City of Anaheim City of Orange Irvine Ranch WD - - - - - -- City of Tustin J -. "NOW a Average Survey Bill= $53.63 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 BLACK & VEATCH I Executive 5:: 65B -25 13 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! City of Santa Ana, CA principal and interest expense on bonded debt, and capital improvement requirements are considered. Annual projections of customers, water use, revenues, and expenditures have been made using historical data for the next five years. SCOPE OF WORK Black & Veatch was retained by the City to develop a multi -year financial plan, conduct a cost of service analysis and design rates for both of its enterprises. The results of a study of the projected revenues, revenue requirements, costs of service, and rates for water service are presented herein. For purposes of this report, the study period is the five fiscal years beginning July 1, 2014 and ending June 30, 2019. Based on Proposition 218, agencies may not set rates in excess of 5 -year increments. Unless otherwise noted, references in this report to a specific year are for the City's year ending June 30. To avoid confusion between calendar and fiscal years, the term FY refers to the year beginning July 1 and ending June 30. Black & Veatch has projected revenues and revenue requirements for the study period based on a review of historical factors and the each enterprise's operating and capital budgets and financial policies. The study of revenue requirements recognizes projected operation and maintenance (0 &M) expense, establishment and /or maintenance of reserve funds, and capital financing requirements. Capital financing requirements include payments on outstanding bond issues as well as capital improvement expenditures met from annual revenues and available reserve funds. The Water Enterprise's cost of service used the American Water Works Association (AWWA) Manual M1. This allocation methodology produces cost of service allocations recognizing the projected customer service requirements for the City. Proposed rates are designed in accordance with allocated cost of service and local policy considerations. The extent to which the existing rate structure recovers revenues from customer classes in accordance with cost of service allocations is also evaluated. OVERVIEW OF LEGAL AND INDUSTRY BEST PRACTICES FOR COST -OF- SERVICE STUDIES Rate - setting procedures in California require that agencies responsible for imposing property- related charges must demonstrate a nexus between the cost of providing services and the services or benefits received. The state of California considers water and wastewater services as property - related fees and as such, subject to state constitutional and statutory requirements. Presented in the next few sections are brief summaries of the relevant laws governing the Study. Proposition 13 Government Code Section §50076, adopted in 1979 provides that "special taxes shall not include any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged." Proposition 218 California voters approved Proposition 218 in November 1996. This voter - approved initiative added Articles XIIIC and D to the California Constitution. Article MID Section 2(e), is a definition of a "fee ". Essentially, as defined by Proposition 218, a fee is "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a userfee or charge for a property related service ". Until 2006, sewer charges were BLACK & VEATCH I Introduction 15 65B -27 WATER RATE STUDY City of Santa Ana, CA considered property related services while water charge were not defined as property - related until the 2006 California Supreme Court decision in Bighorn- Desert View Water Agency v. Verjil. After this decision, water charges are now considered as property - related fees and any new or increased water charges must comply with the substantive and procedural requirements of Proposition 218. The substantive requirements include: • Revenues derived from the fee or charge cannot exceed the funds required to provide the property related service. • Revenues derived from the fee or charge cannot be used for any other purpose other than for which the fee or charge was imposed for. • A property - related fee or charge cannot exceed the proportional cost of service attributable to the parcel. Proposition 26 California voters approved Proposition 26 in November 2010. Included in the language of proposition, which amended California Constitution Article XIII C, Section 1, is a definition of "tax ". Essentially, as defined by Proposition 26, a tax is any "levy, charge, or exaction of any kind imposed by a local government' with specifically outlined exceptions. These exceptions are: • A charge imposed for a specific benefit conferred or a privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege, and • A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product. Proposition 26 establishes that the "...local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payo's burdens on, or benefits received from, the governmental activity." Government Code Section §54999.7 Under this section, rate - setting activities by public agencies are directed to follow cost -of- service principles and states that fees for "...for public utility service, other than electricity or gas, shall not exceed the reasonable cost of providing the utility service." It also provides that these fees will be "established in consideration of service characteristics, demand patterns, and other relevant factors." Generally Accepted Rate - Setting Standards The American Water Works Association (AWWA) and Water Environmental Federation (WEF) are the industry organizations tasked with providing guidance on the operation and management of water and wastewater utilities. AWWA and WEF have established a general set of principles used to guide the development of water and wastewater rates. These principles were developed to provide a consistent approach and minimum standards to rate - setting procedures. It is important to note that both AWWA and WEF observe that there is no prescribed single approach for establishing cost -based rates. Rather, 16 M \• • NOVEMBER 2014 City of Santa Ana, CA .`. agencies must exercise judgment to align rates and charges with local conditions and requirements, as well as applicable state law. Black & Veatch has used the guidelines contained in the AWWA and WEF documents and followed the applicable State law, including Proposition 218, to conduct the analyses contained herein. DISCLAIMER In conducting our study, we reviewed the books, records, agreements, and customer sales and financial projections of the Water Enterprise as we deemed necessary to express our opinion of the operating results and projections. While we consider such books, records, documents, and projections to be reliable, Black & Veatch has not verified the accuracy of these documents. The projections set forth in this report below are intended as "forward- looking statements ". In formulating these projections, Black & Veatch has made certain assumptions with respect to 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 actually 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, and adverse legislative, regulatory or legal decisions (including environmental laws and regulations) affecting the ability of any of the enterprise's ability to manage the system and meet water quality, waste discharge, and /or other regulatory or environmental requirements. BLACK & VEATCH I Introdurt,?, [INTENTIONALLY LEFT BLANK] 65B -29 IIA WATER RATE STUDY I City of Santa Ana, CA Water Rate Study REVENUE AND REVENUE REQUIREMENTS To meet the costs associated with providing water services to its customers, the Water Enterprise derives revenue from a variety of sources including water sales charges, basic service charges, reconnection fees, penalties, tag fees, rental of property, interest earned from the investment of available funds, and other miscellaneous revenues. The level of future revenue generated in the study is projected through a combination of an analysis of historical and future system growth in terms of number of accounts and water consumption. With revenue derived from the various sources, the Water Enterprise meets the cash requirements of operation and maintenance (0 &M); principal, interest, and reserve payments on revenue and other bond indebtedness; and recurring annual capital expenditures for replacements, system betterments, and extensions not debt financed. Operation and maintenance expenses are those expenditures necessary to maintain the system in good working order. Routine annual capital expenditures, which include equipment replacements, consist of recurring annual replacements, minor extensions, and betterments which are normally revenue financed. Other capital costs include principal and interest payments, bond covenant - required payments, and cash financed capital improvements. Accounts and Customer Usage Projections To forecast revenue, the customer accounts and billed water sales volume needs to be determined within the Water Enterprise's service area. Billed water is incorporated into the equation by projecting the average number of customer accounts illustrated in Table 1 and assessing an average use per account to produce the billed water volumes shown in Table 2. Based on the Urban Water Management Plan, discussions with City staff and the impact of the drought, water growth is estimated to remain constant at 15,948,300 hundred cubic feet (HCF) or 36,612 acre -feet (AF) between FY 14/15 and FY 18/19. The City under State mandate must comply with Senate Bill x7 -7, which stipulates a mandatory reduction of 20 percent water used by 2020 for all water purveyors in California. The City is at near built - out conditions and increase in water flow will result of increased density or infill of vacant properties. [INTENTIONALLY LEFT BLANK] 65B -30 NOVEMBER 2014 City of Santa Ana, CA I WATER RAT: STUDY Table - 1: Average Number of Accounts ESTIMATED I PROJECTED NUMBER OF ACCOUNTS CUSTOMER CLASS I FY 13/14 1 FY 14/15 1 FY 1S/16 I FY 16/17 1 FY 17/18 FY 18/19 Single Family Residential 35,491 35,491 35,491 35,491 35,491 35,491 Multi - Family Residential 3,633 3,633 3,633 3,633 3,633 3,633 Commercial 4,442 4,442 4,442 4,442 4,442 4,442 Industrial 84 84 84 84 84 84 Institutional 539 539 539 539 539 539 Irrigation 438 438 438 438 438 438 Outside City 45 45 45 45 45 45 Recycled Water 20 20 20 20 20 20 Fire Service 1,594 1,594 1,594 1,594 1,594 1,594 Total Accounts 46,286 46,286 46,286 46,286 46,286 46,286 Table - 2: Projected Billed Water Volumes Revenue Projections The City generates revenue from basic service charges, water sales, reconnection fees, penalties, tag fees, rental of property, interest earned from the investment of available funds, and other miscellaneous revenues. Since revenue generated outside of basic service charges and water sales are not subject to rate increases, we have excluded them from this portion of the analysis. These additional revenue sources are incorporated later in the cash flow portion of the report. BLACK & VEATCH I Water Rate Study 65B -31 Single Family Residential 6,261,100 6,073,900 6,073,900 6,073,900 6,073,900 6,073,900 Multi - Family Residential 4,654,300 4,515,100 4,515,100 4,515,100 4,515,100 4,515,100 Commercial 2,878,900 2,792,800 2,792,800 2,792,800 2,792,800 2,792,800 Industrial 697,700 676,900 676,900 676,900 676,900 676,900 Institutional 1,276, 700 1,238,500 1,238,500 1,238,500 1,238,500 1,238,500 Irrigation 570,300 553,200 553,200 553,200 553,200 553,200 Outside City 12,200 11,800 11,800 11,800 11,800 11,800 Recycled Water 88,800 86,100 86,100 86,100 86,100 86,100 Total Billed Volume 16,440,000 15,948,300 15,948,300 15,948,300 15,948,300 15,948,300 Revenue Projections The City generates revenue from basic service charges, water sales, reconnection fees, penalties, tag fees, rental of property, interest earned from the investment of available funds, and other miscellaneous revenues. Since revenue generated outside of basic service charges and water sales are not subject to rate increases, we have excluded them from this portion of the analysis. These additional revenue sources are incorporated later in the cash flow portion of the report. BLACK & VEATCH I Water Rate Study 65B -31 WATER RATE STUDY I City of Santa Ana, CA The Water Enterprise's revenues are composed of two parts: a basic bimonthly service charge and a commodity charge. The bimonthly service charge is a fixed amount based on meter size that is designed to recover fixed costs, which do not vary with the volume of water used by a customer such as meter reading, customer billing, and debt service. The commodity charge is an amount based on units of consumption, which is measured by the number of hundred cubic feet of water consumed during the billing cycle. Included in the commodity charge are the costs associated with water purchases. Since the Water Enterprise has traditionally reviewed rates on an annual basis, any increases from the Orange County Water District and /or MWD for purchased water have been incorporated in July. Summarized in Table 3 are the current water rates for all customer classes. Table - 3: Existing Rates (Effective July 1, 2010) 5/8" $7.00 3/4" $11.00 V. $16.40 1.5" $23.40 2" $46.40 $14.00 3" $116.60 $14.00 4" $186.60 $18.00 6" $280.00 $24.00 8" $32.00 30" $38.00 12" $44.00 [ "]Multi- Family per unit charge $4.20 Tier 1(0 -44 HCF) $2.73 Ter 2 (Over 45 HCF) $3.15 Recycled Water $2.18 Incorporating the existing water rates with the number of accounts and customer usage projections, water sales revenue under existing rates is tabulated as shown in Table 4. The anticipated revenue 20 NOVEMBER 2014 65B -32 City of Santa Ana, CA I WATER RATE STUDY generated is expected to remain constant at $49,784,700 throughout the study period. Reclaimed water is primarily used to meet landscape irrigation needs. Table - 4: Revenues under Existing Rates in Thousands of Dollars Single Family Residential 19,011.3 18,494.2 18,494.2 18,494.2 18,494.2 18,494.2 Multi - Family Residential 13,991.2 13,605.8 13,605.8 13,605.8 13,605.8 13,605.8 Commercial 9,456.1 9,193.8 9,193.8 9,193.8 9,193.8 9,193.8 Industrial 2,228.4 2,163.1 2,163.1 2,163.1 2,163.1 2,163.1 Institutional 4,169.6 4,050.5 4,050.5 4,050.5 4,050.5 4,050.5 Irrigation 1,844.4 1,791.7 1,791.7 1,791.7 1,791.7 1,791.7 Outside City 37.2 36.0 36.0 36.0 36.0 36.0 Recycled Water 206.9 201.0 201.0 201.0 201.0 201.0 Fire Service 248.6 248.6 248.6 248.6 248.6 248.6 Total Revenue $51,193.7 ' $49,784.7 $49,784.7 $49,784.7 $49,784.7 $49,784.7 Operation and Maintenance Projections In order to adequately adjust rates, it is necessary to project operation and maintenance (0 &M) expenses. Summarized in Table 5 are Waters projected O &M expenditures. These expenditures include costs related to personnel (including additional staff), contract services, operating supplies, utilities and general administrative. The forecasted expenditures are based Black & Veatch and City staffs expertise and knowledge. The table to the right summarizes key assumptions for inflation rates used in the C &M expense projections. The levels of adjustment illustrated on the right are consistent with recent increases seen throughout the area. For the purposes of this study, no escalation factor is applied to imported water sources. The volatility of water supply and wholesale costs are not within the City's control; as such, the City should be handling purchased water and pumped water increases via a pass- through mechanism. The OCWD is responsible for managing the groundwater basin from which the City pumps. In FY 13/14, the City's basin pumping percentage (BPP) was 70 percent and OCWD's budgeted BPP for FY 14/15 is 72 percent. It is OCWD's intent to increase the BPP to 75 percent and increase its water supply portfolio through increasing capacity at the Groundwater Replenishment System (GWRS) and purchasing water from the Huntington Beach Desalination Project. For the purposes of this Study, due to severe drought conditions, Black & Veatch is estimating an average 68 percent for the study period. BLACK & VEATCH I Water Rate Study 65B -33 21 22 WATER RATE STUDY I City of Santa Ana, CA Table - 5: Operation and Maintenance Expenses in Thousands of Dollars EST. PROJECTED O &M EXPENSES ($000'S) DESCRIPTION FY 13/14 1 FY 14/15 1 FY 15/16 FY 16/17 1 FY 17/18 1 FY 18/19 Water Production & Supply Salaries & Benefits 1,363.2 1,377.0 1,412.4 1,448.8 1,486.3 1,524.7 Contractual Services 11,147.5 11,565.3 12,581.0 12,900.5 13,229.7 13,569.0 Commodities 11,063.3 10,475.5 10,475.5 10,475.5 10,475.5 10,475.5 Administration 986.7 999.5 1,018.6 1,038.1 1,058.1 1,078.5 Routine Capital Outlay 231.7 373.2 373.2 373.2 373.2 373.2 Subtotal $24,792.4 $24,790.5 $25,860.7 $26,236.1 $25,622.8 $27,020.9 Water Systems Maintenance Salaries & Benefits 1,408.0 1,474.3 1,512.8 1,552.7 1,593.7 1,636.0 Contractual Services 221.8 718.1 788.6 804.6 820.9 837.5 Commodities 642.5 719.5 719.5 719.5 719.5 719.5 Administration 811.0 822.1 833.4 845.0 856.9 869.0 Routine Capital Outlay 54.7 592.1 2,733.6 592.1 592.1 592.1 Subtotal $3,138.0 $4,326.1 $6,5829 $4,513.9 $4,583.1 $4,654.1 Miscellaneous Operating Expenses Commodities 61.2 0.0 0.0 0.0 0.0 0.0 Administration 9,720.2 9,262.7 9,308.1 9,354.4 9,401.7 9,449.9 Subtotal $9,781.4 $9,262.7 $9,308.1 $9,354.4 $9,401.7 $9,449.9 Water Quality & Measurement Salaries & Benefits 1,188.1 1,232.9 1,264.4 1,296.8 1,330.2 1,364.6 Contractual Services 113.6 834.3 913.1 931.7 950.6 970.0 Commodities 690.4 781.7 781,7 781.7 781.7 781.7 Administration 172.3 175.3 178.0 180.8 183.7 186.7 Routine Capital Outlay 57.7 141.2 141.2 141;2 141.2 141.2 Subtotal $2,222.1 $3,165.4 $3,278.4 $3,332.2 $3,3824 $3,444.2 Water Administration & Engineering Salaries & Benefits 595.6 1,122.5 1,149.7 1,177.7 1,206.5 1,236.1 Contractual Services - 526.2 1,018.5 1,118.9 1,141.5 1,164.6 1,188.1 Commodities 91.2 79.7 79.7 79.7 79.7 79.7 Administration 1,260.0 1,287.6 1,313.1' 1,339.1 1,365.6 1,392.7 Routine Capital Outlay 0.0 50.4 50.4 50.4 50.4 50.4 Subtotal 2,473.0 3,559..7 3,711.8 3,788.4 3,866.8 3,947.0 Total O &M Expense $42,406.9 $45,104.4 $48,746.9 $47,225.0 $47,861.8 $48,516.1 65B -34 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY In addition, there are two one -time increases in FY 15/16 — one under routine capital outlay to cover vehicle and heavy equipment needs and one under contract services. The latter adjustment reflects the City's move to comply with the Prevailing Wage laws in order to qualify for grants and low- interest loans administered by the State. The projected impact to contract services to address the Prevailing Wage laws is 10 percent. Total 0 &M is projected to increase from $45,104,400 in FY 14/15 to $48,516,400 in FY 18/19. Capital Improvement Program While 0 &M expenses cover day -to -day operations, the Water Enterprise incurs additional capital expenditures to replace existing water facilities or installed new facilities for planned future growth. As a result, the Water Enterprise requested Black & Veatch to assist with developing a long -term R &R Program that identifies future water system needs and upgrades. Black & Veatch conducted a high -level asset condition review using City - provided Geographic Information System (GIS) data and available condition reports for the water system. Black & Veatch evaluated the available data and held two workshops with engineering and maintenance staff to develop weighting factors for the asset assessment. Overview of Asset Information Figure 1 illustrates the distribution of the City's water mains by installation decade and pipe material. The mains included in the analysis are for "potable" use and do not include the MWD lines that served the City and are within the City's boundaries. Of the approximately 508 miles of mains in the system, over 70 percent was installed pre 1980 and the average age of the pipes in the system is 50 years. From Figure 1 it is clear that the City will soon face a major reinvestment period as water mains reach the end of their useful life. In the absence of any condition assessments, the industry standard for main replacement is 1 percent of the system per year. If we apply this approach to the City's system, the result is an annual replacement rate of 5 miles of mains. The City is currently replacing mains at a rate of 0.5 percent per year. BLACK & VEATCH I Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -35 24 �VRYEH R.", I c S7U7`I City of Santa Ana, CA Figure -1: Distribution of Pipe Materials by Install Decade d d 0 600 a c � 500 O 400 v i a I m 300 N c L 200 1 1 , , , , 0 1930Pre 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s LINK MAC MCI MCMLC MICYL MIDI MPVC MISTL MUNK AC= Asbestos Concrete CYL = Pre-stressed Concrete STL — Steel Cl = Cast Iron DI = Ductile Iron LINK = Unknown CMLC= Cement Mortar -Lined & Coated Steel PVC= Poly Vinyl Chloride Replacing assets based on a depreciation life does not address site - specific conditions that may lead to increased break frequencies. Breaks may occur due to a number of reasons including age, soil conditions, corrosive environments, and lack of maintenance. Figure 2 illustrates the number of breaks by material and decade installed for the City's system. [INTENTIONALLY LEFT BLANK] 65B -36 NOVEMBER 2014 City of Santa Ana, CA 1 WATER RATE STUDY Figure - 2: Distribution of Breaks by Pipe Material and Install Decade AC = Asbestos Concrete CYL = Pre - stressed Concrete STL— Steel Cl = Cast Iron DI = Ductile Iron UNK= Unknown CMLC = Cement Mortar -Lined & Coated Steel PVC = Poly Vinyl Chloride Developing an R &R Program based on the results of Figures 3 and 4 would indicate that at a minimum, the City should be prioritizing replacement work for all lines installed in the 1950s through the 1960s, which represents almost 44 percent of the miles of mains in the system. Black & Veatch also examined the age of the pipe at the time of a detected break. Figure 3 summarizes our findings of this analysis using data from 1990 forward. The City did not track this information prior to 1990. As Figure 3 illustrates, the majority of breaks occur in two groupings: between 34 and 39 years old and between 42 and 46 years of age. These periods correspond to installations dates between 1975 to 1980 and 1968 to 1972, respectively. BLACK & VEATCH 1 Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -37 ?5 26 Figure - 3: Age of Pipe at Time of Break by Material • 10 io `0 8 d E E 6 z 4 2 0 WATER RATE STUDY I City of Santa Ana, CA MAC MCI MCMLC MCYL ■DI aPVC n °m m °m Z AC= Asbestos Concrete CYL = Pre-stressed Concrete STL — Steel Cl = Cast Iron DI = Ductile Iron UNK = Unknown CIVIC = Cement Mortar -Lined & Coated Steel PVC = Poly Vinyl Chloride In the next part of the work, Black & Veatch conducted further analyses to refine the conclusions reached above and incorporated asset management methodologies to develop the suggested R &R Program. Refinement of Asset Evaluation The methodologies employed in developing asset management programs all revolve around managing risks. For example, while a Pipe "X" may have a high probability of failure, the impact of its failure (the consequence) is very low. So, from a risk perspective, would it be better to let Pipe "X" fail, or should you just go ahead and spend the money to repair it? Implementing a robust asset management system can help answer these types of questions. The City is starting to develop its own asset management system and as a first step, Black & Veatch conducted a number of meetings to help assess the City's perspective on risk and failure. Combining the condition reports and workshop results, Black & Veatch determined the Probability of Failure (PoF) and the Consequence of Failure (CoF). The product of the PoF and the CoF results in the Business Risk Exposure (BRE) —the higher the BRE score, the higher the likelihood that the asset requires attention. Without detailed condition assessment information, Black & Veatch cannot quantify the absolute risk of failure; instead, the analysis conducted herein provides a picture of the relative risk of failure. In other words, the analysis indicates which assets are more likely to fail in relation to other system assets. On its own, the BRE score is not sufficient to develop a Capital Improvement Program (CIP). Consequently, Black & Veatch developed R &R strategies reflecting how public agencies tend to conduct work — M \, • NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY grouping projects by area. Based on criticality criteria (PoF and CoF), Black & Veatch developed a list of projects to address immediate system needs over the next 5 years. After the 5 -year period, the suggested CIP is split between annual R &R distribution system projects and addressing non - distribution system (booster stations, reservoirs, etc.) assets. At a minimum, Black & Veatch suggests that the City invest approximately $8 million annually into infrastructure needs. Appendix D contains a suggested level of investment for non - distribution system assets. As shown in Figure 4 and explained in more detail in Appendices A through D, the City's water system has approximately 0.08 miles ($0.2 million, 2012 dollars)of mains that are in extremely critical condition (red zone — highest risk of failure). Examining the next tiers of criticality, the City has another 1.35 miles ($3.2 million, 2012 dollars) of mains in highly critical condition (gold zone), and 3.30 miles ($7.2 million, 2012 dollars) of mains that are danger of imminent failure (yellow and green zones). The $888.8 million value in Figure 4 represents the cost of repairing or replacing the portion of main impacted. It does not represent the replacement cost of the entire system. P,LACK & VEATCH I Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -39 27 28 WATER RATE STUDY I City of Santa Ana, CA Figure - 4: Criticality Heat Map Graphic by Cost and R &R Strategy Groups 10 L 3 9 LL 8 4- 7 O 6 v C 5 d! 3 4 a (1) 3 N 2 O V 1 Probability of Failure 1 2 3 4 5 6 7 8 9 10 $0.8 $0.3 $0.3 X1.3 $0.7 561 $0.1 $0.2 $0.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.2 $0.6 $0.3 $2.3 $6.1 4 $6.4 y0 1 $0.1 $0.0 $0.0 $0.0 $0.0 $1.9 $0.0 $0.0 $0.0 $0.7 $3.3 $1.1 $4.6 $16.4 $9.2 $0.2 $2.3 $0.0 $0.9 $0.0 $0.5 $4.3 $3.0 $2.1 $16.9 $2.5 $14.8 $10.9 $3.4 $0.0 $0.8 $20.9 $17.5 $11.7 $55.7 $6.7 $44.8 $21.3 $10.9 $0.9 $5.4 $4.1 $1.9 $3.9 $22.0 $1.2 $4.8 $3.1 $4.2 $0.9 $0.9 $38.7 $25.1 $15.3 $91.4 $12.8 $35.5 $18.9 $11.5 $3.4 $4.9 $1.7 $6.0 $9.2 $75.2 $24.5 $54.3 $47.4 $26.8 $4.0 $3.0 Millions of Dollars Extremely High Probability and Consequence Very High Probability and Consequence High Probability and Consequence Moderate Probability and Consequence Extremely High Probability and Low to Moderate Consequence High Probability and Low to Moderate Consequence Lowto Moderate Probability and Extremely High Consequence Low to Moderate Probability and High Consequence Unknown Low Criticality Total Cost: $888.8 Table 6 summarizes the results of the preliminary asset risk evaluation and indicates that over the next 5 years, the City should invest approximately $11.2 million (2012 dollars) in its water system to catch -up with deferred activities. Figure 5 identifies the color -coded areas on a map of the City. Black & Veatch has spread out the critical projects identified for the CIP over five years. M L� �M NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Table - 6: Annual Inspection and Replacement Schedule Based on Risk Profile Yearl $213,400 $213,400 $213,400 Year2 $1,624,500 $1,624,500 $1,837,900 Year3 $831,000 $2,189,800 $3,020,800 $4,858,700 Year4 $2,189,800 $2,189,800 $7,048,500 Year 5 $4,190,500 $4,190,500 $11,239,000 Total $1,044,400 $10,194,600 $11,239,000 The capital projects shown in Table 7 is for FY 14/15 through FY 18/19 and consist of capital projects planned for design and construction during the study period. A full discussion regarding the development of the R &R program and recommendations developed by Black & Veatch are provided later in this report. Table 7 includes planned expenditures for the advanced metering infrastructure (AMI) project, which will allow the City to measure and collect customer usage in real time and inspections to support the R &R Program. Table 7 also proposes normal (annual) R &R projects required to keep the system maintained. The annual level of R &R projects assumes that the City will replace over the Study period is approximately 3 miles of main per year; thereafter, the City should increase activities to target at least 5 miles of mains annually. Replacing 5 miles of main per year equates to a 100 -year replacement life. Completing the suggested critical R &R projects by the end of the study period, and maintaining the 5 miles /year replacement rate thereafter will help the City keep up with infrastructure needs. It is important to note that differences between the values proposed in Table 6 for the R &R critical projects and those in Table 7 reflect an annual CIP inflation cost as well as inclusion of engineering /design /construction management costs and the City's trench cut fee. This fee is imposed on all activities that cut into the City's streets and increases significantly if work is done on streets under the paving moratorium. The Water Enterprise estimates that the majority of work to be performed under the Critical Projects category will be conducted on streets under the moratorium. BLACK & VEATCH Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -41 29 WATER RATE STUDY I City of Santa Ana, CA Figure - 5: Map of City -owned Mains color -coded by Strategy Group (A -Z) r— rj ni , -Id Fs_LHt- liz, — v 0 3,000 6,000 12,000 Ft Main by BRE Score — Group A Probability of Failure Grou B 1 2 3 6 5 6 ) B 9 10 p Group C d m -- Group D ? 9 — Group E LL 9 Group F ] — GroupG y 6 — GroupH c s Group W @i City Boundary c 4 T RailRoads 0 ' $a0 ;S477A$3A O $4.3 V 1 30 PSUSM WSUS0.1 0 Sae $0. 0 So.], 513 SL3 59.E $0.1 $23 $a0 ;S477A$3A Sas $4.3 $16.9 $25 $10.8 S88 $SA $20.9 $55.] $6.] $MA $0.1 $nk $910 *1591,4 $L2 $128 $0.8 $35S $0n $4.9 $3B.r $1] $]93 $24.5 $50.3 $3A M1111on5 a wlam Ta U ,: 5aeae 65B -42 /ANA W E s City of Santa Ana, CA Water I Wastewater System Analysis - 2012 IYl � l li / Water Distribution System BRIE Scoring by Grid 02 City -Owned Mains Only BLACK &VEATCH Building a world of difference! NOVEMBER 2014 City of Santa Ana, CAI lN, \TF. is Rn CE 51 U DY Table - 7: Capital Improvement Program based on System Risk Profile in Thousands of Dollars 3,582.2 5,208.8 0.0 0.0 8,738.8 Total Capital Expenditures $3,064.2 $10,462.2 $12,244.9 $13,059.3 $14,476.3 $17,529.8 From FY 14/15 through FY 18/19, the Water Enterprise is projecting expenditures totaling $67,772,500. As part of the financial plan analyses, an annual inflation allowance of 3 percent beginning in FY 15/16 was included in the above capital improvement project costs. Capital Fund Financing A proposed financing plan for the Water Enterprise's CIP is shown in Table 8 and Table 9. Table 8 summarizes the plan in the event that the City elects to forego revenue adjustments, execute the proposed CIP but omit the annual R &R projects, and cash finance all activities (Status Quo Scenario). Table 9 is the proposed financing under the assumption that the City will elect to propose revenue adjustments (Scenario 1). Financing for the CIP is anticipated to come from a combination of funds on hand, transfers from water sales revenues derived from rates, grants, and bond proceeds. The Water Enterprise currently maintains a capital fund that is used to finance CIP projects as well as to separate the commingling of rate and connection funds. The capital fund generates revenue from developer fees, transfers and debt proceeds (as appropriate). With new development in City slowing dramatically, the Water Enterprise will depend on rate revenue and bond proceeds (as necessary) to execute planned CIP projects. BLACK & VEATCH I Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -43 41 �9:(�11iMIiH4_1 911_1 ■11419a�lNiNIiC1�9:U)14Q CUSTOMER CLASS Advanced Metering Infrastructure 0.0 0.0 3,278.2 3,376.5 3,477.8 R &R - Annual Projects 0.0 0.0 5,352.5 0.0 5,057.2 Well 32 Rehabilitation 0.0 0.0 0.0 5,177.3 0.0 Inspections 0.0 0.0 314.8 0.0 1,300.6 R &R- Critical Projects 3,064.2 10,462.2 3,299.4 4,505.5 4,640.7 3,582.2 5,208.8 0.0 0.0 8,738.8 Total Capital Expenditures $3,064.2 $10,462.2 $12,244.9 $13,059.3 $14,476.3 $17,529.8 From FY 14/15 through FY 18/19, the Water Enterprise is projecting expenditures totaling $67,772,500. As part of the financial plan analyses, an annual inflation allowance of 3 percent beginning in FY 15/16 was included in the above capital improvement project costs. Capital Fund Financing A proposed financing plan for the Water Enterprise's CIP is shown in Table 8 and Table 9. Table 8 summarizes the plan in the event that the City elects to forego revenue adjustments, execute the proposed CIP but omit the annual R &R projects, and cash finance all activities (Status Quo Scenario). Table 9 is the proposed financing under the assumption that the City will elect to propose revenue adjustments (Scenario 1). Financing for the CIP is anticipated to come from a combination of funds on hand, transfers from water sales revenues derived from rates, grants, and bond proceeds. The Water Enterprise currently maintains a capital fund that is used to finance CIP projects as well as to separate the commingling of rate and connection funds. The capital fund generates revenue from developer fees, transfers and debt proceeds (as appropriate). With new development in City slowing dramatically, the Water Enterprise will depend on rate revenue and bond proceeds (as necessary) to execute planned CIP projects. BLACK & VEATCH I Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -43 41 32 WATER RATE STUDY I City of Santa Ana, CA Table -8: CIP Financing Plan in Thousands of Dollars - Status Quo Scenario Table - 9: CIP Financing Plan in Thousands of Dollars- Scenario 1 � P PROJECTED ICAPITAL I1419a�DIiW IiP1�7a17179671PFInnrlr.7� Capital Improvements 3,064.2 10,462.2 12,244.9 13,059.3 14,476.3 17,529.8 Beginning Balance 9,961.5 9,609.4 5,476.9 5,841.0 1,085.2 1,210.3 Sources of Funds $3,064.2 $10,462.2 $13,324.9 $13,059.3 $14,476.3 $17,529.8 Debt Proceeds 0.0 0.0 0.0 0.0 0.0 0.0 Transfers from Operating Fund 2,534.9 5,900.4 9,500.0 9,500.0 9,500.0 9,500.0 Interest Income 177.2 771 56.6 34.6 11.5 7.6 Total Sources of Funds $12,673.6 $15,587.0 $15,033.5 $15,375.6 $10,596.7 $10,717.9 Uses of Funds Capital Improvements 3,064.2 10,462.2 9,192.5 14,290.4 9,386.4 10,402.0 Debt Issuance Expenses 0.0 0.0 0.0 0.0 0.0 0.0 Total Uses of Funds $3,064.2 $10,462.2 $9,192.5 $14,290.4 $9,386.4 $10,402.0 Ending Balance 9,609.4 5,476.9 5,841.0 1,085.2 1,210.3 315.9 Table - 9: CIP Financing Plan in Thousands of Dollars- Scenario 1 � Uses of Funds PROJECTED CAPITAL Capital Improvements 3,064.2 10,462.2 12,244.9 13,059.3 14,476.3 17,529.8 Beginning Balance 9,961.5 9,609.4 5,476.9 23,647.6 18,147.3 11,167.6 Sources of Funds $3,064.2 $10,462.2 $13,324.9 $13,059.3 $14,476.3 $17,529.8 Debt Proceeds 0.0 0.0 24,000.0 0.0 0.0 0.0 Transfers from Operating Fund 2,534.9 5,900.4 7,350.0 7,350.0 7,350.0 7,350.0 Interest Income 177.2 77.2 145.6 209.0 146.6 61.1 Total Sources of Funds $12,673.6 $15,587.0 $36,972.5 $31,206.6 $25,643.9 $18,578.7 Uses of Funds Capital Improvements 3,064.2 10,462.2 12,244.9 13,059.3 14,476.3 17,529.8 Debt Issuance Expenses 0.0 0.0 1,080.0 0.0 0.0 0.0 Total Uses of Funds $3,064.2 $10,462.2 $13,324.9 $13,059.3 $14,476.3 $17,529.8 Ending Balance 9,609.4 5,476.9 23,647.6 18,147.3 11,167.6 1,048.9 �� imEfl NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Based on the proposed CIP summarized above, the Water Enterprise will need to issue debt through revenue bonds in FY 15/16 under Scenario 1 to allow the utility to catch up with deferred activities. The proposed debts is indicated above assume the following service terms: 20 -year payment period, 5.5 percent annual interest rate, 2 percent issuance expense, and issuance of a surety bond equal to 2.5 percent of the nominal debt issuance. Operating Fund Financing Summarized in Tables 10 and 11 are the proposed long -term operating financial plans for the Water Enterprise under each scenario. Table 10 summarizes the financial results should the City elect to carry out the CIP in the absence of revenue adjustments (Status Quo Scenario) and Table 11 shows the plan for the preferred option (Scenario 1). The intent of the financial plan is to generate sufficient funds to cover short-term and long -term expenses. Sources of revenue include water sales under existing rates, additional revenues realized from proposed rate adjustments, miscellaneous revenue and interest earnings on available balances. As mentioned, other miscellaneous revenue includes meter installations and turn -on charges, trust agency revenue, and security fee charges. Uses of funds include operation and maintenance expenses (including water purchases), routine capital outlay, debt service payments, and transfers to other funds such as the capital fund. The projected water revenue under existing rates represents service and commodity charges at current rate levels that are subject to rate adjustments. Based on the existing revenue indicated, additional annual revenue adjustments are necessary to meet operating fund requirements and fiscal policy objectives. Adjustments are typically assumed to become effective July 1 of each fiscal year, except for FY 14/15 increases, which are planned for March 1. Initial analyses indicate that steady rate increases are needed for the next five years as shown on Lines 2 through 6 on each table. Any changes to the capital- financing policies and /or CIP may alter these results since the operating fund helps supplement funds for traditional repair and replace projects. The resulting dollar impact of the proposed revenue adjustments are illustrated on Line 7. In addition to rate revenue, other operating and non - operating charges contribute to the income of the Water Enterprise. Typically, these revenue sources are minimal and volatile and are thus considered a constant in the revenue projections. There is a one -time revenue bump in FY 14/15 that represents the refinancing of the 2004 Water Revenue Bond. Non - operating sources include interest income from the operating fund. Interest income is calculated using an interest rate of 1 percent in order to be conservative. BLACK & VEATCH I water Rate Study [INTENTIONALLY LEFT BLANK] 65B -45 33 34 WATER RATE STUDY I City of Santa Ana, CA Table -10: Operating Fund Financing Plan in Thousands of Dollars — Status Quo Scenario M �l i • NOVEMBER 2014 PROJECTED Revenue 1 Revenue from Existing Rates 51,193.9 49,784.8 49,784.8 49,784.8 49,784.8 49,784.8 Year Month Inc. 2 FY 14/15 4 0.0% 0 0 0 0 0 3 FY 15/16 12 0.0% 0 0 0 4 FY 16/17 12 0.0% 0 0 5 FY 17/18 12 0.0% 0 6 FY 18/19 12 0.0% 7 Increase from Adjustments 0 0 0 0 0 0 8 Total Rate Revenue 51,193.9 49,784.8 49,784.8 49,784.8 49,784.8 49,784.8 9 Other Operating Revenue 3,090.3 19,722.3 1,528.4 1,528.4 1,528.4 1,528.4 10 Interest Income 294.9 254.6 - 229.6 139.0 52.0 0.0 11 Total Other Operating Rev. 3,385.2 19,976.9 1,758.0 1,667.4 1,580.4 1,528.4 12 Total Revenue $54,579.1. $69,761.7 $51,542.8 $51,452.2 $51,365.2 $51,313.2 Revenue Requirements 13 O &M Expenses 24,068.0 22,236.4 23,555.8 24,674.2 24,934.2 25,588.5 14 Water Purchase 17,994.8 21,711.1 21,892.7 21,393.9 21,770.7 21,770.7 15 Routine Capital Outlay 344.1 1,156.9 3,298.4 1,156.9 1,156.9 1,156.9 Debt Service 16 Existing Debt 1,712.4 12,496.4 1,575.1 1,574.5 1,577.9 1,578.1 17 Proposed Debt 0.0 0.0 0.0 0.0 0.0 0.0 18 Total Debt Service 1,712.4 12,496.4 1,575.1 1,574.5 1,577.9 1,5781 Transfers 19 Transfer to Capital Fund 2,534.9 5,900.4 9,500.0 9,500.0 9,500.0 9,500.0 20 Transfer to NPDES Fund 1,446.8 1,493.5 1,493.5 1,493.5 1,493.5 1,493.5 21 Total Transfers 3,981.7 7,393.9 10,993.5 10,993.5 10,993.5 10,993.5 22 Total Revenue Requirements $48,101.0 $64,994.7 $61,315.5 $59,793.0 $60,433.2 $61,087.7 Operating Fund Balance 23 Net Cash Balance 6,478.1 4,767.0 (9,772.7) (8,340.8) (9,068.0) (9,774.5) 24 Beginning Fund Balance 16,598.4 23,076.5 27,843.5 18,070.8 9,730.0 662.0 25 Cumulative Fund Balance $23,076.5 $27,843.5 $18,070.8 $9,730.0 $662.0 ($9,112.5) Target Minimum Fund Balance 26 (25% O&M) + $1M Emergency 11,371.6 11,836.4 12,206.5 12,359.3 12,516.3 12,677.6 M �l i • NOVEMBER 2014 City of Santa Ana, CA 1 MATER RATE STUDY Table -11: Operating Fund Financing Plan in Thousands of Dollars— Scenario 1 BLACK & VEATCH I Water Rate Si udy 65B -47 35 Revenue 1 Revenue from Existing Rates 51,193.9 49,784.8 49,784.8 49,784.8 49,784.8 49,784.8 Year Month Inc. 2 FY 14/15 4 2.8% 464.7 1,394.0 1,394.0 1,394.0 1,394.0 3 FY 15/16 12 2.8% 0.0 1,433.0 1,433.0 1,433.0 1,433.0 4 FY 16/17 12 2.8% 0.0 0.0 1,473.1 1,473.1 1,473.1 5 FY 17/18 12 2.8% 0.0 0.0 0.0 1,514.4 1,514.4 6 FY 18/19 12 2.8% 0.0 0.0 0.0 0.0 1,556.8 7 Increase from Adjustments 0.0 464.7 2,827.0 4,300.1 5,814.5 7,371.3 8 Total Rate Revenue 51,193.9 50,282.6 52,816.6 54,401.1 56,033.1 57,714.1 9 Other Operating Revenue 3,090.3 19,722.3 1,528.4 1,528.4 1,528.4 1,528.4 10 Interest Income 294.9 256.9 252.8 202.9 167.2 139.6 11 Total Other Operating Rev. 3,385.2 19,979.2 1,781.2 1,731.3 1,695.6 1,668.0 12 Total Revenue $54,579.1 $70,228.7 $54,393.0 $55,815.2 $57,294.9 $58,824.1 Revenue Requirements 13 0 &M Expenses 24,068.0 22,236.4 23,555.8 24,674.2 24,934.2 25,588.5 14 Water Purchase 17,994.8 21,711.1 21,892.7 21,393.9 21,770.7 21,770.7 15 Routine Capital Outlay 344.1 1,156.9 3,298.4 1,156.9 1,156.9 1,156.9 Debt Service 16 Existing Debt 1,712.4 12,496.4 1,575.1 1,574.5 1,577.9 1,578.1 17 Proposed Debt 0.0 0.0 1,171.5 2,008.3 2,008.3 2,008.3 18 Total Debt Service 1,712.4 12,496.4 2,746.6 3,582.8 3,586.2 3,586.4 Transfers 19 Transferto Capital Fund 2,534.9 5,900.4 7,350.0 7,350.0 7,350.0 7,350.0 20 Transfer to NPDES Fund 1,446.8 1,507.5 1,578.4 1,622.5 1,668.0 1,714.7 21 Total Transfers 3,981.7 7,407.9 8,928.4 8,972.5 9,018.0 9,064.7 22 Total Revenue Requirements $48,101.0 $65,008.7 $60,421.9 $59,780.3 $60,466.0 $51,167.2 Operating Fund Balance 23 Net Cash Balance 6,478.1 5,220.0 (6,028.9) (3,964.1) (3,171.1) (2,343.1) 24 Beginning Fund Balance 16,598.4 23,076.5 28,296.5 22,267.6 18,303.5 15,132.4 25 Cumulative Fund Balance $23,076.5 $28,296.5 $22,267.6 $18,303.5 $15,132.4 $12,789.3 Target Minimum Fund Balance 26 (25 %O &M) +$1M Emergency 11,371.6 11,836.4 12,206.5 12,359.3 12,516.3 12,677.6 BLACK & VEATCH I Water Rate Si udy 65B -47 35 36 WATER RATE STUDY i City of Santa Ana, CA Projected total 0 &M expense is shown on Line 13. The O &M expenses shown represent expenses associated with operating the water system minus the water purchases. Since water purchases represent a significant amount of 0 &M expense when utilized, it is recommended that it be extracted from O &M expenditures to demonstrate the significance. Routine capital outlay is shown on Line 15. Routine capital outlay is typically set aside to purchase minor equipment, less than $5,000, such as furniture, parts, and minor equipment. Debt service on proposed bond issues is shown on Line 17. All proposed bond issues are forecasted with 20 -year terms at an initial 5.5 percent. To date, the Water Enterprise has one outstanding bond debt obligation and one long -term note. There is a one -time debt payment in FY 14/15 that represents the defeasance of the 2004 Water Revenue Bonds. Transfers to the capital fund are shown on Line 19. Funds transferred to the capital fund are used for capital projects. Line 20 shows the transfer payment to cover the Water Enterprise's share of the National Pollutant Discharge Elimination System (NPDES) MS -4 requirements. Lines 23 through 25 summarize the impact to the ending fund balance for the Water Enterprise. A minimum target of 25 percent of 0 &M expenses plus any encumbrances serves as the minimum level of working capital that Water sets to have on hand for operational purposes. In addition to the minimum target of 25 percent of O &M expenses, Black & Veatch recommends that the City set aside $1 million for an emergency fund. The initial funding level of the emergency reserve represents the approximate cost for repairing a major main break. Given the number of mains that are in immediate need of replacement, Black & Veatch believes that establishing an emergency reserve fund is a prudent measure. Although it is not shown on Tables 8 and 9 for the Study Period, Black & Veatch also recommends that as funds become available, the City should establish an R &R fund to address future replacement needs. Annual funding levels for this reserve should increase to reach a minimum level equivalent to one - year's depreciation expense. Summary of Revenues, Expenditures, and Obligations To maintain financial viability as an enterprise fund, the Water Enterprise's annual revenues must be sufficient to satisfy three elements: 1. Adequate cash flow to cover 0 &M, capital and debt obligations 2. Meet debt service coverage (DSC) covenants 3. Maintain reserve funds Long -term financial viability requires meeting all three elements. The need for revenue adjustments is either "cash flow" driven or "debt service coverage" driven depending on which of the first two elements creates the larger adjustment. Based on the analyses of revenues and revenue requirements, it is evident that the Water Enterprise needs are "cash- flow" driven and a rate revenue increase is needed in order to meet revenue requirements and working capital reserve as a standalone enterprise. As shown in Figure 5, should the City elect to maintain the status quo (no rate increases), the Water Enterprise runs into a significant cash deficit position by the end of the 5 -year period. M �l m• NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure -6: Projected Revenues and Revenue Requirements – Status Quo: No Revenue Increases [ *] a us uo: Projected Revenue and Revenue Requirements $80,000 in $000's $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 - $10,000 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 � O &M Expenses ® Water Purchase 6...d Annual Capital Outlay ® Debt service � Capital Projects -01ho-Revenue Target Cash Balance —*--Cash Balance [ *I FY 14/15 revenues include one -time receipt of funds from water bond refinancing activities. In the event that the City should elect to delay CIP activities, it does allow the Water Enterprise to stretch out available cash; however, continued deferral of needed CIP projects also increases the probability, consequence and cost of asset failure. As a rough approximation, Black & Veatch estimated the cost of continuing to defer CIP projects using the methodology set forth in the American Society of Civil Engineers' (ASCE's) 2012 Failure to Act Economic Report for Water (FAE Report). The FAC Report notes that in addition to the actual repair /replacement costs, there are costs associated with payment of claims to impacted households and businesses. Additionally, if projects are deferred by several years, there is an economic loss due to lost water supply, loss of jobs, lost work days, business closures, traffic delays, street repairs, etc. Table 12 summarizes the cost of not executing the proposed CIP using the FAE Report methodology. Table 12 does not include the cost of replacing the asset. Table -12: Economic Impacts of Delaying the Proposed CIP Households $366,000 - $1,314,600 Businesses $917,100 - $3,286,500 Local Economy $4,463,100 - $15,994,300 Total $5,747,000 - $20,595,400 BLACK &VEATCH Water Fate Study M Ll • Total household claim payments. Total business claim payments. Range depends on the severity of breaks. 37 38 WATER RATE STUDY I City of Santa Ana, CA Based on the analyses of revenues and revenue requirements, it is evident that regardless of the level of CIP activity, the Water Enterprise needs a rate revenue increase in order to meet revenue requirements and working capital reserve as a stand -alone enterprise. The suggested adjustments are summarized below for Scenario 1 in Table 13 and are shown on Lines 2 through 6 of Table 12. Table -13: Proposed Rate Adjustments FY 14/15 March 1 2.8% FY 15/16 July 1 2.8% FY 16/17 July 1 2.8% FY 17/18 July 1 2.8% FY 18/19 July 1 2.8% With these adjustments, the Water Enterprise should be able to accomplish its objectives under the assumption that no significant change occurs. Without the proposed revenue adjustments, the Water Enterprise may have trouble meeting debt covenant requirements and will run into cash flow difficulties. While the financial plan should be a working document, the City will need to re- examine the rate structure prior to FY 18/19 to verify it is still adequate. The revenue requirements of Water consist of system 0 &M expenses, routine capital outlay for minor expenditures on equipment not financed from bond proceeds, debt service requirements on existing and proposed bonded debt, transfers to other funds, and reserve requirements to ensure that debt service coverage, rate covenant requirements, and adequate levels of working capital are met. As shown on Line 22 in Tables 10 through 11, total revenue requirements for the Water Enterprise fluctuate during the study period and can be correlated with inflationary factors, different R &R funding levels, and additional debt service requirements. Under the Status Quo, the total revenue requirements range from $64,994,700 in FY 14/15 to $61,087,700 in FY 18/19. For Scenario 1, total revenue requirements range from a low of $60,421,900 in FY 15/16 to a high of $65,008,700 in FY 14/15. Subtracting total revenue requirements from total revenues results in the projected annual operating fund surpluses or deficits shown on Line 23. As of July 1, 2013, it was estimated that a beginning balance of $16.6 million was available for use in this fund. The ending balance is shown on Line 25, while the minimum ending balance of 25 percent of operation and maintenance expense plus an emergency reserve is shown on Line 26. Applying a cumulative revenue adjustment of 14.8 percent (Scenario 1) over the 5 -year period should allow the Water Enterprise to maintain the desired target level of ending year -end balances, meet minimum working capital and satisfy minimum debt service requirements. The financial objectives and targets are not met under the Status Quo. 65B -50 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY It should be recognized that the indicated percentage revenue increase discussed above are overall revenue increases. The results of the cost of service analysis presented later in this report may indicate that rate increases may vary from this average for the various customer classes with some classes receiving a greater than average increase, while others receive a less than average increase or perhaps a decrease. Test Year Revenue Requirements In analyzing the Water Enterprise's cost of service for allocation to customer classes, the annual revenue requirements for FY 18/19 is selected as the Test Year (TY) requirements to demonstrate the development of cost -of- service water rates. BLACK & VEATCH I Water Rate Study [INTENTIONALLY LEFT BLANK] 65B -51 40 WATER RATE STUDY I City of Santa Ana, CA COST OF SERVICE ALLOCATIONS The revenue requirements to be derived from rates and charges for water service are summarized in Lines 1 through 13 of Table 13. 14 analyzing the Water Enterprise's cost of service for allocation to customer classes, the annual revenue requirements for FY 18/19 and Scenario 1 were selected as the Test Year requirements to demonstrate the development of cost of service water rates. In determining the cost of service to be met from charges for water service, we deduct income received from other sources that not subject to rate adjustments from the total revenue requirements. As a result, the total cost of service to be recovered from rates is shown on Line 13, Column 3. Table -14: Total Costs to be Recovered from Rates — Scenario 1 Functional Cost Components In developing an equitable rate structure, revenue requirements are allocated to the various customer classifications according to the cost of service rendered. Allocations of these requirements to customer classes of water should take into account water flow, the number of customers, and other relevant factors. Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. For the purposes of 65B -52 NOVEMBER 2014 Column Reference [1] [2] [3] Revenue Requirements 1 O &M Expenses (Table 11, Line 13) 25,588,500 0 25,588,500 2 Water Purchase (Table 11, Line 14) 21,770,700 0 21,770,700 3 Debt Service 0 3,586,400 3,586,400 4 Transfers (Table 11, Lines 189 20) 0 9,064,700 9,064,700 5 Routine Capital (Table 11, Line 15) 0 1,156,900 1,156,900 6 Subtotal $47,359,200 $13,808,000 $61,167,200 Less Revenue Requirements met from Other Sources 7 Other Operating Revenue (Table 11, Line 9) 1,528,400 0 1,528,400 8 Interest Income (Table 11, Line 10) 139,600 0 139,600 9 Subtotal $1,668,000 $0 $1,668,000 Adjustments 10 Annual Cash Fund Balance (Table 11, Line 23) 2,343;100 0 2,343,100 11 Annual Rate Increase (Table 11, Line 7) 0 0 0 12 Subtotal $2,343,100 $0 $2,343,100 13 Cost of Service to be Recovered from Rates $43,348,100 $13,808,000 $57,156,100 Functional Cost Components In developing an equitable rate structure, revenue requirements are allocated to the various customer classifications according to the cost of service rendered. Allocations of these requirements to customer classes of water should take into account water flow, the number of customers, and other relevant factors. Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. For the purposes of 65B -52 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY the cost of service analysis, the customer classifications in this study include single family and multi- family residential, commercial, industrial, irrigation, reclaimed water and fire protection. These customer classes were assumed to exhibit similar types of system load characteristics. The cost -of- service methodology first allocates costs to functional cost components, then to cost categories, and subsequently distributes the costs to customer classes. In this analysis, there are seven primary cost categories: (1) base flow, or volume costs, (2) maximum day cost, (3) peak hour costs, (4) meter services, (5) customer and billing costs, (6) fire protection, and (7) recycled water (RW). Allocation to Cost Components In this report, Black & Veatch analyzes the cost of providing water service by system function in order to properly allocate the costs to the various classes of customers and subsequently design rates. As a basis for allocating costs of service among customer classes, we have separated costs into the following four basic functional cost components: (1) "Base'; (2) "Extra Capacity'; (3) "Customer'; and (4) "Direct Assignment" In order to provide service to its customers at all times, the City must be capable of not only providing the total amount of water used, but also meet peak or maximum rates of demand. • Base costs include the purchase of water, regulatory fees, debt service costs, water treatment, energy, administration, and operating and maintenance costs of the System associated with service to customers to the extent required for a constant, or average annual rate of use. • Extra Capacity costs represent those operating costs incurred in meeting demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. • Customer costs are those elements that tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collecting and accounting, and maintenance and capital costs associated with meters and services. • Directly assigned costs are costs specifically identified as, those incurred to serve a specific customer group(s). The separation of costs of service into these principal categories facilitates allocating such costs to the various customer classes based on the respective service requirements of each class. This Study uses the base -extra capacity allocation method. Figure 6 illustrates some of the base - extra capacity concepts for water systems. BLACK & VEATCH I Water Rate Study 65B -53 41 Figure - 7: Water Cost of Service Concepts 6—U Max Day Extra Capacity Annual Average Day Treatment Plant WATER RATE STUDY City of Santa Ana, CA Black & Veatch has allocated each element of cost to functional cost components using the parameter or parameters having the most significant influence on the magnitude of that element of cost. We allocate O &M and general and administrative (G &A) expense items directly to appropriate cost components, while the allocation of capital and replacement costs uses a detailed allocation of related capital investment. The separation of costs into functional components provides a means for distributing such costs to the various classes of customers based on their respective responsibilities for each particular type of service. For volume - related cost allocations, the first step in determining the allocation percentages is to assign system ax Day peaking factors. The Base element is equal to the average uu a capacity Water Mains daily demand (ADD) and assigned a value of 1.0. The City's maximum day (Max Day) demand is estimated to be 1.50 times the ADD. Thus, the Max Day is assigned a value of 1.50. The maximum instantaneous usage is approximated by the maximum hourly (Max Hour) usage and is estimated to be 2.0 times the ADD. Thus, Max Hour is assigned a value of 2.0. These peaking factors are based on a combination of historic billing data and discussions with City staff. Cost components that are solely Base - related, are allocated 100 percent to Base. Cost components that are designed to meet Max Day requirements, such as reservoirs, are allocated to Base and Max Day factors as follows: Base = (1.0/1.50) x 100 = 66.7% Max Day = (1.50 —1.0) /1.50 x 100 = 33.3% Cost components that are designed to meet Max Hour design requirements, such as Distribution, are allocated in a similar fashion, as follows: Base = (1.0/2.00) x 100 = 50.0% Max Day = (1.50 -1.0) /2.00 x 100 = 25.0% Max Hour = (2.00 — 1.50)/2.00x 100 = 25.0% Fire Protection A direct cost to the water system is fire protection. Fire protection consists of those costs associated with having the capability to provide public (municipal fire hydrants) and private (individual fire sprinklers) fire suppression services. While a small amount of water is actually consumed for fire suppression and fire training, the water system is still designed to accommodate relatively large flows of water for short durations at suitable pressure. Therefore, when allocating 0 &M and capital expenses to 42 NOVEMBER 2014 65B -54 City of Santa Ana, CAI WATER RATE STUDY the four basic functional costs factors, a pro rata share of 0 &M and capital expenses is directly assigned to the fire protection category. Allocation of Operation and Maintenance Expenses Table 15 summarizes the allocation percentages used in Table 16. Table 16 shows the allocation of 0 &M expense to cost functions. Where possible, percentage allocations use data gathered from employee time cards and discussions with staff. Additionally, Black & Veatch reviewed the City's budgeting process to understand budget line items and internal cost allocation schemes with respect to different operating sections within the Water Enterprise. 0 &M costs such as general and administrative expenses (G &A) are distributed to functional cost components based on the average of the other line item costs. The net operation and maintenance expense to be recovered for water sales is derived by deducting funds available from other sources from the total Test Year expense. Net Test Year operation and maintenance expense of $43,348,100 (Table 14, Line 13, Column 1) is shown allocated to the six primary cost components on Line 28. Note that routine capital outlay is excluded from 0 &M expenses as these expenses can be deferred based on the financial state of the enterprise. Allocation of 0 &M expenses to the different functional components uses average time spent by staff executing different services. Expenses incurred because of specific activities are allocated directly to that cost component. Table - 15: Cost of Service Allocation Percentages Base 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Max Day 66.7% 33.3% 0.0% 0.0% 0.0% 0.0% 0.0% Max Hour 50.0% 25.0% 25.0% 0.0% 0.0% 0.0% 0.0% Meters 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Billing 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Administration 32.2% 10.0% 10.0% 20.0% 20.0% 2.5% 5.25% Source of Supply 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Pumping Plant 50.0% 25.0% 25.0% 0.0% 0.0% 0.0% 0.0% Treatment 66.7% 33.3% 0.0% 0.0% 0.0% 0.0% 0.0% T &D 52.4% 40.0% 7.6% 0.0% 0.0% 0.0% 0.0% Hydrants 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% Net Plant 58.9% 22.8% 15.0% 1.9% 0.1% 1.3% 0.1% Average 80.0% 14.9% 5.0% 0.0% 0.0% 0.2% 0.2% BLACK & VEATCH i Water Rate Study 65B -55 43 4a, WATER RATE STUDY I City of Santa Ana, CA Table - 16: Allocation of O &M Expenses in Thousands of Dollars to Functional Cost Components EXTRA CAPACITY CUSTOMER DII MAX MAX BASE DAY HOUR METERS I BILLS FIRE 65B -56 NOVEMBER "O I Water Production & Supply Personnel (Source of 1 supply) 1,524.7 1,524.7 0.0 0.0 0.0 0.0 0.0 0.0 Contractual 2 (Source of supply) 13,569.0 13,569.0 0.0 0.0 0.0 0.0 0.0 0.0 Commodities 3 (Source of supply) 10,475.5 3,613.6 0.0 0.0 6,861.9 0.0 0.0 0.0 Cross Charges 4 (Source of Supply) 1,078.5 1,078.5 0.0 0.0 0.0 0.0 0.0 0.0 5 Subtotal $26,647.7 $19,785.8 $0.0 $0.0 $6,861.9 $0.0 $0.0 $0.0 Water System Maintenance Personnel 6 (T &D) 1,636.0 857.3 654.4 124.3 0.0 0.0 0.0 0.0 Contractual 7 (T &D) 837.5 438.8 335.0 63.7 0.0 0.0 0.0 0.0 Commodities 8 (T &D) 719.5 377.0 287.8 54.7 0.0 0.0 0.0 0.0 Cross Charges 9 (T &o) 869.0 455.4 347.6 66.0 0.0 0.0 0.0 0.0 10 Subtotal $4,062.0 $2,128.5 $1,624.8 $308.7 $0.0 $0.0 $0.0 $0.0 Miscellaneous Operating Expense Contractual 11 (T &D) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cross Charges 12 (T &D) 9,449.9 4,951.7 3,780.0 718.2 0.0 0.0 0.0 0.0 13 Subtotal $9,449.9 $4,951.7 $3,780.0 $718.2 $0.0 $0.0 $0.0 $0.0 Water Quality & Measurement Personnel 14 (Treatment) 1,364.6 909.7 454.9 0.0 0.0 0.0 0.0 0.0 Contractual 15 (Treatment) 970.0 646.7 323.3 0.0 0.0 0.0 0.0 0.0 Commodities 16 (Treatment) 781.7 521.1 260.6 0.0 0.0 0.0 0.0 0.0 Cross Charges 17 (Treatment) 186.7 124.5 62.2 0.0 0.0 0.0 0.0 0.0 65B -56 NOVEMBER "O I City of Santa Ana, CA •.VATER RATE STUDY 18 Subtotal $3,303.0 $2,202.0 $1,101.0 $0.0 $0.0 $0.0 $0.0 $0.0 Water Administration & Engineering Personnel 19 (Adman) 1,236.1 398.1 123.6 123.6 247.2 247.2 30.9 65.5 Contractual 20 (Admin) 1,188.1 382.6 118.8 118.8 237.6 237.6 29.7 63.0 Commodities 21 (Admin) 79.7 25.7 8.0 8.0 15.9 15.9 2.0 4.2 Cross Charges 22 (Admin) 1,392.7 448.5 139.3 139.3 278.5 278.5 34.8 73.8 23 Subtotal 3,896.6 1,254.9 389.7 389.7 779.2 779.2 97.4 206.5 24 Total $47,359.2 $30,322.9 $6,895.5 $1,416.6 $7,641.1 $779.2 $97.4 $206.5 Less Other Revenue Miscellaneous Revenues 25 (Average) 1,668.0 1,335.6 242.9 83.4 0.0 0.0 3.4 2.7 Other Adjustments 26 (Average) 2,343.1 1,876.2 341.2 117.2 0.0 0.0 4.8 3.7 27 Subtotal $4,011.1 $3,211.8 $584.1 $200.6 $0.0 $0.0 $8.2 $6.4 Net Operating 28 Expenses $43,348.1 $27,111.1 $6,311.4 $1,216.0 $7,641.1 $779.2 $89.2 $200.1 Allocation of Capital Costs The estimated investment in water and recycled system facilities is allocated to appropriate cost components as a basis for the further distribution of capital related costs to the various customer classes. The allocation of estimated plant investment serving water customers for the Test Year is shown in Table 17. The total plant investment of $60,328,538 shown on Line 8 represents the estimated Test Year original cost less accumulated depreciation of plant in service. The allocation of specific items of investment to the cost categories, as shown, is made on the basis previously described. For example, source of supply items are related to flow and these investment costs are assigned to the volume cost component and further delineated by whether the asset is common -to -all or primarily serves specific customers. The water treatment is designed primarily on the basis of treatment plant flow and is also assigned to the volume cost function. Elements within this category, such as storage facilities are assigned to the max hour category because such facilities are designed for this purpose. BLACK & VEATCH i Water Rate Study 45 65B -57 46 WATER RATE STUDY I City of Santa Ana, CA Table -17: Allocation of Net Capital Costs in Thousands of Dollars to Functional Cost Components Units of Service The total cost responsibility of each class of service may be established by developing unit costs of service for each cost function and assigning those costs to the customer classes based on the respective service requirements of each. To properly recognize the cost of service, each customer class is allocated its share of base, maximum day and peak hour costs. 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. Summarized in Table 18 are the estimated units of service for the various customer classes. M LI � • NOVEMBER 2014 Source of Supply 1 (Source of Supply) 22,321.2 22,321.2 0.0 0.0 0.0 0.0 0.0 0.0 Pumping Plant 2 (Pumping Plant) 384.2 192.2 96.0 96.0 0.0 0.0 0.0 0.0 Treatment 3 (Treatment) 5,496.0 3,664.0 1,832.0 0.0 0.0 0.0 0.0 0.0 Transmission & Distribution 4 (T &D) 29,312.0 15,359.5 11,724.8 2,227.7 0.0 0.0 - 0.0 0.0 Meters & Services 5 (Meters) 1,099.2 (0.0) 0.0 0.0 1,099.2 0.0 0.0 0.0 Hydrants 6 (Hydrants) 732.8 (0.0) 0.0 0.0 0.0 0.0 732.8 0.0 General Plant 7 (Admin) 983.2 368.8 98.3 98.3 196.6 196.6 24.6 52.1 8 Total $60,328.5 $41,905.6 $13,751.1 $2,422.0 $1,295.8 $196.6 $757.4 $52.1 Less Other Revenue 9 Misc. Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 10 Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11 Subtotal $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 12 Net Plant 60,328.5 41,905.6 13,751.1 2,422.0 1,295.8 196.6 757.4 52.1 13 Capital Costs $13,808.0 $9,579.4 $3,147.4 $554.3 $296.6 $45.0 $173.4 $11.9 Units of Service The total cost responsibility of each class of service may be established by developing unit costs of service for each cost function and assigning those costs to the customer classes based on the respective service requirements of each. To properly recognize the cost of service, each customer class is allocated its share of base, maximum day and peak hour costs. 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. Summarized in Table 18 are the estimated units of service for the various customer classes. M LI � • NOVEMBER 2014 W rN F w u `a V♦ O W N m F m w a � vl ul O vl D O N r O r N vl m u x ti m m ry -ii 6 N v h ^1 0 0 0 � 0 0 0 0 m n N n N n N m m m b N y N N N M N N b N N b N m' g m o m Q m o m a Q r m °m v ry m � rNi v x m Q ry m m 'T N v b b � vl ul O vl D O N r O r N vl m u x ti m m ry -ii 6 N v h ^1 N I M I Z� T a x ° Q m ^ m ry m m N N N V U d H O w V1 n N m N v h ^1 N I M I Z� b 1 io 06 v a c a v c v N u 65B -59 a in v v yv 2 F 4 M U m 48 WATER RATE STUDY I City of Santa Ana, CA The cost of service responsibility for base costs varies with the volume of water requirements and may be distributed to customer classes on that basis. Extra - capacity costs are those costs associated with meeting peak rates of water use, and are distributed to customer classes based on their respective system capacity requirements in excess of average requirement rates. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated based on the number of equivalent meters and bills. Private fire protection costs are allocated on the basis of equivalent fire hydrants. The estimated units of service for the various customer classifications are shown below. Estimates of test year annual water requirements, shown in Column 1, are based on the projections of total water sales from Table 4. Average daily use of all water sales, which is simply , Column 1 divided by 365 days, is presented in Column 2. Columns 3 Meter Size EM through 8 represent the estimated maximum day and peak hour 5/8" x 3/4" 1.00 capacity factors for each customer class. - -- 3/4" 1.50 In the overall rate setting process there is a need to establish a base - -- 1" 2.50 level of cost for which the cost of larger customers can be measured. _ 1.5" 5.00 Customer - related meter and service costs are allocated based on the 2" _8.00 number of equivalent 5/8" meters because the 518" meter is the most 3" 15.00 prevalent meter size found in many water utilities. Included in the development of meter cost ratios is the direct cost of the various categories of labor involved in the installation, fringe benefit related overheads and other appropriate administrative overheads applicable to the labor costs, all direct materials and supplies costs, and the cost of equipment used in the installation. 4" 25.00 6" 50.00 8" 80.00 10" 115.00 12" 165.00 Generally, equivalent meter cost ratios should be used when assigning elements of costs specifically related to meters among the various sizes of meters used by the customer in the system. The Water's base meter size is a %" meter, so the equivalent meter ratios use the base unit of a '' %" meter. The equivalent meter ratios used in this study are shown to the right. Customer billing and accounting costs are distributed to classes based on number of bills for each customer class in Columns 9 through 11. Direct charges for fire protection are found in Column 12 and those for reclaimed water are in Column 13. In accordance with M1 standards and typical engineering design, the provision of the maximum hour component addresses peak system needs, in addition to those posed by fire protection requirements. To the extent possible, actual system and billing data by customer class to derive maximum day capacity factors. Generating maximum hour data can be time consuming and may not be readily available. For the purposes of the analyses, we used a peak hour to average day ratio of 1.5 to calculate the maximum hour capacity factor. As a check on the validity of our assumptions, we calculated a diversity ratio for the system. This ratio is a measure of the total non - coincidental to coincidental demand. Based on the projections for FY 18/19, the max day ratio of non - coincidental to coincidental demand is 1.26 and the max hour ratio is 1.12. The calculated system diversity ratio is within the typical range of 1.10 to 1.40. \• • NOVEMBER 2014 City of Santa Ana, CAI WATER, i2Ai E STUDY Cost of Service Allocations Costs of service are allocated to the customer classes by application of unit costs of service to respective service requirements. Unit costs of service are based upon the total costs previously allocated to functional components and the total number of applicable units of service. Dividing the costs allocated to functional cost components by the respective total units of service requirements develops unit costs of operation and maintenance expense, and net capital costs. Unit Costs of Service Table 19 presents total Test Year 0 &M expense and net capital costs allocated to functional cost component as taken from Tables 16 and 17. Table -19: Unit Costs of Services with Costs in Thousands of Dollars 1 2 3 4 5 Net Operating Expense (Table 16, line 28) Capital Costs (Table 17, Line 13) Total Cost of Service ($000's) Units of Service in 000's (Table 18, Line 13) Cost per Unit 43,348.1 27,111.1 6,311.4 1,216.0 7,641.1 779.2 89.2 200.1 13,808.0 9,579.4 3,147.4 554.3 296.6 45.0 173.4 11.9 $57,156.1 $36,690.5 $9,458.8 $1,770.3 $7,937.7 $824.2 $262.6 $212.0 15,862.2 40.1 23.0 122.0 $2.31 $235.68 $76.81 $65.05 per per per HCF HCF /day HCF /day per EM 268.2 7.3 86.1 $3.07 $36.13 $2.46 per hydran per per bill t - HCF Distribution of Costs of Service to Customer Classes The customer class responsibility for service is obtained by applying the unit costs of service to the number of units for which the customer class is responsible. Table 20 illustrates this process, in which the unit costs of service are applied to the customer class units of service. BLACK & VEATCH i 'a`/a'a. °: 49 65B -61 50 WATER RATE STUDY I City of Santa Ana, CA Table - 20: Allocation of COS to Customer Classes 65B -62 NOVEMBER 2014 per per per per HCF HCF /day HCF /day per EM per bill hydrant per HCF Cost per Unit 1 (Table 19, Line 5) $2.31 $235.68 $76.81 $65.05 $3.07 $36.13 $2.46 Single Family Residential Units 2 (Table 18, Line 1) 6,073,900 15,809 9,984 41,033 212,946 0 0 Allocation of costs of service 3 (Line 2 x Line 1) 20,871.8 14,049.4 3,347.7 150.7 2,669.4 654.6 0.0 0.0 Multi Family Residential Units 4 (Table 18, Line 2) 4,515,100 5,567 4,948 53,431 21,798 0 0 Allocation of costs of service 5 (Line 4 x Line 1) 15,678.7 10,443.8. 1,311.9 380.1 3,475.9 67.0 0.0 0.0 Commercial Units 6 (Table 17, Li8e 3) 2,792,800 9,564 3,826 18,905 26,652 0 0 Allocation of costs of service 7 (Line 6 x Line 1) 10,319.7 6,460.0 2,254.1 293.9 1,229.8 81.9 0.0 0.0 Industrial Units 8 (Table 18, Line 4) 676,900 2,689 1,020 974 504 0 0 Allocation of costs of service 9 (Line 8 x Line 1) 2,342.5 1,565.7 633.7 78.3 63.3 1.5 0.0 0.0 Institutional Units 10 (Table 18, Line 5) 1,238,500 4,581 1,357 4,803 3,234 0 0 Allocation of costs of service 11 (Line 10 x Line 1) 4,370.9 2,864.7 1,079.6 104.3 312.4 9.9 0.0 0.0 Irrigation Units 12 (Table 18, Line 61 553,200 1,895 1,895 2,462 2,628 0 0 Allocation of costs of service 13 (Line 12 x Line 1) 2,039.8 1,279.6 446.5 145.5 160.1 8.1 0.0 0.0 65B -62 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Outside City Units 14 (Table 18, Line 7) 11,800 31 18 63 270 0 0 Allocation of costs of service 15 (Line 14 x Line 1) 40.8 27.3 7.2 1.4 4.1 0.8 0.0 0.0 Recycled Water Units 16 (Table 18, Line 8) 0 0 0 349 120 0 86,100 Allocation of costs of service 17 (Line 16 x Line 1) 235.1 0.0 0.0 0.0 22.7 0.4 0.0 212.0 Public Fire Protection Units (Table 18, Line 18 10) 0 1,104 5,518 0 0 5,000 0 Allocation of costs of service 19 (Line 18 x Line 1) 864.5 0.0 260.1 423.8 0.0 0.0 180.6 0.0 Private Fire Protection Units (Table 18, Line 20 11) 0 501 2,504 0 0 2,269 0 Allocation of costs of service 21 (Line 20 x Line 1) 392.3 0.0 118.0 192.3 0.0 0.0 82.0 0.0 TOTAL COSTS OF SERVICE 22 ($000's) $57,156.1 $36,690.5 $9,458.8 $1,770.3 $7,937.7 $824.2 $262.6 $212.0 Adequacy of Existing Rates to Meet Costs of Service Presented in Table 21 is a comparison of the allocated cost of service and revenue under existing rates for the system in total. Adjustments to the allocated cost of service take place in Column 2. For the Water Enterprise, the cost of public fire protection is allocated to all customers because it is viewed as a general benefit to all and therefore reallocated to the other customer classes based on allocated cost. The last column indicates the approximate adjustment rate levels necessary to recover 100 percent of the allocated costs of service. BLACK & VEATCH I Water Rate Study 65B -63 51 52 WA I FE STUDY I City of Santa Ana, CA Table - 21: Comparison of Adjusted COS with Revenues under Existing Rates [INTENTIONALLY LEFT BLANK] LI M • 'Tel 101134.1 10 Column Reference [S] [2] [31 [4] [5] Single Family 1 Residential 20,871,800 336,700 21,208,500 18,494,200 14.7% Multi - Family 2 Residential 15,678,700 253,000 15,931,700 13,605,800 17.1% 3 Commercial 10,319,700 166,500 10,486,200 9,193,800 14.1% 4 Industrial 2,342,500 37,800 2,380,300 2,163,100 10.0% 5 Institutional 4,370,900 70,500 4,441,400 4,050,500 9.7% 6 Irrigation 2,039,800 0 2,039,800 1,791,700 13.8% 7 Outside City 40,800 0 40,800 36,000 13.3% 8 Recycled Water 235,100 0 235,100 201,000 17.0% 9 Subtotal $55,899,300 $864,500 $56,763,800 $49,536,100 14.6% Public Fire 10 Protection 864,500 (864,500) 0 0 0.0% Private Fire 31 Protection 392,300 0 392,300 248,600 57.8% 12 Subtotal $1,256,800 ($864,500) $392,300 $248,600 57.8% 13 Total Water System $57,156,100 $0 $57,156,100 $49,784,700 14.8% [INTENTIONALLY LEFT BLANK] LI M • 'Tel 101134.1 10 City of Santa Ana, CA I WATER RATE STUDY PROPOSED RATE ADJUSTMENTS The initial consideration in the derivation of water rate schedules for utility service is the establishment of equitable charges to the customers commensurate with the cost of providing that service. While the cost of service allocations to customer classes should not be construed as literal or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments. Practical considerations sometimes modify rate adjustments by taking into account additional factors such as the extent of change from previous rate levels, existing contracts, and past local policies and practices. Existing Rates A summary of existing water rates was presented earlier in Table 3. The existing rates consist of a basic service charge, which varies by meter size, and a separate commodity charge applicable to each hundred cubic feet of billed water sales. The commodity charge uses a tier structure. Proposed Rates The costs of service analysis described in preceding sections of this report provide a basis for the design of rates. At the request of the City, Black & Veatch has examined alternative rate schedules based on the proposed CIP. The purpose of alternatives were to determine the impact on rates should the City adopt the CIP plan. In addition, the City asked Black & Veatch to examine the level of cost recovery through the basic service charge. Under the current rate schedule, the City recovers approximately 8 percent of its revenues through the basic service charge. According to Best Management Practice (BMP) 11 as set forth by the California Urban Water Conservation Council (CUWCC), utilities should strive to have no more than 30 percent of its user charge revenues from the meter charge. Using this guideline, the City requested Black & Veatch to propose a set of rate schedules that would gradually increase the fixed component recovery over a 5- year period. Black & Veatch conducted its COS analysis and determined that the level of costs recovered through the basic service charge is closer to 16 percent. To minimize ratepayer impacts, the proposed rate schedules illustrated on Tables 22 and 23 use a phased approach to reach the COS levels by FY 18/19. Meter and fire protection charge rates presented in Tables 22 and 23 are rounded to the nearest 5 cents. Design of Service Charge The service charge and the fire protection charge, reflects the estimated cost of service rate in FY 18/19. It includes the allocated cost of billing, meter service, and some elements of water supply (fixed costs charged by MWDOC). Because the City does not charge fire departments for public fire hydrant service, the industry standard for recovering this cost is via the meters and services component of the water user charge. Black & Veatch has reflected the cost of public fire protection in the proposed meter charges. The service charges for FY 14/15 through FY 17/18 reflect a gradual shift towards the FY 18/19 total fixed revenue recovery rate about 16 percent. BLACK & VEATCH I Water Rate Study 53 65B -65 54 WATER RATE STUDY I City of Santa Ana, CA Table - 22: Proposed Rates for Scenario 1- FY 14/15 and FY 15/16 5/8" $7.00 $7.40 $0.40 $9.05 $1.65 3/4" $11.00 $16.05 $5.05 $19.65 $3.60 1" $16.40 $30.50 $14.10 $37.30 $6.80 1.5" $23.40 $47.85 $24.45 $58.50 $10.65 2" $46.40 $88.25 $41.85 $107.95 $19.70 3" $116.60 $146.05 $29.45 $178.60 $32.55 4" $186.60 $290.45 $103.85 $355.20 $64.75 6" $280.00 $463.70 $183.70 $567.10 $103.40 [ *]Multi - Family per unit charge $4.20 $4.45 $0.25 $5.45 $1.00 Tier 1 (0 -44 HCF) $2.73 $2.78 $0.05 $2.79 $0.01 Tier 2 (> 45 HCF) $3.15 $3.35 $0.20 $3.36 $0.01 Recycled Water $2.18 $2.22 $0.04 $2.23 $0.01 <4" $14.00 $18.20 $4.20 $18.75 $0.55 4" $18.00 $23.40 $5.40 $24.10 $0.70 6" $24.00 $31.20 $7.20 $33.80 $2.60 8" $32.00 $41.60 $9.60 $42.90 $1.30 10" $38.00 $49.40 $11.40 $50.90 $1.50 12" $44.00 $57.20 $13.20 $58.95 $1.75 M �l • • NOVEMBER 2014 Cityof Santa Ana,CA I WATER RATE STUDY Table - 23: Proposed Rates for Scenario 1- FY 16/17 through FY 18/19 5/8" $10.70 $1.65 $12.35 $1.65 $13.90 $1.55 3/4" $23.25 $3.60 $26.80 $3.55 $30.20 $3.40 1" $44.10 $6.80 $50.90 $6.80 $57.30 $6.40 1.5" $69.15 $10.65 $79.85 $10.70 $89.85 $10.00 2" $127.65 $19.70 $147.30 $19.65 $165.80 $18.50 3" $211.15 $32.55 $243.70 $32.55 $274.30 $30.50 4" $419.95 $64.75 $484.70 $64.75 $545.55 $60.85 6" $670.50 $103.40 $773.90 $103.40 $871.05 $97.15 [ *]Multi - Family per unit charge $6.40 $0.95 $7.40 $1.00 $9.50 $2.10 Tier 1 (0 -44 HCF) $2.81 $0.01 $2.82 $0.01 $2.83 $0.01 Tier 2 (> 45 HCF) $3.37 $0.01 $3.38 $0.02 $3.40 $0.01 Recycled Water $2.24 $0.01 $2.25 $0.01 $2.26 $0.01 <4" $19.30 $0.55 $19.85 $0.55 $21.00 $1.15 4" $24.80 $0.70 $25.50 $0.70 $27.00 $1.50 6" $36.40 $2.60 $39.00 $2.60 $41.50 $2.50 8" $44.20 $1.30 $45.50 $1.30 $48.00 $2.50 10" $52.40 $1.50 $53.90 $1.50 $57.00 $3.10 12" $60.70 $1.75 $62.45 $1.75 $66.00 $3.55 BLACK & VEATCH Vater Rate--, 65B -67 5.5 56 WATER RATE STUDY I City of Santa Ana, CA Design of Volumetric Charges Any proposed rate structure should provide for full cost recovery. However, in addition to this fundamental requirement, the design of water rate structures should also meet the following objectives: • Mitigate revenue volatility • Promote water conservation • Minimize excessive customer bill impacts Consequently, water rate design must balance financial management, long -range planning, and public policy considerations. Since the City's last rate increase, Southern California has experienced severe drought conditions. As a result, consumer awareness regarding the need to conserve water is very high. Moreover, the increased use of water - efficient devices (toilets, dishwashers, washers, etc.) has helped customers conserve. The proposed tier breakpoints reflect general usage patterns of the City's single - family residential customers as well as rate setting industry standards and AWWA household usage survey data. AWWA survey data indicate that typical indoor residential water consumption is roughly 50 to 60 gallons per person per day. In Santa Ana, the typical residential family size is 4.3 persons per household according to data from the California State Department of Finance (2014). Thus, the approximate monthly residential water use can range from 6,500 gallons per month to 7,700 gallons per month (or 8.6 hcf to 10.3 hcf per month). The US EPA notes that indoor use can vary from 30 to 70 percent of total billed usage. The variance depends on local conditions including lot size, population density, and water scarcity. For the City, examining the peak winter to summer usage data reveals that the indoor /outdoor ratio for the single - family residential is about 40 percent, which corresponds to a monthly usage of about 21.5 hcf. Thus, including an allowance for outdoor irrigation, it is reasonable to maintain the Tier 1 breakpoint at 22 HCF per month. The pricing differentials between tiers are based on factors similar to the maximum day and peak hour peaking factors described earlier in this report as well as local and non -local water supply costs. Non - local water supply costs also include expenses related to distribution and administration costs. In addition, changing the mix of water supplies through the tiers also contributes to the differentials. Black & Veatch has utilized a combination of these factors as well as peak demand considerations in setting the proposed tier pricing. The units of water included in Tier 1 are priced at the lowest rate since it represents the City's least expensive source of water — local supply. As water consumption increases beyond the base tier, water supplies to meet this demand lead to greater investments by the City in alternate sources of supply, yet at much higher costs per acre foot. The use of peaking factors reasonably represents the relationship between higher water consumption and increasing water supply costs. Table 24 illustrates the distribution of base, max day and max hour costs recovered over the tiers. �I M • • [01t•1ri4u11111 lIN City of Santa Ana, CA - � 1 11 j )':' Table - 24: Volumetric Cost Recovery over Tiers for FY 18/19 Tier 1 80% 40% 5% 100% Tier 2 20% 60% 95% 0% To maintain a rate structure that encourages conservation, Black & Veatch examined the incremental costs associated with Tier 2 levels of service. We are recommending that the City move from a 16 percent rate differential to a 20 percent differential between Tier 1 and Tier 2 rates. Design of Private Fire Protection The design of private fire protection connection charges is essentially the same as that for the base fee. The difference is that for private fire connections, the industry standard is to designate the 6" diameter connection as having a flow equivalency of 1.0. Revenue Sufficiency Presented in Table 25 is a comparison of Test Year allocated cost of service with revenues under the suggested water rate structure. Test year costs of service are obtained from Table 20 and the proposed rates recover essentially 100 percent of the total cost of service. Note that for FY 14/15 through FY 17/18, the rates were also designed so that each customer class recovers its proportionate cost of service (about 100 percent). Table - 25: Revenues under Proposed Rates for TY 18/19 (Effective March 1, 2015) — Scenario 1 mm mok � 0 11 Column Reference [S] [2] 131 1- Single Family Residential 21,208,500 21,247,600 100.2% 2 Multi- Family Residential 15,931,700 15,917,700 99.9% 3 Commercial, 10,486,200 10,465,800 99,8% 4 Industrial 2,380,300 2,382,000 100.1% 5 Institutional 4,441,400 4,472,300 100.7% 6 Irrigation 2,039,800 2,049,000 100.5% 7. Outside City 40,800 40,900 100.2% 8 Recycled Water 235,100 235,000 100.0% 9 Subtotal $56,763,800 $56,810,300 100.1% 10 Public Fire Protection 0 0 0.0% 11 Private Fire Protection 392,300 394,100 100.5 °% 12 Subtotal $392,300 $394,100 100.5% 13 Total System $57,156,100 $57,204,400 100.1% BLACK & VEATCH I Water Rate Study \I M • 57 58 \WATER RATE STUDY I City of Santa Ana, CA Typical Bill Impacts Presented in Table 25 is a comparison of typical bills for different customer classes at varying levels of water use. The table compares the existing customer bill to the proposed rate option presented for FY 14/15. Table - 26: Typical Bi- Monthly Bills - Scenario 1, FY 14/15 Proposed Rates Single Family Residential 5/8" 0 7.00 7.40 0.40 5.71% 1 9.73 10.18 0.45 4.66% 2 12.45 12.96 0.51 4.06% 3 15.18 15.74 0.56 3.68% 4 17.91 18.52 0.61 3.42% 5 20.64 21.30 0.66 3.22% 6 23.36 24.08 0.72 3.07% 7 26.09 26.86 0.77 2.96% 8 28.82 29.64 0.82 2.86% 9 31.54 32.42 0.88 2.78% 10 34.27 35.20 0.93 2.71% 12 39.72 40.76 1.04 2.61% 14 45.18 46.32 1.14 2.53% 16 50.63 51.88 1.25 2.46% 18 56.09 57.44 1.35 2.41% 20 61.54 63.00 1.46 2.37% 22 66.99 68.56 1.57 2.34% 24 72.45 74.12 1.67 2.31% 26 77.90 79.68 1.78 2.28% 28 83.36 85.24 1.88 2.26% 30 88.81 90.80 1.99 2.24% 32 94.26 96.36 2.10 2.22% 34 99.72 101.92 2.20 2.21% 65B -70 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY 36 105.17 107.48 2.31 2.19% 38 110.63 113.04 2.41 2.18% 40 116.08 118.60 2.52 2.17% 42 121.53 124.16 2.63 2.16% 44 126.99 129.72 2.73 2.15% 46 133.30 136.42 3.12 2.34% 48 139.60 143.12 3.52 2.52% 50 145.91 149.82 3.91 2.68% 52 152.22 156.52 4.30 2.82% 54 158.53 163.22 4.69 2.96% 56 164.84 169.92 5.08 3.08% 58 171.14 176.62 5.48 3.20% 60 177.45 183.32 5.87 3.31% 62 183.76 190.02 6.26 3.41% 64 190.07 196.72 6.65 - 3.50% 66 196.38 203.42 7.04 3.59% 68 202.68 210.12 7.44 3.67% 70 208.99 216.82 7.83 3.75% Multi - Family Residential 4 units 10 44.07 45.60 1.53 3.47% 50 155.71 160.22 4.51 2.90% 100 313.41 327.72 14.31 4.57% 150 471.11 495.22 24.11 5.12% 200 628.81 662.72 33.91 5.39% Commercial 2" 25 114.58 159.45 44.88 39.17% 50 185.31 232.37 47.06 25.39% 75 264.16 316.12 51.96 19.67% 100 343.01 399.87 56.86 16.58% BLACK & VEATCH I Water Rate Study 65B -71 59 60 WATER RATE STUDY I City of Santa Ana, CA 500 1,604.61 1,739.87 135.26 8.43% Industrial 6" 500 1,838.21 2,123.22 285.01 15.50% 1,000 3,415.21 3,798.22 383.01 11.21% 5,000 16, 031.21. 17,198.22 1,167.01 7.28% 10,000 31,801.21 33,948.22 2,147.01 6.75% Figure 7 presents a comparison of a monthly Santa Ana single - family residential bill (5/8" meter and 15 HCF usage) to those in surrounding cities. SUMMARY Based on the results of the analyses conducted herein, Black & Veatch recommends that the City implements, at minimum, the revenue adjustments proposed in Table 11. These revenue increases are based on the City executing the proposed CIP program, which includes the suggested R &R improvements noted in Appendices A through D. Additionally, the revenue increases allow the City to reach the suggested minimum working capital and emergency reserve levels by the end of the study period. [INTENTIONALLY LEFT BLANK] 65B -72 NOVEMBER 20' City of Santa Ana, CAI (WATER RATE STUDY Figure -8: Monthly Single Family Residential Bills (5/8" meter and 15 HCF usage) — Rates as of October 25, 2014 Water Bill City of Stanton South Coast WD East Orange CWD Retail Zone City of Placentia City of Cypress Laguna Beach CWD City of San Clemente City of Newport Beach Serrano WD Mesa WD City of San Juan Capistrano City of Brea City of Fullerton City of Long Beach City of La Habra Yorba Linda WD _ City of Santa Ana (Proposed) City of Seal Beach �. City of Garden Grove City of Fountain Valley City of Santa Ana (Existing) Moulton Niguel WD nrerers�w/ City of Westminster City of Buena Park i City of La Palma Santa Margarita WD - - - -- - -- - - I City of Huntington Beach - }, CittyofO Orange , City of Orange Irvine Ranch WD j City of Tustin Average Survey Bill = $53.63 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 BLACK & VEATCH I Water Rate Study 65B -73 61 62 WATER RATE STUDY I City of Santa Ana, CA Appendix A: Refurbishment & Replacement Program 65B -74 i![�Pl�ul•7��'i�F�! City of Santa Ana, CA I WATER RATE STUDY As part of the scope of work conducted for this study, Black & Veatch assisted the City in developing an appropriate Refurbishment and Replacement (R &R) level of funding for the Water Enterprise. The following sections outline the approach undertaken for this effort and the basis for the suggested levels and timing of R &R activities. CAPITAL ASSET VALUATION AND REFURBISHMENT AND REPLACEMENT NEEDS EVALUATION METHODOLOGY The purpose of identifying future Refurbishment and Replacement (R &R) needs and costs is to estimate the required level of capital funding needed to maintain the Water utility infrastructure systems in sound operable condition and to meet the level of service expectations of the City over the next several years (defined as "modeling period" within this analysis). Black & Veatch used a 30 years modeling period for the analysis conducted herein. Methodology In this section, Black & Veatch outlines the approach that was used projecting future capital asset R &R schedules; estimated costs for the Water infrastructure managed by the City; and value of installed City assets. Utility Historical Asset Performance Black & Veatch conducted an R &R needs evaluation using an industry- accepted approach to project the R &R activities over a 30 -year period to support the development of a reserve funding strategy and financial recommendations. By projecting the expected useful life and intervals between major refurbishment of assets from their original installation year, then aggregating all R &R activities for each year, Black & Veatch developed an estimate of capital expenditure needs and then used these estimates as input to the development of appropriate funding strategies. A methodical and consistent approach to evaluating R &R activities involves using an asset class library, as described below to manage the inputs of projected R &R by each class and associated estimated costs. The graphic to the right illustrates Black & Veatch's approach. 4 Class Based Useful Life Adjust for Utility Use /Duty • Adjust for Age • Calculate Remaining Useful Life Condition & Performance Adjustment • Adjust Remaining Useful Life r Target Replacement Year • Risk Based Lowest • Remaining Useful Life Medium /Long-Tern Needs Refurbishment & Replacement Schedule • Implementation Scheduled • Budget Development of Asset Class Library Black & Veatch undertook a review of each asset inventory for the City's water assets. Based on this review, Black & Veatch developed a draft asset class listing for input into the Asset Class Library described below. "Asset Classes" are logical units of assets. in the context of R &R modeling, asset classes are those assets having a similar function, cost structure, and useful lives and refurbishment intervals. The Asset Class Library provides the listing of asset classes and the various components that define the R &R schedule for the particular asset including; useful lives, refurbishment program definitions and intervals and replacement schedules and estimated costs. Black & Veatch developed a draft Asset Class Library based on our knowledge of similar systems and specific asset types. The draft Asset Class Library BLACK & VEATCH I Appendix A: Refurbishment & Repia ' F,,' 63 65B -75 64 WATER RATE STUDY I City of Santa Ana, CA was then refined through collaboration with the City staff with system- specific familiarity, to reflect the best appropriate information for use in the R &R analysis. The components of each of the asset classes were presented in detail in draft form, then finailized based on discusion of the asset class details, and any follow -up research on costs, types of assets and related information. Using this method, the resulting class library developed for the City incorporates Black & Veatch's experiences with other agencies, as well as City- specific experience with each asset class. For the City's asset class library, Black & Veatch developed the following elements, which are available forviewing within the Comprehensive Asset Management Prioritization System (CAMPS). Expected useful lives For each defined asset class, and for each specific asset where required, appropriate expected useful lives were developed for these assets. Black & Veatch defines useful life as the number of years of normal use that can be expected prior to replacement becoming necessary. It should be noted that some assets would be expected to fail before and after the estimated useful life, however, this approach provides planning level funding needs when averaged over a 5, 10, 15, or 20 year smoothing period. These estimates are based on our industry experience, manufacturers' estimates, previous literature research, and our work for other agencies. Adjusted useful lives, based on Condition Monitoring The expected useful life of the asset is an average expected life for that asset class, as described above. The CAMPS database contains the functionality for the City to identify assets that are in need of immediate or near -term (next 1 -2 years) replacement, by indicating a condition rating of '1' within the asset registry. Similarly, CAMPS contains the functionality for Staff to indicate assets as being in very good condition, using a rating of '3' within the asset registry. Presented below are examples of each of these cases illustrating how users can adjust the expected useful life of a specific asset to reflect a more detailed knowledge of the assets. Case #1: Asset with an Assessed Condition Rating of 1 (Poor Condition) A pump (associated with a pump station) was placed in service in 2002, with a class life of 30 years. At the time of the analysis, 2012, the pump is 10 years old and should be expected to operate effectively for another 20 years. If the pump has been assessed at a poor condition (rating = 1), then an adjustment is made to indicate more urgent replacement, or analysis year+ 1 year. Algorithm used by the CAMPS model: tt If Condition Rating =1, then use current year + 1 for Replacement Year Case #2: Older Asset with an Assessed Condition Rating of 3 (Excellent, or like new condition) A pump was placed in service in 1987, with the same class life of 30 years. In this case, the pump is 25 years old and expected to last until 2017. If the pump has been assessed at a like new condition (rating = 3), then an adjustment is made to extend the life of the asset an additional 50% of its class life (or 15 years) to a target replacement of 2032. 65B -76 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Algorithm used by the CAMPS model: ■ If Condition Rating = 3, then compare (calculate Remaining Useful Life = Replacement Year - Current Year) with (calculate (50% x Useful Life) + Current Year) and use largest value for Replacement Year. To continue to refine and improve these class -based useful life estimates, which have a large impact on funding strategy analysis, Black & Veatch recommends initiating an infrastructure risk analysis and condition - monitoring program. Leading asset management practices within the infrastructure management industry are to monitor the condition of assets, using a prioritization approach. Such an approach may consist of beginning with those assets where assets are past or nearing the end of their expected useful. Another key element in risk management would be to conduct condition monitoring on those assets posing the greatest risk to the City, should the asset fail. Provided later in this report is further discussion of risk analysis and condition monitoring. Refurbishment programs, intervals and cost Most asset classes require various capital refurbishments on a cyclic basis in order to sustain or extend the asset's useful lives. Pump stations, for example, can be expected to undergo pump refurbishment, motor overhaul, replacement of electric components, and mechanical overhaul at intervals shorter than the cycle for the replacement of assets themselves. Appropriate refurbishment intervals and costs that are considered major (non - operational /annual) expenditures, were developed for specific asset classes. Replacement costs For each asset class and for specific assets where required, Black & Veatch estimated the base -year (FY2013) replacement cost. Black & Veatch's estimates are based on the experience of our engineers, construction cost estimates recently prepared for other clients, industry standards, and our experience with other agencies. Where possible, replacement costs, were defined in terms of unit costs to facilitate the class -based estimating approach (examples include dollars per foot of various types of pipe, dollars per gallon for storage facilities, and dollars per square foot for buildings of various classes). For Governmental Accounting Standards Board (GASB) 34 compliance, Black & Veatch has included factors to include ancillary costs such as planning, design, site development, and internal administrative costs where appropriate for the types of assets. The Asset Class Library, along with the asset inventory were the key input for projecting capital asset R &R needs. DEVELOPMENT OF REFURBISHMENT AND REPLACEMENT SCHEDULES AND COSTS Black & Veatch used its Comprehensive Asset Management Prioritization System (CAMPS) Model in conjunction with risk profile analysis to develop the R &R schedules presented in this report. The R &R schedules project the capitalized refurbishment, and replacement costs (in 2012 dollars) needed to sustain the water infrastructure managed by the City. Black & Veatch then escalated costs for each BLACK & VEATCH I Appendix A: Refurbishment & Replacement Program 65 65B -77 m WATER RATE STUDY I City of Santa Ana, CA specific R &R activity to the expected year of R &R expenditure. Next, we then summed the total estimated R &R costs for all assets and each modeled year to project future capital funding needs and to develop reserve fund development strategies. DEVELOPMENT OF VALUATION OF CAPITAL ASSETS Black & Veatch also used the CAMPS tool to calculate a current depreciated value for each capital asset within the asset inventory based on the Reproduction Cost New Less Depreciation (RCNLD) methodology. This methodology values assets at their current reproduction costs (2012 Dollars) and calculates depreciation based on this estimated cost, the original year in service, reasonable estimates of useful lives, using a straight -line approach. Reasonable estimates of expected useful lives are determined using the same approach described previously, including the use of class lives and adjustments to class lives based on condition assessment data. Presented below are examples of valuation calculations. Case #1: Valuation based on Class Life A 20 hp pump and motor (associated with a pump station) was placed in service in 2002, with a class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, approximately 2/3 of its expected useful life. The asset is valued at $16,000 and has depreciated approximately 2/3 of its value, using a straight -line approach. The current 2012 value for this asset would then be approximately $5,333. Case #2: Valuation based on Condition Rating A 20 hp pump and motor (associated with a pump station) was placed in service in 2002, with a class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, but staff has assessed the condition of the asset as poor (condition rating of 1). With the adjustment of the expected useful life according to the algorithm described in the Adjustments to Useful Life Based on Condition Monitoring discussion above, the asset has approximately 1/15 of its original value, or approximately $1,067. Financial, land and intangible assets were not included in the inventory or in this analysis. CAPITAL ASSET INVENTORY, ASSET CLASS LIBRARY AND REPLACEMENT SCHEDULE DATABASE DEVELOPMENT Asset Inventory The City provided several asset inventories that Black & Veatch then evaluated, summarized and then compiled into a single database to facilitate the development of R &R schedules and costs, using the methodology described previously. Inventory Data Sources Asset Inventory data records for the plant facilities were obtained from the City's Geographical Information System (GIS). Additionally, asset inventory data records for the above ground infrastructure assets for water above -grade assets use historical data captured by City staff from various different M \l • NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY historical records. The City's GIS and historical records provided material type and /or size, year in service and quantity for the infrastructure assets. Black & Veatch undertook a gap analysis of the provided asset inventory data, to identify missing data. Using our experience with similar facilities, and as validated with City staff familiar with specific assets, Black & Veatch derived useful lives, R &R schedules and costs for the water assets. Asset Class Library Contents Black & Veatch used CAMPS to model R &R needs for water infrastructure asset classes. To support this modeling effort, Black & Veatch developed an asset class library consisting of asset class definitions, expected useful lives, and unit costs for each asset class to project in a methodical and consistent manner the timing of R &R of assets and estimated costs to support the reserve funding strategy analysis. Described below are Black & Veatch's assumptions in developing the Asset Class Library that forms the basis for projecting the R &R schedules and costs and contained within CAMPS. Water Infrastructure System Water system assets range from water production assets (wells, pumps, storage and treatment) to distribution system assets (such as pipe, valves, and service connections). Water infrastructure asset classes were defined by Black & Veatch and grouped into the following categories for the analysis. ® Water Production and Treatment Facilities • Reservoirs and Tanks • Wells o Metropolitan Water District (MWD) Connections o Pumps /Motors o Water Production Meters • Control Valves (Associated with water production and storage facilities) • Chemical Treatment (Chlorination Units) N Water Distribution Facilities (Pipe and Appurtenances) Table A - 1 presents the expected useful life for water infrastructure system assets below for each asset class. BLACK & VEATCH I Appendix A, Refurbishment & Replacement l rn—af- 67 65B -79 68 WATER RATE STUDY j City of Santa Ana, CA Table A - 1: Water System Expected Useful Lives CHLOR PSI Chlorination Unit 12 ELEV_TANK Elevated Water Storage Tank 75 GENH Hydro Generator 60 METR Flow meter (above ground meters) 15 MWD Metropolitan Water District 75 (MWD) Connection PRV Pressure Reducing Station - 50 PUMP_W Pump and Motor (non- 10 submersible) PUMPS_W Submersible Pump 10 VALV CNTL Cla -Val Control Valves 50 WELL Well 75 WTRM_AC Water Mains made of AC pipe 60 WTRM CI Water Mains made of Cl pipe 75 WTRM CMLC Water Mains made of CMLC pipe 75 WTRM_CYL Water Mains made of Cylinder pipe 75 WTRM_DI Water Mains made of Ductile Iron 100 pipe WTRM_PVC Water Mains made of PVC pipe 75 WTRM STL Water Mains made of Steel pipe 75 WTRM_UNK Water Mains made of unknown 60 material Water Production Facilities The asset classes within the water production facilities are composed of various asset categories. Table A - 2 through A -4 present the replacement costs of these various asset categories. Where possible, Black & Veatch used current construction estimates available from projects in the surrounding area. All replacement costs are in 2012 dollars. Table A - 2: Wells, Meters and Valves Replacement Costs ■�:1L' 111 •[cll:lg9�_[Mi�41�t�1f.71'1� �:i79IeUi�4liPIlU�7� Wells All sizes $562,800 Meters All sizes $8,800 Control Valves All sizes $5,000 M L� •• ' NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Table A - 3: Water Pumps and Hydro Generator Replacement Costs Pumps (hp) 1 10 $14,600 11 30 $18,000 31 100 $24,800 101 250 $49,500 Hydro Generator 200kw $400,000 Table A -4: Tanks, Chemical Feed and Misc. Replacement Costs Up to 500,000 $540,200 Up to 1,000,000 $696,000 Up to 2,000,000 $1,056,000 Reservoirs (by gal) Up to 4,000,000 $1,680,000 Up to 6,000,000 $2,232,000 Up to 8,000,000 $2,880,000 Up to 10,000,000 $3,848,000 Misc. Structures (per sq. ft.) All sizes $130 Water Distribution Facilities The water pipe asset class incorporates pipe, and associated appurtenances (incl. pipe isolation valves, and hydrants). These types of assets are grouped together as it is far more practical (cost and minimization of disruption) to replace appurtenances associated with a pipe within portions of each water system at the same time. The replacement costs for this asset class used for the analysis varies by pipe size as shown in Table A - 5. All replacement costs are in 2012 dollars. BLACK & VEATCH I Appendix A Refurbishment & R -,�' . ^ o sc am Lm � • 10.0 Up to 50,000 $184,000 Up to 100,000 $280,000 Elevated Tanks (by gal) Up to 250,000 $776,000 Up to 500,000 $1,380,000 Up to 750,000 $1,675,000 Up to 1,000,000 $2,400,000 Chlorination Unit All sizes $56,000 MWD Connections All sizes $250,000 Pressure Reducing Stations All sizes $72,500 Misc. Structures (per sq. ft.) All sizes $130 Water Distribution Facilities The water pipe asset class incorporates pipe, and associated appurtenances (incl. pipe isolation valves, and hydrants). These types of assets are grouped together as it is far more practical (cost and minimization of disruption) to replace appurtenances associated with a pipe within portions of each water system at the same time. The replacement costs for this asset class used for the analysis varies by pipe size as shown in Table A - 5. All replacement costs are in 2012 dollars. BLACK & VEATCH I Appendix A Refurbishment & R -,�' . ^ o sc am Lm � • 10.0 70 WATER RATE STUDY I City of Santa Ana, CA Table A - 5: Water Pipe Replacement Sizes and Costs 2 $282.72 18 $435.57 4 $301.82 20 $454.68 6 $320.93 24 $492.89 8 $340.04 30 $550.21 10 $359.14 36 $607.53 12 $378.25 48 $722.17 14 $397.36 54 $779.49 16 $416.46 78 $1,008.77 Non - System- Specific Assets Black & Veatch developed several asset classes to group like assets within the asset inventory that are associated with multiple infrastructure systems. Table A - 6 through A -8 present the expected useful lives and replacement costs for these non - system specific asset classes. All costs are in 2012 dollars. We note that the assets listed in the tables below assume "like" replacements. Table A - 6: Non System - Specific Expected Useful Lives GENF Water, Sewer Fixed generators w/Transfer Switch 60 GENPLG Water, Sewer Gen Set Plug and Transfer Switch for Portable Generator 20 Table A - 7: Generator Replacement Costs — 2012 dollars 1 100 $63,000 Generator - Fixed 101 200 $112,600 201 400 $250,000 M LI M • NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Table A - 8: Misc. Assets Replacement Costs — 2012 dollars Gen Set Plug $11,300 Refurbishment Intervals and Schedule Capital refurbishment activities were identified for specific assets where major (non - operational /annual) expenditures would be required to maintain the intended useful life of the asset. For each of these refurbishments, defined intervals and costs were developed for specific asset classes, as presented in Table A - 9. Table A - 9: Assets Refurbishment Intervals and Costs— 2012 dollars BLACK & VEATCH I Appendix A. Rerurbishment & Repia 7I 65B -83 Minor refurbishment (paint ELEV_TANK Elevated Tank 10 5% and repairs) MWD Major refurbishment (valves, MOD 20 30% Connection gaskets, misc. piping, controls) Pressure Major refurbishment (valves, PRV 20 30% Reducing Vault gaskets, misc. piping, controls) BLACK & VEATCH I Appendix A. Rerurbishment & Repia 7I 65B -83 Major refurbishment (seal replacement, bearing PUMP_W Pump (Water) replacement, shaft sleeve 5 30% repair, rewind, varnish and bake, etc.) Major refurbishment (seal replacement, bearing Submersible PUMPS W replacement, shaft sleeve 5 30% — Pump (Water) repair, rewind, varnish and bake, etc.) RESV Reservoir Exterior painting, grouting 5 5% Piping, valves and other RESV Reservoir 30 10% appurtenances Misc. rehabilitation (e.g„ STRN Structure 15 10% paint, fix up stucco, etc.) BLACK & VEATCH I Appendix A. Rerurbishment & Repia 7I 65B -83 72 WELL %HATER RATE STUDY I City of Santa Ana, CA Major Refurbishment (TV well, Well sonarjet screens, brush, swab, 30 25% and bail as needed.) CAPITAL ASSET VALUATION AND SCHEDULE OF R &R NEEDS AND ESTIMATED COSTS A common practice used in the industry to determine a baseline value for R &R needs is to take the estimated replacement cost asset value, adjusted for depreciation, and then apply a depreciation calculation. This approach is acceptable when a utility has performed no system condition assessments. In the following sections, Black & Veatch presents suggested R &R schedules for the Water Enterprise. Where available, Black & Veatch used condition assessment data and developed risk profiles to more accurately reflect replacement needs. Capital Asset Valuation Summary The valuation of Water system infrastructure capital assets was developed using the asset class -based methodology to estimate replacement costs (in FY2012 dollars), then adjusted for depreciation (straight - line). Table A - 10 presents the estimated replacement cost and depreciated FY2012 value for capital assets for each of the systems. Table A -10: Asset Valuation by System Water $1,013,137,165 $435,688,075 43% 1. Replacement Costs (in 2012 dollars) are calculated using the unit costs presented in within this report applied to all assets Water and Sewer assets. 2. The asset valuation methodology (RCNLD) represents an estimate of total infrastructure value, accounting for depreciation of assets. A comparison of the current infrastructure value with the total replacement cost presented previously is an indicator of overall infrastructure age, and represented as a Value Ratio. The value ratio is calculated as the Asset Value divided by Replacement Cost. Total System Capital Asset Schedule of R &R Needs Using the R &R needs forecasting methodology described previously, Figure A - 1 illustrates the overall R &R needs identified projected over a 30 -year period, beginning with FY 2013 for the combined Water and Sewer Enterprises. M L� � • .0 NOVFNISEP 1.111 City of Santa Ana, CAI WATER RATE STUDY Figure A - 1: Annual Capital Asset R &R Needs for Water and Sewer Assets over 30 -Yr Period *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 Observations 1. There were a significant number of assets that were modeled to be beyond their Class -Based Useful Life (Approx $37M). Of this total, 99% are for Water and Sewer mains. 2. Of this 99 %, 76% are for Water mains, which have no condition assessment information (Approx $28M). 3. R &R needs profiles for R &R vary considerably between Water and Sewer system assets. Table A - 11 summarizes the total funding needs identified during the 30 -year model period by infrastructure group based on available information. BLACK & VEATCri r �_ _ M • III MG! WATER RATE STUD`! I City of Santa Ana, CA Table A -11: Total Modeled R &R 30 Year Costs Water Boosters $14,048,100 Chlorination unit $2,940,800 Control Valve $196,500 Generator $63,400 M W D $4,500,700 Production meter $1,054,400 PRV $540,100 Reservoir $27,253,600 Total Water System $1,434,510,000 *Costs have been escalated to the year of R &R, using a 3% escalation from FY 2013 As identified above, each system has a unique profile of Capital Asset R &R needs that is dependent on overall age of the infrastructure, type of infrastructure assets (predominantly short or long asset lives), and detailed asset knowledge as determined through inspections. Figure A- 2 illustrates this unique profile for the Water system. Figure A- 2: Annual Capital Asset R &R Needs for the Water System *Costs have been escalated to the year of R &R, using a 3% escalation from FY 2013 M • • NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY As discussed earlier, R &R schedules derived using depreciation methodologies are a good tool when condition assessment data is not available. For the City, some information for water mains exist and as such, Black & Veatch made refinements to the schedules proposed above. R &R projections for all other assets remain until the City has completed its condition assessment work for aboveground assets. BLACK & VEATCH I Appendix A: Refurbishment & Replacement Program M \l • 75 76 WATER RATE STUDY I City of Santa Ana, CA Appendix B: Water CIP Prioritization Process M . . � • • NOVEMBER 7_01 a City of Santa Ana, CA WATER RATE STUDY INTRODUCTION Making informed decisions to maximize the integrity of a utility's infrastructure in today's economic and business environment can be a challenging task. In many cases, a utility's greatest ally is existing information about their infrastructure. By tapping into existing datasets and staff knowledge, critical information can gleaned about the condition and life expectancies of their facilities; and these can be related to ever - changing business drivers, operational strategies, and budgetary priorities. Capital improvement planning (CIP) for the outside plant assets can also be a challenge. In many cases direct visual inspection of the assets may not be possible or economically feasible. Therefore, condition assessments must rely mostly on existing information and indirect assessments. The process typically evaluates a variety of information such as pipe materials, main break rates, installation dates, soil conditions, proximity to sensitive customers, hydraulic model results, etc. In many cases the most accessible and usable data is from the utility's Geographic Information System (GIS) and /or asset management database(s). This data is used to assist in prioritizing facilities for inspections and /or renewal based on criticality, life- expectancy, and /or geographic boundaries (e.g. City Council boundaries). CIP FOR OUTSIDE PLANT ASSETS The general approach to capital improvement planning for the outside plant assets typically follows a multi- stepped process. For the City's pipeline assessment, a set of GIS -based tools and processes were used. Combined, these are called "iCIP" for interactive Capital Improvement Planning. The typical steps include: 1. Compile source data for the assets to be evaluated in the study. This often includes the utility's GIS and /or asset management database(s), a variety of spreadsheets, and input from the utility's staff. 2. Review source data to gain an overall understanding of the quantity and quality of the data. Special attention is given to missing or conflicting information. This data is also evaluated to determine which sources are suitable for CIP assessment and which data appear to provide insight into the past, current or future condition of the assets. 3. Organize source data into a logical data structure suitable for further analysis. 4. Perform both spatial and non - spatial assessments to identify statistically- significant trends. Much of this is considered "exploratory" as relationships between things like pipe material, break frequencies, and soil conditions are often not readily apparent. In many cases only a cursory review of these relationships can be performed due to time and budget constraints, or lack of sufficient source data. 5. Identify key Probability of Failure (PoF) criteria based on the initial review of source data. PoF is also known as Likelihood of Failure (LoF). These typically include such factors as: a. Main breaks b. Customer Complaints c. Soil Conditions d. Pipe Diameter and Material e. Pipe Age / Remaining Life f. Pipe Inspections/ Condition BLACK & VEATCH I Appendix B: Water CIP Prioritization P, a:. e,. M \• M • • • 77 78 WATER RATE STUDY City of Santa Ana, CA g. Hydraulic Capacity 6. Identify key Consequence of Failure (CoF), also known as criticality criteria. These typically include such direct or indirect factors as: a. Effect on Customers (from size of pipe, number of services impacted, etc.) b. Asset redundancy c. Proximity to critical roads, water sources, environmental areas, etc. d. Critical customers e. Public Health & Safety f. Financial impacts 7. Calculate overall Business Risk Exposure (BRE) for each asset. The BRE score is a product of the PoF times the CoF scores. This score is an informative indicator of facilities that will likely require higher levels of attention. It is typically based on a 1 to 100 scale metric. 8. Generate resulting tables, graphs and output maps to further identify trends and recommendations. Typical facility replacement cost look -up tables are then used to determine overall budgetary estimates and schedules. By plotting the PoF and CoF scores on the two axes of a graph, the relative level of risk can be readily apparent. Figure B - 1 below provides an example risk heat map graph. Higher probability of failure assets are plotted near the top. Higher consequences of failure assets are plotted to the right. Suggested possible action plans appropriate to the levels of risk are also included in this chart. 9. As a final step in the CIP assessment, individual capital improvement projects can then be identified. These projects area often based on the identification of high -risk assets and then grouping those assets that are in close proximity. The City's water distribution system was evaluated using this process. Since the overall focus of this study was to identify likely pipe replacement cost estimates for a budgetary plan and schedule, many of these investigations were performed at a relatively high level. It is recommended that the City review these results and refine the assessments as additional source data becomes available. M Z• ' NOVEMBER 2014 City of Santa Ana, CA Figure B - 1: Example Risk Heat Map Graph Relating PoF and CoF Scores. 10 C, v 3 8 LL 7 W 0 6 v V v 5 3 v 4 c v 0 3 F] 1 Probability of Failure 1 2 3 4 5 6 7 8 9 10 GENERAL ASSUMPTIONS AND OBSERVATIONS During the source data review, condition assessment and planning analysis, various assumptions were made to permit further evaluation. Many of these were necessary due to limitations in the existing data such as missing or conflicting pipe attributes, limited inspection data, or similar constraints. for example, the timing of pipeline lining is often unclear. The association of water break data to the correct asset was also not precise. Although good engineering judgment was used in the analysis of historic pipeline condition data, an unknown level of inaccuracy exists. Due to the limited quantity and quality of source data, further investigation is recommended before making specific rehabilitation or replacement decisions. The following list includes many of the general assumptions and observations made during the planning assessment on the water outside -plant network system. Additional comments are included in specific sections of this document. • Only water mains were considered in this assessment. The condition of pump stations, service laterals, reservoirs, etc. were not addressed. • Pipeline Type = "PRIV" or "ABAN" were omitted from the water analysis. • Pipe segments with zero length were omitted from the analysis. • The timing of pipeline lining is often unclear. Therefore, it was assumed that any inspection data referred to the pipe conditions prior to lining. Once lined, the pipe was assumed to have been "fixed" and currently be in very good structure condition. • Based on the GIS source data provided, it appears that zero water or sewer pipe was installed in 2010; even though 47 water main breaks occurred that year. BLACK & VEATCH I Appendix B'. Water CIP Prlerltizanon Process 65B -91 79 SO City of Santa Ana, CA It should be noted that Black & Veatch conducted two analyses with respect to the City's assets: one including all assets found in the GIS system (Appendix C) and a second analysis looking at only City - owned assets (Appendix D. The results from Appendix D are reflected in the main body of this Report. WATER COLLECTION SYSTEM CIP ANALYSIS Water System Statistics For the purpose of this condition assessment / rate study, only the water mains were evaluated. Service lines, hydrants, valves, etc. were not evaluated. However, except for service lines, their costs were included in future replacement forecasting as part of the combined pipe replacement cost as applicable. Source data was primarily provided from Santa Ana's GIS system. Additional data was provided in spreadsheets, text files, and /or from communications with City staff. According to the City's GIS database, the water distribution system contains about 508 miles of water mains and has 13,591 pipe segments. The oldest pipe listed dates back to 1906. This condition analysis study does not include data from the Service Lines or Abandoned Mains tables. Water main break data was available only since 1990. Breaks with no break data (19 records) were also not included in the analysis. Pipe Material By far, the most predominant pipe materials in the water distribution system are Cast Iron (CI) and Asbestos Concrete (AC) Pipe; making up 39 and 36 percent of the system respectively. Material percentages (by length) are shown in Figure B - 2 below. Figure B- 3 provides a map of water mains color coded by pipe material. Figure B - 2: Water Mains Material by Miles and Percentages ■ Asbestos Concrete (AC) ■ Cast Iron (CI) ■ Cement Mortar Lined & Coated steel (CMLC) 0 Cylindrical (CYL) ■ Ductile Iron (DI) 0 Polyvinyl Chloride (PVC) 0 Steel (STL) W Unknown 65B -92 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Figure B- 3: Map of Water Mains Color -coded by Pipe Material r 0 3,000 6,000 12,000 Ft s la E Water Main by Material City of Santa Ana, CA -- Asbestos Concrete Water ! Wastewater CML &C — Cast Iron System Analysis - 2012 — Cylinder Ductil Iron — Polyvinyl Chloride �� li — Steel ` — Unknown® v l- City Boundary -- RailRoads Water Distribution System Mains by Pipe Material 0 BLACK &VEATCH e.,,. ,,,. Building aworld of diHerencer BLACK& VEATCH; Appendix B: Wa`c � r =.r - , 65B -93 £31 82 WATER RAl'E S1 U DY I City of Santa Ana, CA Pipe Diameter Over 86 percent of the City's water mains are 6 to12 inch in diameter. The remainder range in sizes up to a maximum diameter of 78 inches. Pipe diameter quantities are listed in Figure B -4 below. Figure B- 5 provides a map of water mains color coded by pipe diameter. As expected, the distribution of pipe size is driven by network capacity considerations. Figure B -4: Water Pipe Diameters by Miles Installed [SPACE INTENTIONALLY LEFT BLANK] M L• • NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STU L ?Y Figure B- 5: Map of Water Mains Color -Coded by Pipe Diameter I- 0 3,000 6,000 12,000 Ft s Water Main by Diameter 0 -6" _..... 7 - 10" 11 - 14 15 -30" — 31 -78" City Boundary — RailRoads BLACK & VEATCH I Appendix B: Water CIP Prioritization P. r 1 =, 65B -95 >e City of Santa Ana, CA Water I Wastewater System Analysis - 2012 Water Distribution System Mains by Pipe Diameter BLACK &VEATCH Building a world of differences 83 84 WATER RATE STUDY I City of Santa Ana, CA Pipe Vintage The oldest pipes in the system appear to have been installed as early as 1906. Over 12 percent were installed prior to 1930. The majority of the system (about 76 percent) was installed in the 1950s through the 1980s. Pipe vintages (install decade) are listed in Table B - 1 below. Figure B - 6 also shows the amount of pipe installed each year as well as the cumulative totals. Figure B - 7 provides a map of water mains color coded by pipe install decade. This map depicts the historic growth of the City's water distribution system; starting in the main downtown area and generally expanding outward. Table B -1: Pipe Vintages by Install Decade M \• Z• NOVEMBER 2014 Pre 1930 292 1.36% 56,312 10.67 2.10% 1930s 191 0.89% 46,208 8.75 1.72% 1940s 394 1.83% 70,419 13.34 2.63% 19505 3,976 18.51% 418,267 78.22 15.60% 1960s 5,599 26.07% 749,510 141.95 27.95% 1970s 4,114 19.16% 539,623 102.20 20.13% 19805 2,697 12.56% 327,949 62.11 12.23% 19905 1,570 7.31% 224,573 42.53 8.38% 20006 1,592 7.41% 171,996 32.57 6.41% 2010s 918 4.27% 35,523 6.73 1.32% UNK 134 0.62% 40,781 7.72 1.52% Total 21,477 100.00% 2,681,161 507.50 100.00% M \• Z• NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Figure B - 6: Annual and Cumulative Miles of Installed Pipe by Year [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix 3: Water CIP Prioritization P. ^c =s. 65B -97 600 ®Cum Miles —Miles 30 S00 25 v w a 400 -- -- 20 c-.. -.- d c 2300 15 E 200 10 e � u a 100 5 0 0 C W N 4p Ot N I� O V n O M b M N vl W ti V N O ?� O N N N M M V C V N vl Vf of b b t0 N N N CO CO W O] 01 Ot O O O rl o m m m m m m m m m m m m m m rn m m m m m m m m m m m 0 0 M o 0 Y C Install Year [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix 3: Water CIP Prioritization P. ^c =s. 65B -97 86 Figure B - 7: Map of Water Mains Color -Coded by Pipe Install Decade F 0 WATER RATE STUDY I City of Santa Ana, CA 3,000 6,000 12,000 Ft s I Water Main by Decade City of Santa Ana, CA — Unknown Water / Wastewater — Pre 1930 System Analysis - 2012 -- 1930s 1940s 1960s -- 1960s tlll — 1970s — 1980s - --.«- - 1990s — 2000 and later 7j City Boundary Water Distribution System RailR °ads Mains by Install Decade ©BLACK &VEATCH Building a World of difference! M \• •• NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Total Pipe Installed by Decade and Material Based on Table B - 2 and Figure B - 8 below, the majority of the water distribution system is Cast Iron pipe (38 percent) and Asbestos Cement (36 percent). Cast Iron pipe is also predominately the older pipes. Table B- 2: Water Mains Listed by Install Decade and Pipe Material Decade AC cl CMLC CYL DI PVC STL UNK Total )Ft) % 1930 Pre 480 55,833 56,313 2.1% 1930s 5,953 40,202 52 46,207 1.7% 1940s 1,538 68,274 607 70,419 2.6% 1950s 66,077 318,982 4,756 23,316 5,136 418,266 15.6% 1960s 139,460 521,645 6,474 72,012 35 9,882 749,508 28.0% 19706 506,177 20,814 56 4,468 8,111 539,624 20.1% 1980s 246,571 226 33,122 35,901 11,552 576 327,948 12.2% 19905 2,694 9,254 47 102,358 110,221 224,574 8.4% 2000s 118 7,081 164,630 167 171,996 6.4% 2010s 1,586 33,936 35,522 1.3% UNK 4,986 3,673 30,694 24 249 302 853 40,781 1.5% Total (Ft) 974,053 1,029,650 51,234 133,041 161,063 320,641 10,624 853 2,681,159 100.0% Miles 184.48 195.01 9.70 25.20 30.50 60.73 2.01 0.16 507.80 Percent 36.33% 38.40% 1.91% 4.96% 6.01% 11.96% 0.40% 0.03 °% 100.00% Figure B - 8: Water Mains by Install Decade and Pipe Material 600,000 ■ AC 500,000 w ■ CI m 400,000 ■ CMLC v v- 300,000 ■CYL ■ DI 200,000 ■ PVC c m J 100,000 ■ STL 0 ■ UNK 1930Pre 19305 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s UNK BLACK & VEATCH I Appendix B: Water CIP Prioritization Pro-e , 87 65B -99 WATER RATE STUDY I City of Santa Ana, CA Total Pipe Installed by Diameter and Material Table B - 3 and Figure B - 9 indicates the distribution of pipe diameter and material Table B - 3: Water Mains Listed by Pipe Diameter and Material Size AC CI CMLC CYL DI PVC STL UNK Total (Ft) % 0 19 19 0.0% 2 1,601 1,601 0.1% 4 5,767 11,578 109 204 626 18,284 0.7% 6 347,741 457,862 1,558 57 6,713 26,655 840,586 31.4% 8 337,169 218,700 972 328 31,091 188,276 3 776,538 29.0% 10 40,728 12,331 93 1,797 54,949 2.0% 12 193,777 294,773 3,108 11,934 44,089 96,807 576 645,063 24.1% 14 23,665 11,438 630 8,900 9,566 1,830 56,029 2.1% 16 17,460 1,255 5,241 52,411 15,474 1,684 93,524 3.5% 18 6,455 15,407 1,636 4,593 10,825 1,388 40,305 1.5% 20 1,264 6,029 1,271 12,698 6,579 2,002 29,843 1.1% 24 275 3,766 10,476 35,033 167 49,717 1.9% 30 27 2,291 1,447 3,766 0.1% 36 30,652 7,413 38,065 1.4% 48 2,326 2,326 0.1% 54 20,439 20,439 0.8% 78 9,882 9,882 0.4% (blank) 223 223 0.0% Total (Ft) 974,053 1,029,650 51,234 133,041 161,063 320,641 10,624 853 2,681,159 100% Miles 184.48 195.01 9.70 25.20 30.50 60.73 2.01 0.16 507.80 Percent 36.33% 38.40% 1.91% 4.96% 6.01% 11.96% 0.40% 0.03% 100.00% NOVEMBER 2014 65B -100 City of Santa Ana, CA I WATER RATE STUDY Figure B - 9: Water Mains by Mipe Diameter and material Water Main Break Statistics Water Break Data According to the City's GIS database, there are almost 400 break (Leak) records added to the database since 1990. These records are tied to a street address or street intersection only. Therefore, no direct reference to specific water facilities is provided. To identify which pipe segment the break occurred on, a GIS -based spatial analysis was performed. This process identified the closest water pipe to each break symbol. The distance between the break and pipe was also measured. If this distance was minimal, it was considered a valid match. Validation checks were also used to identify match success based on pipe and break record attributes. However, many break record attributes were missing or likely inaccurate. For example, for some records the pipe material listed for the broken pipe was more likely the material used in the repair. Therefore, many break records could not be used in the pipe condition analysis. In total 290 main line breaks were usable, over the period of 1990 to 3/2012. Of these, 12 breaks were on abandoned pipes. Note, slight variations in break totals are listed in the following sections due to availability of source data attributes. The relatively small sample size limits the statistical significance of the analysis and trending that can be undertaken using these data. However, general trends and problem areas can still be identified. These results and assumptions should be revisited over time to further refine and validate the conclusions. This will require a condition assessment plan to be put in place which involves the targeting and collection of condition data at specific locations and within particular 'cohorts' of interest as well as opportunistic collection and analysis of samples of failed pipe collected both during operational incidents and proactive pipe rehabilitation /replacement activities. Changes in the data attributes to be collected are also recommended. BLACK & VEATCH I Appendix 8: water CIP Prioritia?t'.:;, rr-=e;-. 89 65B -101 m WATER RATE STUDY I City of Santa Ana, CA Number of Breaks by Decade Pipe Installed and Material Table B - 4 and Figure B - 10 indicates the total number of breaks repaired (not necessarily reported) since 1990 on mains installed during each decade. These are listed by the material of the associated main. Table B - 4: Water Main Breaks by Pipe Install Decade and Material Decade AC cl CMLC CYL DI PVC Total .Percent !. m 1930 Pre 16 16 5.61% 1930s 3 11 14 4.91% 1940s 16 16 5.61% 19506 8 65 1 74 25.96% 1960s 9 84 1 94 32.98% 1970s 24 3 1 2 30 10.53% 19805 11 16 4 31 10.88% 19906 1 1 3 5 1.75% 2000s 1 1 0.35% UNK 1 3 4 1.40% .Total s5 196 _4 3; 19. 8 285 100.00% Fimve R - in. Water Main Breaks by Pine Install Decade and Material Figure B - 11 provides a map depicting the same map as above (showing the installation decade of mains), but with the addition of main line break locations color coded by the installation decade of mains. 65B -102 NOVEMBER 2014 City of Santa Ana, CAI WAT£R RATE STUDY Figure B - 11: Map Showing the Distribution of Water Mains and Breaks based on Pipe Installation Decade IP 0 ITT 0 3,000 6,000 12,000 Ft Breaks by Pipe Decade Water Main by Decade O LINK — Unknown • Pre 1930 — Pre 1930 • 19305 — 19305 O 1940s 1940s O 19505 19505 O 19605 19605 ® 1970s - — 1970s a 19805 °— 19805 O 19905 — 19905 • 2000s — 2000 and later - -?, City Boundary -- RailRoads BLACK & VEATCH I Appendix B, Water CIP Prioritization Process 65B -103 F5 >E City of Santa Ana, CA Water I Wastewater System Analysis - 2012 tY Water Distribution System Breaks by Pipe Install Decad BLACK &VEATCH Building a World otdifferencer 91 92 WATER RATE STUDY I City of Santa Ana, CA Similar maps were created to show the relation of main breaks to main pipe materials (see Figure B - 12 through B -14. The first map shows all main breaks over the entire distribution network. Subsequent maps show only breaks and mains for Asbestos Concrete or Cast Iron main material types. These maps were created to help identify any spatial trends that might help explain pipe break concentrations. [SPACE INTENTIONALLY LEFT BLANK] 65B -104 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure B - 12: Map Showing Water Mains and Breaks based on Pipe Material (All Pipe Materials) r 0 3,000 6,000 12,000 Ft s Breaks by Pipe Material Water Main by Material • Asbestos Concrete — Asbestos Concrete f Cast Iron — CML &C © CMLC — Cast Iron • Cylinder — Cylinder B Ductll Iron — Duchl Iron • Polyvinyl Chloride — Polyvinyl Chloride • Unknown — Steel — Unknown I =; City Boundary — RailRoads BLACK & VEATCH I Appendix B: Water CIP Prioritization P .-oces 65B -105 >_ e City of Santa Ana, CA Water I Wastewater System Analysis - 2012 Al Water Distribution System Breaks by Pipe Material-All BLACK &VEATCH Building a world of difference.- WATER RATE STUDY I City of Santa Ana, CA Figure B - 13: Map Showing Water Mains and Breaks based on Pipe Material (Asbestos Concrete only) r- 0 3,000 6,000 12,000 Ft 5 Breaks by Pipe Material Water Main by Material ® Asbestos Concrete — Asbestos Concrete — CMLBC — Cast Iron — Cylinder — Ductil Iron — Polyvinyl Chloride — Steel — Unknown L �I City Boundary — RailRoads 94 65B -106 ,F City of Santa Ana, CA Water I Wastewater System Analysis - 2012 nA I Water Distribution System Breaks by Pipe Material -AC BLACK &VEATCH Building a World of diRerencv NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure B - 14: Map Showing Water Mains and Breaks based on Pipe Material (Cast Iron only(. F 0 3,000 6,000 12,000 Ft S Breaks by Pipe Material Water Main by Material • Cl — Asbestos Concrete -- CML &C Cast Iron -- Cylinder — Ductil Iron — Polyvinyl Chloride Steel -- Unknown I'i City Boundary RailRoads BLACK& VEATCH I Appendix B'. Water OP Prioritizatw— P r') ,", 65B -107 I City of Santa Ana, CA Water I Wastewater System Analysis - 2012 (pf\ Water Distribution System Breaks by Pipe Material -CI BLACK &VEATCH Building aworld of difference' 9F it WATER RATE STUDY I City of Santa Ana, CA Number of Breaks per Mile by Decade Pipe Installed and Material To better understand the trends in break history, one must also consider the growth of the system over time - not just the distribution of breaks. Table B - 5 and Figure B- 15 below charts the number of total breaks per mile by decade pipe was installed and by material. These graphics show that almost 68 percent of the breaks have occurred in Cast Iron pipe, 19 percent in Asbestos Cement and 7 percent in Ductile Iron. Also, 58 percent of the breaks have occurred in pipe installed in the 1950 -6Os. However, only 43 percent of all pipes were installed during these two decades. The GIS break records do not include any indication of the causes of breaks. City staff has indicated that most breaks are not due to third -party (excavation) causes. Therefore, it is concluded that the breaks are predominantly caused by material deterioration, defects, and /or construction methods. Table B - 5: Number of Breaks per Mile by Decade Pipe Installed and Material Decade AC CI CMLC CYL DI PVC STL UNK,"�' bfitjXtl. 1930 Pre 0.00 1.51 0.00 0.00 0.00 0.00 0.00 0.00 1.50 1930s 2.66 1.44 0.00 0.00 0.00 0.00 0.00 0.00 1.60 1940s 0.00 1.24 0.00 0.00 0.00 0.00 0.00 0.00 1.20 1950s 0.64 1.08 0.00 0.23 0.00 0.00 0.00 0.00 0.93 1960s 0.34 0.85 0.00 0.07 0.00 0.00 0.00 0.00 0.66 1970s 0.25 0.76 0.00 1.18 1.30 0.00 0.00 0.00 0.29 1980s 0.24 0.00 0.00 0.00 2.35 1.83 0.00 0.00 0.50 1990s 0.00 0.00 0.57 0.00 0.05 0.14 0.00 0.00 0.12 2000s 0.00 0.00 0.00 0.00 0.00 0.03 0.00 0.00 0.03 2010s 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 0:30. - 1.01 0.41 0.12 0.62 0.20 0.00 0.00 0.57 Figure B -15: Number of Breaks per Mile by Decade Pipe Installed and Material 65B -108 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY These results support the conclusion that the Cast Iron pipe failure rate is most likely age related. Pre - 1930s pipe has an average failure rate of 1.5 breaks per mile; whereas the failure rate decreases lineally through to the 1970s pipe which has a failure rate of 0.75 breaks /mile. Early Asbestos Cement pipe is also showing significant break rates and again a broadly linear pattern which seems to be age related. Fortunately, the bulk of the Asbestos Cement pipe was not installed until the 1970s. Likewise 1970s and 80s vintage Ductile Iron pipe shows a significantly high break rate. This cohort warrants further investigation as pipes of this vintage and material would not be expected to have significant failure rates. No obvious correlations with clay soils which could cause aggressive conditions and accelerated corrosion were found. Any planned condition assessment or opportunistic pipe condition sample collection and analysis should concentrate on this cohort of pipes. Operational conditions in these areas should also be assessed in more detail. Another unexpectedly high failure rate was observed in the 1980s PVC pipes. However, on further investigation it was determined that this anomaly was actually four breaks on the same pipe segment; three on the same day. Also, the "PVC' break records are of lower reliability as some records may reflect the replacement pipe material, not the original failed pipe material. Number of Breaks by Pipe Diameter and Material Table B- 6 and Figure B - 16 indicates the total number of breaks repaired since 1990 on pipe of various diameters. These are listed by the material of the associated main. The break -to -main relationship was established using the same process as described above. Table B- 6: Number of Breaks by Pipe Diameter and Material Diameter AC CI CMLC CYL DI PVC Total Percent 4 2 7 9 3.11% 6 26 117 2 145 50.17% 8 18 50 9 6 83 28.72% 10 1 3 4 1.38% 12 7 18 5 4 34 11.76% 14 1 1 2 0.69% 16 1 1 1 4 7 2.42% 18 1 1 0.35% 20 1 1 0.35% 36 3 3 1.04% Total 55 196 4 3 19 12 289 100.00% BLACK & VEATCH I Appendix B: water CIP Prioritization Q-, 65B -109 97 98 WATER RATE STUDY ] City of Santa Ana, CA Figure B - 17 provides a map depicting the same map as above (showing the diameter of mains), but with the addition of break locations color coded by main diameter. [SPACE INTENTIONALLY LEFT BLANK] 65B -110 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure B - 17: Map Showing the Distribution of Water Mains and Breaks based on Main Diameter = �7 A; ° o 0 0 sot 7 i ° 80 00 ° o8 oco 0 go to 1 00 0 CD 0 1 °o mO o ° o° o O ° 0 0 °k 1�1 -t,� , 0 0 I ° 0 ° $ ®o ,0 0 Ot$ o o D0 0° o o o ° $ o O L 7 �ODO 9 aP 0 ° �0 o 0 ¢� -0 ° ° C III D o� \r ,' 00 0 a , I r \ o C%QO o 0 0 8 o `. o� 0 0 °,R� o m 001po PO 0 00 0 0 0 6 - I ° 0 0 ,.,0 0 0 o r ° o ° X80 N _ uL 6�- 0 3,000 6,000 12,000 Ft a Breaks by Pipe Diameter Water Main by Diameter City of Santa Ana, CA 0 4;6 0 -6° Water I Wastewater O 8: 10 _— 7-10" 0 12;14 11 - 14° System Analysis - 2012 O 16; 18: 20; 24 15 - 30" • 36 — 31-78" ` City Boundary Ali — RailRoads Water Distribution System Breaks by Pipe Diameter BLACK &VEATCH Building a world 0 difference: BLACK & VEATCH I Appendix B: Water CIP Prioritization Process 99 65B -111 rr WATER RATE STUDY I City of Santa Ana, CA Number of Breaks per Mile of Pipe by Diameter and Material Break frequency was also reviewed against pipe diameter and material. Table B - 7 and Figure B - 18 present the results. Although 4 inch pipe represents less than 1 percent of the system, it exhibited the highest break per mile frequency. In general the larger the pipe, the less break frequency was observed. This is as expected as the standards for these pipes are different than for larger pipes and these tend to be sallower and in high traffic areas. Other than this, there appears to be no significant trends based on pipe size and material. Table B - 7: Number of Breaks per Mile of Pipe by Diameter and Material Diameter AC Cl CM LC CYL DI PVC STL UNK Total '.. 4 1.83 3.19 0.00 0.00 0.00 0.00 0.00 0.00 2.60 6 0.39 1.35 0.00 0.00 0.00 0.40 0.00 0.00 0.91 8 0.28 1.21 0.00 0.00 1.53 0.17 0.00 0.00 0.56 10 0.13 1.28 0.00 0.00 0.00 0.00 0.00 0.00 0.38 12 0.19 0.32 0.00 0.00 0.60 0.22 0.00 0.00 0.28 14 0.00 0.46 0.00 0.59 0.00 0.00 0.00 0.00 0.19 16 0.30 0.00 1.01 0.10 1.36 0.00 0.00 0.00 0.40 18 0.00 0.00 0.00 0.00 0.49 0.00 0.00 0.00 0.13 20 0.00 0.00 0.00 0.42 0.00 0.00 0.00 0.00 0.18 24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 36 0.00 0.00 0.52 0.00 0.00 0.00 0.00 0.00 0.42 ITgt�i 0.30 1.01 0.41 0.12 0.62 0.20 0.00 0.00 0.57 Figure B - 18: Number of Breaks per Mile of Pipe by Diameter and Material 65B -112 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Number of Breaks per Year per 100 Miles of Total Installed Pipe The City's water distribution system is a dynamic, evolving network. Pipes have been installed and /or replaced for the past century. However, the City only has break records since 1990. To understand the system -wide break history the following graph was generated (see Figure B - 19). It indicates the annual breaks per 100 miles of actual installed pipe as of that year. Overall the City's average annual water main break rate (since 1990) is 2.64 per 100 miles per year. This compares to a national average of 12 -14 breaks per 100 miles per year. The anomaly spike in the graph for 2010 is because the City's GIS database indicates that no mains were installed that year even though there were 47 breaks listed for 2010. Figure B -19: Number of Breaks per Year per 100 Miles of Installed Pipe Figure B - 20 provides a map depicting the location of breaks color coded by break year since 1990. BLACK & VEATCH ' Aonend'a: R_ VVat =_r CIP PnonYizafior Process 65B -113 102 WATER RATE STUDY I City of Santa Ana, CA Figure B - 20: Map Showing the Location of Breaks Color -coded by Break Year Since 1990 • too •• ® ® » • so goo • • it • • O • 69 I • ® o • • • o • ® • o • • o do 0 so 00 0 go ® % ®® 40 0 • �t 0 so • ® ®o t , -� • ®o • • • -- r=' :r - • 0 3,000 6.000 12,000 Ft s Break by Break Year Water Mains City of Santa Ana, CA • <Nuil> Water Mains Water I Wastewater • 1990-1994 City Boundary O 1995-1999 RailRoads System Analysis - 2012 • 2000-2004 • 2005 - 20091 • 2010-2012 MZ Water Distribution System Breaks by Break Year BLACK &VEATCH Building a world of difference.• 65B -114 NOVEMBER -11;14 City of Santa Ana, CA! J DY Number of Breaks per Main Segment Some pipe segments have had multiple (up to five) recorded breaks since 1990. City staff indicates that it is not uncommon to repair one main break and then have to return a week later for a repair a short distance away. This observation is important — either repairs are not being done well or the problems (operational; high pressure, water hammer, etc.) are transferring to the immediate proximity of a break as it is fixed. This would require a review of the water hammer and /or pressures (beyond the scope of this study). Another possibility is that the repair efforts could have caused additional strain on adjacent pipe causing it to fail; or that the leak was actually in multiple locations along the same pipe segment. Figure B - 21 provides a map showing water mains color coded by the number of breaks per main segment. [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix B: Water CIP Prioritization P --; —;s, 65B -115 103 WATER RATE STUDY I City of Santa Ana, CA Figure B - 21: Map Showing Water Mains by the Number of Breaks per Segment r- 0 3,000 6,000 12,000 Ft s Breaks Per Main Segment ,Null, —1 2 3 4 5 - City Boundary — RailRoads 104 65B -116 �E City of Santa Ana, CA Water I Wastewater System Analysis - 2012 d Water Distribution System Breaks Per Main Segment BLACK &VEATCH Building a World of difference: 1061 41VA IAtwille City of Santa Ana, CA I WATER RATE STUDY Soils Analysis To evaluate likely impacts to pipeline deterioration due to soil conditions along the pipe facilities, soil data was downloaded from the US Department of Agriculture, National Resources Conservation Service (NRCS). Several soils characteristics were then reviewed to determine if they may be contributing factors to pipe failures and degradation. Although conclusive trends were not identified, key characteristics were reviewed and area depicted in Table B - 8 and on Figure B - 22. • Corrosion of Steel: since soils for almost the entire City has "high" Corrosion of Steel values, there was minimal spatial variation over the area. Thus, this factor was ignored. • Corrosion of Concrete: except for a small area to the south, the majority of soils for the City have "Low" Corrosion of Concrete values. Only a very small area has "High" values. No obvious relationship of this soil property to the main breaks was identified. Thus, this factor was ignored. • Linear Extensibility: general indicator of the soils' capacity to shrinking or swelling due to changing water content. • Drainage Class: general indicator of the soils' capacity to retain water. Table B - 8: Impacts on Breaks /Mile by Material AC 1930s Cl all by age Somewhat drained CMLC CVL 19706 DI 1970 -80s Somewhat drained PVC 19805 poorly C, D silt loam 7.5, 4.5 8.5, 8.2 Moderate silty clay loam poorly C, D silty clay loam 4.5 8.2 silt loam D clay 7.5 8.5 Moderate BLACK & VEATCH I Appendix B: Water CIP Pnorftiz�P.cr ?roc =" 65B -117 I()K. 106 tNATER RATE STUDY I City of Santa Ana, CA Figure B - 22: Several Maps Showing Selective Soil characteristics and Main Breaks by Main Material • ••° •s rs • • •.O •s ra e I• ..lr2� +O. � ° ••ire •O• ° a. 0 r1 • _•e_.my. e �1 al • •• 11 onto I�rll il _•a��e ____ _ _.._____. -... BtNMS Oy PIpa Ne1Ma14o11: COrtoslon of a" Liry of Santa Ana, CA Brxkf Oy PIpPINIwIe1COmNm 01COnC1•te Clry of Arab Ana, CA • p.yvm Cmwele .11i06 WatxlWasnewater • paMtlas C.—I. WalRfn War. l YJAVA—W • Casslran modand, Systml Analysis • Can Iran e; Modem Systam Analysis -2012 • CMLC � I.A. • Waaa Iran • CMLC Ina •PJW ^MCnwae • CyFeler '. Not rated or nin- isabl. it . LyyM•r " *B.1ramdri -cil —Ael. li�lf! • Wsdlmn City BOUNary Y • DWI— =O'EOUMary • PNVSyi CNrcias — Iiady-da • PormylCNmN. — ybBi0ada • e .e ra WaW Dlslel6ouon Sys[en WStsrO sim ult Sysbn Sall: C...I.n of Stall SNI: CA..ien N CA,.. WSW Distribution Syst.n SNI: Llnesr ExtmsWlliry I V // Y ei+y r 1l° 2• N I�TTTT -1 • • - T • Brob by Pip r61NY1 DNnapa Claw •_ a•1 .Ert— r— tym.imd WSW /W.S.w..r ••� fir ANA Som.nbt exmasrvsly aramen •2 2'• As, NAY arair. Cy6,N., wry wdara.ryweaaaansn , • Waaa Iran mSoin —Ins. poll an »W •PJW ^MCnwae .Fmrldr /ned I• • . than— Nolianoda t—olsble =CNBOUNary WOW DISMlmat SYSWA Y — RaMoads Sall: Onlna0a CAR. BLARcicalitipirli • e .e ra BrWR by Plp• Ma[Ma1LInur Extensibility Llty, Of Santa Ana. CA • Asian. C-1. LOw 10 -]I Watw l Wast•W..r • Union laL 6khral.a 61 Systxn Analysis -2012 e CMLC Ifyb 16 -81 • Cyrda, assavaty Niexls -6oi Dow1. ouotmaamnma ral.bie mW CMaga masSOUNatl ,, In • IPnMmr WSW Distribution Syst.n SNI: Llnesr ExtmsWlliry I V // Y ei+y r 1l° 2• N I�TTTT -1 • • - T • Brob by Pip r61NY1 DNnapa Claw City of $a Mrs Ana, CA • PsbaMe Co..,. .Ert— r— tym.imd WSW /W.S.w..r • Coarlmn ANA Som.nbt exmasrvsly aramen Systln Analysis 2012 CIALC As, NAY arair. Cy6,N., wry wdara.ryweaaaansn , • Waaa Iran mSoin —Ins. poll an »W •PJW ^MCnwae .Fmrldr /ned . than— Nolianoda t—olsble =CNBOUNary WOW DISMlmat SYSWA — RaMoads Sall: Onlna0a CAR. BLARcicalitipirli 65B -118 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Other Factors Other water distribution system factors are sometimes used for pipeline condition analysis if the data is available. These data sources may include the use of customer complaints for identifying areas of the system that may be deficient in water pressure or quality. Another data source may include results of hydraulic modeling analysis; again indicating possible capacity deficiencies, pressure / surge issues, or water quality indicators. These data sets were not available for this study. However, the City may decide to include these factors in future analysis efforts as their Asset Management system matures. Probability of Failure Analysis (PoF) The Probability of Failure (PoF) criteria (factors) are used to assess the likelihood that a particular asset will fail. This is done by considering the physical properties of the asset itself as well as its surrounding environment and /or operational history. Three criteria were used for evaluating the likelihood of failure of the City's water main segments. These criteria include Cohort Rank, Pipe Vintage (age), and Repeated Failures. The following section describes the approach taken to select and prioritize pipe segments for replacement or rehabilitation. This approach is based on identifying, from the analysis above, the factors which have the most tangible effects on pipe deterioration and assigning weightings to these factors to reflect their relative importance. Cohort Rank Some materials have been shown to be more prone to failure than others. Likewise, the older the asset is, typically the more likely it is to fail. Often it is the combination of these considerations that impacts the asset's life expectancy. By combining pipe material and vintage (installation year), groups of similarly performing pipes can be identified. These are considered pipe "cohorts." An evaluation of the City's pipe data on materials, age, breaks, etc. was performed to identify likely pipe cohorts. This evaluation included trends as observed in the source data and also general past performance knowledge of similar materials in similar environments. Not all pipe segment records in the GIS database provided complete or accurate date attributes. The City is encouraged to investigate further to identify these missing data. This might be accomplished by reviewing appropriate asbuilt drawings, or assuming attribute data based on neighborhood construction periods or adjacent pipe attributes. This effort was beyond the scope of this investigation. Once the missing data is identified, these pipe segments may likely acquire lower Cohort ranks. Based on a review of the GIS data, the Number of Breaks per Mile by Decade Pipe Installed and Material analysis appears to provide the best insight into grouping of similar pipe performance. The following pipe cohorts have been identified for this analysis and were assigned a priority PoF ranking: • Cohort 5, High PoF Score: 1970s / 1980s Ductile Iron Pipe and High Pressure 36" MWD Transmission Line • Cohort 4, Med -High PoF Score: Asbestos Cement Pipe installed before 1940 • Cohort 3, Med PoF Score: Cast Iron Pipe installed before 1960 • Cohort 2, Med -Low PoF Score: Cast Iron Pipe Installed after 1960 • Cohort 1, Low PoF Score: Asbestos Cement Pipe Installed after 1940 BLACK & VEATCH I Appendix B'. Water CIP Prioritization Prst r�ss 65B -119 107 108 WATER RATE STUDY I City of Santa Ana, CA • Cohort 0, Very Low PoF Score: All other pipe materials and installation years Note: The City has structural concerns with a high pressure 36" MWD transmission line. Therefore it was specifically assigned a high Cohort PoF score. Figure B - 23 shows these Cohorts, grouped by breaks per 100 miles per year, and they range from an average of 0.7 breaks per hundred miles per year in Cohort 0 to more than 9.5 breaks per hundred miles per year in Cohort 5. Again, this can be compared to a national average of 12 -14 breaks per 100 miles per year. Based on the Cohort groups as described above, more than 95 percent of the water distribution mains were in Cohort groups 0, 1, 2 and 3 as shown in Figure B - 24. Figure B - 24 provides a map of water mains color coded by Cohort Rank. The Cohort Rank results were included as 60 percent of the initial PoF Score. Figure B - 23: Breaks per 100 miles per Year by Cohort Group 65B -120 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure B - 24: Percentage of Water System Pipelines by Cohort Group Cohort 4 Cohort 5 0.4% 2.8% [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix B: Water CIP Prioritization Process 65B -121 I()9 110 Figure B - 25: Map of Water Mains color-coded by Cohort Rank 17– 0 WATER RATE STUDY I City of Santa Ana, CA 3,000 6.000 12,000 Ft s I E Main by Cohort Rank City of Santa Ana, CA —0 Water / Wastewater — 1 —2 System Analysis - 2012 3 —4 —5 I= City Boundary 111TINry. MZ Railifoads 65B -122 Water Distribution System Mains by Cohort Rank 0 BLACK&VEATCH . Building a world of differencef NOVEMBER 2014 City of Santa Ana, CA I �1JATER RATE STUDY Pipe Vintage (Age) Although the Pipe Cohorts were the single most critical aspect of the PoF Score, it was important to also consider the age of a pipeline without regard for material. As shown in Figure B - 26 below — which displays the number of breaks per 100 miles per year since 1990 for water system pipelines installed in each decade — pipes installed prior to 1940 were shown to have more than 6 breaks per hundred miles per year. For pipes installed after 1940, the number of breaks per hundred miles per year steadily decreased based on installation year, from more than 4 for pipes installed in the 1950s to less than 1 for pipes installed in the 1990s and 2000s. Figure B - 26 provides a map of water mains highlighting those pipes that have not had CCTV inspections. Depending on the asset management strategy used, the City may want to target future inspections on those uninspected mains or on those mains having high -risk conditions. Performing repeated inspections every few years provides valuable insight into the rate of change. Figure B - 26: Water Pipeline Historical Break Rate by Installation Decade Because the age of the pipelines clearly plays an integral role in the overall probability of a failure occurring, pipeline installation year was included as 40 percent of the initial PoF Score. Pipe age considerations were assigned as follows: • Pipes installed before 1940 were assigned a score of 10 • Pipes installed in 1940 or after were assigned a decreasing linear score from 10 to 1 • 1970s and 1980s Ductile Pipe was considered 0 percent BLACK &VEATCH I Appendix8: Water CIP Prioritiza?lo,� P, -1 -',s 65B -123 111 112 WATER RATE STUDY I City of Santa Ana, CA Repeated Failures Finally, while the Pipeline Cohorts and Age make up the overall PoF data, City staff mentioned that in many instances, pipelines that have failed in the past have experienced multiple failures. Therefore, pipe segments that have had more than one recorded break since 1990 had their individual PoF score increased by 2. Pipes which have had one recorded break since 1990 had their PoF score increased by 1. Pipes with no recorded breaks since 1990 had their PoF Score determined solely by their Cohort and Age. Resulting PoF scores were limited to not exceed 10. Other PoF Considerations Several other physical properties and environmental conditions were considered for inclusion in this analysis. Some of them are addressed below. Although these factors were not actually used in the PoF prioritization analysis, they may someday provide useful information. Therefore, the City is encouraged to reevaluate these once their Asset Management system is more mature. • Mains by Diameter: There does not appear to be any obvious correlation of water pipe failure and pipe diameter. Therefore, this aspect was not considered for PoF calculations. • Depth of burial: Data not available. • Heavy street traffic: Data not available. • Operating Pressure: Hydraulic modeling data not available. • Soils: A high level review did not reveal any obvious correlation of high break concentrations for water pipe to key soil characteristics. However the City may want to further review these considerations in the future. Overall PoF Calculation To produce an overall PoF score for individual pipe segments, weighted scores for each of the contributing PoF criteria were added together. The resulting PoF scores are, by design, within the range of 0 to 10. For simplicity, the three PoF criteria were all assigned the same weighting (level of importance). By adjusting these weights other assessment scenarios could be created. Table B - 9 below provides a summary of the PoF criteria used in this analysis. [SPACE INTENTIONALLY LEFT BLANK] 65B -124 NOVEMBER 7014 City of Santa Ana, CA I WATER RATE STUDY Table B - 9: Summary of PoF Criteria used in this Analysis PoF Criteria Weight Comment Strategy / Assumption Cohort Rank (0- 60% Assigned values 0 -5 Cohort 5, High PoF Score: 1970s / 1980s Ductile Iron Pipe and High 5 values) range, multiply by 2 Pressure 36" MWD Transmission Line to get values 0 to 10 Cohort 4, Med -High PoF Score: Asbestos Cement Pipe installed before 1940 Cohort 3, Med PoF Score: Cast Iron Pipe installed before 1960 Cohort 2, Med -Low PoF Score: Cast Iron Pipe Installed after 1960 Cohort 1, Low PoF Score: Asbestos Cement Pipe Installed after 1940 Cohort 0, Very Low PoF Score: All other pipe materials and installation years Pipe Vintage 40% Assigned values Pipes installed before 1940 were assigned a score of 10 (age) based on assumption Pipes installed in 1940 or after were assigned a decreasing linear score that older pipes are from 10 to 1 more likely to fail 1970s and 1980s Ductile Pipe was considered 0 percent Repeated n/a Additive: based on 2 or more previous failures: add 2 to final PoF score Failures assumption that if a 1 previous failure: add 1 to final PoF score pipe fails once, there is a higher probability Never failed: keep final PoF score that it will fail again Total (sum of 100% The resulting PoF above) I I scores are 0 to 10. By applying the weighting described above (60% Cohort Score, 40% Age, and 0% Failures) to each of the 21,477 active main pipeline segments in the Santa Ana Water System, a 0 to 10 PoF Score was calculated for each and the distribution is shown in Figure B - 27 below. Figure B - 28 provides a map of water mains color coded by total PoF score. BLACK & VEATCH I Appendix B: Water CIP Prioritization erocess 65B -125 113 WATER RATE STUDY I City of Santa Ana, CA Figure B - 27: Distribution of Water Pipeline PoF Scores [SPACE INTENTIONALLY LEFT BLANK] NOVEMBER 2014 65B -126 City of Santa Ana, CA I WATER RATE STUDY Figure B - 28: Map of Water Mains Color -coded by Total PoF Score I- 0 3,000 6,000 12,000 Ft Main by PoF Score >9 and 10 >8 and < =9 >7 and < =8 -- -- >6and< =7 — >5and< =6 <= 5 City Boundary RailRoads BLACK & VEATCH I ° ,� , 65B -127 3 City of Santa Ana, CA Water / Wastewater System Analysis • 2012 116 E Water Distribution System Mains by PoF Score BLACK &VEATCH Building a world of difference! L15 116 WATER RATE STUDY I City of Santa Ana, CA Consequence of Failure Analysis (CoF) In order to assess the criticality of each pipe segment for use in risk based prioritization, a set of criteria (rules) were required that reflect the relative importance of each pipe section in terms of delivery of levels of service (serviceability), economics and health and safety. A risk workshop was held with City staff on May 31, 2012 to identify likely criticality factors and their relative importance. Although several possible criteria were suggested, some could not be used due to lack of sufficient source data or were beyond the scope of this study. In a process similar to the PoF analysis, criteria for the Consequence of Failure (CoF) were then identified and evaluated. These criteria are described below. Pipe Diameter Primarily, the consequence of any given pipeline failing is related to the number of customers which are directly served, the impact of that pipeline on the overall hydraulics of the system and the impact of that main break from a safety standpoint. Without a hydraulic model to assess the hydraulic criticality of each pipeline, the most effective proxy available in the existing data is simply pipe diameter. The assumption used is that the consequence of a larger main failing is more significant than that of a smaller main, plus the repair cost will likely be greater. Pipe diameter was used as 100 percent of the initial CoF score and defined as shown in Figure B - 29 below. Figure B - 29: Water System Pipelines CoF Scores by Diameter Critical Customer Impacts In addition to the diameter of each main, the proximity of each main segment to critical customers (such as hospitals, schools and government buildings) was also utilized in order to increase the initial CoF Score. The concern here is for increased risk due to possible environmental and inconvenience to nearby critical customers. The City provided tabular lists of critical customer locations. These sites were geocoded by address data (if available) to identify the customer's location on a map. Using GIS spatial processes, all mains within a 300 foot radius of each critical site was tagged. A count of nearby sites was then tabulated for each main segment. Note, other methods could be used to identify the impact of nearby critical customers. However, based on the source data available, this approach was the most logical. The initial CoF Score (diameter) was then adjusted as follows: 65B -128 NOVEMBER 2014 City of Santa Ana, CA WATER RATE STUDY • Two critical customers within 300 feet of pipe: Increase CoF by 2. • One critical customer within 300 feet of pipe: Increase CoF by 1. • No critical customers within 300 feet of pipe: CoF is based solely on diameter score. • Total CoF score not to exceed 10. Other CoF Criteria Other CoF criteria have been used in assessments like this: such as proximity to major roads, water intake sources, industry / business; public health and safety concerns; reputational damage; or other financial impacts. Several of these were discussed at a risk workshop with the City. However, due to limited source data available and /or schedule, these additional considerations were outside the scope of this assessment. The City should consider addressing these in future assessments. • Major Customers: The City indicated the desire to give higher consideration to top water consumers. However, a reliable list of top 20 consumers was not available. A partial list was considered for use. However, without hydraulic modeling support, only the closest pipe to each top customer would have received a higher score. In reality, numerous pipes should receive higher risk scores based on the hydraulic impact caused by a possible pipe failure along any given pipe segment. Therefore, this criterion was not used. • Proximity to Pumping Station: The concern here is that a failure along one of the primary network feeder pipelines (i.e., near pumping stations) would cause a major impact to the distribution system's ability to supply adequate water and /or pressure. As in the previous topic, this would also require hydraulic modeling support to correctly identify the most critical pipe segments. However, as a reasonable alternative, pipe diameter could be considered. This assumes that larger pipes are more important (not necessarily the closest to the pump stations) and should receive the higher risk ratings. Since this factor was already considered in the CoF analysis, it was not repeated here. • Customer Impacts: The City suggested that a cumulative count of water services associated to each main segment might identify more "important" facilities. To be accurate, hydraulic modeling support would be needed. The other approach would be to consider only the most immediate pipe segments. However, since service lines are mostly on the smaller diameter pipes, the importance of the larger mains would be lowered —thus canceling out the other criteria. Therefore, this criterion was not used. • Proximity to major roads, railroads, industry / business, easements: This assumes that access will be more difficult in some locations and that potential damage impacts would potentially be greater — thus more costly. Identification of key sites (Central Business District, Mall, Civic Center Plaza, and easements), major roads and railroads was considered. However, other than roads and railroads, this source data was unavailable within the schedule. • Depth of Burial: Do not currently have this data — future capability. Overall CoF Calculation To produce an overall CoF score for individual pipe segments, weighted scores for each of the contributing CoF criteria were added together. The resulting CoF scores are, by design, within the range of 0 to 10. Because the Proximity to Critical Customers criteria was considered to be less important than the other two criteria, it received a lower weighting. Therefore, the Pipe Diameter criteria was weighted at 100% and the Critical Customer count was weighted at 0 %. By adjusting these weights other assessment scenarios could be created. Table B - 10 below provides a summary of the CoF criteria used in this analysis. BLACK & VEATCH I Appendix B: Water CIP Prioritization Prn_es- 65B -129 117 lis WATER RATE STUDY I City of Santa Ana, CA Table B -10: Summary of CoF Criteria used in this Study By applying the weighting described above (100% Diameter, 0% Critical Locations) to each of the 21,477 active main pipeline segments in the Santa Ana Water System, a 1 to 10 CoF Score was calculated for each, with the distribution shown in Figure B - 30. Figure B - 31 provides a map of water mains color coded by total CoF score. Figure B - 30: Distribution of Water Pipeline CoF Scores 65B -130 NOVEMBER 2014 Pipe Diameter 100% Assigned values 0 -10 = <4" assigned score of 0 16" assigned score of 6 range 6" assigned score of 1 18" assigned score of 7 8" assigned score of 2 20" assigned score of 8 10" assigned score of 3 24 - 30" assigned score of 9 12" assigned score of 4 36 -78" assigned score of 10 14" assigned score of S Critical n/a Additive: based on 2 critical customers within 300 feet of pipe: Increase CoF by 2 Customer assumption that 1 critical customer within 300 feet of pipe: Increase CoF by 1 Impact No critical customers within 300 feet of pipe: CoF is based solely on diameter score Total (sum of 100% The resulting CoF Total CoF score not to exceed 10 above) scores are 0 to 10. By applying the weighting described above (100% Diameter, 0% Critical Locations) to each of the 21,477 active main pipeline segments in the Santa Ana Water System, a 1 to 10 CoF Score was calculated for each, with the distribution shown in Figure B - 30. Figure B - 31 provides a map of water mains color coded by total CoF score. Figure B - 30: Distribution of Water Pipeline CoF Scores 65B -130 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Figure B - 31: Map of Water Mains Color -coded by CoF Scores U _i �? N W I L E 0 3,000 6,000 12,000 Ft s Main by CoF Score City of Santa Ana, CA 70 Water I Wastewater s 6 System Analysis - 2012 <. s ,'>d City Boundary RailRoads Water Distribution System Mains by CoF Score 0 BLACK &VEATCH Lill Building a world of difference: BLACK & VEATCH I Appendix 8: Water OP Prioritization r'- 119 65B -131 120 ViA PE R RATE 5 FU D i I City of Santa Ana, CA Business Risk Exposure (BRE) The overall Business Risk Exposure (BRE) was then calculated for each asset. The BRE score is a product of the PoF times the CoF scores. This score is an informative indicator of facilities that will likely require higher levels of attention; in the form of proactive replacement and /or targeted inspection monitoring. It is typically based on a 1 to 100 scale metric. Figure B - 32 provides a distribution of Water Pipeline BRE Scores. Figure B- 32: Distribution of Water Pipeline BRE Scores Figure B - 33 provides a "heat map' graph showing the resulting distribution of PoF vs. CoF scores by miles of main. Combined, these represent the BRE score. Higher probability of failure assets are plotted near the right. Higher consequences of failure assets are plotted near to the top. Figure B - 34 provides a map of water mains color coded by total BRE score. A partial table of water main pipeline segments ranked by BRE score is included in the Replacement Prioritization section below. 65B -132 NOVEMBER 2014 City of Santa Ana, CAI i ::. 3 f U ur Figure B- 33: Water System BRE Heat Map Graphic by Miles of Main Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 0.3 -, i! 11.7 2.1 5.8 4J -� L 9 0.1 1.9 23 3 •� 8 0.5 1.4 2.7 j� 0. 2.3 M 4- 7 0.1 1.3 2.7 2.8 1.4 1.5 O 4) 6 2.8 7.5 4.2 1.1 W J2.2 5 2.9 1.0 8.3 1.3 7.4 5.4 1.7 4 9.2 5.8 27.9 3.4 - 22.4 10.7 6.0 C 3 2.3 1.4 2.1 12.0 0.6 2.7 1.7 2.3 O V 2 21.6 14.1 8.5 j..2 7.2 19.9 10.6 6.5 1.9 2.7 1 1.0 3.5 5.4 _ A.5 14.5 32. 27.9 15.9 2.4 1.8 Miles Total Miles: 507.8 Most of the pipe segments that fell into the upper right most corner cell were the 36 inch high pressure MWD transmission main that the City already had concerns about. These assets had PoF and CoF scores of 10 each; with a combined BRIE score of 100. [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix B: Water OF Prioritization Proses t 21 65B -133 122 Figure B - 34: Map of Water Mains Color -coded by BRE Scores r- 0 WATER RATE STUDY i City of Santa Ana, CA 3,000 6,000 12,000 Ft 5 aE Main by BRE Score City of Santa Ana, CA — 180 and <= 100 Water I Wastewater —>70 and 80 System Analysis - 2012 > 60 and <= 70 >50 and 60 — >40 and 50 — >30 and < =40 — > 20 and <= 30 <= 20 -- ---_ i. City Boundary RailRoads Water Distribution System Mains by BRE Score 0 BLACK &VEATCH Building a world or dirrerencv 65B -134 NOVEMBER %0?? City of Santa Ana, CA I WATER RATE STUDY Appendix C: Replacement Cost Calculation — All Assets within City Service Area BLACK & VEATCH i Appendix C Replacement Cost Calculation - All Assets svithin City Service Area 123 65B -135 124 WATER RATE STUDY I City of Santa Ana, CA INTRODUCTION The final step in this assessment process is to calculate the overall inspection and replacement cost for each asset. The inspection costs were calculated at $150,000 per mile for all pipe diameters. Average facility replacement cost look -up tables were used to determine overall budgetary estimates and schedules (see Table C - 1 below). Construction cost (2012 dollars) values were based on an informal survey of Southern California utilities in recent years, and inspection costs were based on estimates from nation -wide projects. Specific cost estimates based on experience in Santa Ana were not available at the time of printing. Replacement costs were not specific to pipe material, and replacement was assumed to be the same diameter. Pipe segments with a diameter of 0 or unknown were replaced with a 6 inch pipe. Costs also assume basic construction practices, including imported sand bedding and backfill, compaction, pavement removal, hauling, shoring, trench excavation, testing and disinfection. Table C -1: Water Pipe Replacement Costs (2012 dollars) 2 $282.72 18 $435.57 4 $301.82 20 $454.68 6 $320.93 24 $492.89 8 $340.04 30 $550.21 10 $359.14 36 $607.53 12 $378.25 48 $722.17 14 $397.36 54 $779.49 16 $416.46 78. $1,008.77 Figure C - 1 shows the distribution of BRE scores (across the bottom) against the total estimated replacement costs. The cumulative replacement cost line is also provided. It must be emphasized that BRE scores calculated in this study were based on relative values and do not represent an absolute level of risk. As such, it is not possible to quantitatively determine an acceptable BRE target. As the City collects additional condition and failure information, further investigation is recommended to better characterize the risk relationship and define appropriate targets. 65B -136 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY Figure C - 1: BRE Scores and Costs for Water Distribution System A variation of the previous heat map graphic is provided in Figure C- 2. This version is based on cost rather than pipe length. [SPACE INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix C: Replacement Cost Calculation —Al I Assets within City Service Area 125 65B -137 126 WATER RATE STUDY I City of Santa Ana, CA Figure C- 2: BRE Heat Map Graphic by Main Replacement cost (2012 dollars) O) L LL 4- O 4J U i GJ Cr O H O V 1 10 $0.8 9 $0.3 8 $1.2 7 $0.3 6 $1.1 5 $4.3 Probability of Failure 2 3 4 5 6 7 8 9 10 4 $20.9 $18.5 $11.7 $55.7 $6.7 $44.8 $21.3 $12.0 3 i $4.1 ( $2.5 1 $3.9 $22.0 $1.2 $4.8 $3.1 $4.2 $0.9 $5.4 $0.9 $0.9 2 $38.7 $25.2 $15.3 $91.4 $12.8 $35.5 $18.9 $11.5 $3.4 $4.9 1 $1.7 $6.0 $9.2 $753 $24.5 $54.3 $47.4 $26.8 $4.0 $3.0 Millions of Dollars Total Cost: $973.2 WATER DISTRIBUTION SYSTEM R &R PRIORITIZATION Up to this point the analysis focused on assessing the likely condition of the water distribution system mains based on available source data. PoF and CoF scores were combined into an overall risk score for each pipe segment. Using these results the study then took on a different focus; that of prioritizing pipe inspections and /or replacements and grouping those pipe segments into probable R &R projects. These steps include: • BRE Replacement Prioritization: each pipe segment ranked from highest to lowest risk and assigned a full replacement cost estimate. It gives equal consideration for both PoF and CoF factors. Although useful information, this listing is generally not used for actual replacement planning or budgeting. • R &R Strategy Groups and CIP Budgeting: pipe segments assigned to various inspection and /or replacement strategies applied to address differing risk considerations. Based on the suggested R &R activity for each strategy group, annual inspection and replacement budgets were developed. These results are sufficient for general budgetary planning. However, since prioritized pipe segments may be highly segmented and scattered across the service area, this summery is only partially useful for detailed planning. Adjusting the assumptions made here can create a variety of budgeting scenarios. 65B -138 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY • CIP Project Identification: individual CIP projects identified based on high -risk assets and /or assets that are in close proximity. Pipe segment identification, budgets and schedules often differ from the previous lists due to logical regrouping of assets. For example, it makes more sense to inspect or replace an entire continuous stretch of pipe even though the risk prioritization may have scheduled specific segments to have been done at different times. Therefore a single project will likely have segments with differing risk strategy group assignments. Note: risk prioritization and R &R replacement planning was based on existing data provided by the City. Although the source data is believed to be the best available it may not reflect current conditions of all facilities. Additionally, recent R &R activities may have already addressed some of the issues identified. Therefore, recommendations should be verified with current R &R records and /or pipe inspection prior to actual replacement. BRE REPLACEMENT PRIORITIZATION Using the results of the BRE analysis and replacement costing table, each water main pipe segment was ranked from highest to lowest risk and assigned a replacement cost estimate. A partial list (risk scores of 50 or higher) of water main pipeline segments ranked by BRE score is included in Table C - 2 below. This list includes the top 146 of the 21,477 total ranked records. Table C -2: Partial List of Water Main Pipe Segments Ranked by BRE Score Rank 1 Unique Pipe ID 4875 Material DI Size (in) 24 Year Installed 1970 Decade 1970s Length 0.07 Cohort 5 PoF 10.0 CoF 10.0 100.0 Estimated $190,577 2 11288 CMLC 36 0 UNK 0.77 5 10.0 10.0 100.0 $2,464,515 3 11296 CMLC 36 0 UNK 0.04 5 10.0 10.0 100.0 $133,496 4 11302 CMLC 36 0 UNK 0.22 5 10.0 10.0 100.0 $692,575 5 11308 CMLC 36 0 UNK 0.35 5 10.0 10.0 100.0 $1,130,456 6 11310 CMLC 36 0 UNK 0.01 5 10.0 10.0 100.0 $19,067 7 11326 CMLC 36 0 UNK 0.31 5 10.0 10.0 100.0 $986,112 8 11332 CMLC 36 0 UNK 0.41 5 10.0 10.0 100.0 $1,303,576 9 11337 CMLC 36 0 UNK 0.29 1 5 10.0 10.0 100.0 $930,778 10 11338 CMLC 36 0 UNK 0.33 5 10.0 1 10.0 100.0 $1,050,971 11 11339 CMLC 36 0 UNK 0.26 5 10.0 10.0 1 100.0 $818,127 12 11383 CMLC 36 0 UNK 0.30 5 10.0 10.0 100.0 $967,834 13 11401 CMLC 36 0 UNK 0.03 5 10.0 10.0 100.0 $93,426 14 11422 CMLC 36 0 UNK 0.37 5 10.0 10.0 100.0 $1,184,887 15 11423 CMLC 36 0 UNK 0.30 5 10.0 10.0 100.0 $970,724 16 11424 CMLC 36 0 UNK 0.11 5 10.0 10.0 100.0 $365,904 17 11425 CMLC 36 0 UNK 0.31 1 5 10.0 10.0 100.0 $997,434 18 11426 CMLC 36 0 UNK 0.35 5 10.0 10.0 100.0 $1,115,092 19 11427 CMLC 36 0 UNK 0.40 5 10.0 10.0 100.0 $1,271,689 20 11428 CMLC 36 0 UNK 0.10 5 10.0 10.0 100.0 $319,249 21 11444 CMLC 36 0 UNK 0.10 5 10.0 10.0 100.0 $318,859 22 11445 CMLC 36 0 UNK 0.08 5 10.0 10.0 100.0 $255,366 23 11446 CMLC 36 0 UNK 0.07 5 10.0 10.0 100.0 $224,415 24 11518 CMLC 36 0 UNK 0.25 5 10.0 10.0 100.0 $791,631 25 20333 CMLC 36 0 UNK 0.00 5 10.0 10.0 100.0 $7,989 BLACK & VEATCH i Appendix C: ',I! Assets within City Service Area 127 65B -139 128 WATER PATE STUDY I City of Santa Ana, CA Rank 26 Unique Pipe ID 28284 Material CMLC size (in) 36 Year Installed 0 Decade UNK Length (miles) 0.02 Cohort Rank 5 PoF Score 10.0 CoF Score 10.0 BRE 100.0 Estimated Cost 752,929 27 4676 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $2,273 28 4677 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $2,739 29 4684 DI 24 1970 19706 0.00 5 10.0 9.0 90.0 $4,667 30 4874 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $778 31 20049 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $67 32 6583 DI 20 1989 1980s 0.00 5 10.0 8.0 80.0 $1,167 33 6584 DI 20 1989 19806 0.12 1 5 10.0 8.0 80.0 $292,112 34 11300 DI 16 1988 19806 0.05 5 10.0 8.0 80.0 $114,882 35 11301 DI 16 1988 1980s 0.08 5 10.0 8.0 80.0 $168,012 36 12188 DI 16 1988 1980s 0.06 5 10.0 8.0 1 80.0 $139,008 37 4392 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $3,124 38 4682 DI 18 1970 1970s 0.11 5 10.0 7.0 70.0 $262,355 39 4683 DI 18 1970 1970s 0.13 5 10.0 7.0 70.0 $294,800 40 4393 DI 18 1970 1970s 0.05 5 10.0 7.0 70.0 $117,211 41 4394 DI 18 1970 1970s 0.27 5 10.0 7.0 70.0 $616,296 42 4598 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,787 43 11209 DI 18 1970 1970s 0.17 5 10.0 7.0 70.0 $398,641 44 11210 DI 18 1970 1970s 0.17 5 10.0 7.0 70.0 $382,005 45 11233 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $29,915 46 11234 DI 18 1970 1970s 0.13 5 10.0 7.0 70.0 $287,779 47 11235 DI 18 1970 1970s 0.00 5 10.0 1 7.0 70.0 $3,164 48 11306 DI 16 1988 19806 0.11 5 10.0 1 7.0 70.0 $240,656 49 12187 DI 16 1988 1980s 0.17 5 10.0 7.0 70.0 $369,752 50 21095 DI 16 1988 1980s 0.00 5 10.0 7.0 70.0 $5,385 51 20030 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,832 52 20038 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $16,826 53 20047 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $10,293 54 20065 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $3,017 55 21077 DI 16 1988 19806 0.00 5 10.0 7.0 70.0 $1,604 56 34190 DI 18 1970 19706 0.06 5 10.0 7.0 70.0 $128,966 57 34192 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $27,236 58 34194 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $14,269 59 34196 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,481 60 34198 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $13,853 61 34200 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $28,552 62 34202 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $19,656 63 34203 DI 18 1970 1970s 0.02 5 10.0 7.0 70.0 $51,389 64 5200 CI 20 1928 Pre 1930 0.08 3 7.6 9.0 68.4 $195,278 65 11127 CI 20 1906 Pre 1930 0.09 3 7.6 9.0 68.4 $225,069 66 11129 CI 20 1906 Pre 1930 0.07 3 7.6 9.0 68.4 $160,216 67 4856 CI 20 1956 19506 0.07 3 6.8 9.0 61.1 $164,013 68 5603 Cl 20 1920 Pre 1930 0.06 3 7.6 8.0 1 60.8 $141,695 69 5604 Cl 20 1920 Pre 1930 0.00 1 3 7.6 8.0 60.8 $8,395 70 5243 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $2,676 71 5244 CI 20 1928 Pre 1930 0.05 3 7.6 8.0 60.8 $128,445 72 5392 CI 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $2,769 73 5550 Cl 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $16,963 74 5551 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $3,558 75 5552 1 CI 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $931 65B -140 NOVEMBER 2014 City of Santa Ana, CAI �NATE R RATE S 7U DY Rank 76 Unique Pipe ID 5553 Material CI size lin) 20 Year Installed 1928 Decade Pre 1930 (miles) 0.00 Rank 3 Score 7.6 Score 8.0 BRE 60.8 Cost 71,112 77 5599 CI 20 1920 Pre 1930 0.05 3 7.6 8.0 60.8 $120,178 78 5600 CI 20 1928 Pre 1930 0.04 3 7.6 8.0 60.8 $107,387 79 5601 CI 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $16,475 80 5602 CI 20 1920 Pre 1930 0.06 3 7.6 8.0 60.8 $140,924 81 5921 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $3,301 82 5922 CI 20 1920 Pre 1930 0.13 3 7.6 8.0 60.8 $312,849 83 11125 CI 20 1920 Pre 1930 1 0.10 3 7.6 8.0 1 60.8 $251,192 84 11535 CI 18 1939 1930s 0.53 3 7.6 8.0 60.8 $1,224,650 85 11573 CI 18 1939 1930s 0.49 3 7.6 8.0 60.8 $1,130,092 86 11589 CI 18 1939 1930s 0.47 1 3 7.6 8.0 60.8 $1,084,106 87 13150 CI 20 1906 Pre 1930 0.06 3 7.6 8.0 60.8 $139,340 88 13152 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $4,651 89 13153 Cl 20 1920 Pre 1930 0.05 3 7.6 8.0 60.8 $129,504 90 13155 Cl 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $6,893 91 13158 Cl 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,539 92 13160 Cl 20 1920 Pre 1930 0.06 3 7.6 8.0 60.8 $142,078 93 13163 Cl 20 1906 Pre 1930 0.06 3 7.6 8.0 60.8 $133,936 94 19913 Cl 20 1928 Pre 1930 0.00 1 3 7.6 8.0 60.8 $1,652 95 19914 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $667 96 19975 Cl 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $6,758 97 19980 Cl 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $18,671 98 19993 Cl 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $8,659 99 20007 Cl 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $4,307 100 20008 Cl 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,121 101 20009 Cl 20 1920 1 Pre 1930 0.00 3 7.6 8.0 60.8 $1,118 102 20010 Cl 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $1,179 103 20020 CI 20 1920 Pre 1930 0.01 3 7.6 8.0 60.8 $31,678 104 20034 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,118 105 20035 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,121 106 4353 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $2,946 107 4377 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $373 108 7776 DI 16 1988 19806 0.01 5 10.0 6.0 60.0 $30,422 109 998 DI 16 1970 19706 0.01 5 10.0 6.0 60.0 $12,482 110 4305 DI 16 1970 1970s 0.01 5 10.0 6.0 60.0 $29,577 111 4306 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $431 112 8943 DI 16 1988 19805 0.01 5 10.0 6.0 60.0 $24,441 113 11187 DI 16 1979 1970s 0.02 5 10.0 6.0 60.0 $53,560 114 11307 DI 16 1988 19805 0.12 5 10.0 6.0 60.0 $254,573 115 11482 DI 16 1988 1980s 0.00 5 10.0 6.0 60.0 $2,668 116 11483 DI 16 1988 1980s 0.01 5 10.0 6.0 60.0 $11,505 117 11484 DI 16 1988 19806 0.00 5 10.0 6.0 60.0 $1,351 118 11485 DI 16 1988 19806 0.02 1 5 1 10.0 6.0 60.0 $49,428 119 11486 DI 16 1988 1980s 0.00 5 10.0 6.0 60.0 $8,626 120 12186 DI 16 1988 19806 0.00 5 10.0 6.0 60.0 $837 121 21099 DI 16 1988 19806 0.00 5 10.0 6.0 60.0 $1,509 122 21747 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $6,123 123 38192 CI 18 1954 19506 0.01 3 6.9 8.0 55.1 $14,088 124 4855 CI 20 1956 1950s 0.00 3 6.8 8.0 54.3 $2,524 125 11536 CI 18 1939 1930s 0.44 3 7.6 7.0 53.2 $1,003,105 BLACK & VEATCH I Appendix C Replacemr rt Ce T.a;c 0 City Service Area 129 65B -141 130 WATER RATE STUDY I City of Santa Ana, CA Rank 126 Unique Pipe ID 11567 Material CI Size (in) 18 Year Installed 1939 Decade 19306 Length (miles) 0.07 Cohort Rank 3 PoF Score 7.6 CoF Score 7.0 BRE 53.2 Estimated Cost $165,359 127 11588 CI 18 1939 1930s 0.88 3 7.6 7.0 53.2 $2,025,202 128 4689 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $4,467 129 4690 DI 12 1989 19806 0.02 5 10.0 5.0 50.0 $36,392 130 4694 DI 14 1982 19806 0.00 5 10.0 5.0 50.0 $9,883 131 4183 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $636 132 4184 DI 12 1989 19806 0.03 5 10.0 5.0 50.0 $50,949 133 4845 DI 12 1989 1980s 0.12 5 10.0 5.0 50.0 $230,867 134 7128 DI 12 1988 19805 0.00 5 10.0 5.0 1 50.0 $1,271 135 7129 DI 12 1988 1 19806 0.00 1 5 10.0 5.0 50.0 $2,964 136 7130 1 DI 12 1988 1980s 0.08 5 10.0 5.0 50.0 $153,953 137 7863 DI 12 1987 1980s 0.00 5 10.0 5.0 50.0 $164 138 11392 DI 12 1989 1980s 0.02 5 10.0 5.0 50.0 $38,226 139 11393 DI 12 1989 1980s 0.03 5 10.0 5.0 50.0 $56,080 140 13145 DI 12 1987 19806 0.05 5 10.0 5.0 50.0 $91,806 141 19868 DI 12 1989 19806 0.00 5 10.0 5.0 50.0 $464 142 19992 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $1,362 143 20025 DI 12 1988 19806 0.00 5 10.0 5.0 50.0 $1,441 144 37932 DI 12 1989 19806 0.02 5 10.0 5.0 50.0 $41,267 145 37816 DI 12 1989 19809 0.04 5 10.0 5.0 50.0 $83,702 146 37819 DI 12 1989 19806 0.00 5 10.0 5.0 50.0 $220 R &R STRATEGY GROUPS AND CIP BUDGETING The risk prioritization table just presented identifies pipe segments having the highest BRE score. Since this score is based on the product of PoF times CoF factors, it gives equal consideration for both factors. Typically, different R &R strategies are applied to address these two considerations. Based on the BRE heat map graphic results, the ranked assets were then grouped into logical R &R strategies. Figure C - 3 shows the same BRE heat map graphic as before, but color coded by strategy group. Figure C - 4 shows a map of the mains color -coded by Strategy Group (A -Z). Table C - 3 defines each of these groupings and provides additional summarizations and recommendations. 65B -142 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Figure C - 3: BRE Heat Map Graphic by Cost and R &R Strategy Groups Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 L _3 9 M 8 U. 4- 7 O (1) 6 U c s 3 4 Cr 0) 3 H C 2 O U 1 $0.8 $37.6 $10.7 $0.1 $0.1 $0.0 $0.0 $0.0 $0.3 $4.9 $6.1 $0.2 $0.1 $0.0 $0.2 $0.6 $1.2 $3.4 $6.4 $0.4 $0.1 $0.0 $0.0 $5.3 7$0.0$0.5 $0.3 $3.0 $6.1 $6.4 $0.1 $0.0 $0.0 $3.2 $1.1 $6.0 $16.4 $9.2 $0.2 $2.3 $0.0 $0.9 $4.3 $6.0 $2.1 $16.9 $2.5 $14.8 $10.9 $3.4 $0.0 $0.8 $20.9 $18.5 $11.7 $55.7 $6.8 $44.8 $21.3 $12.0 $0.9 $5.4 $4.1 $2.5 $3.9 $22.0 $1.2 $4.8 $3.1 $4.2 $0.9 $0.9 $38.7 $25.2 $15.3 $91.4 $12.9 $35.5 $18.9 $11.5 $3.4 $4.9 $1.7 $6.0 $9.2 $75.3 $24.9 $54.3 $47.4 $26.8 $4.0 $3.0 Millions of Dollars [SPACE INTENTIONALLY LEFT BLANK] Total Cost: $973.8 BLACK & VEATCH I Appendix C Re placement "a'c=. :t -r All A srts within City Service Area 65B -143 131 Figure C - 4: Map of Mains Color -coded by Strategy Group (A -Z) r- 0 WATER RATE STUDY I City of Santa Ana, CA 3,000 6,000 12,000 Ft s Main by BRE Score $3A — Group $6A Group B '$ao ;'$ao $4a- Group C $aa Snfi $s-3 $33 Group D 9 -- Group LL e — Group F G 7 — Group G y 6 — GroupH C s Group �. $ea I. City Boundary 5a9 — RailRoads 1 al $6A O1 $71.9 $il V 1 132 Probability of Failure a 9 to $03 $3A $6.1 $6A $0.1 '$ao ;'$ao $4a- 1 sat, So. Sao $0.a $aa Snfi $s-3 $33 Saa $0.o $0.7 $3.3 $L1 $6.0 116A #.1 $9.2 $16.9 $0.2 $29 #Od #09 �O,U �. $ea $03 $6.a 5a9 $169 $11.7 $55.7 $6A WA $71.9 $il $5A I ;goe $0.1 #s $39 $72.0 $11 $0.6 $3a7 #SZ $15.3 $93A $119 $35s $1a.9 #7A +5w '.,. -.$9A ''... SL7 $6.0 $9.7 S753 #0.9 $903 Mni.Mooia. T.IlC $913.8 65B -144 sE City of Santa Ana, CA Water I Wastewater System Analysis - 2012 t Water Distribution System BRE Scoring by Grid 02 BLACK &VEATCH Building aworldofdiHere w NOVEMBER 2014 65B.145 wE \`- 2 [][ ;!! ;!| . tj !!! !i) !c 2 15 ;® t4 C t ]E ; ! \ ) _ _ ;i _) 29 u z: ! ■ § ! ! ; § ! § } \ / . ! # # ¥ R 4 # ; ..• : § § K « ■ ! ! , ! ! ® ® f/! JOE H-- 65B.145 134 WATER RATE STUDY I City of Santa Ana, CA GIS Improvement Opportunities Based on a high -level review of the City's GIS database for water and sewer facilities, several opportunities for possible improvement were noted. Suggested changes fall into several categories to identify and specify: • Database design changes to improve storage, tracking and analysis capabilities; especially for time - dependent data such as inspections or maintenance activities. • Data attribution cleanup processes to provide unique ID fields, improve data integrity, and extend data analysis capabilities. • Business work process changes that could acquire missing or conflicting data attribution. • Additional source data to better support the Asset Management system; especially on the risk and replacement prioritization analysis. • Integration with hydraulic modeling. The above consulting tasks could likely be done for about $20,000 — 40,000;however, actually making these changes to the database (especially acquiring missing data) will take more effort based on the selected approach, the level of implementation and who is to make the changes. An additional $100,000 would be an appropriate estimate for the level of effort. Planning Recommendations A Water Distribution System Master Plan is recommended to • Develop an initial assessment program to refine prioritization, • Complete computer hydraulic modeling for (a) identifying capacity -based recommendations and (b) improving consequence of failure scoring in the prioritization, and • Compile a more complete capital improvements program containing specific projects and more precise planning level cost - estimates. Assessment Recommendations • A more detailed engineering review of maps, as -built drawings, and discussions with staff regarding the high risk pipes will enable development of a targeted assessment plan. Inspection and assessment techniques can vary depending on the material and location in particular, but also based on other relevant factors. • As a preliminary measure, assessment of all high risk pipe is recommended as soon as possible, followed by subsequent assessments to obtain better characteristic information on a system- wide basis. The subsequent assessments would be identified and planned as part of the water system master planning process, to align results with the overall master plan. • Costs associated with assessment can vary significantly depending on the techniques selected and the testing environment. Recent programs have involved inspection and engineering costs ranging from $100,000 to $200,000 per mile. Based on these ranges, costs were assumed to be $150,000 per mile. This allows for a broad range of testing technologies as well as engineering 65B -146 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUD`! review of the results. It is intended to be a composite cost of the technologies and methods that would be recommended. Replacement /Rehabilitation Recommendations • No pipes are recommended for immediate replacement or rehabilitation because data was not sufficient to make that determination. Instead, assessments are recommended, and a replacement /rehabilitation program would be prepared based on the assessments. • Replacements have been budgeted for the CIP based on assumptions about the fraction of pipe in each risk grouping that would need to be replaced. There is considerable uncertainty in these assumptions, and while we attempted to be conservative (but not overly conservative) in our assumptions, little is known about the actual condition of the pipes to be inspected, so the anticipated costs may change significantly. WATER SYSTEM CAPITAL IMPROVEMENTS PROGRAM Based on the proposed strategy presented above and the CAMPS analysis for non - distribution system assets, Table C - 4 presents the resulting capital improvements program costs. Table C -4: Water System Capital Improvements Program ["] MW� ®® 1 $400,000 $1,301,000 $1,413,000 $1,007,300 $1,153,300 $717,100 $5,991,700 2 $4,342,500 $1,455,400 $1,930,200 $1,223,100 $1,876,900 $10,828,100 3 $1,116,100 $4,472,800 $1,499,100 $1,970,500 $2,203,000 $1,471,800 $12,733,300 4 $5,740,100 $1,544,000 $2,752,000 $7,439,100 $2,020,100 $19,495,300 5 $5,912,300 $1,590,300 $2,809,500 $2,596,800 $2,727,800 $15,636,700 *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 BLACK & VEATCH I Appendix C Replacement Cost Calculation All Assets within City Service Area 65B -147 135 WATER RATE STUDY I City of Santa Ana, CA Appendix D: City -Owned Mains Analysis NOVEMBER 2014 65B -148 City of Santa Ana, CA I WATER RATE STUDY REVISED ANALYSIS At the request of the City, a revised Water System CIP Analysis was performed for Santa Ana after the draft report was developed. The revised results reflect the removal of all non -City owned water distribution mains (specifically those listed as Water_Type = "IRWD," "MCWD," "MWD," or "Reclaimed "). None of the initial pipe statistics, cohorts, PoF / CoF criteria or prioritization factors were changed. The non -City owned mains were removed after the full prioritization process to allow comparison of results. The following sections provide the summarized results of the "revised" analysis starting at the conclusion of the Business Risk Exposure (BRE) calculation. Business Risk Exposure (BRE) Figure D - 1 provides a "heat map" graph showing the resulting distribution of PoF vs. CoF scores by miles of City -owned mains. Combined, these represent the BRE score. Higher probability of failure assets are plotted near the right. Higher consequences of failure assets are plotted near to the top. Figure D - 2 provides a map of City -owned mains color coded by total BRE score. A partial table of water main pipeline segments ranked by BRE score is included in the Replacement Prioritization section below. Figure D - 1: Water System BRE Heat Map Graphic by Miles of City -owned Water Mains Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 .3 0.0,' -'0 0..0 i 9 0.1 0.5 2.3 - 0. '0 - 0.2 F 0.0 3 e •� 8 0.5 1.2 2.7 ;0.0 0 0.8 ,0.0 0.3 LL llL 7 0.1 1.0 .� 2.7 2.8 0.0 - -.0 0.0 1.5 O y 6 v 0.5 2.1 7.5 4.2 1 00 0 "` 0.0 0.2 V F 5 2.2 1.5 1.0 8.3 !� 1.3 7.4 5,4 1.7 0.0 0.4 7 S 4 10.5 8.8 5.8 27.9 3.4 22.4 10.7 5.5 0.4 2.7 OJ 3 2.3 . 1.0 .1 12,0 0.6 2.7 1.7 2.3 0.5 0.5 O 2 21.6 14.0 8.5 t,2 51.2 7.2 19.9 132.1 10.6 6.5 1.9 2.7 1 1.0 3.5 5.4 44.5 14.5 27.9 15.9 2A 1.8 Miles Total Miles: 480.3 SLACK & VEA'TCH s ppenoix C r- Owned 3rrs dnaiy;is 65B -149 138 WA 1 HI RA-rE STuC)Y i City of Santa Ana, CA Figure D - 2: Map of City -owned Water Mains Color coded by BRE Scores F 0 3,000 6,000 12,000 Ft s >F Main by BRE Score City of Santa Ana, CA — > 80 and <= 100 Water I Wastewater -- > 70 and <= 80 System Analysis - 2012 > 60 and <= 70 > 50 and <= 60 -- > 40 and <= 50�, — > 30 and <= 40 — > 20 and <= 30 IMURVINII — <= 20 __ nr 1 City Boundary Water Distribution System — RailRoads Mains by BRE Score City -Owned Mains Only BLACK &VEATCH Building a world or diffveocer i Sar An'Amr BRE Sm 60b4 _ _ 65B -150 NOVEMBER 2014 City of Santa Ana, CAI WATER RATE STUDY Inspection and Replacement Cost Calculation Figure D - 3 shows the distribution of BRE scores (across the bottom) against the total estimated replacement costs for City -owned mains. The cumulative replacement cost line is also provided. Figure D - 3: BRE Scores and costs for City -Owned Water Distribution System A variation of the previous heat map graphic is provided in Figure D - 4. This version is based on cost rather than pipe length. BLACK & VEATCH I Append(, D. City- O'amed Malns Analysis 139 65B -151 WATER RATE STUDY I City of Santa Ana, CA Figure D - 4: BRE Heat Map Graphic by City -owned Main Replacement Cost (2012 dollars) Probability of Failure 1 2 3 4 5 6 7 8 $6.4 $9.2 $16.9 $55.7 $22.0 $91.4 1 $1.7 $6.0 $9.2 $75.2 $73.4 $64.8 $77.8 $277.5 Millions of Dollars $0.2 $0.6 9 10 ,. 50.2 $0.0 $1.9 $0.0 $0.7 0.0 10 $0.8 $0.3 $0.7 i 9 $0.3 $1.3 $6.1 $0.5 $2.5 $14.8 $10.9 '', $3.4 •� 8 $1.2 $2.8 $6.4 10.0 1 9.0 90.0 $6.7 R LL $10.9 $0.9 $5.4 $1.2 4- 7 $0.3 $2.3 $6.1 O 41 6 $1.1 $4.6 $16.4 v 1970s 0.00 5 10.0 41 5 $4.3 $3.0 $2.1 DI 24 1970 1970s 0.00 Cr 4 $20.9 $17.5 $11.7 v 20049 DI 24 1970 C 3 $4.1 $1.9 $3.9 O $67 32 6583 DI U 2 $38.7 $25.1 $15.3 $6.4 $9.2 $16.9 $55.7 $22.0 $91.4 1 $1.7 $6.0 $9.2 $75.2 $73.4 $64.8 $77.8 $277.5 Millions of Dollars $0.2 $0.6 9 10 ,. 50.2 $0.0 $1.9 $0.0 $0.7 0.0 $0.0 $0.0 $0.0 $3.3 PF $2.3 Cohort 5 $0.9 $0.0 $0.5 $2.5 $14.8 $10.9 '', $3.4 $0.0 $0.8 1970s 0.00 -i 10.0 1 9.0 90.0 $6.7 $44.8 $21.3 $10.9 $0.9 $5.4 $1.2 $4.8 $3.1 $4.2 $0.9 $0.9 $12.8 $35.5 $18.9 1 $11.5 $3.4 $4.9 $24.5 $54.3 $47.4 $26.8 $4.0 $3.0 $48.2 $156.4 $101.6 $60.2 $9.3 $19.7 Total Cost: $888.8 BRE Replacement Prioritization Using the results of the BRE analysis and replacement costing table, each sewer main pipe segment was ranked from highest to lowest risk and assigned a replacement cost estimate. Table D - 1 below is a revised table (with the non -City owned mains removed) for all pipes having a BRE score of 50 or above. The rank IDs were left as they were initially assigned to easily indicate which pipes were removed. Table D -1: Partial List of Water Mains Ranked by BRE Score with Non -City owned Mains Removed 1 Unique Pipe[Cr 4875 Material DI Diameter (in) 24 Year Installed 1970 Decade 1970s Length 0.07 Cohort 5 PoF 10.0 CoF 1 10.0 100.0 Estimated 1 190,577 27 4676 DI 24 1970 1970s 0.00 5 10.0 1 9.0 90.0 1 $2,273 28 4677 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $2,739 29 4684 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $4,667 30 4874 DI 24 1970 1970s 0.00 5 10.0 9.0 90.0 $778 31 20049 DI 24 1970 19706 0.00 5 10.0 9.0 90.0 $67 32 6583 DI 20 1989 1980s 0.00 5 10.0 8.0 80.0 $1,167 33 6584 DI 20 1989 1980s 0.12 5 10.0 8.0 80.0 $292,112 34 11300 DI 16 1988 19806 0.05 5 10.0 8.0 80.0 $114,882 140 NOVEMBER 2014 6513-152 City of Santa Ana, CA I WATER RATE STUDY 35 Unique PipelD 11301 Material DI Diameter (in) 16 Year Installed 1988 Decade 19805 Length (miles) 0.08 Cohort Rank 5 PoF Score 10.0 COF Score 8.0 BRE 80.0 Estimated Cost 5168,012 36 12188 DI 16 1988 19805 0.06 5 10.0 8.0 80.0 $139,008 37 4392 DI 18 1970 19705 0.00 5 10.0 7.0 70.0 $3,124 38 4682 DI 18 1970 1970s 0.11 5 10.0 7.0 70.0 $262,355 39 4683 DI 18 1970 1970s 0.13 5 10.0 7.0 70.0 $294,800 40 4393 DI 18 1970 1970s 0.05 5 10.0 7.0 70.0 $117,211 41 4394 DI 18 1970 1970s 0.27 5 10.0 7.0 70.0 $616,296 42 4598 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,787 43 11209 DI 18 1970 19706 0.17 5 10.0 7.0 70.0 $398,641 44 11210 DI 18 1970 1970s 0.17 5 10.0 7.0 70.0 $382,005 45 11233 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $29,915 46 11234 DI 18 1970 1970s 0.13 5 10.0 7.0 70.0 $287,779 47 11235 DI 18 1970 19706 0.00 5 10.0 7.0 70.0 $3,164 48 11306 DI 16 1988 19805 0.11 5 10.0 7.0 70.0 $240,656 49 12187 DI 16 1988 1980s 0.17 5 10.0 7.0 70.0 $369,752 50 21095 DI 16 1988 1980s 0.00 5 10.0 7.0 70.0 $5,385 51 20030 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,832 52 20038 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $16,826 53 20047 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $10,293 54 20065 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $3,017 55 21077 DI 16 1988 1980s 0.00 5 10.0 7.0 70.0 $1,604 56 34190 DI 18 1970 1970s 0.06 5 10.0 7.0 70.0 $128,966 57 34192 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $27,236 58 34194 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $14,269 59 34196 DI 18 1970 1970s 0.00 5 10.0 7.0 70.0 $2,481 60 34198 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $13,853 61 34200 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $28,552 62 34202 DI 18 1970 1970s 0.01 5 10.0 7.0 70.0 $19,656 63 34203 DI 18 1970 1970s 0.02 5 10.0 7.0 70.0 $51,389 64 5200 Cl 20 1928 Pre 1930 0.08 3 7.6 9.0 68.4 $195,278 65 11127 CI 20 1906 Pre 1930 0.09 3 7.6 9.0 68.4 $225,069 66 11129 CI 20 1906 Pre 1930 0.07 3 7.6 9.0 68.4 $160,216 67 4856 CI 20 1956 1950s 0.07 3 6.8 9.0 61.1 $164,013 68 5603 CI 20 1920 Pre 1930 0.06 3 7.6 8.0 60.8 $141,695 69 5604 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $8,395 70 5243 CI 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $2,676 71 5244 Cl 20 1928 Pre 1930 0.05 3 7.6 8.0 60.8 $128,445 72 5392 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $2,769 73 5550 Cl 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $16,963 74 5551 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $3,558 75 5552 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $931 76 5553 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $1,112 77 5599 Cl 20 1920 Pre 1930 0.05 3 7.6 8.0 60.8 $120,178 78 5600 Cl 20 1928 Pre 1930 0.04 3 7.6 8.0 60.8 $107,387 79 5601 CI 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $16,475 80 5602 CI 20 1920 Pre 1930 0.06 3 7.6 8.0 60.8 $140,924 81 5921 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $3,301 82 5922 CI 20 1920 Pre 1930 0.13 3 7.6 8.0 60.8 $312,849 83 11125 CI 20 1920 Pre 1930 0.10 3 7.6 8.0 60.8 $251,192 87 13150 CI 20 1906 Pre 1930 0.06 3 7.6 8.0 60.8 $139,340 88 13152 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $4,651 BLACK & VEEATCH I Appendix D. City-Owned Mairs A: -'vsl, 65B -153 141 f@7 Y/AiEF FATE STUDY I City of Santa Ana, CA 89 Unique r 13153 CI Diameter 20 1920 Decade Pre 1930 0.05 3 7.6 8.0 60.8 $129,504 90 13155 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $6,893 91 13158 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,539 92 13160 CI 20 1920 Pre 1930 0.06 3 7.6 8.0 60.8 $142,078 93 13163 CI 20 1906 Pre 1930 0.06 3 7.6 8.0 60.8 $133,936 94 19913 CI 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $1,652 95 19914 Cl 20 1928 Pre 1930 0.00 3 7.6 8.0 60.8 $667 96 19975 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $6,758 97 19980 CI 20 1928 Pre 1930 0.01 3 7.6 8.0 60.8 $18,671 98 19993 CI 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $8,659 99 20007 CI 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $4,307 100 20008 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,121 101 20009 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,118 102 20010 CI 20 1906 Pre 1930 0.00 3 7.6 8.0 60.8 $1,179 103 20020 CI 20 1920 Pre 1930 0.01 3 7.6 8.0 60.8 $31,678 104 20034 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,118 105 20035 CI 20 1920 Pre 1930 0.00 3 7.6 8.0 60.8 $1,121 106 4353 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $2,946 107 4377 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $373 108 7776 DI 16 1988 19805 0.01 5 10.0 6.0 60.0 $30,422 109 998 DI 16 1970 1970s 0.01 5 10.0 6.0 60.0 $12,482 110 4305 DI 16 1970 1970s 0.01 5 10.0 6.0 60.0 $29,577 111 4306 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $431 112 8943 DI 16 1988 19805 0.01 5 10.0 6.0 60.0 $24,441 113 11187 DI 16 1979 1970s 0.02 5 10.0 6.0 60.0 $53,560 114 11307 DI 16 1988 19806 0.12 5 10.0 6.0 60.0 $254,573 115 11482 DI 16 1988 19805 0.00 5 10.0 6.0 60.0 $2,668 116 11483 DI 16 1988 19805 0.01 5 10.0 6.0 60.0 $11,505 117 11484 DI 16 1988 19805 0.00 5 10.0 6.0 60.0 $1,351 118 11485 DI 16 1988 1980s 0.02 5 10.0 6.0 60.0 $49,428 119 11486 DI 16 1988 1980s 0.00 5 10.0 6.0 60.0 $8,626 120 12186 DI 16 1988 19805 0.00 5 10.0 6.0 60.0 $837 121 21099 DI 16 1988 19805 0.00 5 10.0 6.0 60.0 $1,509 122 21747 DI 16 1970 1970s 0.00 5 10.0 6.0 60.0 $6,123 123 38192 CI 18 1954 19505 0.01 3 6.9 8.0 55.1 $14,088 124 4855 CI 20 1956 1950s 0.00 3 6.8 8.0 54.3 $2,524 128 4689 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $4,467 129 4690 DI 12 1989 1980s 0.02 5 10.0 5.0 50.0 $36,392 130 4694 DI 14 1982 19805 0.00 5 10.0 5.0 50.0 $9,883 131 4183 DI 12 1989 19805 0.00 5 10.0 5.0 50.0 $636 132 4184 DI 12 1989 19805 0.03 5 10.0 5.0 50.0 $50,949 133 4845 DI 12 1989 19805 0.12 5 10.0 5.0 50.0 $230,867 134 7128 DI 12 1988 19806 0.00 5 10.0 5.0 50.0 $1,271 135 7129 DI 12 1988 19805 0.00 5 10.0 5.0 50.0 $2,964 136 7130 DI 12 1988 19805 0.08 5 10.0 5.0 50.0 $153,953 137 7863 DI 12 1987 19805 0.00 5 10.0 5.0 50.0 $164 138 11392 DI 12 1989 19805 0.02 5 10.0 5.0 50.0 $38,226 139 11393 DI 12 1989 19805 0.03 5 10.0 5.0 50.0 $56,080 140 13145 DI 12 1987 1980s 0.05 5 10.0 5.0 50.0 $91,806 141 19868 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $464 142 19992 DI 12 1989 1980s 0.00 5 10.0 5.0 50.0 $1,362 65B -154 NOVEMBER 2014 City of Santa Ana, CA I WATER RATE STUDY R &R Strategy Groups and CIP Budgeting The risk prioritization table just presented identifies pipe segments having the highest BRE score. Since this score is based on the product of PoF times CoF factors, it gives equal consideration for both factors. Typically, different R &R strategies are applied to address these two considerations. Based on the BRE heat map graphic results, the ranked assets were then grouped into logical R &R strategies. Figure D - 5 shows the same BRE heat map graphic as before, but color coded by strategy group. Figure D - 6 shows a map of the City -owned mains color -coded by Strategy Group (A -Z). Table D - 2 defines each of these groupings and provides additional summarizations and recommendations. Figure D - 5: BRE Heat Map Graphic by Cost and R &R Strategy Groups for City -owned Mains 30 L 9 FO 8 LL O 7 y 6 U C 5 3 4 Cr OJ 3 N = 2 O U 1 Probability of Failure 1 2 3 4 5 6 7 8 9 10 Group .3 $2. ° $6.1 $0°{2 $00' $0.0 $0.0 $0.0 $01 $0.0 $0.6 B $0.4 $0.1 $0.0 $0.0 $1.9 $U $0.7 C $0.3 $2.3 $6.1 $6.4 $0.1 $0.0 $0.0 $0.0 $0.0 $3.3 D $1.1 $4.6 $16.4 $9.2 $0.2 a 0 $0.9 $0.0 $0.5 E $4.3 $3.0 $2.1 $16.9 $2.5 $14.8 $10.9 $3.4 $0.0 $0.8 F $20.9 $17.5 $11.7 $55.7 $6.7 $44.8 $21.3 $10.9 $0.9 $5.4 $4.1 $1.9 $3.9 $22.0 $1.2 $4.8 $3.1 $4.2 $0.9 $0.9 l $38.7 $25.1 $15.3 $91.4 $12.8 $35.5 $18.9 $11.5 $3.4 $4.9 y $1.7 $6.0 1 $9.2 $75.2 $24.5 $54.3 $47.4 $26.8 $4.0 $3.0 2 Millions of Dollars Total Cost: $888.8 BLACK & VEATCH I Appendix R Cary -Owned Malns Analvs�, 65B -155 144 WATER RATE STUDY I City of Santa Ana, CA Figure D - 6: Map of City -owned Mains color -coded by Strategy Group (A -Z) II ni -t t 0 3,000 6,000 12,000 Ft tt f IT /ANA s Main by BRIE Score City of Santa Ana, CA — Group A Probability of Failure Water l Wastewater Group m '° , 2 3 4 S ° , 9 Sae $ao 9 ,° System Analysis - 2072 Group C Group D ? ° $0.2 $ae Group E LL ° sob $x9 Sao $a1 -- Group F G $03 5x3 5x3 $5a $0.1 Sap $oA $oe 53.3 ( Off ij 65B.157 ƒ \| /]§ E; ] |][ !$!f!!) !!) ]!) ]!) \\ \} \ \ E - )) )) |)j v! o w 16 § ) }o - }\ \ \\ \ \\ \} \} \\ /\ Lq \ E ! ¥ ! ! : § § ■ ! K ! , ! 65B.157 46 WATER RATE 5TU7Y I City of Santa Ana, CA Water System Capital Improvements Program Based on the proposed strategy presented above and the CAMPS analysis for non - distribution system assets, Table D - 3 presents the resulting capital improvements program costs for City -owned assets only. Table D - 3: City -owned Water System Capital Improvements Program [ *] DISTRIBUTION SYSTEM NON- DISTRIBUTION SYSTEM Master Planned Reactive Year Plan Inspection R/R R/R Boosters Reservoirs Other TOTAL 1 $400,000 $1,301,000 $0 $1,413,000 $1,007,300 $1,153,300 $717,100 $5,991,700 2 $3,342,500 $1,455,400 $1,430,200 $1,223,100 $1,376,900 $8,828,100 3 $1,116,100 $2,472,800 $1,499,100 $1,470,500 $1,703,000 $1,471,800 $9,733,300 4 $2,740,100 $1,544,000 $1,752,000 $4,439,100 $1,520,100 $11,995,300 5 $2,912,300 $1,590,300 $1,809,500 $1,596,800 $2,227,800 $10,136,700 *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 65B -158 NOVEMBER 2014 Exhibit 2 65B -159 City of Santa Ana, CA I SEWER RATE STUDY Table of Contents ExecutiveSummary .................................................................................... ..............................8 Summary of Findings and Recommendations ........................................... ..............................8 GuidingPrinciples ........................................................................................... ............................... 8 Sewer Enterprise Capital Program ............................................................ ..............................9 Sewer Enterprise Financial Plan .............................................................. .............................12 Sewer Utility Cost of Service Allocations .............................................. .............................15 ProposedSewer Rates .................................................................................. .............................15 Introduction................................................................................................ .............................18 Background............................................................................................................ .............................18 Purpose.................................................................................................................... .............................18 Scopeof Work ....................................................................................................... .............................19 Overview of Legal and Industry Best Practices for Cost -Of- Service Studies ............ 19 Proposition13 .................................................................................................. .............................19 Proposition218 ............................................................................................... .............................19 Proposition26 ................................................................................................ ............................... 20 Government Code Section §54999.7 .................................................... ............................... 20 Generally Accepted Rate - Setting Standards ...................................... ............................... 20 Disclaimer............................................................................................................. ............................... 21 SewerRate Study ....................................................................................... .............................22 Revenue and Revenue Requirements ........................................................ ............................... 22 Accounts and Customer Usage Projections ........................................ ............................... 22 RevenueProjections ...................................................................................... .............................23 Operation and Maintenance Projections ............................................. ............................... 24 Capital Improvement Program ............................................................... ............................... 25 CapitalFund Financing ............................................................................... ............................... 32 OperatingFund Financing ......................................................................... ............................... 33 Summary of Revenues, Expenditures, and Obligations ................ ............................... 36 Test Year Revenue Requirements .......................................................... ............................... 39 CostOf Service Allocations ............................................................................ ............................... 40 Functional Cost Components ..................................................................... .............................41 Allocation to Cost Components ................................................................. .............................41 Unitsof Service ................................................................................................ .............................43 Cost of Service Allocations .......................................................................... .............................45 Proposed Rate Adjustments .......................................................................... ............................... 48 ExistingRates ................................................................................................... .............................49 BLACK & VEATCH I Table of Contents 65B -160 Proposed Rates SEWER RATE STUDY I City of Santa Ana, CA 49 RevenueSufficiency ..................................................................................... ............................... 50 TypicalBill Impacts ...................................................................................... ............................... 51 Summary............................................................................................................... ............................... 53 Appendix A: Refurbishment & Replacement Program .............. ............................... 54 Capital Asset Valuation and Refurbishment and Replacement Needs EvaluationMethodology ................................................................................. ............................... 55 Methodology................................................................................................... ............................... 55 Development of Asset Class Library ..................................................... ............................... 55 Development of Refurbishment and Replacement Schedules and Costs .................. 57 Development of Valuation of Capital Assets ........................................... ............................... 58 Capital Asset Inventory, Asset Class Library and Replacement Schedule ............................... 76 DatabaseDevelopment .................................................................................... ............................... 58 AssetInventory .............................................................................................. ............................... 58 Inventory Data Sources .............................................................................. ............................... 58 Asset Class Library Contents .................................................................... ............................... 59 Sewer Infrastructure System ................................................................... ............................... 59 Non-System- Specific Assets ...................... .. .... —..................................................................... 61 Refurbishment Intervals and Schedule ............................................... ............................... 62 Capital Asset Valuation and Schedule of R &R Needs and Estimated Costs .............. 62 Capital Asset Valuation Summary .......................................................... ............................... 62 Total System Capital Asset Schedule of R &R Needs ....................... ............................... 63 Appendix B: Sewer CIP Prioritization Process ................................ .............................65 Introduction....................................................................................................... .............................. — 66 CIP for Outside Plant Assets .......................................................................... ............................... 66 General Assumptions and Observations .................................................. ............................... 68 Sewer Collection System CIP Analysis ...................................................... ............................... 69 SewerSystem Statistics .............................................................................. ............................... 69 CCTV Observations, Sewer Spills and Repairs .................................. ............................... 76 Probability of Failure Analysis (PoF) ................................................... ............................... 90 Consequence of Failure Analysis (CoF) ............................................... ............................... 99 Business Risk Exposure ( BRE) .................................. ............................... ............................103 Appendix C: Inspection and Replacement Cost Calculation ..... ............................106 Introduction........................................................................... ............................... ............................107 Sewer Collection System R &R Prioritization..........— .............................. ............................109 BRE Replacement Prioritization .................................... ............................... ............................110 R &R Strategy Groups and CIP Budgeting ................... ............................... ............................113 CIP Project Identification .................................................. ............................... ............................118 NOVEMBER 2014 65B -161 City of Santa Ana, CA I SEWER RATE STUDY Appendix D: City -Owned Mains Analysis ......... ............................... ............................123 Revised Analysis ............124 Business Risk Exposure ( BRE) .................................. ............................... ............................124 Inspection and Replacement Cost Calculation .... ............................... ............................124 BRE Replacement Prioritization ............................... ............................... ............................127 R &R Strategy Groups and CIP Budgeting .............. ............................... ............................127 Sewer System Capital Improvements Program . ............................... ............................130 BLACK & VEATCH I Table of Contents 65B -162 IN SEWER RATE STUDY I City of Santa Ana, CA LIST OF TABLES Table ES - 1: Annual Inspection and Replacement Budget Table (2012 Dollars) .................................................................................................. .............................12 Table ES - 2: Economic Impact of Delaying Proposed CIP ....................... .............................14 Table ES - 3: Proposed Revenue Adjustments .............................................. .............................14 Table ES - 5: Proposed Rates for Scenario 1- FY 14/15 through FY 18/19 .................16 Table ES - 5: Typical Monthly Bills for City Customers (Rates Effective March 1, 2015) ................................................................................................. .............................16 Table 1: Average Number of Accounts .......................................................... ............................... 22 Table 2: Projected Billed Sewage Volumes .................................................. ............................... 23 Table 3: Existing Rates (Effective July 2010) .............................................. ............................... 23 Table 4: Revenues under Existing Rates ....................................................... ............................... 24 Table 5: Operation and Maintenance Expenses ......................................... ............................... 25 Table 6: NASCCO PACP Rating System .......................................................... ............................... 27 Table 7: Annual Inspection and Replacement Budget Table ( 2012 $) ............................. 31 Table 8: Capital Improvement Program based on System Risk Profile .......................... 31 Table 9: CIP Financing Plan - Status Quo Scenario ................................... ............................... 32 Table 10: CIP Financing Plan - Scenario 1 .................................................... ............................... 33 Table 11: Operating Fund Financing Plan - Status Quo Scenario ...... ............................... 34 Table 12: Operating Fund Financing Plan - Scenario 1 ........................... ............................... 35 Table 13: Economic Impacts of Delaying Proposed CIP ......................... ............................... 38 Table 14: Proposed Rate Adjustments - Scenario 1 ................................ ............................... 38 Table 15: Total Costs to be Recovered from Rates ................................... ............................... 40 Table 16: Cost of Service Allocation Percentages ........................................ .............................41 Table 17: Allocation of 0 &M Expenses to Functional Cost Components in Thousandsof Dollars ....................................................................... .............................42 Table 18: Allocation of Net Capital Costs to Functional Cost Components in Thousandsof Dollars ....................................................................... .............................43 Table 19: Units of Service for TY 14/ 15 .......................................................... .............................44 Table 20: Unit Costs of Services with Costs in Thousands of Dollars .............................. 45 Table 21: Allocation of COS to Customer Cl asses ........................................ .............................47 Table 22: Comparison of Adjusted COS with Revenues under Existing Rates ............. 48 Table 23: Proposed Rates for FY 14/15 through FY 18/19 - Scenario 1 .......................49 Table 24: Revenues under Proposed Rates (Option B) for TY 14/15 (Effective March 1, 2015) ............................................................ ............................... 51 Table 25: Typical Bills for Single Family Residential Customer (Rates Effective March 1, 2015) .............................................................. ............................... 51 v 65B -163 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Table A - 1: Sewer System Expected Useful Lives ..................................... ............................... 59 Table A - 2: Sewer Pipe Replacement Sizes and Costs ............................ ............................... 60 Table A - 3: Sewer Pumps /Motors Replacement Costs - 2012 dollars ........................... 61 Table A - 4: Misc. Assets Replacement Costs - 2012 dollars ................ ............................... 61 Table A - 5: Non System- Specific Expected Useful Lives. .................................... ................. 61 Table A - 6: Generator Replacement Costs - 2012 dollars .................... ............................... 61 Table A - 7: Miscellaneous Assets Replacement Costs - 2012 dollars ............................. 61 Table A - 8: Assets Refurbishment Intervals and Costs - 2012 dollars ........................... 62 Table A - 9: Asset Valuation by System .......................................................... ............................... 63 Table A - 10: Total Modeled R &R 30 Year Costs ........................................ ............................... 64 Table B - 1: Pipe Vintages by Install Decade ............................................... ............................... 74 Table B - 2: Summary of PoF Criteria used in this Analysis .................. ............................... 97 Table B - 3: Summary of CoF Criteria used in this Study ........................ ............................101 Table C - 1: Sewer Pipe Inspection and Replacement Costs (2012 dollars) ...............107 Table C - 2: Partial List of Sewer Main Pipe Segments Ranked by BRE Score ............ 110 Table C- 3: Sewer System R &R Summarizations and Recommendations ....................115 Table C - 4: Annual Inspection and Replacement Assumption Plans . ............................117 Table C - 5: Annual Inspection and Replacement Budget Table .......... ............................117 Table C - 6: Summary of Inspection Project Footages .............................. ............................120 Table C - 7: Summary of Inspection Project Costs ...... ............................... ............................120 Table C - 8: Summary of Group A and B Replacement Projects ........... ............................122 Table D - 1: Partial List of Sewer Mains Ranked by BRE Score with Non -City ownedMains Removed .................................. ............................... ............................127 Table D - 2: City -Owned Sewer System R &R Summarizations and Recommendations (2012 dollars). ................................... ................................... 129 Table D - 3: City -Owned Sewer System Capital Improvements Program [ *] ..............130 BLACK & VEATCH I Table of Contents 65B -164 V SEWER RATE STUDY I City of Santa Ana, CA LIST OF FIGURES Figure ES - 1: Installed Mains by Decade ........................................................ .............................10 Figure ES - 2: Criticality Heat Map Graphic by Cost and R &R Strategy Groups ........... 11 Figure ES - 3: Projected Revenues and Revenue Requirements - No Revenue Increases............................................................................................... .............................13 Figure ES - 4: Monthly Single Family Residential Bills (15 HCF usage ) ..........................17 Figure 1 Mains by Installation Decade ........................................................... ............................... 26 Figure 2: QSR Ratings by Install Year ............................................................. ............................... 28 Figure 3: QMR Ratings by Install Year ........................................................... ............................... 28 Figure 4: Criticality Heat Map Graphic by Cost and R &R Strategy Groups .................... 30 Figure 5: Projected Revenues and Revenue Requirements - No Revenue Increases, Status Quo .................................................................... ............................... 37 Figure 6: Monthly Single Family Residential Bills (25 HCF usage) .... ............................... 53 Figure A- 1: Annual Capital Asset R &R Needs for Water and Sewer Assets over30 -Year Period ....................................................................... ............................... 63 Figure A- 2: Annual Capital Asset R &R Needs for the Sewer System ............................... 64 Figure B- 1: Example Risk Heat Map Graph Relating PoF and CoF Scores .................... 68 Figure B- 2: Sewer Pipe Material Percentages (by Length) .................. ............................... 69 Figure B- 3: Map of Sewer Mains Color -Coded by Pipe Material ........ ............................... 70 Figure B- 4: Map of Sewer Mains that have been Lined ......................... ............................... 71 Figure B- 5: Sewer Pipe Diameters by Miles Installed ............................ ............................... 72 Figure B- 6: Map of Sewer Mains Color -Coded by Pipe Diameter ...... ............................... 73 Figure B- 7: Annual and Cumulative Miles of Installed Pipe by Year ............................... 74 Figure B- 8: Map of Sewer Mains Color Coded by Pipe Install Decade ............................ 75 Figure B- 9: Map of Sewer Mains Color -Coded by CCTV Inspection Year ...................... 77 Figure B- 10: Map of the Identified EMLs, FSEs and Spills ...................... .............................79 Figure B -11: Map of the Sewer Main Repairs ............................................ ............................... 80 Figure B- 12: QSR Ratings by Percent of Total System Main Length ............................... 82 Figure B- 13: Length of Pipe Installed by Year and by QSR Ratings .. ............................... 83 Figure B- 14: Map of Mains Colored by QSR Grade (Raw QSR Grading Method) ............................................................................................... ............................... 84 Figure B- 15: Map of Sewer Mains with High QSR Scores and Repairs ........................... 85 Figure B- 16: Map of Sewer Mains Color -Coded by Overall QSR Segment Score..................................................................................................... ............................... 87 Figure B- 17: QMR Ratings by Percent of Sewer System Length ........ ............................... 88 V 65B -165 NOVEMBER 2014 City of Santa Ana, CA SEWER RATE STUDY Figure B- 18: Map of Sewer Mains Color -Coded by QMR Grades ....... ............................... 89 Figure B- 19: Percent of Mains with High Raw QSR Grades by Pipe Install Year....................................................................................................... ............................... 90 Figure B- 20: Percentage of Sewer System Pipelines by Cohort Group .......................... 92 Figure B- 21: Map of Sewer Mains Color -Coded by Cohort Rank ....... ............................... 93 Figure B- 22: Map of Sewers that have not had CCTV Inspections .... ............................... 95 Figure B- 23: Distribution of Sewer Pipeline PoF Scores ....................... ............................... 97 Figure B- 24: Map of Sewer Mains Color -Coded by Total PoF Score . ............................... 98 Figure B- 25: Sewer System Pipelines CoF Scores by Diameter .......... ............................... 99 Figure B- 26: Pipeline Length by Number of Upstream Customer Laterals ................100 Figure B- 27: Distribution of Sewer Pipeline CoF Scores ........................ ............................101 Figure B- 28: Map of Sewer Mains Color -Coded by CoF Scores ........... ............................102 Figure B- 29: Distribution of Sewer Pipeline BRE Scores ....................... ............................103 Figure B- 30: Sewer System BRE Heat Map Graphic by Miles of Main ..........................104 Figure B- 31: Map of Sewer Mains Color -Coded by BRE Scores ........... ............................105 Figure C- 1: BRE Scores and Costs for Sewer Collections System ....... ............................108 Figure C- 2: BRE Heat Map Graphic by Main Replacement Cost (2012 dollars) .......109 Figure C- 3: BRE Heat Map Graphic by Cost and R &R Strategy Groups ........................114 Figure C- 4: Sewer System Map of R &R Strategy Groups ........................ ............................116 Figure C- 5: Annual Inspection and Replacement Budget Graph ......... ............................118 Figure C- 6: Sewer System Map Showing Suggested Inspection Projects ....................119 Figure C- 7: Map of CIP Replacement Projects for Groups A and B .... ............................121 Figure D - 1: Sewer System BRE Heat Map Graphic by Miles of City -Owned SewerMains ........................................................ ............................... ............................124 Figure D - 2: BRE Scores and costs for City -Owned Sewer Collection System (2012 dollars) ..................................................... ............................... ............................125 Figure D - 3: BRE Heat Map Graphic by City -Owned Main Replacement Cost (2012 dollars).. ................................................................................................... .......... 126 Figure D - 4: BRE Heat Map Graphic by Cost and R &R Strategy Groups for City -Owned Mains... ............................................... - ................................................... 128 BLACK & VEATCH I Table of Contents 65B -166 Vii SEWER RATE STUDY I City of Santa Ana, CA Executive Summary 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 (SBx7 -7). SUMMARY OF FINDINGS AND RECOMMENDATIONS A number of factors influence the financial condition of the Sewer Enterprise. Rates charged for service at a minimum should be adequate to cover operating and repair and replacement costs and to meet outstanding debt covenant requirements. Sound financial operations also include maintaining a capital reserve to address unplanned and emergency capital requirements. Financing major capital expenditures is dependent upon the policies and practices of the City. Cash financing capital expenditures minimizes the cost of the improvements. While debt financing increases the cost, it spreads those costs over the life of the facility, allocating the costs to the actual users of the facility. Changes in the financing of capital expenditures may affect the financial condition of the Sewer Enterprise and any necessary rate adjustments. The City of Santa Ana has engaged Black & Veatch to review the financial condition of the Sewer Enterprise, to conduct a cost of service analysis, and to design wastewater rate schedules that address cost -of- service and revenue stability issues. This is the City's first comprehensive review of needs since 1995. Summarized herein are the principal findings and recommendations of the study. Guiding Principles It is the intent of the City to operate its Sewer Utility as business enterprises. As part of this philosophy, the City asked Black & Veatch to provide comments and recommendations on the following guiding principles: 8 • Should the Sewer Utility be operated as a "neutral" enterprise? In general, enterprise funds are defined as self- supporting entities. These funds have separate revenue streams based on provided services, which allows them to have the capacity to issue revenue - backed bonds and generate sufficient revenues to cover operational and capital costs. Although city enterprises 65B -167 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY provide distinct services to its ratepayers, they are also dependent on services provided by General Fund operations. For example, most wastewater departments share human resources, finance, and legal services with other city departments. As such, it is a common practice to allocate shared General Fund costs to all benefiting departments. With respect to the City, the Wastewater Enterprise Fund currently pays its proportionate portion of allocated General Fund costs as determined through the City's indirect cost allocation model. These General Fund costs are business costs that allow the utilities to provide services to the City's residents. • What is a prudent level of operating reserves? The City is formulating a formal operating reserve policy. In light of this, Black & Veatch recommends that the City establish a 90 -days target for an operating reserve. This benchmark is a typical one used by many utilities, including many of the City's surrounding communities. The recent collapse of the nation's financial markets, coupled with the uncertainty of Southern California's water supply situation has led to a change in this benchmark level. Ratings agencies such as Moody's and Standard's & Poor's are now suggesting that utilities have operating reserves between 180 and 360 days' worth of operating expenses. An alternative reserve policy approach is to maintain approximately 90 days of operating expenses together with a $500,000 to $1,000,000 emergency reserve. Higher reserve levels helps the City attain better bond ratings, which in turn, leads to lower borrowing costs. Black & Veatch's proposed long -term financial plan provides a path for meeting the 90 -day operational level and establishing a $1,000,000 emergency reserve. • What is an appropriate level for capital reserves? In general, sewer utilities tend to underfund capital reserves, such as those for rehabilitation and replacement (R &R). It has only been within the last decade or so that agencies are seeing the ramifications of not having adequate R &R reserves on hand to address aging infrastructure needs. In the absence of a depreciation study or condition assessment, a general guideline is for utilities to set aside an amount equivalent to one year of depreciation expense. This reserve amount calls for a physical transfer of cash to a reserve account — it is not the same as the depreciation expense recorded on the Income Statement. The latter is not a cash requirement, unlike the former situation. Black & Veatch recommends that as the Sewer Utility becomes financial stable, R &R reserve funds should be established and funded. As cash is available, the annual funding level should eventually equal one -year of depreciation expense (approximately $500,000). Sewer Enterprise Capital Program Figure ES 1 illustrates the distribution of the City's sewer mains by installation decade. The mains included in the analysis are the City's collection system and do not include Orange County Sanitation District (OCSD), other agency, or private sewer lines. As seen from the figure, over 86 percent of the City's sewer mains were installed pre 1980 and about 90 percent of the lines are over 50 years of age. From Figure ES 1 it is clear that the City will soon face a major reinvestment period as sewer mains reach the end of their useful life. In the absence of any condition assessments, the industry standard for main replacement is 1 percent of the system per year. If we apply this approach to the City's system, the result is an annual replacement rate of 4 miles of mains. The City is currently replacing at a rate of 0.1 percent (0.38 miles). BLACK &VEATCH I Executive Summary 65B -168 9 Figure ES - 1: Installed Mains by Decade :oo a 700 LL 0 v 600 c 500 0 r c 400 v m 300 m Y N 5 200 N C 100 0 SEWER RATE STUDY I City of Santa Ana, CA In order to produce an R &R program, Black & Veatch conducted a high -level condition assessment review using City - provided Geographic Information System (GIS) data and available condition reports for the water system. Black & Veatch evaluated the available data and held two workshops with engineering and maintenance staff to develop weighting factors for the asset assessment. Combining the condition reports and workshop results, Black & Veatch determined the Probability of Failure (PoF) and the Consequence of Failure (CoF). The PoF is a measurement of the likelihood that a particular asset will fail. The PoF score is arrived at by weighing factors such as the physical properties of the asset (material, age, etc.), the conditions of the surrounding environment (soil conditions, earthquake faults, etc.), and operational history. The CoF assesses the relative importance of each pipe in terms of delivery levels of service, economics, and health and safety. Criteria weighed in determining a CoF score include, but are not limited to, pipe size, critical customer impacts, and proximity to major roads. The product of the PoF and the CoF results in the Business Risk Exposure (BRE) — the higher the BRE score, the higherthe likelihood that the asset requires attention. Without detailed condition assessment information, Black & Veatch cannot quantify the absolute risk of failure; instead, the analysis conducted herein provides a picture of the relative risk of failure. In other words, the analysis indicates which assets are more likely to fail in relation to other system assets. On its own, the BRE score is not sufficient to develop a Capital Improvement Program (CIP). Consequently, Black & Veatch developed R &R strategies reflecting how public agencies tend to conduct work — grouping projects by area. Based on criticality criteria (PoF and CoF), Black & Veatch developed a list of projects to address immediate system needs over the next 5 years. As shown in Figure ES 2 and explained in more detail in Appendices A through D, the City's sewer system has no extremely critical condition (red zone — highest risk of failure) lines. There is 0.1 miles ($0.1 million) in highly critical condition (gold zone), 3.8 miles ($3.7 million) that are critical (yellow zone), and 10 65B -169 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY another 3.8 miles ($4.1 million) in danger of imminent failure (green zone). On a positive note, the City has 320 miles of mains ($316.7 million) that are in the lower category for failure (white zone). Figure ES -2: Criticality Heat Map Graphic by Cost and R &R Strategy Groups- Excludes OCSD Lines Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 L 3 9 M 8 LL 4- 7 O 6 U C 5 OJ 4 0) 3 2 O V 1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Z $0.0 $0.2 $0.0 $0.0 $0.0 $0.5 $0.0 $0.0 $3.6 $0.4 $0.7 $0.0 $3.4 $0.0 1$0.6$0.3 $0.0 $0.2 $6.1 $0.4 $0.8 $0.1 $3.8 $0.1 $0.0 $2.0 $15.7 $2.5 $2.7 $3.0 $5.5 $2.2 $0.4 $0.5 $3.4 $0.7 $0.6 1 $0.5 $1.0 $0.6 $0.2 $0.2 $0.1 $0.4 $5.2 $1.2 $1.2 $1.0 $2.4 $0.2 $0.2 $0.0 $0.1 $0.8 $8.4 $1.5 $1.6 $1.8 $2.1 $1.4 $0.2 $0.1 $0.3 $2.6 $27.8 $4.4 $4.3 $4.5 $5.7 $3.1 $1.1 $0.3 $0.8 $9.2 $118.7 $24.1 $17.1 $17.1 $28.7 $9.5 $4.8 $1.1 $2.0 Millions of Dollars Extremely Critical B 'Highly Critical Criticant Fal- Likelihood Immineilure Potential Failure Critical - Consequence High Consequence High Consequence Unknown Low Criticality C D E F Y Z Total Cost: $380.1 Table ES 1 summarizes the results of the preliminary asset condition evaluation and indicates that over the next 5 years, the City should invest approximately $6.8 million (2012 dollars) in its sewer system to catch -up with deferred maintenance activities (replacement of all assets in colored zones). The $380.1 million value in Figure ES 2 represents the cost of repairing or replacing the portion of main impacted. It does not represent the replacement cost of the entire system. BLACK & VEATCH I Executive Summary 65B -170 11 SEWER RATE STUDY I City of Santa Ana, CA Table ES - 1: Annual Inspection and Replacement Budget Table (2012 Dollars) Yearl $541,700 $788,700 $1,330,400 $1,330,400 Year2 $541,700 $788,700 $1,330,400 $2,660,800 Year3 $261,000 $875,400 $1,136,400 $3,797,200 Year $1,521,600 $1,521,600 $5,318,800 Year 5 $1,521,600 $1,521,600 $6,840,400 Total $1,344,400 $5,496,000 $6,840;400 After the 5 -year Study Period, Black & Veatch recommends that the CIP include an annual level of R &R main replacements. At a minimum, Black & Veatch suggests that the City invest approximately $4 million annually into infrastructure needs. Sewer Enterprise Financial Plan In developing the financial plan for the Sewer Enterprise, Black & Veatch analyzed the level of revenue adjustments needed to support the operational and capital needs of the utility. As a point of comparison, Black & Veatch also analyzed the impact on the utility should the City elect to forego rate increases and maintain the same level of infrastructure investment. As seen in Figure ES 3, the Sewer Enterprise does have sufficient cash on hand to meet ongoing 0 &M obligations and address a small amount of infrastructure needs, but it does not have sufficient funds to make emergency repairs or address critically affected assets. By FY 15/16, the Sewer Enterprise's revenue requirements will exceed revenues and will require the Enterprise to dip into its working capital reserve. The annual deficit cash grows from ($1.8 million) in FY 15/16 to ($3.9 million) by FY 18/19 and creates an ending cash balance deficit of ($14.1 million). 12 [INTENTIONALLY LEFT BLANK] 65B -171 N0VE1VeEe zoi� City of Santa Ana, CAI SEWER RA i E STUDY Figure ES - 3: Projected Revenues and Revenue Requirements — No Revenue Increases 2015 2016 2017 2018 2019 ® O &M Expenses - Routine Capital Outlay c Transfers r•ab--Revenue — • Target Cash Balance Cash Balance Delaying CIP activities does stretch out available cash; however, continued deferral of needed CIP projects also increases the probability, consequence and cost of asset failure. As a rough approximation, Black & Veatch estimated the cost of continuing to defer CIP projects using the methodology set forth in the American Society of Civil Engineers' (ASCE's) 2012 Failure to Act Economic Report for Water (FAC Report). The FAC Report notes that in addition to the actual repair /replacement costs, there are costs associated with payment of claims to impacted households and businesses. Additionally, if projects are deferred by several years, there is an economic loss due to loss of jobs, lost work days, business closures, traffic delays, street repairs, contamination of receiving waters, etc. Table ES 3 summarizes the cost of not executing the proposed CIP using the FAC Report methodology. Note that Table ES 2 does not include the cost of replacing the asset nor does it include fines that the State may impose for violating Waste Discharge Requirements (WDRs) should sanitary sewer overflows (SSOs) occur. State enforcement actions for WDR violations include fines of $10,000 per day plus $10 per gallon spilled (for spills over 1,000 gallons), and mandated CIP activities through a consent decree. BLACK& VEATCH I Executive Summary 65B -172 13 Table ES - 2: Economic Impact of Delaying Proposed CIP Households SEWER RATE STUDY I City of Santa Ana, CA $129,700 - $1,078,500 Total household claim payments. Businesses $324,100 - $2,696,300 Total business claim payments. Local Economy $1,577,400 - $13,122,200 Range depends on the severity of breaks. Total $2,031,200 - $16,897,000 . Black & Veatch recommends that the Sewer Enterprise initiate a program that will help establish recommended reserve balances for both its operational and capital needs over the planning period, as well as a $1 million emergency fund. Given the level of infrastructure in critical condition, establishing an emergency fund to address unexpected main breaks would be prudent. For the analyses conducted herein, forecasted operations and maintenance (0 &M) expenses are based on an inflation rate of 2 percent for personnel, 4 percent for benefits, 3 percent for maintenance, 2 percent for general and administrative (G &A), and 5 percent for utilities. • Status Quo Scenario. Under the Status Quo Scenario, implementing no revenue increases over the planning period results in the Sewer Enterprise running a deficit starting in FY 2016. By the end of the planning period, the cumulative deficit position grows to ($14.1 million). • Scenario 1. The implementation of annual revenue increases allows the Sewer Enterprise to maintain a positive balance in the Operating Fund while still executing the proposed CIP. Table ES 3 summarizes the proposed revenue adjustments for the proposed scenario examined. All increases are effective July 1 of the fiscal year, except for FY 14/15, which has a March 1, 2015 effective date. Table ES - 3: Proposed Revenue Adjustments 14 March 2015 8.8% July 2015 8.8% July 2016 8.8% July 2017 8.8% July 2018 8.8% 65B -173 NOVEMBER 20 14 City of Santa Ana, CA I SEWER RATE STUDY Sewer Utility Cost of Service Allocations • The revenue requirements for a selected Test Year (TY) are allocated to customer classes utilizing a cost causative approach endorsed by the Water Environment Federation (WEF). • Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. • In this analysis, there are five primary cost components: (1) base flow or volume costs, (2) strength (Biological Oxygen Demand and Total Suspended Solids), (3) customer meter and billing costs, (4) Lateral Repair Program costs, and (5) Fats, Oils, and Greases Program costs. Proposed Sewer Rates Currently, the Sewer Enterprise recovers costs through a commodity -only rate structure, which can result in a volatile revenue stream. To increase revenue stability, Black & Veatch examined different combinations of fixed /variable rate structures. The purpose of these changes is to provide funds for specific capital or operating activities. For example, the Sewer Enterprise provides lateral repairs to all customers who request this service. Previously, the City provided this service when funds are available. For this rate study, the City provided the average cost for lateral repairs and the proposed alternative rate schedule includes a specific charge intended to fund this program. Black & Veatch is also proposing consideration of a capital recovery charge, intended to provide dedicated funds to address R &R needs. The rate schedule shown in Table ES 4 is for Scenario 1 and reflects the rates over the entire study period for Option A (maintain the same rate structure) and Option B (Proposed alternative structure). Black & Veatch recommends Option B as the preferred alternative. BLACK & VEATCH I Executive Summary [INTENTIONALLY LEFT BLANK] 65B -174 15 SEWER RATE STUDY I City of Santa Ana, CA Table ES - 4: Proposed Rates for Scenario 1- FY 14/15 through FY 18/19 M ®M®M®M®M®M® Option A- Existing Rate Structure Commodity Charge ($ /HCF) $0.345 $0.376 $0.031 $0.410 $0.034 $0.447 $0.037 $0.487 $0.040 $0.531 $0.044 All customers Flat 8i- Monthly Charge $13.80 $15.05 $1.25 $16.40 $1.35 $17.88 $1.48 $19.49 $1.61 $21.24 $1.75 Unmetered customers Option B - Proposed Alternative Structure Capital 80.9% 15 $5.18 $5.76 $0.59 Commercial 7.60% 50 $17.25 16.41 ($0.84) Food Service Establishment Recovery $0.50 $0.50 $0.55 $0.04 $0.59 $0.05 $0.65 $0.05 $0.70 $0.06 Charge ($ /month) Lateral Repair Program $0.70 $0.70 $0.76 $0.06 $0.83 $0.07 $0.90 $0.07 $0.98 $0.08 ($ /month) Commodity $0.345 0.304 ($0.041) $0.331 $0.027 $0.360 $0.029 $0.392 $0.032 $0.426 $0.034 Charge ($ /hcf) FOG Program ($ /month) $17.40 $17.40 $18.93 $1.53 $20.60 $1.67 $22.41 $1.81 $24.38 $1.97 Food Service accounts only hcf = hundred cubic feet Finally, Table ES 5 presents typical monthly bills for different customers in hundred cubic feet (hcf) per month. A comparison to surrounding cities for a single - family residential customer using 15 hcf (monthly) is shown in Figure ES 4. Table ES - 5: Typical Monthly Bills for City Customers (Rates Effective March 1, 2015) 111 Single Family Residential 80.9% 15 $5.18 $5.76 $0.59 Commercial 7.60% 50 $17.25 16.41 ($0.84) Food Service Establishment 2.52% 50 $17.25 $33.81 $16.56 Industrial 0.19% 500 $172.50 $153.30 ($19.20) 65B -175 NOVEMBER 2014 City of Santa Ana, CA -VVER RATE STUDY Figure ES-4: Monthly Single Family Residential Bills (15 HCF usage) a sr g a mi y' e ential Customer u Sewer Bill Ir11s'eIrrano WD ' City of Seal Beach South Coast WD City of Fullerton City of San Juan Capistrano Moulton Niguel WD Santa Margarita WD Irvine Ranch WD Laguna Beach CWD City of San Clemente City of Cypress City of Garden Grove City of Tustin City of Newport Beach City of Huntington Beach City of Brea Mesa WD City of Westminster City of La Habra City of Fountain Valley City of Santa Ana (Proposed) Yorba Linda WD City of Stanton City of Placentia City of Santa Ana (Existing) City of Anaheim City of Buena Park City of La Palma East Orange CWD Retail Zone City of Orange City of Long Beach $0 BLACK & VEATCH I Executive Summary $20 $40 J a [INTENTIONALLY LEFT BLANK] 65B -176 mo sinHCF n Average Survey Bill = $40.80 $60 $80 $10D I $120 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 City of Santa Ana, CA I SEWER RATE STUDY SCOPE OF WORK The City retained Black & Veatch to develop a multi -year financial plan, conduct a cost of service analysis and design rates for both of its enterprises. Presented herein are the results of a study of the projected revenues, revenue requirements, costs of service, and rates for sewer service. For purposes of this report, the study period is the five fiscal years beginning July 1, 2014 and ending June 30, 2019. Based on Proposition 218, agencies may not set rates in excess of 5 -year increments. Unless otherwise noted, references in this report to a specific year are for the City's year ending June 30. To avoid confusion between calendar and fiscal years, the term FY refers to the year beginning July 1 and ending June 30. Black & Veatch has projected revenues and revenue requirements for the study period based on a review of historical factors and the each enterprise's operating and capital budgets and financial policies. The study of revenue requirements recognizes projected operation and maintenance (0 &M) expense, establishment and /or maintenance of reserve funds, and capital financing requirements. Capital financing requirements include payments on outstanding bond issues as well as capital improvement expenditures met from annual revenues and available reserve funds. The Sewer Enterprise's cost of service used the Water Environment Federation (WEF) Manual of Practice No. (MOP) 27. This allocation methodology produces cost of service allocations recognizing the projected customer service requirements for the City. Black & Veatch designed the proposed rates in accordance with cost of service and local policy considerations. In addition, Black & Veatch also evaluated the extent to which the existing rate structure recovers revenues from customer classes in accordance with cost of service allocations. OVERVIEW OF LEGAL AND INDUSTRY BEST PRACTICES FOR COST -OF- SERVICE STUDIES Rate - setting procedures in California require that agencies responsible for imposing property - related charges must demonstrate a nexus between the cost of providing services and the services or benefits received. The state of California considers water and wastewater services as property - related fees and as such, subject to state constitutional and statutory requirements. Presented in the next few sections are brief summaries of the relevant laws governing this study. Proposition 13 Government Code Section §50076, adopted in 1979 provides that "special taxes shall not include any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged." Proposition 218 California voters approved Proposition 218 in November 1996. This voter - approved initiative added Articles XIIIC and D to the California Constitution. Article MID Section 2(e), is a definition of a "fee ". Essentially, as defined by Proposition 218, a fee is "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a userfee or charge fora property related service ". Until 2006, sewer charges were considered property related services while water charge were not defined as property - related until the 2006 California Supreme Court decision in Bighorn- Desert View Water Agency v. Verjil. After this decision, water charges are now considered as property - related fees and any new or increased water BLACK & VEATCH I Introduction 65B -178 19 SEWER RATE STUDY I City of Santa Ana, CA charges must comply with the substantive and procedural requirements of Proposition 218. The substantive requirements include: • Revenues derived from the fee or charge cannot exceed the funds required to provide the property related service. • Revenues derived from the fee or charge cannot be used for any other purpose other than for which the fee or charge was imposed for. • A property- related fee or charge cannot exceed the proportional cost of service attributable to the parcel. Proposition 26 California voters approved Proposition 26 in November 2010. Included in the language of proposition, which amended California Constitution Article XIII C, Section 1, is a definition of "tax ". Essentially, as defined by Proposition 26, a tax is any "levy, charge, or exaction of any kind imposed by a local government' with specifically outlined exceptions. These exceptions are: • A charge imposed for a specific benefit conferred or a privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege, and • A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product. Proposition 26 establishes that the "...local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payors burdens on, or benefits received from, the governmental activity." Government Code Section §54999.7 Under this section, rate - setting activities by public agencies are directed to follow cost -of- service principles and states that fees for "...for public utility service, other than electricity or gas, shall not exceed the reasonable cost of providing the utility service." It also provides that these fees will be "established in consideration of service characteristics, demand patterns, and other relevant factors." Generally Accepted Rate - Setting Standards The American Water Works Association (AWWA) and Water Environmental Federation (WEF) are the industry organizations tasked with providing guidance on the operation and management of water and wastewater utilities. AWWA and WEF have established a general set of principles used to guide the development of water and wastewater rates. AWWA and WEF developed these principles to provide a consistent approach and minimum standards to rate - setting procedures. It is important to note that both AWWA and WEF observe that there is no prescribed single approach for establishing cost -based rates. Rather, agencies must exercise judgment to align rates and charges with local conditions and requirements, as well as applicable state law. Pill 65B -179 NOVEMBER 2014 City of Santa Ana, CA i _ I J 1'� Black & Veatch has used the guidelines contained in the AWWA and WEF documents and followed the applicable State law, including Proposition 218, to conduct the analyses contained herein. DISCLAIMER In conducting our study, we reviewed the books, records, agreements, and customer sales and financial projections of the Sewer Enterprise, as we deemed necessary to express our opinion of the operating results and projections. While we consider such books, records, documents, and projections to be reliable, Black & Veatch has not verified the accuracy of these documents. The projections set forth in this report below are intended as "forward- looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to 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 actually 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, and adverse legislative, regulatory or legal decisions (including environmental laws and regulations) affecting the ability of any of the enterprise's ability to manage the system and meet water quality, waste discharge, and / or other regulatory or environmental requirements. BLACK & VEATCH I Introduction [INTENTIONALLY LEFT BLANK] 65B -180 21 SEWER RATE STUDY I City of Santa Ana, CA Sewer Rate Study REVENUE AND REVENUE REQUIREMENTS To meet the costs associated with providing sewer services to its customers, the Sewer Enterprise derives revenue from a variety of sources including sewer service charges, interest earned from the investment of available funds, and other miscellaneous revenues. A combination of an analysis of historical and future system growth in terms of wastewater billed serves as the basis for projecting future revenues. With revenue derived from the various sources, the Sewer Enterprise meets the cash requirements of operation and maintenance (O &M); principal, interest, and reserve payments on revenue and other bond indebtedness; and recurring annual capital expenditures for replacements, system betterments, and extensions not debt financed. 0 &M expenses are those expenditures necessary to maintain the system in good working order. Routine annual capital expenditures, which include equipment replacements, consist of recurring annual replacements, minor extensions, and betterments, which are normally revenue financed. Other capital costs include principal and interest payments, bond covenant - required payments, and cash financed capital improvements. Accounts and Customer Usage Projections To forecast revenue, the billed sewer sales volume needs to be determined within the Sewer Enterprise's service area. Billed sewage is incorporated into the equation by projecting the average number of customer accounts illustrated in Table 1 and assessing an average use per account to produce the billed sewage volumes in hundred cubic feet (HCF) shown in Table 2. Based on the sewer master plan and discussions with City staff, sewage growth is estimated to remain constant at 15,269,300 between FY 14/15 and FY 18/19. The City is at near built -out conditions and increase in sewage flow will result of increased density or infill of vacant properties. Table 1: Average Number of Accounts • PROJECTED NUMBER OF • CUSTOMER Single Family Residential 35,244 35,244 35,244 35,244 35,244 35,244 Multi - Family Residential 3,608 Commercial 4,398 Industrial 83 Institutional 226 Irrigation 16 Outside City 12 Reclaim Water 2 Total Accounts 43,589 3,608 3,608 3,608 3,608 3,608 4,398 4;398 4,398 4,398 4,398 83 83 83 83 83 226 226 226 226 226 16 16 16 16 16 12 12 12 12 12 2 2 2 2 2 43,589 43,589 43,589 43,589 43,589 22 NOVEMBER 2014 65B -181 City of Santa Ana, CA I SEWER RATE STUDY Table 2: Projected Billed Sewage Volumes Single Family Residential 6,211,700 6,097,800 6,097,800 6,097,800 6,097,800 6,097,800 Multi - Family Residential 4,813,400 4,730,000 4,730,000 4,730,000 4,730,000 4,730,000 Commercial 2,823,300 2,862,400 2,862,400 2,862,400 2,862,400 2,862,400 Industrial 649,700 658,700 658,700 658,700 658,700 658,700 Institutional 787,600 798,600 798,600 798,600 798,600 798,600 Irrigation 10,800 30,900 30,900 30,900 30,900 30,900 Outside City 2,600 2,600 2,600 2,600 2,600 2,600 Reclaim Water 8,200 88,300 88,300 88,300 88,300 88,300 Total Billed Usage 15,307,300 15,269,300 15,269,300 15,269,300 15,269,300 15,269,300 Revenue Projections The City generates revenue from sewer services, interest earned from the investment of available funds, and other miscellaneous revenues. Since revenue generated outside of sewer sales are not subject to rate increases, we have excluded them from this portion of the analysis. These additional revenue sources are incorporated later in the cash flow portion of the report. The Sewer Enterprise's revenues are composed of solely a commodity charge. Since the system is a collection only system, the customers do not pay treatment services to the City and thus are only billed based on flow. Customers pay costs for treatment services to OCSD through property tax bills. The commodity charge is based on every HCF of water consumed. The fee is designed to recover fixed and variable costs with collecting the wastewater. Summarized in Table 3 are the current sewer rates for all customer classes. Table 3: Existing Rates (Effective July 2010) Customer Class Rate All Customers $0.345 Unmetered Customers ($) Flat Bi- Monthly Charge $13.80 Incorporating the existing sewer rate with the billed sewage projections, sewer sales revenue under existing rates is tabulated as shown in Table 4. The anticipated revenue generated under existing rates is expected to remain constant at $5,268,000 throughout the study period. BLACK & VEATCH I Sewer Rate Study 65B -182 23 24 sf,4Vt:R w, rE s iuo t I City of Santa Ana, CA Black & Veatch notes that the revenues on Table 4 reflect gross sewer receipts and are 5 percent higher than those figures reported in the City's Comprehensive Financial Annual Report (CAFR). It is the City's policy to direct 5 percent of gross revenues to the National Pollutant Discharge Elimination System (NPDES) Fund to pay for the Sewer Enterprise's share of cost recovery. This transfer of revenues has first priority on all Sewer Enterprise obligations. The total revenues less this 5 percent charge foot to the City's reported CAFR numbers. Table 4: Revenues under Existing Rates Single Family Residential Multi - Family Residential Commercial Industrial Institutional 2,143.0 2,103.7 2,103.7 2,103.7 2,103.7 2,143.0 1,660.6 1,631.9 1,631.9 1,631.9 1,631.9 1,660.6 974.0 987.5 987.5 987.5 987.5 974.0 224.2 227.2 227.2 227.2 227.2 224.2 271.7 275.6 275.6 275.6 275.6 271.7 Irrigation 3.7 10.7 10.7 10.7 10.7 3.7 Outside City 0.9 0.9 0.9 0.9 0.9 0.9 Reclaim Water 2.8 30.5 30.5 30.5 30.5 2.8 Total Revenues $5,280.9 $5,268.0 $5,268.0 $5,268.0 $5,268.0 $5,280.9 Operation and Maintenance Projections In order to adequately adjust rates, it is necessary to project operation and maintenance (0 &M) expenses. Summarized in Table 5 are Sewer's projected 0 &M expenditures. These expenditures include costs related to personnel (including additional staff), contract services, operating supplies, utilities and general administrative. The forecasted expenditures are based Black & Veatch and City staff's expertise and knowledge. The table to the right summarizes key assumptions for inflation rates used in the 0 &M expense projections. The levels of adjustment illustrated on the right are consistent with recent increases seen throughout the area. There are two one -time increases in FY 15/16 under machinery to cover vehicle and heavy equipment needs and under contract services. This latter adjustment reflects the City's move to comply with the Prevailing Wage laws in order to qualify for grants and low- interest loans administered by the State. The projected impact to contract services to address the Prevailing Wage laws is 10 percent. Total C &M (including routine capital outlay) is projected to increase from $4,622,700 in FY 14/15 to $5,126,300 in FY 18/19. 65B -183 NOVEMBER 2014 City of Santa Ana, CAI SENIER RATE 517UDY Table 5: Operation and Maintenance Expenses Salaries & Benefits 1,913.4 1,900.9 1,938.9 1,977.7 2,017.4 2,057.8 Contractual Services 1,011.3 1,914.3 2,102.1 2,144.2 2,187.1 2,230.9 Commodities - 264.5 252.2 252.2 252.2 252.2 252.2 General and Administrative 537.7 517.0 524.3 531.8 539.4 547.1 Routine Capital Outlay 146.8 38.3 1,378.3 38.3 38.3 38.3 Total O&M $3,873.7 $4,622.7 $6,195.8 $4,944.2 $5,034.4 $5,126.3 Capital Improvement Program While O &M expenses cover day -to -day operations, the Sewer Enterprise incurs additional capital expenditures to replace existing wastewater facilities or installed new facilities for planned future growth. As a result, the City asked Black & Veatch to help develop a long -term Capital Improvement Program (CIP) that identifies future wastewater facility needs. Black & Veatch conducted a high -level asset condition review using City - provided Geographic Information System (GIS) data and available condition reports for the sewer system. Black & Veatch evaluated the available data and held two workshops with engineering and maintenance staff to develop weighting factors for the asset assessment. Overview of Asset Information Figure 1 illustrates the distribution of the City's sewer mains by installation decade. The mains included in the analysis are the City's collection system and do not include OCSD, other agency, or private sewer lines. As seen from the figure, over 86 percent of the City's sewer mains were installed pre 1980 and about 90 percent of the lines are over 50 years of age. From Figure 1 it is clear that the City will soon face a major reinvestment period as sewer mains reach the end of their useful life. In the absence of any condition assessments, the industry standard for main replacement is 1 percent of the system per year. If we apply this approach to the City's system, the result is an annual replacement rate of 4 miles of mains. The City is currently replacing about 0.1 percent per year (0.38 miles). BLACK & VEATCH I Sewer Rate Study [INTENTIONALLY LEFT BLANK] 65B -184 25 26 SEWER RATE STUDY I City of Santa Ana, CA Figure 1 Mains by Installation Decade Refinement of Asset Evaluation Replacing assets based on a depreciation life does not address site- specific conditions that may lead to increased break frequencies. Breaks may occur due to a number of reasons including age, soil conditions, corrosive environments, and lack of maintenance. Unlike the Water Enterprise, the City's sewer system has undergone a condition rating review by an outside vendor. The City has been performing closed- circuit television (CCTV) inspections on about 70 miles of pipe each year. This equates to about a 6 -7 year cycle to cover the entire system. The GIS database includes information compiled from CCTV inspections over the years. About 78 percent of the sewer system includes at least some inspection - related data. This information is very useful in that it provides the most accurate assessment of the facilities current (recent) condition and expectation for failure. The CCTV data also provides key indications related to ongoing operational / maintenance considerations. In general, the City has used these observations to identify sections of sewer to line or clean. However, the City has not used this information to assess the overall probability and consequence of failure. Having the latest CCTV inspection results are critical in assessing current pipeline conditions. Some of the CCTV observation data includes indications of pipeline problems, such as structural issues and grease or root issues. Of the structure issues listed, about 13 percent of all pipes in the collection system have at least one location that is broken, cracked, fractured, or has a hole or offset. Almost 29 percent of the pipe records are listed as having no structural defects. The remaining 58 percent had no structural issues value (not inspected or no recorded value). For grease, over 53 percent of all system lines are shown as being clean, about 29 percent have light grease, and only about 3 percent are listed at medium or heavy. The remaining 15 percent had no grease issue value. Roots show a similar status: 63 percent at none, 21 percent at light, and about 1 percent are listed at medium or heavy. The remaining 15 percent had no roots issue value. 65B -185 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY The National Association of Sewer Service Companies ( NASSCO) has developed a standardized system of ratings to provide a consistent assessment of sanitary sewer conditions. Known as the Pipeline Assessment Condition Program (PACP), the system provides the capability to benchmark sewer conditions in order track deterioration over time. Using the PACP process allows utilities to identify major deterioration factors and assign a rating reflecting the likelihood of collapse. CCTV data only provides information on the internal defects that affect condition. Utilities need additional information to fully assess the condition of a main. The PACP process classifies deterioration factors in "structural' defects and "O &M" defects. Ratings are based on a 5 -point system with 1 being "excellent condition — minor defects" and 5 being "immediate action — pipe will likely fail in less than 5 years." Table 6 summarizes the NASCCO PACP Rating system. Table 6: NASCCO PACP Rating System 1 Excellent Minor defects Defects that have 2 not started Good deteriorating Moderate defects 3 that will continue to Fair deteriorate 4 Poor Severe defects 5 Immediate Defect requires Attention immediate action Unlikely in the foreseeable future No cracks Unlikely to fail for at Some longitudinal least 20 years cracking visible May fail in 30 to 20 years Probably will fail in 5 to 10 years Has failed or likely will fail within the next 5 years Multiple fractures Broken pipe Collapsed pipe Free of roots and deposits Fine roots present Capacity decrease of up to 15 percent due to deposits Infiltration occurring Root ball decreasing flow capacity by up to 50 percent Figures 2 and 3 present the CCTV for the City's sewer system using the "Quick Structural Rating" (QSR) and "Quick Maintenance Rating" (QMR) values calculated based on the rating process in Table 6. Black & Veatch notes that while QMR ratings provide useful information regarding maintenance practices, Black & Veatch did not use them as part of the prioritization process. Operational and local FOG (fats, oils and grease) issues rather than installation materials, structural conditions or probability of failure considerations, impact QMR scores more. BLACK & VEATCH I Sewer Rate Study 65B -186 VIVA 0 Figure 2: QSR Ratings by Install Year 17 SSINER RATE STUDY I City of Santa Ana, CA Count of QSR Ratings by Install Year 200 rc C ea o c O W V 40 20 .. .. .. d - - - - ., .. - - - - - _, -., ■QSR 3m QSR4 0 QSR S Figure 3: QMR Ratings by Install Year Count of QMR Ratings by Install Year 90 60 O J O ■QMR3 ■QMR4 ■QMR5 Based on the QSRs and QMRs calculated from the CCTV data, more than 55 percent of the defects noted are at a rating of 4 or 5 based on structural and /or 0 &M issues. This corresponds to almost 75 miles of pipe. 65B -187 NOVEMBER 2014 City of Santa Ana, CAI Tii TC4'i Development of the R &R Program The analyses conducted above provide the City with good information on how to clean and maintain its system. However, it does not create an R &R program. The methodologies employed in developing asset management programs all revolve around managing risks. For example, while a Pipe "X" may have a high probability of failure, the impact of its failure (the consequence) is very low. So, from a risk perspective, would it be better to let Pipe "X" fail, or should you just go ahead and spend the money to repair it? Implementing a robust asset management system can help answer these types of questions. The City is starting to develop its own asset management system and as a first step, Black & Veatch conducted a number of meetings to help assess the City's perspective on risk and failure. Combining the condition reports prepared by an outside vendor and workshop results, Black & Veatch determined the Probability of Failure (PoF) and the Consequence of Failure (CoF). The product of the PoF and the CoF results in the Business Risk Exposure (BRE) — the higher the BRE score, the higher the likelihood that the asset requires attention. Black & Veatch cannot quantify the absolute risk of failure; instead, the analysis conducted herein provides a picture of the relative risk of failure. In other words, the analysis indicates which assets are more likely to fail in relation to other system assets. On its own, the BRE score is not sufficient to develop CIP. Consequently, Black & Veatch developed R &R strategies reflecting how public agencies tend to conduct work — grouping projects by area. Based on criticality criteria (PoF and CoF), Black & Veatch developed a list of projects to address immediate system needs over the next 5 years. As shown in Figure 4 and explained in more detail in Appendices A through D, the City's sewer system has no extremely critical condition (red zone — highest risk of failure) lines. There is 0.1 miles ($0.1 million) in highly critical condition (gold zone), 3.8 miles ($3.7 million) that are critical (yellow zone), and another 3.8 miles ($4.1 million) in danger of imminent failure (green zone). BLACK & VEATCH I Sewer Rate Study [INTENTIONALLY LEFT BLANK] 65B -188 29 30 SEWER RATE STUDY I City of Santa Ana, CA Figure 4: Criticality Heat Map Graphic by Cost and R &R Strategy Groups Probability of Failure 1 2 3 4 5 6 7 8 9 10 30 i 7 9 M 8 LL 4- 7 O 6 V i 5 3 4 Q) 3 H 2 O U 1 $0.0 $0.0 $0.0 $0.0 $0.0 ' $0.0 $0.0 $0.0 Y Z $0.0 $0.2 $0.0 $0.0 $0.0 $0.5 $0.0 $0.0 $0.0 $3.6 $0.4 $0.7 $0.0 $3.4 $0.0 $0.0 $0.0 $0.0 $0.2 $6.1 $0.4 $0.8 $0.1 $3.8 $0.1 $0.0 $0.0 $0.0 $2.0 $15.7 $2.5 $2.7 $3.0 $5.5 $2.2 $0.6 $0.3 $0.4 $0.5 $3.4 $0.7 $0.6 $0.5 $1.0 $0.6 $0.2 $0.2 $0.1 $0.4 $5.2 $1.2 $1.2 $1.0 $2.4 $0.2 $0.2 $0.0 $0.1 $0.8 $8.4 $1.5 $1.6 $1.8 $2.1 $1.4 $0.2 $0.1 $0.3 $2.6 $27.8 $4.4 $4.3 $4.5 $5.7 $3.1 $1.1 $0.3 $0.8 $9.2 $118.7 $24.1 $17.1 $17.1 $28.7 $9.5 $4.8 $1.1 $2.0 Millions of Dollars Extremely Critical B Highly Critical Critical - Likelihood Imminent Failure Potential Failure Critical - Consequence High Consequence Consequence Unknown Low Criticality C D E F . HHigh Y Z Total Cost: $380.1 At the request of the City, Black & Veatch was asked to prioritize critical R &R projects for a five -year period. Table 7 summarizes the results of the preliminary asset condition evaluation and indicates that over the next 3 years, the City should invest approximately $6.8 million (2012 dollars) in its sewer system to catch -up with deferred maintenance activities (replacement of all assets in colored zones). The $380.1 million value in Figure 4 represents the cost of repairing or replacing the portion of main impacted. It does not represent the replacement cost of the entire system. 6513-189 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Table 7: Annual Inspection and Replacement Budget Table (2012$) Yearl $541,700 $788,700 $1,330,400 $1,330,400 Year2 $541,700 $788,700 $1,330,400 $2,660,800 Year3 $261,000 $875,400 $1,136,400 $3,797,200 Year $1,521,600 $1,521,600 $5,318,800 Year $1,521,600 $1,521,600 $6,840,400 Total $1,344,400 $5,496,000 $6,840,400 The capital projects shown in Table 8 are for FY 14/15 through FY 18/19 and consist of capital projects planned for design and construction during the study period. A full discussion regarding the development of the R &R program and recommendations developed by Black & Veatch is provided in Appendices A through C in this report. After the Study Period, Black & Veatch recommends that the City should begin increasing investment in its annual R &R program to keep the system maintained. The annual level of R &R projects suggested is approximately 4 miles of mains annually. Replacing 4 miles of main per year means that the remaining mains will be replaced over the next 84 years. Completing the suggested critical R &R projects by the end of the study period and the follow -on 5 -year period, and maintaining the 4 miles /year replacement rate thereafter will help the City keep up with infrastructure needs. It is important to note that differences between the values proposed in Table 7 for the R &R critical projects and those in Table 8 reflect an annual CIP inflation cost as well as addition of engineering /design /construction soft costs and inclusion of the City's trench cut fee. This fee is imposed on all activities that cut into the City's streets and increases significantly if work is done on streets under the paving moratorium. The Sewer Enterprise estimates that the majority of work to be performed under the Critical Projects category will be conducted on streets under the moratorium. Table 8: Capital Improvement Program based on System Risk Profile Sewer R &R Projects - Critical 1,230.8 2,674.8 3,393.2 1,154.0 2,805.9 5,550.5 Master Plan 300.0 0.0 0.0 0.0 0.0 0.0 Inspections 0.0 0.0 0.0 1,241.4 663.0 0.0 Sewer Non - Collection Projects 0.0 0.0 84.7 327.3 399.3 155.8 Total Capital Expenditures $1,530.8 $2,674.8 $3,477.9 $2,722.7 $3,868.2 $5,706.3 BLACK & VEATCH I Sewer Rate Study 65B -190 31 32 SEWER RATE STUDY I City of Santa Ana, CA The Sewer Enterprise's CIP includes recommendations for expenditures totaling $18.4 million over the next 5 years. As part of the financial plan analyses, an annual inflation allowance of 3 percent was included in the above capital improvement project costs. Capital Fund Financing A proposed financing plan for the Sewer Enterprise's CIP is shown in Table 9 and Table 10. Table 9 summarizes the plan in the event that the City elects to forego revenue adjustments and cash finance all activities (Status Quo Scenario). Table 10 is the proposed financing under the assumption that the City will elect to propose revenue adjustments (Scenario 1). Financing for the CIP is anticipated to come from a combination of funds on hand, transfers from water sales revenues derived from rates, grants, and bond proceeds. The Sewer Enterprise currently maintains a capital fund that is used to finance CIP projects as well as to separate the commingling of rate and connection funds. The capital fund generates revenue from developer connection fees, transfers and debt proceeds (as appropriate). With new development in the City slowing dramatically, the Sewer Enterprise will depend on rate revenue and bond proceeds (as necessary) to execute planned CIP projects. Table 9: CIP Financing Plan - Status Quo Scenario Beginning Balance 1,792.3 1,518.1 1,109.7 1,397.5 2,448.8 2,360.7 Sources of Funds 1,530.8 2,674.8 3,477.9 2,722.7 3,868.2 5,706.3 Debt Proceeds 0.0 0.0 0.0 0.0 0.0 0.0 Transfers from Operating Fund 1,246.8 2,250..0 3,750.0 3,750.0 3,750.0 3,750.0 Interest Income 9.8 16.4 15.7 24.0 30.1 17.4 Total Sources of Funds $1,256.6 $2,266.4 $3,765.7 $3,774.0 $3,780.1 $3,767.4 Uses of Funds Capital Improvements 1,530.8 2,674.8 3,477.9 2,722.7 3,868.2 5,706.3 Debt Issuance Expenses 0.0 0.0 0.0 0.0 0.0 0.0 Total Uses of Funds $1,530.8 $2,674.8 $3,477.9 $2,722.7 $3,868.2 $5,706.3 Ending Balance 1,518.1 1,109.7 1,397.5 2,448.8 2,360.7 421.8 [INTENTIONALLY LEFT BLANK] 65B -191 NOVEMBER ;1014 City of Santa Ana, CA I SEWER RATE STUDY Table 10: CIP Financing Plan -Scenario 1 Beginning Balance Sources of Funds Debt Proceeds Transfers from Operating Fund Interest Income Total Sources of Funds Uses of Funds Capital Improvements Debt Issuance Expenses Total Uses of Funds Ending Balance 1,792.3 1,518.1 1,109.7 =Y 16/17 1 FY 17/18 1 FY 18/19 0.0 0.0 0.0 0.0 13,500.0 0.0 0.0 0.0 1,246.8 2,250.0 500.0 500.0 525.0 525.0 9.8 16.4 76.3 125.7 92.2 39.8 $1,256.6 $2,266.4 $14,076.3 $625.7 $617.2 $564.8 1,530.8 2,674.8 3,477.9 2,722.7 3,868.2 5,706.3 0.0 0.0 607.5 0.0 0.0 0.0 $1,530.8 $2,674.8 $4,085.4 $2,722.7 $3,858.2 $5,706.3 1,518.1 1,109.7 11,100.6 9,003.6 5,752.6 611.1 Based on the proposed CIP summarized above, the Sewer Enterprise will need to issue debt through revenue bonds in FY 15/16 under Scenario 1 to allow the utility to catch up with deferred activities. The proposed debts is indicated above assume the following service terms: 20 -year payment period, 5.5 percent annual interest rate, 2 percent issuance expense, and issuance of a surety bond equal to 2.5 percent of the nominal debt issuance. Black & Veatch has further assumed that the rate covenant will require a 1.25 coverage ratio. Operating Fund Financing Summarized in Tables 11 and 12 are the proposed long -term operating financial plans for the Sewer Enterprise under each scenario. Table 11 summarizes the financial results should the City elect to carry out the CIP in the absence of revenue adjustments (Status Quo Scenario) and Table 12 shows the plan for the preferred option (Scenario 1). The intent of the financial plan is to generate sufficient funds to cover short-term and long -term expenses. Sources of revenue include sewer sales under existing rates, additional revenues realized from proposed rate adjustments, miscellaneous revenue and interest earnings on available balances. As mentioned, other miscellaneous revenue includes trust agency revenue, and security fee charges. Uses of funds include operation and maintenance expenses (including water purchases), routine capital outlay, debt service payments, and transfers to other funds such as the capital fund. BLACK & VEATCH I Sewer Rate Study 65B -192 33 34 65B -193 NOVEMBER 2014 SEWER RATE STUDY I City of Santa Ana, CA Table 11: Operating Fund Financing Plan - Status Quo Scenario PROJECTED 00r Revenue 1 Revenue from Existing Rates 5,280.9 5,268.0 5,268.0 5,268.0 5,268.0 5,268.0 Months Year Effective Rate 2 FY 14/15 4 0.0% 0.0 0.0 0.0 0.0 0.0 3 FY 15/16 12 0.0% 0.0 0.0 0.0 0.0 4 FY 16/17 12 0.0% 0.0 0.0 0.0 5 FY 17/18 12 0.0% 0.0 0.0 6 FY 18/19 12 0.0% 0.0 Increased Revenue Due to 7 Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 8 Total Rate Revenue 5,280.9 5,268.0 5,268.0 5,268.0 5,268.0 5,268.0 Other Operating Revenue 9 Miscellaneous Revenue 0.0 18.0 18.0 18.0 18.0 18.0 10 Interest Income 22.0 38.3 0.0 0.0 0.0 0.0 11 Total Other Operating Revenue 22.0 56.3 18.0 18.0 18.0 18.0 12 Total Revenue $5,302.9 $5,324.3 $5,286.0 $5,286.0 $5,286.0 $5,286.0 Revenue Requirements 13 O &M Expenses 3,726.9 4,584.4 4,817.5 4,905.9 4,996.1 5,088.0 14 Routine Capital Outlay 146.8 38.3 1,378.3 38.3 38.3 38.3 Debt Service 15 Proposed Debt 0.0 0.0 0.0 0.0 0.0 0.0 16 Total Debt Service 0.0 0.0 0.0 0.0 0.0 0.0 Transfers 17 Transfer to NPDES Fund 264.0 263.4 263.4 263.4 263.4 263.4 18 Transfer to Capital Fund 1,246.8 2,250.0 3,750.0 3,750.0 3,750.0 3,750.0 19 Total Transfers 1,510.8 2,513.4 4,013.4 4,013.4 4,013.4 4,013.4 20 Total Revenue Requirements $5,384.5 $7,136.1 $10,209.2 $8,957.5 $9,047.8 $9,139.7 Operating Fund Balance 21 Net Cash Balance (81.6) (1,811.8) (4,923.2) (3,671.6) (3,761.8) (3,853.7) 22 Beginning Fund Balance 4,050.6 3,969.0 2,157.2 (2,766.0) (6,437.6) (10,199.4) 23 Cumulative Fund Balance 3,969.0 2,157.2 (2,766.0) (6,437.6) (10,199.4) (14,053.1) Target Minimum Fund Balance 24 (25 %O &M) +$1M Emergency 1,919.0 2,130.4 2,187.9 2,209.7 2,231.9 2,254.6 65B -193 NOVEMBER 2014 City of Santa Ana, CA SEWER RATE STUDY Table 12: Operating LINE EST. PROJECTED IN $000'S NO. DESCRIPTION FY 13/14 FY 14/15 FY 15/16 1 FY 16/17 1 FY 17/18 1 FY 18/19 BLACK & VEATCH I Sewer Rate Study 65B -194 35 . Revenue 1 Revenue from Existing Rates 5,280.9 5,268.0 5,268.0 5,268.0 5,268.0 5,268.0 Months Year Effective Rate 2 FY 14/15 4 8.8% 154.5 463.6 463.6 463.6 463.6 3 FY 15/16 12 8.8% 504.4 504.4 904.4 504.4 4 FY 16/17 12 8.8 %. 548.8 548.8 548.8 5 FY 17/18 12 8.8% 597.1 597.1 6 FY 18/19 12 8.8% 649.6 Increased Revenue Due to 7 Adjustments 0.0 154.5 968.0 1,516.8 2,113.9 2,763.5 8 Total Rate Revenue 5,280.9 5,422.5 6,236.0 6,784.8 7,381.9 8,031.5 Other Operating Revenue 9 Miscellaneous Revenue 0.0 18.0 18.0 18.0 18.0 18.0 10 Interest Income 22.0 39.2 23.1 16.7 18.4 26.2 it Total Other Operating Revenue 22.0 57.2 41.1 34.7 36.4 44.2 12 Total Revenue $5,302.9 $5,479.7 $6,277.1 $6, 819.5 $7,418,3 $8,075.7 Revenue Requirements 13 O &M Expenses 3,726.9 4,584.4 4,817.5 4;905.9 4,996.1 5,088.0 14 Routine Capital Outlay 146.8 38.3 1,378.3 38.3 38.3 38.3 Debt Service 15 Proposed Debt 0.0 0.0 188.3 1,129.7 1,129.7 1,129.7 16 Total Debt Service 0.0 0.0 188.3 1,129.7 1,129.7 1,129.7 Transfers 17 Transfer to NPDES Fund 264.0 271.1 311.8 339.2 369.1 401.6 18 Transfer to Capital Fund 1,246.8 2,250.0 500.0 500.0 525.0 525.0 19 Total Transfers 1,510.8 2,521.1 811,8 839.2 894.1 926.6 20 Total Revenue Requirements $5,384.5 $7,143.8 $7,195.9 $6,913.1 $7,058.2 $7,182.6 Operating Fund Balance 21 Net Cash Balance (81.6) (1,664.1) (918.8) (93.6) 360.1 893.1 22 Beginning Fund Balance 4,050.6 3,969.0 2,304.9 1,386.1 1,292.5 1,652.6 23 Cumulative Fund Balance 3,969.0 2,304.9 1,386.1 1,292.5 1,652.6 2,545.7 Target Minimum Fund Balance 24 (25 %O &M) +$1M Emergency 1,919.0 2,130.4 2,187.9 2,209.7 2,231.9 2,254.6 25 Debt Service Coverage 47.75 1.69 2.14 2.64 BLACK & VEATCH I Sewer Rate Study 65B -194 35 36 SEWER RATE STUDY I City of Santa Ana, CA The projected wastewater revenue under existing rates represents service, commodity, and strength charges at current rate levels that are subject to rate adjustments. Based on the existing revenue indicated, additional annual revenue adjustments are necessary to meet operating fund requirements and fiscal policy objectives. Adjustments are typically assumed to become effective July 1 of each fiscal year, except for FY 14/15, which assumes a March 1, 2015 effective date. Initial analyses indicate that rate increases are needed for the next five years as shown on Lines 2 through 6. Any changes to the capital- financing policies and /or CIP may alter these results since the operating fund helps supplement funds for traditional repair and replace projects. The resulting dollar impact of the proposed revenue adjustments are illustrated on Line 7. In addition to rate revenue, other operating and non - operating charges contribute to the income of the Sewer Enterprise. Typically, these revenue sources are minimal and volatile and are thus considered a constant in the revenue projections. A non - operating source includes interest income from the operating fund. Interest income is calculated using an interest rate of 1 percent in order to be conservative. Projected total O &M expense is shown on Line 13. The 0 &M expenses shown represent expenses associated with operating the wastewater system. Routine capital outlays are on Line 14. Under the proposed CIP scenario, Black & Veatch is proposing to cash - finance all R &R activities. As a result, no additional debt service is on Line 16. In the event that the City wishes to debt finance all or part of the CIP, all proposed bond issues are forecasted with 20 -year terms at an initial 5.5 percent. To date, the Sewer Enterprise has no outstanding bond debt obligations. Although the City transfers 5 percent of user charge revenues to the NPDES Fund prior to all other obligations, Black & Veatch is showing the NPDES Fund transfer on Line 17 to illustrate this activity. Funds transferred to the capital fund are used for capital projects and are shown on Line 18. Lines 21 through 23 summarize the impact to the ending fund balance for the Sewer Enterprise. A minimum target of 25 percent of 0 &M expenses plus any encumbrances serves as the minimum level of working capital that the Sewer Enterprise sets to have on hand for operational purposes. Finally, if debt exists, the debt service coverage ratio calculation is shown on Line 25 for relevant years. Summary of Revenues, Expenditures, and Obligations To maintain financial viability as an enterprise fund, the Sewer Enterprise's annual revenues must be sufficient to satisfy three elements: 1. Adequate cash flow to cover 0 &M, capital and debt obligations 2. Meet debt service coverage (DSC) covenants 3. Maintain reserve funds Long -term financial viability requires meeting all three elements. The need for revenue adjustments is either "cash flow' driven or "debt service coverage" driven depending on which of the first two elements creates the larger adjustment. Based on the analyses of revenues and revenue requirements, the Sewer Enterprise is a "cash- flow" driven. Whether cash -flow or coverage driven, it is clear that in order for the Sewer Enterprise to 65B -195 NOVEMBER 2014 City of Santa Ana, CA SEWER RATE STUDY address critical backlogged R &R projects, a rate revenue increase is needed As shown in Figure 5, should the City elect to maintain the status quo (do nothing), the Sewer Enterprise runs into a cash deficit position by FY15/16 and will not be able to address critical system needs. By the end of the Study Period, the Sewer Enterprise will have a ($14.1 million) deficit. Figure 5: Projected Revenues and Revenue Requirements — No Revenue Increases, Status Quo Projected Revenue and Revenue Requirements - Status Quo $ty $io $5 - -$5 -$10 -$15 -$20 M 2015 2016 2017 2018 2019 �O&M Expenses .__--. Routine Capital Outlay iiiiiiiiiiiiiiiiTransfers —46P— Revenue — •Target Cash Balance Cash Balance Delaying CIP activities does stretch out available cash; however, continued deferral of needed CIP projects also increases the probability, consequence and cost of asset failure. As a rough approximation, Black & Veatch estimated the cost of continuing to defer CIP projects using the methodology set forth in the American Society of Civil Engineers' (ASCE's) 2012 Failure to Act Economic Report for Water (FAC Report). The FAC Report notes that in addition to the actual repair /replacement costs, there are costs associated with payment of claims to impacted households and businesses. Additionally, if projects are deferred by several years, there is an economic loss due to loss of jobs, lost work days, business closures, traffic delays, street repairs, contamination of receiving waters, etc. Table 13 below summarizes the cost of not executing the proposed CIP using the FAC Report methodology. Note that the values presented in Table 13 do not include the cost of replacing the asset nor does it include fines that the State may impose for violating Waste Discharge Requirements (WDRs) should sanitary sewer overflows (SS0s) occur. State enforcement actions for WDR violations include fines of $10,000 per day plus $10 per gallon spilled (for spills over 1,000 gallons), and mandated CIP activities through a consent decree. BLACK & VEATCH I Sewer Rate Study 65B -196 37 38 SEWER RATE s -ru oy I City of Santa Ana, CA Table 13: Economic Impacts of Delaying Proposed CIP Households $129,700 - $1,078,500 Total household claim payments. Businesses $324,100 - $2,696,300 Total business claim payments. Local Economy $1,577,400 - $13,122,200 Range depends on the severity of breaks. Total $2,031,200- $16,897,000 Based on the analyses of revenues and revenue requirements, it is evident that regardless of the level of CIP activity, the Sewer Enterprise needs a rate revenue increase in order to meet revenue requirements and working capital reserve as a standalone enterprise. The suggested adjustments are summarized below for Scenario 1 in Table 14 and are shown on Lines 2 through 6 of Table 12. Table 14: Proposed Rate Adjustments — Scenario 1 FY 14/15 March 1 8.8% FY 15/16 July 1 8.8% FY 16/17 July 1 8.8% FY 17/18 July 1 8.8% FY 18/19 July 1 8.8% With these adjustments, the City should be able to accomplish its objectives under the assumption that no significant change occurs. While the financial plan should be a working document, the Sewer Enterprise will need to re- examine the rate structure prior to FY 18/19 to verify it is still adequate. The revenue requirements of the Sewer Enterprise consist of system O &M expenses, routine capital outlay for minor expenditures on equipment not financed from bond proceeds, debt service requirements on existing and proposed bonded debt, transfers to other funds, and reserve requirements to ensure that debt service coverage, rate covenant requirements, and adequate levels of working capital are met. As shown on Line 20 in Tables 11 and 12, total revenue requirements for the Sewer Enterprise increase during the study period and can be correlated with projected increases in staffing, inflationary factors and additional R &R requirements. For the Status Quo Scenario, the total revenue requirements will increase from a low of $7,136,100 in FY 14/15 to a high of $10,209,200 in FY 15/16. For Scenario 1, total 65B -197 NOVEMBER 2014 City of Santa Ana, CAI SEWER RATE STUDY revenue requirements range from $7,143,800 in FY 14/15 to $7,182,600 in FY 18/19. Subtracting total revenue requirements from total revenues results in the projected annual operating fund surpluses or deficits shown on Line 21. As of July 1, 2013, it was estimated that a beginning balance of $6.8 million was available for use in this fund. No additional monies were available for use in the capital funds. Cash financing of projects occurs through transfers from the operating fund as illustrated in Tables 11 and 12 on Line 18. The ending balance is shown on Line 23, while the minimum ending balance of 25 percent of operation and maintenance expense (90 days) is shown on Line 24. In addition to the minimum target of 25 percent of 0 &M expenses, Black & Veatch recommends that the City establish two additional reserve funds: an emergency fund and an R &R fund. Black & Veatch suggests that the initial funding level of the emergency reserve represent the approximate cost for repairing a major main break, which is about $1 million. Given the low level of main replacement, Black & Veatch believes that establishing an emergency reserve fund is a prudent measure and should be undertaken as soon as possible. Second, to help address future R &R needs, the City should start funding an R &R fund as soon as funds become available. The target level of funding for the R &R fund should be at least equal to one - year's depreciation expense or about $500,000. Applying a cumulative revenue adjustment of about 52 percent through to FY 18/19 should allow the Sewer Enterprise to achieve the desired target level of ending year -end balances and meet minimum working capital requirements. It should be recognized that the indicated percentage revenue increase discussed above are overall revenue increases. The results of the cost of service analysis presented later in this report may indicate that rate increases may vary from this average for the various customer classes with some classes receiving a greater than average increase, while others receive a less than average increase or perhaps a decrease. Test Year Revenue Requirements In analyzing the Sewer Enterprise's cost of service for allocation to customer classes, the annual revenue requirements for FY 14/15 is selected as the Test Year (TY) requirements to demonstrate the development of cost -of- service wastewater rates. BLACK & VEATCH I Sewer Rate Study 65B -198 39 40 S9bVE8 RATE STUDY I City of Santa Ana, CA COST OF SERVICE ALLOCATIONS The revenue requirements to be derived from rates and charges for wastewater service are summarized in Lines 1 through 12 of Table 14. In analyzing the Sewer Enterprise's cost of service for allocation to customer classes, the annual revenue requirements for FY 14/15 are selected as the Test Year requirements to demonstrate the development of cost of service (COS) wastewater rates. In determining the cost of service to be met from charges for wastewater service, we deduct income received from other sources that not subject to rate adjustments from the total revenue requirements. As a result, the total cost of service to be recovered from rates is shown on Line 12, Column 3. To facilitate understanding of the COS methodology uses the revenue requirements developed in the previous sections, as well as how to follow the flow of allocations, Table and Line references are included as appropriate. For example, the 0 &M expenses for TY 14/15 illustrated on Line 1 of Table 15 corresponds to Line 13 from Table 12. Table 15: Total Costs to be Recovered from Rates Column Reference [1] [2] ]3] Revenue Requirements 1,664,100 0 1,664,100 1 0 &M Expenses (Table 12, Line 13) 4,584,400 0 4,584,400 2 Debt Service 0 0 0 3 Transfers (Table 12, Lines 17,18) 0 2,521,100 2,521,100 4 Routine Capital (Table 12, Line 14) 0 38,300 38,300 5 Subtotal $4,584,400 $2,559,400 $7,143,800 Less Revenue Requirements met from Other Sources 6 Other Operating Revenue (Table 12, Line 11) 18,000 0 18,000 7 Interest Income (Table 12, Line 10) 39,200 0 39,200 8 Subtotal $57,200 $0 $57,200 Adjustments 9 Annual Cash Fund Balance (Table 12, Line 21) 1,664,100 0 1,664,100 10 Annual Rate Increase (Table 12, Line 7) (309,100) 0 (309,100) 11 Subtotal $1,355,000 $0 $1,355,000 12 Cost of Service to be Recovered from Rates $3,172,200 $2,559,400 $5,731,600 65B -199 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Functional Cost Components In developing an equitable rate structure, revenue requirements are allocated to the various customer classifications according to the cost of service rendered. Allocations of these requirements to customer classes of Wastewater should take into account flow, the number of customers, and other relevant factors. Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. For the purposes of the cost of service analysis, the customer classifications in this study include single family and multi- family residential, commercial, industrial, institutional, irrigation, and Outside City. These customer classes were assumed to exhibit similar types of system load characteristics. Allocation to Cost Components As a basis for allocating costs of service among customer classes, costs are first allocated to functional cost components, then allocated to cost categories, and subsequently distributed to customer classes. In this analysis, there are seven primary cost components: (1) base flow, or volume costs, (2) strength (BOD and TSS), (3) customer service (CS) billing costs and administration (CS /Billing), (4) Fats, Oils and Grease (FOG) Program costs, and (5) Lateral Repair Program costs. Each element of cost is allocated to functional cost components on the basis of the parameter or parameters having the most significant influence on the magnitude of that element of cost. For this Study, Black & Veatch reviewed historic data and conducted interviews with staff regarding allocation of time for specific activities. Additionally, Black & Veatch reviewed the City's budgeting process to understand budget line items and internal cost allocation schemes with respect to different operating sections within the Sewer Enterprise. Table 16 summarizes the percentage allocations to the COS factors estimated for the major cost categories. Table 16: Cost of Service Allocation Percentages Collection 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% General Plant 75.0% 5.0% 5.0% 15.0% 0.0% 0.0% Monitoring 50.0% 25.0% 25.0% 0.0% 0.0% 0.0% Net Plant 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other 80.5% 0.0% 0.0% 0.0% 0.0% 21.5% Allocation of Operation and Maintenance Expenses The allocation of O &M expense to cost functions is shown in Table 17. The net operation and maintenance expense to be recovered for wastewater sales is derived by deducting funds available from other sources from the total Test Year expense. Net Test Year operation and maintenance expense of BLACK & VEATCH I Sewer Rate Study 65B -200 41 42 SEWER RATE STUDY I City of Santa Ana, CA $3,172,200, which corresponds to Table 15, Line 12, Column 1 is shown allocated to the six primary cost components on Line 10. Note that routine capital outlay is excluded from 0 &M expenses as it is a capital element in that it deals with assets. Routine capital outlays are budgeted under 0 &M because of accounting rules governing capitalization activities, but from a COS- perspective, it is a capital - related item. Table 17: Allocation of 0 &M Expenses to Functional Cost Components in Thousands of Dollars Allocation of Capital Costs The estimated investment in wastewater and stormwater facilities is allocated to appropriate cost components as a basis for the further distribution of capital related costs to the various customer classes. The allocation of estimated plant investment serving wastewater customers for the Test Year is shown in Table 18. The total plant investment of $16,620,500 shown on Line 4 represents the estimated Test Year original cost less accumulated depreciation of plant in service. The allocation of specific items of investment to the cost categories, as shown, is made on the basis previously described and shown in Table 16. For example, collection items are related to flow and these 65B -201 NOVEMBER 2014 Personnel 1 (Collection) 1,900.9 1,232.4 0.0 0.0 0.0 0.0 668.5 Contractual 2 (Collection) 1,914.3 1,255.5 0.0 0.0 0.0 658.8 0.0 Commodities 3 (Collection) 252.2 252.2 0.0 0.0 0.0 0.0 0.0 Cross Charges 4 (Collection) 517.0 517.0 0.0 0.0 0.0 0.0 0.0 Transfers 5 (Monitoring) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6 Subtotal $4,584.4 $3,257.1 $0.0 $0.0 $0.0 $558.8 $668.5 Less Other Revenues Misc. Revenues 7 (Other) 57.2 44.9 0.0 0.0 0.0 0.0 12.3 Other Adjustments 8 (Other) 1,355.0 1,063.7 0.0 0.0 0.0 0.0 291.3 9 Subtotal $1,412.2 $1,108.6 $0.0 $0.0 $0.0 $0.0 $303.6 Net Operating 10 Expenses $3,172.2 $2,148.5 $0.0 $0.0 $0.0 $658.8 $364.9 Allocation of Capital Costs The estimated investment in wastewater and stormwater facilities is allocated to appropriate cost components as a basis for the further distribution of capital related costs to the various customer classes. The allocation of estimated plant investment serving wastewater customers for the Test Year is shown in Table 18. The total plant investment of $16,620,500 shown on Line 4 represents the estimated Test Year original cost less accumulated depreciation of plant in service. The allocation of specific items of investment to the cost categories, as shown, is made on the basis previously described and shown in Table 16. For example, collection items are related to flow and these 65B -201 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY investment costs are assigned to the volume cost component and further delineated by whether the asset is common -to -all or primarily serves specific customers. Table 18: Allocation of Net Capital Costs to Functional Cost Components in Thousands of Dollars Collection 0.0 0.0 0.0 1 (Collection) 16,065.1 16,065.1 0.0 Lift Stations 8.8 0.0 0.0 2 (Collection) 496.9 496.9 0.0 General Plant 1.4 0.0 0.0 3 (General Plant) 58.5 43.9 2.9 4 Subtotal $16,620.5 $16,605.9 $2.9 Capital Costs 5 (Table 15, Line 12) 2,559.4 2,557.2 0.4 Less Other Revenues Misc. Revenues 6 (Other) 0.0 0.0 0.0 Other Adjustments 7 (Other) 0.0 0.0 0.0 Net Capital 8 Expenses $2,559.4 $2,557.2 $0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 8.8 0.0 0.0 $2.9 $8.8 $0.0 $0.0 0.4 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 $0.4 $1.4 $0.0 $0.0 Units of Service The total cost responsibility of each class of service may be established by developing unit costs of service for each cost function and assigning those costs to the customer classes based on the respective service requirements of each. Each customer class is allocated its share of base, strength, and direct costs. 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. Strength loadings (BOD and TSS) in milligrams per liter (mg/L) are estimates based on guidelines published by the Department of Water Resources. Use of these guidelines is acceptable when utilities do not have specific monitoring data. Summarized in Table 19 are the estimated units of service for the various customer classes. BLACK & VEATCH 1 Sewer Rate Study 65B -202 43 a V m Q G N N O v e1� :n w t- a'. u� 3 W N V ri O UI Z �n 0 c v a m N O o 0 0 0 $ O N r-I rl N N YI F i o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 m in �n o vi vi o �n o 0 U N o o M O 0 o 0 V O N o0 WN o G W n °l h rl n N N l0 N N 1!1 ry� m l0 M v m n .i V ti 'i io ti N N N ry a m o O �c v ri 1p 0° M m w ^ m w 00 o a n a o ^ N w Lr 0 o 0 a 0 o o O 0 0 o 0 N U Lr N M m ^ a ry N v m °i ^ ° ri M m M M ti N M ^ 0 0 0 0 0 0 0 6 m in �n o vi vi o �n o O O O O O O O 0 U N o o M O 0 o 0 V O N o0 WN o G W n °l h rl n N N O O W N O O O O O O O 65B -203 O 0 w m w O Z e a O O O O O O O N V O a m o O �c v ri 1p 0° M m w 0 o 0 a 0 o o O 0 0 o 0 N U Lr N M o vt O W O O O W ri M ri M M ti N M ^ M n C W E O O O O S M W j `v N � a a v m ry c c o � - O 65B -203 O 0 w m w O Z e a City of Santa Ana, CA I SEWER RATE STUDY The wastewater collected by the Sewer Enterprise consists of two elements: (1) sanitary flow and (2) infiltration /inflow (1 /1) of storm runoff. Sanitary flow is that portion of the annual water use of each customer class estimated to enter the sanitary sewer system. Based on discussions with staff, it is estimated that the amount of flow entering the collection system through 1/1 is approximately 5 percent of the total treated wastewater volume. Since 1/1 is not attributable to a specific customer class, each class will bear its proportionate share of the costs associated with 1/1 in an equitable manner. For the purposes of this Study, 1/1 flow is assigned 70 percent to volume and 30 percent to connections (equivalent meters) Cost of Service Allocations Costs of service are allocated to the customer classes by application of unit costs of service to respective service requirements. Unit costs of service are based upon the total costs previously allocated to functional components and the total number of applicable units of service. Dividing the costs allocated to functional cost components by the respective total units of service requirements develops unit costs of operation and maintenance expense, and net capital costs. Unit Costs of Service Table 20 presents total Test Year O &M expense and net capital costs allocated to functional cost component as taken from Tables 17 and 18. Table 20: Unit Costs of Services with Costs in Thousands of Dollars Net Operating Expense 1 (Table 16, Line 10) Capital Costs 2 (Table 17, Line 8) Total Cost of 3 Service Units of Service In 000's (Table 4 18, Line 9) 5 Cost per Unit 3,172.2 2,148.5 0.0 0.0 0.0 2,559.4 2,557.2 0.4 0.4 1.4 $5,731.6 $4,705.7 $0.4 $0.4 BLACK & VEATCH I Sewer Rate Study 15,269.3 26,747.9 30,348.4 $1.4 658.8 364.9 0.0 0.0 $658.8 $364.9 261.5 13.2 261.4 $0.31 $0.01495 $0.01318 $0.01 $49.91 $1.40 per per per HCF 1,000 Ibs 1,000 Ibs per bill per bill per bill 65B -204 46 SEWER RATE STUDY I City of Santa Ana, CA Distribution of Costs of Service to Customer Classes The customer class responsibility for service is obtained by applying the unit costs of service to the number of units for which the customer class is responsible. This process is illustrated in Table 21, in which the unit costs of service are applied to the customer class units of service. [INTENTIONALLY LEFT BLANK] 65B -205 NOVEMBER Kl,4 City of Santa Ana, CA I SEWER RATE STUDY Table 21: Allocation of COS to Customer Classes BLACK & VEATCH I Sewer Rate Study 65B -206 Column Reference Ill [2) [3) [4] [5) (61 [7) per HCF per lbs per lbs per bill per bill per bill Cost per Unit 1 (Table 20, Line S) $0.31 $0.000015 $0.000013 $0.01 $49.91 $1.40 Single Family Residential 2 Units (Table 19) 6,444,300 9,510,600 9,510,600 211,464 0 211,464 Cost of Service 3 (Line 2 x Line 1) 1,752,200 1,750,600 200 200 1,200 0 295,300 Multi - Family Residential 4 Units (Table 19) 4,924,200 7,377,300 7,377,300 21,648 0 21,648 Cost of Service 5 (Line 4 x Line 1) 1,517,800 1,517,500 100 100 100 0 30,200 Commercial 6 Units (Table 19) 3,009,700 7,143,100 10,714,700 26,388 13,200 26,388 Cost of Service 7 (Line 6x Line 1) 927,800 927,500 100 100 100 658,800 36,800 Industrial 8 Units (Table 19) 684,200 1,438,300 1,438,300 498 0 498 Cost of Service 9 (Line 4x Line l) 210,900 210,900 0 0 0 0 700 Institutional 10 Units (Table 19) 838,400 1,245,600 1,245,600 1,356 0 1,356 Cost of Service 11 (Line 30 x Line 1) 258,400 258,400 0 0 0 0 1,900 Irrigation 12 Units (Table 19) 38,000 28,900 57,800 96 0 0 Cost of Service 13 (Line 12 x Line 1) 11,700 11,700 0 0 0 0 0 Outside City 14 Units (Table 19) 2,900 4,100 4,100 72 0 0 Cost of Service 15 (Line 14 x Line 1) 900 900 0 0 0 0 0 Reclaim Water 16 Units (Table 19) 91,400 0 0 12 0 0 Cost of Service 17 (Line 16 x Line 1) 28,200 28,200 0 0 0 0 0 TOTAL COSTS OF 18 SERVICE $5,731,600 $4,705,700 $400 $400 $1,400 $658,800 $364,900 BLACK & VEATCH I Sewer Rate Study 65B -206 sp, SEWER RATE STUDY I City of Santa Ana, CA Adequacy of Existing Rates to Meet Costs of Service Presented in Table 22 is a comparison of the allocated cost of service and revenue under existing rates for the system in total. The last column indicates the approximate adjustment rate levels necessary to recover 100 percent of the allocated costs of service. In recognition of the fact that having a FOG Program does provide benefits to all customers, 30 percent of the FOG costs are allocated to all customers. The shift in cost recovery shown in Table 22 results from allocating a portion of FOG program costs to food service establishments. Table 22: Comparison of Adjusted COS with Revenues under Existing Rates [INTENTIONALLY LEFT BLANK] 65B -207 NOVEMBER 201=] Column Reference 111 [21 [31 [41 151 1 Single Family 2,047,500 81,500 2,129,000 2,103,700 1.2% 2 Multi - Family 1,548,000 61,400 1,609,400 1,631,900 -1.4% 3 Commercial 1,623,400 (161,600) 1,461,800 987,500 48.0% 4 Industrial 211,600 8,400 220,000 227,200 -3.2% 5 Institutional 260,300 10,300 270,600 275,600 -1.8% 6 Irrigation 11,700 0 11,700 10,700 9.3% 7 Outside City 900 0 900 900 0.0% 8 Reclaim Water 28,200 0 28,200 30,500 -7.5% 9 Total System $5,731,600 $0 $5,731,600 $5,268,000 8.8% [INTENTIONALLY LEFT BLANK] 65B -207 NOVEMBER 201=] City of Santa Ana, CA I HEWER RATE STUDY PROPOSED RATE ADJUSTMENTS The initial consideration in the derivation of wastewater rate schedules for utility service is the establishment of equitable charges to the customers commensurate with the cost of providing that service. While the cost of service allocations to customer classes should not be construed as literal or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments. Practical considerations sometimes modify rate adjustments by taking into account additional factors such as the extent of change from previous rate levels, existing contracts, and past local policies and practices. Existing Rates A summary of existing wastewater rates was presented earlier in Table 3. The existing rate structure is a commodity -only based rate for all customers. Unmetered customers pay a flat bi- monthly base charge. Proposed Rates The costs of service analysis described in preceding sections of this report provide a basis for the design of rates. At the request of the City, Black & Veatch has examined some alternative cost recovery rate schedules. The purpose of these changes is to increase transparency to ratepayers, as well as to provide funds for specific capital or operating activities. For example, the Sewer Enterprise provides lateral repairs to all customers who request this service. Previously, the City provided this service when funds are available. For this rate study, the City provided the average cost for lateral repairs and the proposed alternative rate schedule includes a specific charge intended to fund this program. In a similar manner, a capital recovery charge, intended to provide dedicated funds to address R &R needs is also being proposed in this study. The rate schedule shown in Table 23 reflects the rates for the entire study period. BLACK & VEATCH I Sewer Rate Study [INTENTIONALLY LEFT BLANK] 65B -208 SEWER RATE STUDY I City of Santa Ana, CA Table 23: Proposed Rates for FY 14/15 through FY 18/19 - Scenario 1 ®M®M®M®M®M® Option A- Existing Rate Structure Commodity Charge ($ /HCF) $0.345 $0.376 $0.031 $0.410 $0.034 $0.447 $0.037 $0.487 $0.040 $0.531 $0.044 All customers Flat Bi- Monthly Charge $13.80 $15.05 $1.25 $16.40 $1.35 $17.88 $1.48 $19.49 $1.61 $21.24 $1.75 Unmetered customers Option B - Proposed Alternative Structure Capital Recovery $0.50 $0.50 $0.55 $0.04 $0.59 $0.05 $0.65 $0.05 $0.70 $0.06 Charge ($ /month) Lateral Repair Program $0.70 $0.70 $036 $0.06 $0.83 $0.07 $0.90 $0.07 $0.98 $0.08 ($ /month) Commodity $0.345 0.304 ($0.041) $0.331 $0.027 $0.360 $0.029 $0.392 $0.032 $0.426 $0.034 Charge ($ /hcf) FOG Program ($ /month) $17.40 $17.40 $18.93 $1.53 $20.60 $1.67 $22.41 $1.81 $24.38 $1.97 Food Service accounts only Revenue Sufficiency Presented in Table 24 is a comparison of Test Year allocated cost of service with revenues under the suggested water rate structure (Option B). Test year costs of service are obtained from Table 22, Column 3 and the proposed rates recover essentially 100 percent of the total cost of service. s0 uoveaesEIa ;.l J, 65B -209 City of Santa Ana, CA I SEWER RATE STUDY Table 24: Revenues under Proposed Rates (Option B) for TY 14/15 (Effective March 1, 2015) COST RECOVERY Column Reference [1] [2] 131 1 Single Family Residential 2,129,000 2,145,000 100.8% 2 Multi - Family Residential 1,609,400 1,602,600 99.6% 3 Commercial 1,461,800 1,456,200 99.6% 4 Industrial 220,000 219,700 99.9% 5 Institutional 270,600 269,600 99.6% 6 - Irrigation 11,700 11,600 99.1% 7 Outside City 900 900 100.0% 8 Reclaim Water 28,200 28,200 100.0% 9 Total System $5,731,600 $5,733,800 300.0% Typical Bill Impacts Presented in Table 25 is a comparison of a single - family residential customer's typical bill for varying levels of water use. The table compares the existing customer bill to the two rate options presented for TY 14/15. A comparison to surrounding cities for 15 hcf (monthly) is shown in Figure 6. Table 25: Typical Bills for Single Family Residential Customer (Rates Effective March 1, 2015) 0 $0.00 $0.00 1 $0.35 $0.38 2 $0.69 $0.75 3 $1.04 $1.13 4 $1.38 $1.50 5 $1.73 $1.88 6 $2.07 $2.25 7 $2.42 $2.63 8 $2.76 $3.00 9 $3.11 $3.38 10 $3.45 $3.75 11 $3.80 $4.13 12 $4.14 $4.50 13 $4.49 $4.88 BLACK & VEATCH I Sewer Rate Study $0.00 $2.40 $2.40 $0.03 $2.70 $2.36 $0.06 $3.01 $2.32 $0.09 $3.31 $2.28 $0.12 $3.62 $2.24 $0.15 $3.92 $2.20 $0.18 $4.22 $2.15 $0.21 $4.53 $2.11 $0.24 $4.83 $2.07 $0.27 $5.14 $2.03 $0.30 $5.44 $1.99 $0.33 $5.75 $1.95 $0.36 $6.05 $1.91 $0.39 $6.35 $1.87 65B -210 52 SEWER RATE STUDY I City of Santa Ana, CA 14 $4.83 $5.25 $0.42 $6.66 $1.83 15 $5.18 $5.63 $0.45 $6.96 $1.79 16 $5.52 $6.00 $0.48 $7.27 $1.75 17 $5.87 $6.38 $0.51 $7.57 $1.71 18 $6.21 $6.75 $0.54 $7.87 $1.66 19 $6.56 $7.13 $0.57 $8.18 $1.62 20 $6.90 $7.50 $0.60 $8.48 $1.58 21 $7.25 $7.88 $0.63 $8.79 $1.54 22 $7.59 $8.25 $0.66 $9.09 $1.50 23 $7.94 $8.63 $0.69 $9.40 $1.46 24 $8.28 $9.00 $0.72 $9.70 $1.42 25 $8.63 $9.38 $0.75 $10.00 $1.38 26 $8.97 $9.75 $0.78 $10.31 $1.34 27 $9.32 $10.13 $0.81 $10.61 $1.30 28 $9.66 $10.50 $0.84 $10.92 $1.26 29 $10.01 $10.88 $0.87 $11.22 $1.22 30 $10.35 $11.25 $0.90 $11.53 $1.18 31 $10.70 $11.63 $0.93 $11.83 $1.13 32 $11.04 $12.00 $0.96 $12.13 $1.09 33 $11.39 $12.38 $0.99 $12.44 $1.05 34 $11.73 $12.75 $1.02 $12.74 $1.01 35 $12.08 $13.13 $1.05 $13.05 $0.97 36 $12.42 $13.50 $1.08 $13.35 $0.93 37 $12.77 $13.88 $1.11 $13.65 $0.89 38 $13.11 $14.25 $1.14 $13.96 $0.85 39 $13.46 $14.63 $1.17 $14.26 $0.81 40 $13.80 $15.00 $1.20 $14.57 $0.77 65B -211 NOVEMBER 2014 City of Santa Ana, CAI SEWER RATE STUDY Figure 6: Monthly Single Family Residential Bills (25 HCF usage) ._ Single Family Residential Customer using 15 HCF /month Sewer Bill . - - -- - - -- - -- Serrano WD I City of Seal Beach South Coast WD City of Fullerton City of San Juan Capistrano Moulton Niguel WD Santa Margarita WD Irvine Ranch WD Laguna Beach CWD City of San Clemente City of Cypress City of Garden Grove City of Tustin City of Newport Beach City of Huntington Beach City of Brea Mesa WD City of Westminster City of La Habra City of Fountain Valley City of Santa Aria (Proposed) Yorba Linda WD City of Stanton City of Placentia City of Santa Ana (Existing) City of Anaheim City of Buena Park City of La Palma East Orange CWD Retail Zone City of Orange City of Long Beach SUMMARY $0 $20 $40 Average Survey Bill = $40.81 $60 $80 $100 Based on the results of the analyses conducted herein, Black & Veatch recommends that the City implements, at minimum, the revenue adjustments proposed in Table 12. These revenue increases are based on the City executing the proposed CIP program, which includes the suggested R &R improvements noted in Appendices A through C. Additionally, the revenue increases allow the City to reach the suggested minimum working capital levels by the end of the study period. With respect to the proposed rate structures, although either option will achieve the desired total cost recovery, Option B does provide greater revenue stability for the Sewer Enterprise Fund. BLACK & VEATCH I Sewer Rate Study 65B -212 $120 SEWER RATE STUDY I City of Santa Ana, CA Appendix A: Refurbishment & Replacement Program 65B -213 City of Santa Ana, CA I SEWER RATE STUDY As part of the scope of work conducted for this study, Black & Veatch assisted the City in developing an appropriate Refurbishment and Replacement (R &R) level of funding for the Sewer Enterprise. The following sections outline the approach undertaken for this effort and the basis for the suggested levels and timing of R &R activities. CAPITAL ASSET VALUATION AND REFURBISHMENT AND REPLACEMENT NEEDS EVALUATION METHODOLOGY The purpose of identifying future Refurbishment and Replacement (R &R) needs and costs is to estimate the required level of capital funding needed to maintain the Sewer utility infrastructure systems in sound operable condition and to meet the level of service expectations of the City over the next several years (defined as "modeling period" within this analysis). Black & Veatch used a 30 years modeling period for the analysis conducted herein. Methodology In this section, Black & Veatch outlines the approach that was used projecting future capital asset R &R schedules; estimated costs for the Water and Sewer infrastructure managed by the City; and value of installed Utility Historical Asset Performance City assets. ,i Black & Veatch conducted an R &R needs evaluation using an industry- accepted approach to project the R &R activities over a 30 -year period to support the development of a reserve funding strategy and financial recommendations. By projecting the expected useful life and intervals between major refurbishment of assets from their original installation year, then aggregating all R &R activities for each year, Black & Veatch developed an estimate of capital expenditure needs and then used these estimates as input to the development of appropriate funding strategies. A methodical and consistent approach to evaluating R &R activities involves using an asset class library, as described below to manage the inputs of projected R &R by each class and associated estimated costs. The graphic to the right illustrates Black & Veatch's approach. Class Based Useful Life • Adjust for Utility Use /Duty • Adjust for Age • Calculate Remaining Useful Life 11 Condition & Performance Adjustment • Adjust Remaining Useful Life Target Replacement Year • Risk Based Lowest • Remaining Useful Life MediumfLongJerm Needs Refurbishment & Replacement Schedule • Implementation Scheduled • Budget Development of Asset Class Library Black & Veatch undertook a review of each asset inventory for the City's sewer assets. Based on this review, Black & Veatch developed a draft asset class listing for input into the Asset Class Library described below. 'Asset Classes" are logical units of assets. In the context of R &R modeling, asset classes are those assets having a similar function, cost structure, and useful lives and refurbishment intervals. The Asset Class Library provides the listing of asset classes and the various components that define the R &R schedule for the particular asset including; useful lives, refurbishment program definitions and intervals and replacement schedules and estimated costs. Black & Veatch developed a draft Asset Class BLACK & VEATCH I Appendix A Refuroshment & Repiecerr; .nt Program 65B -214 Y7 SEWER RATE STUDY I City of Santa Ana, CA Library based on our knowledge of similar systems and specific asset types. The draft Asset Class Library was then refined through collaboration with the City staff with system- specific familiarity, to reflect the best appropriate information for use in the R &R analysis. The components of each of the asset classes were presented in detail in draft form, then finailized based on discusion of the asset class details, and any follow -up research on costs, types of assets and related information. Using this method, the resulting class library developed for the City incorporates Black & Veatch's experiences with other agencies, as well as City- specific experience with each asset class. For the City's asset class library, Black & Veatch developed the following elements, which are available for viewing within the Comprehensive Asset Management Prioritization System (CAMPS). Expected useful lives For each defined asset class, and for each specific asset where required, appropriate expected useful lives were developed for these assets. Black & Veatch defines useful life as the number of years of normal use that can be expected prior to replacement becoming necessary. It should be noted that some assets would be expected to fail before and after the estimated useful life, however, this approach provides planning level funding needs when averaged over a 5, 10, 15, or 20 year smoothing period. These estimates are based on our industry experience, manufacturers' estimates, previous literature research, and our work for other agencies. Adjusted useful lives, based on Condition Monitoring The expected useful life of the asset is an average expected life for that asset class, as described above. The CAMPS database contains the functionality for the City to identify assets that are in need of immediate or near -term (next 1 -2 years) replacement, by indicating a condition rating of '1' within the asset registry. Similarly, CAMPS contains the functionality for Staff to indicate assets as being in very good condition, using a rating of '3' within the asset registry. Presented below are examples of each of these cases illustrating how users can adjust the expected useful life of a specific asset to reflect a more detailed knowledge of the assets. Case #1: Asset with an Assessed Condition Rating of 1 (Poor Condition) A sewer pump (associated with a lift station) was placed in service in 2002, with a class life of 30 years. At the time of the analysis, 2012, the pump is 10 years old and should be expected to operate effectively for another 20 years. If the pump has been assessed at a poor condition (rating = 1), then an adjustment is made to indicate more urgent replacement, or analysis year+ 1 year. Algorithm used by the CAMPS model: c, If Condition Rating= 1, then use current year+ 1 for Replacement Year Case #2: Older Asset with an Assessed Condition Rating of 3 (Excellent, or like new condition) A sewer pump was placed in service in 1987, with the same class life of 30 years. In this case, the pump is 25 years old and expected to last until 2017. If the pump has been assessed at a like 65B -215 NOVEMBER 2014 City of Santa Ana, CA SEWER RATE STUDY new condition (rating = 3), then an adjustment is made to extend the life of the asset an additional 50% of its class life (or 15 years) to a target replacement of 2032. Algorithm used by the CAMPS model., If Condition Rating = 3, then compare (calculate Remaining Useful Life = Replacement Year - Current Year) with (calculate (50% x Useful Life) +Current Year) and use largest value for Replacement Year. To continue to refine and improve these class -based useful life estimates, which have a large impact on funding strategy analysis, Black & Veatch recommends initiating an infrastructure risk analysis and condition - monitoring program. Leading asset management practices within the infrastructure management industry are to monitor the condition of assets, using a prioritization approach. Such an approach may consist of beginning with those assets where assets are past or nearing the end of their expected useful. Another key element in risk management would be to conduct condition monitoring on those assets posing the greatest risk to the City, should the asset fail. Provided later in this report is further discussion of risk analysis and condition monitoring. Refurbishment programs, intervals and cost Most asset classes require various capital refurbishments on a cyclic basis in order to sustain or extend the asset's useful lives. Pump stations, for example, can be expected to undergo pump refurbishment, motor overhaul, replacement of electric components, and mechanical overhaul at intervals shorter than the cycle for the replacement of assets themselves. Appropriate refurbishment intervals and costs that are considered major (non - operational /annual) expenditures, were developed for specific asset classes. Replacement costs For each asset class and for specific assets where required, Black & Veatch estimated the base -year (FY2013) replacement cost. Black & Veatch's estimates are based on the experience of our engineers, construction cost estimates recently prepared for other clients, industry standards, and our experience with other agencies. Where possible, replacement costs, were defined in terms of unit costs to facilitate the class -based estimating approach (examples include dollars per foot of various types of pipe, dollars per gallon for storage facilities, and dollars per square foot for buildings of various classes). For Governmental Accounting Standards Board (GASB) 34 compliance, Black & Veatch has included factors to include ancillary costs such as planning, design, site development, and internal administrative costs where appropriate for the types of assets. The Asset Class Library, along with the asset inventory were the key input for projecting capital asset R &R needs. DEVELOPMENT OF REFURBISHMENT AND REPLACEMENT SCHEDULES AND COSTS Black & Veatch used its Comprehensive Asset Management Prioritization System (CAMPS) Model in conjunction with risk profile analysis to develop the R &R schedules presented in this report. The R &R BLACK & VEATCH I Appendix A'. Refurbishment & Replacement Program 65B -216 33 SEWER RATE STUDY I City of Santa Ana, CA schedules project the capitalized refurbishment, and replacement costs (in 2012 dollars) needed to sustain the sewer infrastructure managed by the City. Black & Veatch then escalated costs for each specific R &R activity to the expected year of R &R expenditure. Next, we then summed the total estimated R &R costs for all assets and each modeled year to project future capital funding needs and to develop reserve fund development strategies. DEVELOPMENT OF VALUATION OF CAPITAL ASSETS Black & Veatch also used the CAMPS tool to calculate a current depreciated value for each capital asset within the asset inventory based on the Reproduction Cost New Less Depreciation (RCNLD) methodology. This methodology values assets at their current reproduction costs (2012 Dollars) and calculates depreciation based on this estimated cost, the original year in service, reasonable estimates of useful lives, using a straight -line approach. Reasonable estimates of expected useful lives are determined using the same approach described previously, including the use of class lives and adjustments to class lives based on condition assessment data. Presented below are examples of valuation calculations. Case #1: Valuation based on Class Life A 20 hp sewer pump and motor (associated with a lift station) was placed in service in 2002, with a class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, approximately 2/3 of its expected useful life. The asset is valued at $16,000 and has depreciated approximately 2/3 of its value, using a straight -line approach. The current 2012 value for this asset would then be approximately $5,333. Case #2: Valuation based on Condition Rating A 20 hp sewer pump and motor (associated with a lift station) was placed in service in 2002, with a class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, but staff has assessed the condition of the asset as poor (condition rating of 1). With the adjustment of the expected useful life according to the algorithm described in the Adjustments to Useful Life Based on Condition Monitoring discussion above, the asset has approximately 1/15 of its original value, or approximately $1,067. Financial, land and intangible assets were not included in the inventory or in this analysis. CAPITAL ASSET INVENTORY, ASSET CLASS LIBRARY AND REPLACEMENT SCHEDULE DATABASE DEVELOPMENT Asset Inventory The City provided several asset inventories that Black & Veatch then evaluated, summarized and then compiled into a single database to facilitate the development of R &R schedules and costs, using the methodology described previously. Inventory Data Sources Asset Inventory data records for the plant facilities were obtained from the City's Geographical Information System (GIS). Additionally, asset inventory data records for the above ground infrastructure 65B -217 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY assets use historical data captured by City staff from various different historical records. The City's GIS and historical records provided material type and /or size, year in service and quantity for the infrastructure assets. Black & Veatch undertook a gap analysis of the provided asset inventory data, to identify missing data. Using our experience with similar facilities, and as validated with City staff familiar with specific assets, Black & Veatch derived useful lives, R &R schedules and costs for the water and sewer assets. Asset Class Library Contents Black & Veatch used CAMPS to model R &R needs for sewer infrastructure asset classes. To support this modeling effort, Black & Veatch developed an asset class library consisting of asset class definitions, expected useful lives, and unit costs for each asset class to project in a methodical and consistent manner the timing of R &R of assets and estimated costs to support the reserve funding strategy analysis. Described below are Black & Veatch's assumptions in developing the Asset Class Library that forms the basis for projecting the R &R schedules and costs and contained within CAMPS. Sewer Infrastructure System Sewer system assets consist of collections and conveyance assets. The sewer infrastructure asset classes were defined by Black & Veatch and grouped into the following categories, as described further below. 6 Sewer Gravity Pipe " Sewer Lift Stations, Pumping and Related Equipment Table A 1 presents the expected useful life for sewer infrastructure system assets below for each asset class. Table A -1: Sewer System Expected Useful Lives BLACK & VEATCH I Appendix A: Refurbishment & Replacement Program 65B -218 Lift Station Concrete Sump and Miscellaneous Items (non - pumping LIFT equipment) 75 PUMP—WW Pump and Motor (non - submersible) for Wastewater 10 PUMPS—WW Submersible Pump for Wastewater 10 SEWM ABS Sewer Mains made of ABS pipe 40 SEWM. DI Sewer Mains made of Ductile Iron pipe 75 SEWM FELT Sewer Mains made of Felt -lined pipe 75 SEWM FFPVCL Sewer Mains made of FFPVCL pipe 75 SEWM_FIBER Sewer Mains made of Fiber pipe 75 BLACK & VEATCH I Appendix A: Refurbishment & Replacement Program 65B -218 60 SEWER RATE STUDY I City of Santa Ana, CA SEWM_HDPE Sewer Mains made of HDPE pipe 75 SEWM_PCC Sewer Mains made of PCC pipe 75 SEWM_PVC Sewer Mains made of PVC pipe 75 SEWM .SPIRAL Sewer Mains made of Spiral pipe 75 SEWM UNK Sewer Mains made of unknown material 60 SEWM VCP Sewer Mains made of VCP pipe 100 Sewer Gravity Pipe The sewer gravity pipe asset class incorporates both pipe and maintenance holes and any end of the line cleanouts. Black & Veatch grouped these assets together for design and construction practicality purposes. Therefore, the replacement costs estimated for sewer gravity pipe includes the costs for both the pipe and maintenance holes. Table A 2 summarizes the replacement costs for the various material types and sizes of sewer pipe. Where possible, Black & Veatch used current construction estimates available from projects in the surrounding area. Table A - 2: Sewer Pipe Replacement Sizes and Costs 3 $127.96 21 $295.75 4 $137.69 24 $338.63 6 $157.15 27 $379.31 8 $176.61 30 $400.20 10 $196.07 33 $429.88 12 $195.70 36 $448.57. 14 $234.99 39 $468.36 15 $220.99 42 $498.05 18 $257.27 Sewer Pumping Facilities Table A 3 ummarizes the R &R cost parameters of this asset class. Table A 4 lists the refurbishment activities, costs and intervals associated with sewer pumping facilities. All figures are in 2012 dollars. We note that the assets listed in the tables below assume 'like" replacements. That is, if a 20 hp pump requires replacement, the value provided is for a similar 20 hp pump but in estimated 2012 dollars. 65B -219 NOVEMBER 2014 City of Santa Ana, CA I SEYa FfR RATr TfUO Table A - 3: Sewer Pumps /Motors Replacement Costs — 2012 dollars 1 10 $14,600 11 30 $18,000 Pumps (hp) 31 100 $24,800 101 250 $49,500 Table A -4: Misc. Assets Replacement Costs— 2012 dollars Lift Station $84,400 Non - System - Specific Assets Black & Veatch developed several asset classes to group like assets within the asset inventory that are associated with multiple infrastructure systems. Tables A 5 through A 7 present the expected useful lives and replacement costs for these non - system specific asset classes. All costs are in 2012 dollars. We note that the assets listed in the tables below assume "like' replacements. Table A - 5: Non System- specific Expected Useful Lives GENF Water, Sewer Fixed generators w/Transfer Switch 60 GENPLG Water, Sewer Gen Set Plug and Transfer Switch for Portable Generator 20 Table A -6: Generator Replacement Costs— 2012 dollars 1 100 $63,000 Generator - Fixed 101 200 $112,600 201 400 $250,000 Table A- 7: Miscellaneous Assets Replacement Costs — 2012 dollars Gen Set Plug $11,300 BLACK & VEATCH I Appendix A: Refurbishment & Replacemsnr Program 65B -220 rf: SEWER RATE STUDY I City of Santa Ana, CA Refurbishment Intervals and Schedule Capital refurbishment activities were identified for specific assets where major (non - operational /annual) expenditures would be required to maintain the intended useful life of the asset. For each of these refurbishments, defined intervals and costs were developed for specific asset classes, as presented in Table A 8. Table A -8: Assets Refurbishment Intervals and Costs -2012 dollars Pressure Major refurbishment (valves, gaskets, PRV Reducing 20 30% Vault mist. piping, controls) PUMP W Major refurbishment (seal replacement, W— Pump (Sewer) bearing replacement, shaft sleeve repair, 5 30% rewind, varnish and bake, etc.) PUMPS_ Submersible Major refurbishment (seal replacement, WW Pump (Sewer) bearing replacement, shaft sleeve repair, 5 30% rewind, varnish and bake, etc.) STRN Structure Misc. rehabilitation (e.g., paint, fix up 15 10% stucco, etc.) CAPITAL ASSET VALUATION AND SCHEDULE OF R &R NEEDS AND ESTIMATED COSTS A common practice used in the industry to determine a baseline value for R &R needs is to take the estimated replacement cost asset value, adjusted for depreciation, and then apply a depreciation calculation. This approach is acceptable when a utility has performed no system condition assessments. In the following sections, Black & Veatch presents suggested R &R schedules for the Water and Sewer Enterprises. Where available, Black & Veatch used condition assessment data and developed risk profiles to more accurately reflect replacement needs. Capital Asset Valuation Summary The valuation of Sewer system infrastructure capital assets was developed using the asset class -based methodology to estimate replacement costs (in FY2012 dollars), then adjusted for depreciation (straight - line). Table A 9 presents the estimated replacement cost and depreciated FY2012 value for capital assets for each of the systems. 65B -221 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Table A - 9: Asset Valuation by System Sewer $499,433,649 $232,229,889 46% 1. Replacement Costs (in 2012 dollars) are calculated using the unit costs presented in within this report applied to all assets Water and Sewer assets. 2. The asset valuation methodology (RCNLD) represents an estimate of total infrastructure value, accounting for depreciation of assets. A comparison of the current infrastructure value with the total replacement cost in Table A 9 is an indicator of overall infrastructure age, and represented as a Value Ratio. The value ratio is calculated as the Asset Value divided by Replacement Cost. Total System Capital Asset Schedule of R &R Needs Using the R &R needs forecasting methodology described previously, Figure A 1 illustrates the overall R &R needs identified projected over a 30 -year period, beginning with FY2013 for the combined Water and Sewer Enterprises. Figure A -1: Annual Capital Asset R &R Needs for Water and Sewer Assets over 30 -Year Period *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 Observations 1. There were a significant number of assets that were modeled to be beyond their Class -Based Useful Life (Approx $37M). Of this total, 99% are for Water and Sewer mains. 2. Of this 99 %, 76% are for Water mains, which have no condition assessment information (Approx $28M). 3. R &R needs profiles for R &R vary considerably between Water and Sewer system assets. BLACK & VEATCH I Appendix A: Refurbishment & Replacement Program 65B -222 64 SEWER RATE STUDY I City of Santa Ana, CA Table A 10 summarizes the total funding needs identified during the 30 -year model period by infrastructure group based on available information. Table A - 30: Total Modeled R &R 30 Year Costs Sewer Sewer $1,337,400 Sewer Mains and Lift Stations $118,765,100 Total Sewer System $120,102,500 *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 As identified above, each system has a unique profile of Capital Asset R &R needs that is dependent on overall age of the infrastructure, type of infrastructure assets (predominantly short or long asset lives), and detailed asset knowledge as determined through inspections. Figure A 2 illustrates this unique profile for the Sewer system. Figure A- 2: Annual Capital Asset R &R Needs for the Sewer System *Costs have been escalated to the year of R &R, using a 3% escalation from FY2013 As discussed earlier, R &R schedules derived using depreciation methodologies are a good tool when condition assessment data is not available. For the City, some information for sewer mains exist and as such, Black & Veatch made refinements to the schedules proposed above. R &R projections for all other assets remain until the City has completed its condition assessment work for aboveground assets. 65B -223 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Appendix B: Sewer CIP Prioritization Process BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -224 66 SEWER RATE STUDY I City of Santa Ana, CA INTRODUCTION Making informed decisions to maximize the integrity of a utility's infrastructure in today's economic and business environment can be a challenging task. In many cases, a utility's greatest ally is existing information about their infrastructure. By tapping into existing datasets and staff knowledge, critical information can gleaned about the condition and life expectancies of their facilities; and these can be related to ever - changing business drivers, operational strategies, and budgetary priorities. Capital improvement planning (CIP) for the outside plant assets can also be a challenge. In many cases direct visual inspection of the assets may not be possible or economically feasible. Therefore, condition assessments must rely mostly on existing information and indirect assessments. The process typically evaluates a variety of information such as pipe materials, main break rates, CCTV inspection data, installation dates, soil conditions, proximity to sensitive customers, hydraulic model results, etc. In many cases the most accessible and usable data is from the utility's Geographic Information System (GIS) and /or asset management database(s). This data is used to assist in prioritizing facilities for inspections and /or renewal based on criticality, life- expectancy, and /or geographic boundaries (e.g. City Council boundaries). CIP FOR OUTSIDE PLANT ASSETS The general approach to capital improvement planning for the outside plant assets typically follows a multi- stepped process. For the City's pipeline assessment, a set of GIS -based tools and processes were used. Combined, these are called 1CIP" for interactive Capital Improvement Planning. The typical steps include: 1. Compile source data for the assets to be evaluated in the study. This often includes the utility's GIS and /or asset management database(s), a variety of spreadsheets, and input from the utility's staff. 2. Review source data to gain an overall understanding of the quantity and quality of the data. Special attention is given to missing or conflicting information. This data is also evaluated to determine which sources are suitable for CIP assessment and which data appear to provide insight into the past, current or future condition of the assets. 3. Organize source data into a logical data structure suitable for further analysis. 4. Perform both spatial and non - spatial assessments to identify statistically- significant trends. Much of this is considered "exploratory" as relationships between things like pipe material, break frequencies, and soil conditions are often not readily apparent. In many cases only a cursory review of these relationships can be performed due to time and budget constraints, or lack of sufficient source data. 5. Identify key Probability of Failure (POF) criteria based on the initial review of source data. PoF is also known as Likelihood of Failure (LoF). These typically include such factors as: a. Main breaks, Sewer Blockages b. Customer Complaints c. Soil Conditions d. Pipe Diameter and Material e. Pipe Age / Remaining Life f. Pipe Inspections / Condition 65B -225 NOVEMBER 2014 City of Santa Ana, CAI SEWER RATE STUDY g. Hydraulic Capacity 6. Identify key Consequence of Failure (CoF), also known as criticality criteria. These typically include such direct or indirect factors as: a. Effect on Customers (from size of pipe, number of services impacted, etc.) b. Asset redundancy c. Proximity to critical roads, water sources, environmental areas, etc. d. Critical customers e. Public Health & Safety f. Financial impacts 7. Calculate overall Business Risk Exposure (BRE) for each asset. The BRE score is a product of the PoF times the CoF scores. This score is an informative indicator of facilities that will likely require higher levels of attention. It is typically based on a 1 to 100 scale metric. 8. Generate resulting tables, graphs and output maps to further identify trends and recommendations. Typical facility replacement cost look -up tables are then used to determine overall budgetary estimates and schedules. By plotting the PoF and CoF scores on the two axes of a graph, the relative level of risk can be readily apparent. Figure B 1 below provides an example risk heat map graph. Higher probability of failure assets are plotted near the top. Higher consequences of failure assets are plotted to the right. Suggested possible action plans appropriate to the levels of risk are also included in this chart. 9. As a final step in the CIP assessment, individual capital improvement projects can then be identified. These projects area often based on the identification of high -risk assets and then grouping those assets that are in close proximity. The City's sewer collection system and water distribution system were evaluated using this process. Since the overall focus of this study was to identify likely pipe replacement cost estimates for a budgetary plan and schedule, many of these investigations were performed at a relatively high level. It is recommended that the City review these results and refine the assessments as additional source data becomes available. [INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -226 68 SEWER RATE STUDY 1 City of Santa Ana, CA Figure B- 1: Example Risk Heat Map Graph Relating PoF and CoF Scores Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 9 Q) 8 LL 7 w 0 v 6 V v 5 7 v 4 c V O 3 2 1 10 20 1 30 40 517 1 "' I —_ 1 80 90 ( 100 Replace / Redesign 9 18 27 36 4! Strategy 77 11 Economic Based ) 48 5 72 90 8 80 Replacement Strategy e 7 14 Li to 15 4 SLOt 56 63 70 6 12 18 24 3 SS 42 4R [;a 60 predictive 5 10 15 e J`'��e d� 30 35 Monitoring SO 4 8 teas 20 24 1 28 Strategy 40 12 15 Condition 24 27 30 Monitoring Runto i 8 10 Strategy 16 18 20 Failure 4 5 6 7 8 9 10 GENERAL ASSUMPTIONS AND OBSERVATIONS During the source data review, condition assessment and planning analysis, various assumptions were made to permit further evaluation. Many of these were necessary due to limitations in the existing data such as missing or conflicting pipe attributes, limited inspection data, or similar constraints. For example, the timing of pipeline lining is often unclear. The association of water break data to the correct asset was also not precise. Although good engineering judgment was used in the analysis of historic pipeline condition data, an unknown level of inaccuracy exists. Due to the limited quantity and quality of source data, further investigation is recommended before making specific rehabilitation or replacement decisions. The following list includes many of the general assumptions and observations made during the planning assessment on the sewer outside -plant network system. Additional comments are included in specific sections of this document. • Only sewer mains were considered in this assessment. The condition of manholes, service laterals, lift stations, etc. were not addressed. • Pipeline Type = "PRIV" or "ABAN" were omitted from the sewer analysis. • Pipe segments with zero length were omitted from the analysis. • The timing of pipeline lining is often unclear. Therefore, it was assumed that any CCTV inspection data referred to the pipe conditions prior to lining. Once lined, the pipe was assumed to have been "fixed" and currently be in very good structure condition. • Based on the GIS source data provided, it appears that zero water or sewer pipe was installed in 2010; even though 47 water main breaks occurred that year. 65B -227 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY SEWER COLLECTION SYSTEM CIP ANALYSIS Sewer System Statistics For the purpose of this condition assessment / rate study, only the sewer mains were evaluated. Sewer laterals, manholes, lift stations, etc. were not evaluated. However, their costs were included in future replacement forecasting as part of the combined pipe replacement cost as applicable. Source data was primarily provided from Santa Ana's GIS system. Additional data was provided in spreadsheets, text files, and /or from communications with City staff. According to the City's GIS database, the sewer collection system contains about 446 miles of sewer mains. This total includes all pipeline types including pipes owned by Orange County Sanitation District (OCSD), or jointly managed under a cooperative agreement with Garden Grove (COGG) or Orange County Sanitation District (COOP). These pipeline assets were included in the initial historic assessment so as to gain the most complete past evaluation of pipe conditions. However, for future replacement forecasting, the abandoned and private lines were excluded from the analysis based on the assumption that the City would not be replacing these assets. Pipe Material By far, the most predominant pipe material in the sewer collection system is Vitrified Clay Pipe; making up nearly 90 percent of the system. Material percentages (by length) are indicated in Figure B 2. Figure 8- 2: Sewer Pipe Material Percentages (by Length) ■ VCP (Vitrified Clay Pipe) ■ Lined (a variety of linings) ® PCC(Precast Concrete) Y PVC (Polyvinyl Chloride) ■ Other (ABS, DI, HDPE, UNK) Figure B 3 provides a map of sewer mains color coded by pipe material. Figure B 4 provides a similar map showing sewer mains that have been lined. BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -228 Figure B- 3: Map of Sewer Mains Color -Coded by Pipe Material r- 0 SEWER RATE STUDY I City of Santa Ana, CA Sewer Main by Material — ABS — Conerele — Ducbk Iron -- Lined — High Density Poyelhelyne Polyvinyl Chloride — Unknown — Vitrified Clay I City Boundary -- RailRoads 70 65B -229 City of Santa Ana, CA Water I Wastewater System Analysis - 2012 Wh F Sewer Collection System Mains by Pipe Material BLACK &VEATCH aulldln9 • world of dlRVenca! NOVEMBER 2014 City of Santa Ana, CA I SEWER, RATE STUDY Figure B -4: Map of Sewer Mains that have been Lined r- 0 Llned Mains — Felt Liner — Fiber Glass Liner Fold & Fonn PVC Liner Spiral Wound Liner Sever Main — Sewer Main f__? City Boundary - - -- RailRoads City of Santa Ana, CA Water I Wastewater System Analysis - 2012 Sewer Collection System Mains that have been Lined BLACK &VEATCH Building a world of differantet BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -230 r SEWER RATE STUDY I City of Santa Ana, CA Pipe Diameter Over 70 percent of the City's sewer mains are 6 or 8 inch in diameter. The remainder range in sizes up to a maximum diameter of 84 inches. Pipe diameter quantities are listed in Figure B 5 below. Figure B 6 provides a map of sewer mains color coded by pipe diameter. The OCSD trunk lines are shown in heavier line weights for visibility. Figure B- 5: Sewer Pipe Diameters by Miles Installed [INTENTIONALLY LEFT BLANK] 65B -231 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 6: Map of Sewer Mains Color -Coded by Pipe Diameter Sever Main OCSD Trunk Diameter 4 -8• —10 -tar 21 - 28` 30 - 39" X40 -48" — 51 .84" + Unknown Sever Main by Diameter Diameter 4 -8' –._.. 10-18' 21-28' 30 - 39" — 40 -48` —51-84 - Unknown _ - -'? City Boundary -- RaiiRoads BLACK & VEATCH I Appendix B: Sewer GP Prioritization Process 65B -232 City of Santa Ana, CA Water f Wastewater System Analysis - 2012 i Sewer Collection System Mains by Diameter BLACK &VEATCH Building a world of diffemnce: 74 SEWER RATE STUDY I City of Santa Ana, CA Pipe Vintage The oldest pipes in the system appear to have been installed as early as 1900. Over 12 percent were installed prior to 1930. The majority of the system (about 70 percent) was installed in the 1950s through the 1970s. Pipe vintages (install decade) are listed in Table B 1 below. Figure B 7 also shows the amount of pipe installed each year as well as the cumulative totals. Figure B 8 provides a map of sewer mains color coded by pipe install decade. Table B - 1: Pipe Vintages by Install Decade Pre 1930 938 10.77% 298,228 56.48 12.66% 1930s 68 0.78% 20,902 3.96 0.89% 1940s 318 3.65% 94,930 17.98 4.03% 19505 2,264 26.01% 617,026 116.86 26.18% 1960s 2,682 30.81% 673,698 127.59 28.59% 1970s 1,431 16.44% 404,027 76.52 17.15% 19805 323 3.71% 88,064 16.68 3.74% 19905 231 2.65% 59,956 11.36 2.54% 2000s 155 1.78% 38,054 7.21 1.61% 2010s 57 0.65% 5,944 1.13 0.25% Unknown 239 2.75% 55,689 10.55 2.36% Total 8,706 100.00% 2,356,518 446.31 100.00% Figure B- 7: Annual and Cumulative Miles of Installed Pipe by Year 65B -233 NOVEMBER 2014 500 25 Cum Miles —Miles I 450 400 20 a 350 N —` 300 15 e f 250 d A 200 10 C j 9 150 U 100 5 50 I 0 0 N N N trt M V V V V vt vt tp tp 1p n n n n N M p] � T p\ O O O O III Y C I Install Year I.. 65B -233 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 8: Map of Sewer Mains Color Coded by Pipe Install Decade r- 0 sewer Main by Decade City of Santa Ana, CA 1930 Pre Water / Wastewater 1930s System Analysis - 2012 19405 1950: 19605 1970s 19805 19905 — 2000s — zolos — LINK Sewer Collection System City Boundary Mains by Pipe Install Decade RailRoads 0 BLACK&VEATCH Building a world of difftrence.- BLACK& VEATCH I Appendix B: Sewer CIP Prioritization Process 65B-234 76 SEWER RATE STUDY I City of Santa Ana, CA CCTV Observations, Sewer Spills and Repairs The City has been performing CCTV inspections on about 70 miles of pipe each year. This equates to about a 6 -7 year cycle to cover the entire system. figure B 9 provides a map of sewer mains color coded by CCTV inspection year. The GIS database includes information compiled from CCTV inspections over the years. About 78 percent of the sewer system includes at least some inspection - related data. This information is very useful in that it provides the most accurate assessment of the facilities current (recent) condition and expectation for failure. The CCTV data also provides key indications related to ongoing operational / maintenance considerations. In general, the City has used these observations to identify sections of sewer to line or clean. However, it has not been used for risk assessment. Having the latest CCTV inspection results are critical in assessing current pipeline conditions. However, by comparing these results to prior inspections, one can also gain a better understanding of the rate of changes occurring. In some cases the presence of a pipe defect may not be much of an issue if it has been in the same condition for many years; perhaps even since construction. Over time, the City will be able to see trends in the deterioration of pipe to better project future replacement rates. Therefore, Black & Veatch strongly recommends the City implement a process for storing and assessing prior inspection data as well as the latest data set. The "Quick Structural Rating" (QSR) and "Quick Maintenance Rating' (QMR) values calculated based on the review of CCTV inspections are especially useful to this assessment study. Therefore, these factors have been addressed in their own sections below. Some of the CCTV observation data includes indications of pipeline problems, such as structural issues and grease or root issues. Of the structure issues listed, about 13 percent of all pipes in the collection system have at least one location that is broken, cracked, fractured, or has a hole or offset. Almost 29 percent of the pipe records are listed as having no structural defects. The remaining 58 percent had no structural issues value (not inspected or no recorded value). For grease, over 53 percent of all system lines are shown as being clean, about 29 percent have light grease, and only about 3 percent are listed at medium or heavy. The remaining 15 percent had no grease issue value. Roots show a similar status: 63 percent at none, 21 percent at light, and about 1 percent are listed at medium or heavy. The remaining 15 percent had no roots issue value. 65B -235 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 9: Map of Sewer Mains Color-Coded by CCTV Inspection Year _ nn �rml itil �� Y � IN FA i ME 1-myj 9 N W F 0 3,000 6,000 12.000 Ft Needs CCTV Inspection City of Santa Ana, CA — Needs CCTV Inspection Water / Wastewater CCTV Year System Analysis - 2012 — <Null- - 1990.2004 2005-2009 — 2010 nAh —2011 — 2012 1 City Boundary -- RailRoads Sewer Collection System Mains by CCTV Year 0 BLACK&VEATCH Building a world of difference.- BLACK & VEATCH I Appendix B. Sewer CIP Prioritization Process 65B-236 28 SEWER RATE STUDY I City of Santa Ana, CA The City has also indicated specific areas as "Enhanced Maintenance Locations' (or EMLs). These sections of the sewer network (less than 1 percent of the entire system) exhibit repeated problems with maintenance issues. Although most EMLs are related to issues with Fats, Oils and Grease (FOG), the City staff has indicated that some portion of these may also be a result of structural sags in the sewer lines. Figure B 10 shows a map of the identified EMLs and FSEs. Sewer spill locations (150 spill records listed between 1999 and 2012) were also included for reference since about 43 percent of the spills are listed as grease - related. The staff also indicated that they are planning to conduct further investigations into relating these EMLs to nearby Food Service Establishments (FSEs). Additional review of the spill location data may also be warranted; especially for repeated occurrences. Figure B 11 shows a map of the sewer repairs since 2001 as Indicated in the City's GIS. There are 243 main repair records (impacting about 2.6% of the mains). There were also 1,358 lateral line repairs (impacting about 2.8% of laterals). Repairs were not specifically addressed in his study due to very limited data (mostly listed as a note in the description field). City staff also indicated that main repair location data was primarily used to indicate planned work activities based on the results of CCTV inspections and that they do not indicate an additional level of information about the pipeline condition. [INTENTIONALLY LEFT BLANK] 65B -237 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure B -10: Map of the Identified EMLs, FSEs and Spills r Sewer Spills • Sewer Spills Enhanced Maint. Loc. (EMLs) — Enhanced Maint. Loc (EMLs) Sewer Main Sewer Main FSE Point FSE Point Footprint City Boundary -- RailRoads City of Santa Ana, CA Water 1 Wastewater System Analysis - 2012 n Sewer Collection System Spills, EMS, & FSEs BLACK &VEATCH Building aworld of diHemew BLACK & VEATCH i Appendix B Sewer OP Pr9oritization Process 65B -238 • tt a: t • � y _ 1 1 _ i� t —nj? 1 N I • i� �/ E 0 3,000 6.000 12.000 Ft s Sewer Spills • Sewer Spills Enhanced Maint. Loc. (EMLs) — Enhanced Maint. Loc (EMLs) Sewer Main Sewer Main FSE Point FSE Point Footprint City Boundary -- RailRoads City of Santa Ana, CA Water 1 Wastewater System Analysis - 2012 n Sewer Collection System Spills, EMS, & FSEs BLACK &VEATCH Building aworld of diHemew BLACK & VEATCH i Appendix B Sewer OP Pr9oritization Process 65B -238 80 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 11: Map of the Sewer Main Repairs r x , x x Jr" x x W xx x t „ x 30 x x x «. i f- ' � N I e 0 3,000 6.000 12.000 Ft w-"�E s Sewer Repairs City of Santa Ana, CA x Repairs Water I Wastewater Sewer Main System Analysis - 2012 Sewer Main ?. City Boundary --- RailRoads ` YI� �i' Sewer Collection System Sewer Main Repairs BLACK &VEATCH L Y+,xw &eebiea k+enrl5li! Sem inaJN35CatarifµtiOxweM55t�MS.Ma ane 6rwv Keean m0 Building a world of diHerencer 65B -239 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Quick Structural Rating (QSR) Analysis The most current and reliable sewer main condition assessment data available from within the City's GIS database is the CCTV ratings results for QSR. These values provide actual internal pipeline conditions observed at the time of the inspection. The City's QSR values are assigned to individual sewer pipe segments following the evaluation of CCTV pipeline inspections. These ratings are based on the Pipeline Assessment and Certification Program (PACP) coding systems developed by NASSCO. The grading system only considers internal pipe conditions (defects) observed from the CCTV inspection. The PACP Quick Rating is a four - character score expressing the number of occurrences of the two highest severity grades. No. of Worst Defects No. of 2nd Worst Defects rL1 rA_j QSR: 5 2 3 6 Worst Defect ~2 d Worst Defect These scores are typically used in evaluating the overall grade of the entire pipe segment using one of two methods. Raw QSR Grading Method For simplicity, the first method only considers the first (highest) grade rank. It uses only the left -most digit of the four - character PACP grade for the pipe segment grade. The mechanisms and rates of pipe deterioration are highly dependent on local conditions and operational history. However, the following general guidelines (from NASSCO PACP, 2001) is provided as a starting point: Grade 5: Pipe has failed or will likely fail within five years, immediate attention recommended Grade 4: Pipe will probably fail in 5 to 10 years, in poor condition Grade 3: Pipe may fail in 10 to 20 years, in fair condition Grade 2: Pipe unlikely to fail for at least 20 years, in good condition Grade 1: Failure unlikely in the foreseeable future, in excellent condition Grade 0: No defects observed Null: no rating data provided in the City's GIS database This method is acceptable if you assume that the worst defect (i.e. weakest link) defines the structural condition of the overall pipe segment. It also ignores the frequency that these defects were observed or any lower grade defects. In the "5236" example above, the pipe would receive a Raw QSR Grade of S. By analyzing the City's GIS data for QSR observations, several summaries were made. Figure B 12 shows the percent of total sewer system (by pipe length) listed by each of the QSR Ratings (graded 0 to 5). As the graph shows, 22 percent of all pipeline records have no QSR data and 50 percent have a grade of zero. Of most concern are the highest grade pipes (Grades 3 -5). Combined these represent about 15 percent of the system. BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -240 sit SEW lk RATE STUDY I City of Santa Ana, CA Figure B -12: QSR Ratings by Percent of Total System Main Length Figure B 13 shows the length of sewer mains by year pipe was installed and colored by QSR rank. On initial review, one might conclude that there are two periods of structurally problematic pipe (in the 1920s and 1950 -70s). However, this conclusion is misleading without considering the amount of pipe installed. By comparing the proportion of red / brown (high QSR rank) to the total column heights (total installed pipe), you can better appreciate the magnitude of problem pipe. This consideration is addressed in the Probability of Failure (PoF) section below. [INTENTIONALLY LEFT BLANK] 65B -241 NOVEMBER 2014 City of Santa Ana, CAI SEWER RATE STUDY Figure B- 13: Length of Pipe Installed by Year and by QSR Ratings Figure B 14 provides a map of sewer mains color coded by QSR Grade (using the Raw QSR Grading Method). This map makes it apparent that a majority of the higher QSR graded pipes are in the older, downtown portion of the city. For comparative purposes, Figure B 15 was created to relate mains with high QSR scores (3 and above) to City- identified repair locations. BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Prncess 65B -242 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 14: Map of Mains Colored by QSR Grade (Raw QSR Grading Method) 1 1 1 1 I 1 1 I I 0 3,000 6,000 12,000 Ft Raw QSR Grade —s 4 3 —2 — 1 —0 <Null- 1 -.` City Boundary -- RailRoads 84 65B -243 v s City of Santa Ana, CA Water / Wastewater System Analysis - 2012 n E Sewer Collection System Mains by Raw QSR Grades BLACK &VEATCH a.lidin oWorld of dlROren<o! NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 15: Map of Sewer Mains with High QSR Scores and Repairs � 1 r: i_- `All ar, L fill k - , a .4riI l I � L _. _ I ... !}l I�Jy I fI it r • t I I { - •' N W4 F 0 2.950 5,900 11,800 Fl S Sewer Repairs City of Santa Ana, CA " Repairs Water 1 Wastewater Raw QSR Grade System Analysis - 2012 —5 4 3 ` Null. 0.2 'j City Boundary -- RailRoads - -- Sewer Collection System Mains by Raw QSR Grade and Repair Locations BLACKBVEATCH Building a world of diNaran<at BLACK & VEATCH I Appendix B: Seo;Pr 0P Prlorirization Process 65B -244 86 SEVER RATE STUDY I City of Santa Ana, CA Overall QSR Segment Score Method Although the Raw QSR Grading Method is simple, it ignores the number of defects observed or any lower grade defects. For a more complete evaluation and prioritization, NASSCO suggests using a combined segment scoring method. This approach uses a formula of multiplying both rank scores times the number of occurrences to identify a total risk factor for the pipe segment (i.e. considers the number of defects — not just the grade of the worst defect): Overall QSR Segment Score = Worst Defect x No. of Worst Defects plus 2nd Worst Defect x No. of 2 "d Worst Defects For the QSR example of 5236 given above, this would result in QSR Segment Score of 28. (5x2) +(3x6) =28 This approach is very useful in prioritizing pipe segments into ranked lists based on overall structural severity. It should be noted that pipe segments having numerous Grade 4 defects and only a couple Grade 5 defects could actually receive a higher overall QSR Segment Score than a pipe having only Grade 5 defects. An analysis of the City's QSR values determined that the Overall QSR Segment Scores ranged from 0 (no defects observed) to a high score of 161. About 22 percent had no values (not rated) and 70 percent had scores less the 10. These resulting scores were used in the prioritization process described later in this document. Figure B 16 provides a map of sewer mains color coded by Overall QSR Segment Score. [INTENTIONALLY LEFT BLANK] 65B -245 NOVEMBER 20'. City of Santa Ana, CA I SEWER RATE STUDY Figure 8 -16: Map of Sewer Mains Color -Coded by Overall QSR Segment Score I 0 3.000 6.000 Structural (QSR) Score —80-161 -- 60.79 4059 —20-39 —10-19 Null. 0-9 City Boundary --•- RailRoads f° r r' t- ,f yet 12,000 Ft BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -246 l I it I f t l N 'k s' s City of Santa Ana, CA Water / Wastewater System Analysis - 2012 n Sewer Collection System Mains by QSR Segment Scon BLACK &VEATCH Building a world of different.? 88 SEWER RATE STUDY I City of Santa Ana, CA Quick Maintenance Rating (QMR) Analysis Like the QSR ratings described previously, the City's QMR values were also assigned to individual sewer pipe segments during the evaluation of CCTV pipeline inspections. These ratings address the operational and maintenance related defects observed within the pipe segments. They also use the PACP four - character score expressing the number of occurrences of the two highest severity grades. Figure B 17 shows the percent of pipe lengths having each QMR ranking. Figure B 18 provides a map of sewer mains color coded by QMR Grades. Figure B -17: QMR Ratings by Percent of Sewer System Length Although this QMR information is very useful to the City, it was not included in this pipeline condition and replacement prioritization assessment. QMR scores are impacted more by operational and local FOG (fats, oils and grease) issues rather than installation materials, structural conditions or probability of failure considerations. However, it should be noted that some common maintenance issues (e.g. sags) might be corrected with structural repairs. The City may wish to address these situations further. [INTENTIONALLY LEFT BLANK] 65B -247 NOVEMBER 2024 City of Santa Ana, CA I SEWER RATE STUDY Figure B -18: Map of Sewer Mains Color -Coded by QMR Grades r- 0 1000 6.000 12,000 Ft s aMR Grade — 5 a 3 _1 —0 City Boundary -- RailRoads City of Santa Ana, CA Water I Wastewater System Analysis - 2012 n Sewer Collection System Mains by QMR Grades BLACK &VEATCH Building • world of diffaran<a' BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -248 en: SEWER RATE s rUDY j City of Santa Ana, CA Probability of Failure Analysis (PoF) The Probability of Failure (PoF) criteria (factors) are used to assess the likelihood that a particular asset will fail. This is done by considering the physical properties of the asset itself as well as its surrounding environment and /or operational history. Three criteria were used for evaluating the likelihood of failure of the City's sewer main segments. These criteria include Cohort Rank, Raw QSR Grade, and Overall QSR Segment Score. Each factor was scored on a scale of 0 or 1 to 10 where a 10 is most likely to fail. Cohort Rank Some materials have been shown to be more prone to failure than others. Likewise, the older the asset is, typically the more likely it is to fail. Often it is the combination of these considerations that impacts the asset's life expectancy. By combining pipe material and vintage (installation year), groups of similarly performing pipes can be identified. These are considered pipe "cohorts." Figure B 19 looks at the percentage of pipe having Raw QSR Grades 3 or above shown by pipe installation year groups. This helps to normalize the data to gain a better understanding of what vintage of pipe is more structurally problematic. An average line has been included here to provide a reference. Despite a few years of anomalies (minimal pipe installed), this graph suggests that there is a clear demarcation point in approximately 1946. Pipelines installed prior to 1946 were found to have more significant structural defects than average, while pipelines installed after 1946 were found to have less significant defects than average. Figure B -19: Percent of Mains with High Raw QSR Grades by Pipe Install Year 1111111 Average City staff indicated they often observe that the older VCP pipe is thinner walled and more brittle. Actually wall thickness commonly varies by manufacturer. Getting specifications for older pipe is difficult due to the fact that some manufacturers are no longer in business and several different classes or 65B -249 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY strengths of pipe have been made over the 150 years that clay has been used in the United States. (from www.ncyi.org/fags.asi3#faall). The installation method and backfill material also has a significant impact on its likelihood of failure. Any movement on the infrastructure or the surrounding sub -soil may also lead to stress fractures. An evaluation of the City's pipe data on materials, age, QSR ranks, etc. was performed to identify likely pipe cohorts. This evaluation included trends as observed in the source data (especially the QSR inspection ranks by materials) and also general past performance knowledge of similar materials in similar environments. Based on a review of the analysis results above, it was concluded that a significant factor influencing the likelihood of failure for the City's sewer mains is age (vintage); especially considering that almost 90 percent of the mains are made of Vitrified Clay Pipe (VCP). The following pipe cohorts were developed as logical grouping of pipes having similar deterioration rates. The associated Cohort Rank is also included. These ranks were then multiplied by two to create a range of 1 to 10 (for overall PoF calculation). • Cohort 5, High: All sewer pipelines installed before 1946 • Cohort 4, Med -High: All pipes with an unknown installation year • Cohort 3, Med: All pipes (except PVC and High Density Polyethylene) installed between 1946 and 1975 • Cohort 2, Med -Low: All pipes (except PVC and High Density Polyethylene) installed after 1975 • Cohort 1, Low: All PVC and High Density Polyethylene pipes installed after 1946 and any pipes which have been lined since their original installation As a precaution, all pipe materials with unknown installation year were assigned a rank of Medium High (4). The City is encouraged to investigate further to identify these missing dates. This might be accomplished by reviewing appropriate as -built drawings, or assuming install years based on neighborhood construction periods or adjacent pipe attributes. This effort was beyond the scope of this investigation. Once installation year data is identified, these pipe segments may likely acquire lower Cohort ranks. Lined pipe (including: Felt Liner, Fold Form PVC Liner, Fiber Glass Liner, and Spiral Wound Liner) data is stored in the pipe material field. Therefore, actual pipe material is unknown. Also, the timing of pipeline lining is often unclear. Therefore, it was assumed that any CCTV inspection data referred to the pipe conditions prior to lining. Once lined, the pipe was assumed to have been "fixed" and is currently in very good structure condition. Thus all lined pipe was assigned a Low (1) rating. Figure B 20 provides a graph of pipe cohort ranks (1 -5) and associated total pipe lengths (miles) for each rank. This distribution shows that the majority (68 %) of the sewer pipes fell into Cohort 3, as they were non - plastic pipes installed between 1946 and 1975. Figure B 21 provides a map of sewer mains color coded by Cohort Rank. BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -250 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 20: Percentage of Sewer System Pipelines by Cohort Group Cohort 1 5% [INTENTIONALLY LEFT BLANK] 65B -251 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 21: Map of Sewer Mains Color -Coded by Cohort Rank M t %IX � f F 0 3.000 6.000 Cohort Rank 5 3 2 — 1 i City Boundary -- RailRoads 12.000 Ft s City of Santa Ana, CA Water 1 Wastewater System Analysis - 2012 n Sewer Collection System Mains by Pipe Cohort Rank BLACK &VEATCH Building World otdittaronca.- BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -252 Ytf� , II �I yy _f r 1 L , M t %IX � f F 0 3.000 6.000 Cohort Rank 5 3 2 — 1 i City Boundary -- RailRoads 12.000 Ft s City of Santa Ana, CA Water 1 Wastewater System Analysis - 2012 n Sewer Collection System Mains by Pipe Cohort Rank BLACK &VEATCH Building World otdittaronca.- BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -252 94 SEWER RATE STUDY I City of Santa Ana, CA Raw QSR Grade Using the Raw QSR Grading Method described previously, each pipe segment was assigned a QSR grade from 0 to 5. This grade simply uses the first digit of the QSR value reported during the CCTV inspection. However, lined pipe was assigned a grade of 0 based on the assumption that the inspection predates the lining. And that once lined, the pipe has been "fixed" and is currently in very good structure condition. Since some mains have not been inspected, those pipe segments have no QSR grades to include in this analysis. Since no date is available, it would be inappropriate to use a grade of 0. One option would be to assign a high level grade using the assumption that since the condition is unknown it might be in poor shape. However, this may artificially inflate the PoF scores. Another option would be to simply assign a mid -level grade. A third option (used in this analysis) is to use the Cohort rank as a substitute for the missing QSR values. These ranks were then multiplied by two to create a range of 0 to 10 (for overall PoF calculation). Figure B 22 provides a map of sewer mains highlighting those pipes that have not had CCTV inspections. Depending on the asset management strategy used, the City may want to target future inspections on those uninspected mains or on those mains having high risk conditions. Performing repeated inspections every few years provides valuable insight into the rate of change. [INTENTIONALLY LEFT BLANK] 65B -253 NOVEMBER h'1;.= City of Santa Ana, CA I SEWER RATE STUDY Figure B- 22: Map of Sewers that have not had CCTV Inspections I 1., r—Ti t i m� N 0 3,000 6.000 12.000 Ft s No CCTV Inspection City of Santa Ana, CA Inspected Water I Wastewater Not Inspected City boundary System Analysis - 2012 - - RailROads n Sewer Collection System Mains Not Inspected BLACK &VEATCH Building a World of dlfference� � li I in BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -254 96 SEWER RATE STUDY I City of Santa Ana, CA Overall QSR Segment Score Using the Overall QSR Segment Score Method described previously, an overall QSR score was calculated for each pipe segment. This method uses a formula of multiplying both rank scores times the number of occurrences to identify a total risk factor for the pipe segment. Again, lined pipe was assigned a grade of 0. These scores ranged from 0 to 161. To convert to the desired scoring scale range, these raw values were divided by 16.1 to get decimal values 0 to 10. As in the Raw QSR Grading Method, the Cohort rank was used as a substitute for any missing QSR values. Other PoF Considerations Several other physical properties and environmental conditions were considered for inclusion in this analysis. Some of them are addressed below. Although these factors were not actually used in the PoF prioritization analysis, they may someday provide useful information. Therefore, the City is encouraged to reevaluate these once their Asset Management system is more mature. • Mains by Diameter: There does not appear to be any obvious correlation of sewer pipe failure and pipe diameter. Therefore, this aspect was not considered for PoF calculations. • QMR: As described previously, since this is mostly a maintenance indicator it was not considered as a contributor to structural condition assessment. • Repairs: City staff indicated that repair locations were primarily used to indicate planned work activities based on the results of the CCTV inspections and that they do not indicate an additional level of information about the pipeline condition. Therefore, repairs were not included as a factor. • Enhanced Maintenance Locations (EMLs): Again, since this is mostly a maintenance indicator it was not considered as a contributor to structural condition assessment. • Spills: Also not considered a structural factor. • Soils: A high level review did not reveal any obvious correlation of high QSR scores or repair concentrations for sewer pipe to key soil characteristics. This is to be expected as VCP is normally not very impacted by most soil conditions such as corrositivity, pH, etc. Linear extensibility can be a contributing factor, but appears to be low to moderate in most of the City; being high only in the far southern area (where sewer pipeline issues are uncommon). The City may want to further review these considerations in the future. Overall PoF Calculation To produce an overall PoF score for individual pipe segments, weighted scores for each of the contributing PoF criteria were added together. The resulting PoF scores are, by design, within the range of 0 to 10. For simplicity, the three PoF criteria were all assigned the same weighting (level of importance). By adjusting these weights other assessment scenarios could be created. Table B 2 provides a summary of the PoF criteria used in this analysis. 65B -255 NOVEMBER 2014 City of Santa Ana, CAI SLWER RAT' E STUIOY Table B - 2: Summary of PoF Criteria used in this Analysis PoF Criteria Weight Comment Strategy / Assumption Cohort Rank (1- 33% Assigned values 1 -5 Cohort 5, High: All sewer pipelines installed before 1946 5 values) range, multiply by 2 Cohort 4, Med -High: All pipes with an unknown installation year to get values 1 to 10 Cohort 3, Med: All pipes (except PVC and High Density Polyethylene) installed between 1946 and 1975 Cohort 2, Med -Law: All pipes (except PVC and High Density Polyethylene) installed after 1975 Cohort 1, Low: All PVC and High Density Polyethylene pipes installed after 1946 and any pipes which have been lined since their original installation Raw QSR 33% Raw values 0 -5 Considers only the highest grade (worst defect) only and assigns that Grading range, multiply by 2 value to the entire pipe segment. Does not consider the number of Method (0 -5 to get values 0 to 10 defects or lower grade defects observed. Lined pipe ranked at 0 values) (assumed to be "fixed"). Missing QSR data replaced by Cohort Rank. Overall QSR 33% Calculated: Divide by Uses a PACP formula of multiplying both rank scores times the number Segment Score 16.1 to get decimal of occurrences to identify a total risk factor for the pipe segment (i.e. Method (0 -161 values 0 to 10 considers the number of defects — not just the grade of the worst values) defect). Lined pipe ranked at 0 (assumed to be "fixed "). Missing QSR data replaced by Cohort Rank. Total (sum of 100% The resulting PoF above) scores are 0 to 10. By applying the weighting described above (1/3 Cohort Score, 1/3 Raw QSR, and 1/3 QSR Segment Score) to each of the 8,706 active main pipeline segments in the Santa Ana Sewer System, a 0 to 10 PoF Score was calculated for each and the distribution is shown in Figure B 23 below. Figure B 24 provides a map of sewer mains color coded by total PoF score. Figure B- 23: Distribution of Sewer Pipeline PoF Scores BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Proress 65B -256 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 24: Map of Sewer Mains Color -Coded by Total PoF Score I, L i lug_ E- _- — 1 L � II Il i r 0 3.000 6.000 12,000 Ft Sewer Mein -Poi Score — >9 and < =10 8 and < =9 7 and < =8 b and < =7 — >5 and < =6 <= 5 :._ City Boundary – RallRoads P1.1 65B -257 x F s City of Santa Ana, CA Water I Wastewater System Analysis - 2012 Sewer Collection System Mains by PoF Score BLACK &VEATCH Buildins a world of difference NOVEMBER 2014 City of Santa Ana, CA I SFWER RATE STUDY Consequence of Failure Analysis (CoF) In a process similar to the PoF analysis, criteria for the Consequence of Failure (CoF) were also identified and evaluated. These criteria are described below. Pipe Diameter The assumption here is that larger pipes will be more costly to repair or replace. Likewise, should they fail the consequences will likely be more severe. For the purpose of this analysis, CoF grades were assigned to ranges of pipe sizes increasing in pipe diameter as shown in Figure B 25 below. Pipe records having an unknown diameter were assigned a value of 4. Figure B- 25: Sewer System Pipelines CoF Scores by Diameter Customer Impacts The concern here is for increased risk of service interruptions for customers upstream of a possible facility failure. Using GIS processes, the cumulative count of upstream laterals was calculated for each main segment. Upstream lateral counts of 0 to 36,994 were identified. Although this was generally an effective approach, the counting process was not 100 percent precise. Missing data and inconsistent network connectivity produced some errors. Since the errors did not appear to be significant and since the accuracy of the actual count values did not need to be precise, these errors were ignored. The lateral count ranges were assigned grades between 0 and 10. Figure B 26 displays the distribution of upstream lateral counts throughout the collection system and the assigned grade ranges. As shown, more than 60% of the sewer pipelines have fewer than 100 upstream laterals, corresponding to a CoF Grade of 0. However, approximately 15 percent of the sewer pipelines have more than 500 upstream laterals, which correspond to a high CoF Grade of 10. Pipe records having an unknown lateral count were assigned a Grade of 6. BLACK & VEATCH I Appendix 8: Sewer CIP Prioritization Process 65B -258 100 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 26: Pipeline Length by Number of Upstream Customer Laterals Proximity to Critical Customers The concern here is for increased risk due to possible environmental and inconvenience to nearby critical customers. The City provided tabular lists of critical customer locations, including hospitals, government facilities, and schools. Locations were geocoded by address data (if actual street addresses were available) to identify the customer's location on a map. Using GIS spatial processes, all mains within a 300 foot radius of each critical site was tagged. A count of nearby sites was then tabulated for each main segment. The resulting values ranged between 0 and 2 occurrences. These values were then multiplied by 5 to get the desired 0 — 10 range. Only approximately 10 percent of main segments were within 300 feet of a critical customer. Note, other methods could be used to identify the impact of nearby critical customers. However, based on the source data available, this approach was the most logical. Other CoF Criteria Other CoF criteria have been used in assessments like this: such as proximity to major roads, water intake sources, industry / business; public health and safety concerns; reputational damage; or other financial impacts. Several of these were discussed at a risk workshop with the City. However, due to limited source data available and /or schedule, these additional considerations were outside the scope of this assessment. Overall CoF Calculation To produce an overall CoF score for individual pipe segments, weighted scores for each of the contributing CoF criteria were added together. The resulting CoF scores are, by design, within the range of 0 to 10. Because the Proximity to Critical Customers criteria was considered to be less important than the other two criteria, it received a lower weighting. Therefore, the Pipe Diameter and Customer Impact criteria were weighted at 42% each and the Critical Customer count was weighted at 16 %. By adjusting these weights other assessment scenarios could be created. Table B 3 provides a summary of the CoF criteria used in this analysis. 65B -259 IM01TAI ,JIT— aw. 6m City of Santa Ana, CA I SEWER RATE STUDY Table B - 3: Summary of CoF Criteria used in this Study CoF Criteria Weight Comment Strategy / Assumption Pipe Diameter 42% Assigns grade based 2 36" (10) 2 12" (4) on diameter range > 24„ (8) 21" (2) 218" (6) Unknown (4) Customer Impacts 42% Assigns grade based 0-99(0) 300 - 399 (6) (lateral counts of 0- on Cumulative sum 101 400 -499 (8) 36,994) of upstream laterals 200-299(4) 500& above (10) Unknown: (6) Proximity to a 16% Assigns grade based Increased risk due to possible environmental and inconvenience to critical location for on count of sites nearby critical customers. school, hospital, and within 300' CoF of 10: Two critical customers within 300 feet of pipeline. government (values of 0 -2) CoF of 5: One critical customer within 300 feet of pipeline. CoF of 0: No critical customers within 300 feet of pipeline. Total (sum of above) 100% The resulting CoF scores are 0 to 10. By applying the weighting described above (42% Diameter, 42% Upstream Laterals, 16% Critical Locations) to each of the 8,706 active main pipeline segments in the Santa Ana Sewer System, a 1 to 10 CoF Score was calculated for each, with the distribution shown in Figure B 27. Figure B 28 provides a map of sewer mains color coded by total CoF score. Figure B- 27: Distribution of Sewer Pipeline CoF Scores BLACK & VEATCH I Appendix B. Sewer CIP Prioritization Process 65B -260 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 28: Map of Sewer Mains Color -Coded by CoF Scores rtr 0 3.000 6,000 12,000 Ft Sewer Main-CoF Score 9 and <= 10 >8 and = =9 7 and < =8 »-- >6 and < =7 >5 and < =6 <= 5 ! City Boundary - -- RailRoads r j r i i r s City of Santa Ana, CA Water / Wastewater System Analysis - 2012 tsl h Sewer Collection System Mains by CoF Score 0 BLACK &VEATCH Building ♦ world of difference.- 102 NOVEMBER 2014 65B -261 City of Santa Ana, CAI SEVIFUR RATE STUDY Business Risk Exposure (BRE) The overall Business Risk Exposure (BRE) was then calculated for each asset. The BRE score is a product of the PoF times the CoF scores. This score is an informative indicator of facilities that will likely require higher levels of attention; in the form of proactive replacement and /or targeted inspection monitoring. It is typically based on a 1 to 100 scale metric. Figure B 29provides a distribution of Sewer Pipeline BRE Scores. Figure B- 29: Distribution of Sewer Pipeline BRE Scores Figure B 30 provides a "heat map' graph showing the resulting distribution of PoF vs. CoF scores by miles of main. Combined, these represent the BRE score. Higher probability of failure assets are plotted near the right. Higher consequences of failure assets are plotted near to the top. Figure B 31 provides a map of sewer mains color coded by total BRE score. A partial table of sewer main pipeline segments ranked by BRE score is included in the Replacement Prioritization section. [INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix B; Sewer CIP Prioritization Process 65B -262 104 SEWER RATE STUDY I City of Santa Ana, CA Figure B- 30: Sewer System BRE Heat Map Graphic by Miles of Main Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 2.5 4! 9 11 7.3 1.0 i 8 - 2.4 10.5 0 LL 7 !�,2.41 .3 1.1 4.1 w O 6 y 2.9 2.9 12.5 !2.41 2.6 03 0.4 d 5 0.5 I 3.2 0.7 2.7 0.5 6.1 0.8 4 0.4 4.9 1.1 2.1 1.1 4.5 3 0.8 8.3 1.5 L7 1.9 2.8 0.4 0.3 O - -- U 2 Z7 28.4 4.6 4.5 ` 5.0 7.6 3.5 1.3 0.3 1.0 1 10.2 8.9 26.2 19.0 � 19.1 31.9 11.0 6.2 L2 2.3 Total Miles: 446.3 Let's look specifically at the 1 mile of pipe that scored near the upper right corner. These pipe segments have a PoF of greater than 9 and less than or equal to 10. They also have a CoF of greater than 8 and less than or equal to 9. In reviewing the data tables supporting this graph, this cell includes a total of 1 mile of 36 inch VCP pipe segments installed in 1938. 65B -263 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure B- 31: Map of Sewer Mains Color -Coded by BRE Scores i I 1 0 3,000 6,000 12,000 Ft Sewer Main -BRE Score 180 and <- 100 - > 70 and « 80 > 60 and <= 70 -- > 50 and <= 60 >40 and <= 50 > 30 and <= 40 — 120 and <= 30 <= 20 L1 City Boundary —° RailRoads ILI' ` r 1 E 1 IJ� w E \i5 City of Santa Ana, CA Water 1 Wastewater System Analysis - 2012 n Sewer Collection System Mains by BRE Score BLACK &VEATCH Building a world or difference.- BLACK & VEATCH I Appendix B: Sewer CIP Prioritization Process 65B -264 SEWER R,A f E STUDY I City of Santa Ana, CA Appendix C: Inspection and Replacement Cost Calculation NOVEMBER 2014 65B -265 City of Santa Ana, CA I SEWER RATE STUDY INTRODUCTION The final step in this assessment process is to calculate the overall inspection and replacement cost for each asset. Average facility inspection and replacement cost look -up tables were used to determine overall budgetary estimates and schedules (see Table C 1 below). Construction cost (2012 dollars) values were based on an informal survey of Southern California utilities in recent years, and inspection costs were based on estimates from nation -wide projects. Specific cost estimates based on experience in Santa Ana were not available at the time of printing. Replacement costs were not specific to pipe material, and replacement was assumed to be the same diameter. Pipe segments with a diameter of 0 or unknown were replaced with a 6 inch pipe. Costs also assume basic construction practices, including imported sand bedding and backfill, compaction, pavement removal, hauling, shoring, trench excavation, testing and disinfection. Table C -1: Sewer Pipe Inspection and Replacement Costs (2012 dollars) BLACK & VEATCH I Appendix C Inspection and Replacement Cost Calculation 65B -266 i� i �I�f. 797�1YN1��[ K�S. ti. Y(. 71���� :i79�GtM7:�i1761IQ�17471.7Ii�� 0 / Unknown $1.50 $157.00 3 $1.50 $127.96 4 $1.69 $137.69 6 $1.88 $157.15 8 $2.06 $176.61 10 $2.25 $196.07 12 $2.44 $195.70 14 $2.63 $234.99 15 $2.81 $220.99 16 $3.00 $254.45 18 $3.19 $257.27 21 $3.38 $295.75 24 $3.56 $338.63 27 $3.75 $379.31 30 $3.94 $400.20 33 $4.13 $429.88 36 $4.31 $448.57 39 $4.50 $468.36 42 $4.69 $498.05 45 $4.88 $536.62 48 $5.06 $571.71 51 $5.25 $595.00 54 $5.44 $650.87 BLACK & VEATCH I Appendix C Inspection and Replacement Cost Calculation 65B -266 101-1 SEWER RATE STUDY I City of Santa Ana, CA 60 $5.63 $722.34 78 $5.81 $857.71 84 $6.00 $916.09 Figure C 1 shows the distribution of BRE scores (across the bottom) against the total estimated replacement costs. The cumulative replacement cost line is also provided. It must be emphasized that BRE scores calculated in this study were based on relative values and do not represent an absolute level of risk. As such, it is not possible to quantitatively determine an acceptable BRE target. As the City collects additional condition and failure information, further investigation is recommended to better characterize the risk relationship and define appropriate targets. Figure C -1: BRE Scores and Costs for Sewer Collections System A variation of the previous heat map graphic is provided in Figure C 2. This version is based on cost rather than pipe length. 65B -267 NOVEMBER 2014 City of Santa Ana, CAI >E VER RATE STUDY Figure C- 2: BRE Heat Map Graphic by Main Replacement Cost (2012 dollars) V $2.0 S15.7 52.5 53.5 53.0 $34.7 52.2 52.2 0 C 5 50.5 53.4 50.7 57.5 50.5 510_1 S0.6 ' 51.8 3 4 Cr 50.4 55.2 $1.2 53.4 $1.0 $5.4 $0.2 50.8 3 50.8 ` S8.4 $1.5 51.6 $1.8 $3.0 514 50.4 $0.1 50.3 V2 5166 527.8 $4.4 $4.3 $4.5 $7.4 f $3.1 ( 51.2 $0.3 50.8 1 59.2 x$118 7 $24.1 517.1 $17.1 $29.2 $9.5 55.3 $1.1 52.0 Total Cost: 5499.1 SEWER COLLECTION SYSTEM R &R PRIORITIZATION Up to this point the analysis focused on assessing the likely condition of the sewer collection system mains based on available source data. PoF and CoF scores were combined into an overall risk score for each pipe segment. Using these results the study then took on a different focus; that of prioritizing pipe inspections and /or replacements and grouping those pipe segments into probable R &R projects. These steps include: • BRE Replacement Prioritization: each pipe segment ranked from highest to lowest risk and assigned a full replacement cost estimate. It gives equal consideration for both PoF and CoF factors. Although useful information, this listing is generally not used for actual replacement planning or budgeting. • R &R Strategy Groups and CIP Budgeting: pipe segments assigned to various inspection and /or replacement strategies applied to address differing risk considerations. Based on the suggested R &R activity for each strategy group, annual inspection and replacement budgets were developed. These results are sufficient for general budgetary planning. However, since prioritized pipe segments may be highly segmented and scattered across the service area, this summery is only partially useful for detailed planning. Adjusting the assumptions made here can create a variety of budgeting scenarios. BLACK & VEATCH I Appendix C: Inspection and Replacement Cost Calcul a Nr,n 6513-268 Probability of Failure 1 2 3 3 4 5 5 6 6 7 7 8 8 9 1 10 10 $ $9.1 LJ 9 9 $ $$22.8 $ $2.3 8 8 5 53.7 5 50.4 $ $19.8 6L 4 7 7 $ $0.2 56.1 $ $0.4 5 51,6 $ $5.8 6 SEWER COLLECTION SYSTEM R &R PRIORITIZATION Up to this point the analysis focused on assessing the likely condition of the sewer collection system mains based on available source data. PoF and CoF scores were combined into an overall risk score for each pipe segment. Using these results the study then took on a different focus; that of prioritizing pipe inspections and /or replacements and grouping those pipe segments into probable R &R projects. These steps include: • BRE Replacement Prioritization: each pipe segment ranked from highest to lowest risk and assigned a full replacement cost estimate. It gives equal consideration for both PoF and CoF factors. Although useful information, this listing is generally not used for actual replacement planning or budgeting. • R &R Strategy Groups and CIP Budgeting: pipe segments assigned to various inspection and /or replacement strategies applied to address differing risk considerations. Based on the suggested R &R activity for each strategy group, annual inspection and replacement budgets were developed. These results are sufficient for general budgetary planning. However, since prioritized pipe segments may be highly segmented and scattered across the service area, this summery is only partially useful for detailed planning. Adjusting the assumptions made here can create a variety of budgeting scenarios. BLACK & VEATCH I Appendix C: Inspection and Replacement Cost Calcul a Nr,n 6513-268 110 SEWER RATE STUDY I City of Santa Ana, CA • CIP Project Identification: individual CIP projects identified based on high -risk assets and /or assets that are in close proximity. Pipe segment identification, budgets and schedules often differ from the previous lists due to logical regrouping of assets. For example, it makes more sense to inspect or replace an entire continuous stretch of pipe even though the risk prioritization may have scheduled specific segments to have been done at different times. Therefore a single project will likely have segments with differing risk strategy group assignments. Note: risk prioritization and R &R replacement planning was based on existing data provided by the City. Although the source data is believed to be the best available it may not reflect current conditions of all facilities. Additionally, recent R &R activities may have already addressed some of the issues identified. Therefore, recommendations should be verified with current R &R records and /or pipe inspection prior to actual replacement or lining. BRE REPLACEMENT PRIORITIZATION Using the results of the BRE analysis and replacement costing table, each sewer main pipe segment was ranked from highest to lowest risk and assigned a replacement cost estimate. A partial list (risk scores of 50 or higher) of sewer main pipeline segments ranked by BRE score is included in Table C 2 below. This list includes the top 107 of the 8,706 total ranked records. Table C - 2: Partial List of Sewer Main Pipe Segments Ranked by EIRE Score I OBJECT SIZE YEAR LENGTH COHORT POE COF ESTIMATED RANK ID MATERIAL (IN) INSTALLED DECADE (MILES) RANK SCORE SCORE BRE COST 1 4091 VCP 36 1938 1930s 0.08 5 10.0 8.4 84.0 $200,608 2 4092 VCP 36 1938 1930s 0.07 5 10.0 8.4 84.0 $174,496 3 4418 VCP 36 1938 1930s 0.13 5 10.0 8.4 84.0 $313,555 4 4420 VCP 36 1938 1930s 0.02 5. 10.0 8.4 84.0 $46,930 5 4422 VCP 36 1938 1930s 0.07 5 10.0 8.4 84.0 $177,184 6 4769 VCP 36 1938 19305 0.12 5 10.0 8.4 84.0 $285,290 7 4770 VCP 36 1938 1930s 0.16 5 10.0 8.4 84.0 $374,400 8 4771 VCP 36 1938 1930s 0.22 5. 10.0 8.4 84.0 $511,713 9 5596 VCP 36 1938 1930s 0.06 5 10.0 8.4 84.0 $136,812 10 5600 VCP 36 1938 19305 0.03 5 10.0 8.4 84.0 $74,931 11 7486 VCP 24 0 LINK 0.09 4 8.0 7.6 60.5 $159,863 12 6966 PCC 84 1971 19705 0.19 3 6.0 10.0 60.0 .$914,118 13 7985 PCC 84 1971 1970s 0.22 3 6.0 10.0 60.0 $1,073,723 14 3383 VCP 6 1927 1930 Pre 0.04 5 10.0 5.8 58.4 $35,352. is 3964 VCP 6 1925 1930 Pre 0.06 5 10.0 5.8 58.4 $47,949 16 :7740 VCP 6 1927 1930 Pre 0.03 5 10.0. 5.8 58.4 $24,820 17 3682 PCC 48 1958 1950s 0.24 3 6.0 9.2 55.2 $717,697 18' 4144 PCC 51 1958 1950s 0.24 3 6.0 9.2 55.2 $738,326 19 6537 PCC 42 1952 1950s 0.11 3 6.0 9.2 55.2 $276,417 65B -269 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY OBJECT SIZE I YEAR LENGTH COHORT POF COF ESTIMATED RANK In MATERIAL (IN) INSTALLED DECADE (MILES) RANK SCORE SCORE BRE COST 20 6585 PCC 42 1952 19505 0.18 3 6.0 9.2 55.2 $467,172 21 6609 PCC 42 1952 19505 0.18 3 6.0 9.2 55.2 $467,172 22 6778 PCC 48 1952 1950s .0.02 3 6.0 9.2 55.2 $52,297 23 6779 PCC 48 1952 19505 0.00 3 6.0 9.2 55.2 $5,954 24 6795 PCC 48 1952 1950s 0.27 3 6.0 9.2 55.2 $824,502 25 6954 PCC 84 1971 1970s 0.26 3 6.0 9.2 55.2 $1,257,799 26 6994 PCC 78 1971 1970s 0.15 3 6.0 9.2 55.2 $676,120 27 7099 PCC 42 1952 1950s 0.10 3 6.0 9.2 55.2 $250,009 28 7122 PCC 48 1958 19SOS 0.02 3 6.0 9.2 55.2 $61,420 29 7988 PCC 84 1971 1970s 0.21 3 6.0 9.2 55.2 $995,805 30 1559 VCP 24 1952 19505 0.03 3 6.0 9.2 55.0 $45,035 31 1560 VCP 30 1952 19505 0.05 3 6.0 9.2 55.0 $112,459 32 1646 VCP 30 1952 19505 0.07 3 6.0 9.2 55.0 $156,877 33 62 PCC 51 1958 1950s 0.25 3 6.0 8.4 50.4 $793,317 34 333 PCC 84 1971 1970s 0.11 3 6.0 8.4 50.4 $552,605 35 1670 VCP 36 1971 1970s 0.03 3 6.0 8.4 50.4 $67,959 36 1671 VCP 36 1971 1970s 0.09 3 6.0 8.4 50.4 $204,101 37 1672 VCP 36 1971 1970s 0.12 3 6.0 8.4 50.4 $277,580 38 1749 VCP 36 1971 19705 0.01 3 6.0 8.4 50.4 $29,832 39 1750 VCP 36 1971 1970s 0.11 3 6.0 8.4 50.4 $260,173 40 1751 VCP 36 1971 1970s 0.12 3 6.0 8.4 50.4 $278,117 41 1752 VCP 36 1971 1970s 0.12 3 6.0 8.4 50.4 $284,426 42 1782 VCP 39 1971 1970s 0.14 3 6.0 8.4 50.4 $349,867 43 1792 VCP 39 1971 1970s 0.11 3 6.0 8.4 50.4 $281,627 44 1793 VCP 39 1971 1970s 0.09 3 6.0 8.4 50.4 $233,961 45 4470 PCC 51 1958 19505 0.08 3 6.0 8.4 50.4 $264,409 46 4787 PCC 48 1958 19505 0.25 3 6.0 8.4 50.4 $744,644 47 4792 PCC 48 1958 19505 0.25 3 6.0 8.4 50.4 $752,340 48 6518 PCC 48 1952 1950s 0.09 3 6.0 8.4 50.4 $267,561 49 6522 PCC 48 1952 1950s 0.09 3 6.0 8.4 50.4 $285,113 50 6528 PCC 48 1952 1950s 0.04 3 6.0 8.4 50.4 $132,068 51 6530 PCC 48 1952 1950s 0.11 3 6.0 8.4 50.4 $347,029 52 6531 PCC 48 1952 1950s 0.01 3 6.0 8.4 50.4 $36,590 53 6532 PCC 48 1952 19505 0.01 3 6.0 8.4 50.4 $40,021 54 6533 PCC 48 1952 1950s 0.02 3 6.0 8.4 50.4 $70,316 55 6534 PCC 48 1952 1950s 0.16 3 6.0 8.4 50.4 $483,559 56 6536 PCC 42 1952 1950s 0.07 3 6.0 8.4 50.4 $191,807 57 6586 PCC 42 1952 1950s 0.02 3 6.0 8.4 50.4 $60,619 BLACK & VEATCH I Appendrx C: Inspection and Replacement Cost Calculation 65B -270 SEWER RATE STUDY I City of Santa Ana, CA NOVEMBER 2014 65B -271 58 6587 PCC 42 1952 19505 0.16 3 6.0 8.4 50.4 $414,273 59 6611 PCC 42 1952 1950s 0.06 3 6.0 8.4 50.4 $158,625 60 6613 PCC 42 1952 1950s 0.18 3 6.0 8.4 50.4 $476,135 61 6955 PCC 84 1971 1970s 0.16 3 6.0 8.4 50.4 $782,336 62 6957 PCC 84 1971 1970s 0.13 3 6.0 8.4 50.4 $646,771 63 6964 PCC 84 1971 1970s 0.01 3 6.0 8.4 50.4 $40,300 64 6965 PCC 84 1971 1970$ 0.12 3 6.0 8.4 50.4 $557,904 65 6980 PCC 84 1971 1970s 0.04 3 6.0 8.4 50.4 $189,080 66 6981 PCC 84 1971 1970s 0.14 3 6.0 8.4 50.4 $696,790 67 7011 PCC 78 1971 1970s 0.03 3 6.0 8.4 50.4 $152,673 68 7012 PCC 78 1971 1970s 0.09 3 6.0 8.4 50.4 $400,545 69 7048 PCC 60 1971 19705 0.04 3 6.0 8.4 50.4 $147,358 70 7050 PCC 78 1971 1970s 0.25 3 6.0 8.4 50.4 $1,138,838 71 7081 PCC 78 1971 1970s 0.15 3 6.0 8.4 50.4 $694,713 72 7082 PCC 78 1971 1970s 0.12 3 6.0 8.4 50.4 $531,784 73 7136 PCC 51 1958 19505 0.15 3 6.0 8.4 50.4 $482,973 74 7847 VCP 39 1971 1970s 0.02 3 6.0 8.4 50.4 $38,192 75 7848 VCP 39 1971 19705 0.05 3 6.0 8.4 50.4 $130,174 76 7976 PCC 48 1952 1950s 0.10 3 6.0 8.4 50.4 $292,031 77 7977 PCC 48 1952 1950$ 0.01 3 6.0 8.4 50.4 $37,159 78 7986 PCC 84. 1971 1970s 0.14 3 6.0 8.4 50.4 $683,402. 79 7990 PCC 78 1971 1970s 0.24 3 6.0 8.4 50.4 $1,085,824 80 7999 PCC 78 .1971 19705 0.12 3 6.0 8.4 50.4 $522,744 81 8000 PCC 78 1971 1970s 0.20 3 6.0 8.4 50.4 $889,676 82 955 VCP 24 1952 1950s 0.02 3 6.0 8.4 50.2 $35,895. 83 956 VCP 24 1952 1950s 0.08 3 6.0 8.4 50.2 $147,077 84 957 VCP 24 1952 19505 0.13 3 -6.0 8.4 50.2 $226,882 85 1048 VCP 24 1952 19505 0.08 3 6.0 8.4 50.2 $139,064 86 1080 VCP 24 1966 1960s 0.09 3 6.0 8.4 50.2 $160,940 87 1168 VCP 27 1966 1960s 0.12 3 6.0 8.4 50.2 $250,341 88 1223 VCP 24 1952 1950s. 0.13 3 6.0 8.4 50.2 $232,808 89 2638 VCP 6 1929 1930 Pre 0.01 5 10.0 5.0 50.4 $9,122 90 1225 VCP 27 1952 19505 0.22 3 6.0 8.4 50.2 $432,374 91 2840 VCP 6 1939 1930$ 0.07 5 10.0 5.0 50.4 $60,187 92 1303 VCP 27 1952 1950$ 0.12 3 6.0 8.4 50.2 $232,137 93 3381 VCP 6 1939 1930s 0.07 5 10.0 5.0 50.4 $60,208 94 1304 VCP 27 1952 1950s 0.11 3 6.0 8.4 50.2 $218,037 95 3382 VCP 6 1927 1930 Pre 0.07 5 10.0 5.0 50.4 $60,172 NOVEMBER 2014 65B -271 City of Santa Ana, CA I SEWER FRIATE STUDY OBJECT SIZE I YEAR LENGTH COHORT POF COF ESTIMATED RANK I ID MATERIAL I (IN) INSTALLED DECADE (MILES) RANK SCORE SCORE BRE COST 96 1437 VCP 30 1969 1960s 0.06 3 6.0 8.4 50.2 $135,702 97 1438 VCP 30 1969 1960s 0.03 3 6.0 8.4 50.2 $66,034 98 1439 VCP 27 1969 1960s 0.13 3 6.0 8:4 50.2 $251,067 99 1557 VCP 24 1952 1950s 0.08 3 6.0 8.4 50.2 $137,824 100 5745 VCP 8 1927 1930 Pre 0.01 5 10.0 5.0 50.4 $10,068 101 1558 VCP 24 1952 19505 0.04 3 6.0 8.4 50.2 $74,499 102 1645 VCP 30 1952 1950s 0.08 3 6.0 8.4 50.2 $170,602 103 3664 PCC 48 1958 19505 0.24 3 6.0 8.4 50.2 $737,399 104 6644 VCP 33 1952 1950s 0.17 3 6,0 8.4 50.2 $376,578 105 7805 VCP 24 1952 1950s 0.01 3 6.0 8.4 50.2 $24,720 106 7812 VCP 24 1952 1950s 0.01 3 6.0 8.4 50.2 $20,281 107 7979 VCP 33 1952 19505 0.12 3 6.0 8.4 50.2 $265,940 R &R STRATEGY GROUPS AND CIP BUDGETING The risk prioritization table just presented identifies pipe segments having the highest BRE score. Since this score is based on the product of PoF times CoF factors, it gives equal consideration for both factors. Typically, different R &R strategies are applied to address these two considerations. Based on the BRE heat map graphic results, the ranked sewer main assets were then grouped into logical R &R strategies. Table C 3 defines each of these groupings and provides additional summarizations and recommendations. Figure C 3 shows the same BRE heat map graphic as before, but color coded by strategy group. Figure C 4 presents a map of pipe segments color coded by these strategy groups. [INTENTIONALLY LEFT BLANK] BLACK & VEATCH I Appendix C Inspection and Replacement Cost Calculation 65B -272 SEWER RATE STUDY I City of Santa Ana, CA Figure C- 3: BRIE Heat Map Graphic by Cost and R &R Strategy Groups Probability of Failure 1 2 3 4 5 6 7 8 9 10 Q1 10 L 3 9 �f0 8 LL 4- 7 O 4J 6 U i 5 4 Cr Q) 3 2 O U 1 i, $0.0 $0.0 $0.0 $0.2 $0.0 $9.1 $0.0 $0.0 $0.0 $0.2 $0.0 $3.1 $0.0 $22.8 $0.0 $0.0 $0.0 $3.7 $0.4 $4.5 $0.0 $19.8 $0.0 $0.2 7$0.3$0.4 $0.2 $6.1 $0.4 $1.6 $0.1 $5.8 $0.1 $0.0 $2.0 $15.7 $2.5 $3.5 $3.0 $34.7 $2.2 $2.2 $0.5 $3.4 $0.7 $7.5 $0.5 $10.1 $0.6 $1.8 $0.2 $0.1 $0.4 $5.2 $1.2 $3.4 $1.0 $5.4 $0.2 $0.8 $0.0 $0.1 $0.8 $8.4 $1.5 $1.6 $1.8 $3.0 $1.4 $0.4 $0.1 $0.3 $2.6 $27.8 $4.4 $4.3 $4.5 $7.4 $3.1 $1.2 $0.3 $0.8 $9.2 $118.7 $24.1 $17.1 $17.1 $29.2 $9.5 $5.3 $1.1 $2.0 Millions of Dollars [INTENTIONAL LEFT BLANK] 6513-273 Total Cost: $499.1 6 a V E E 3 x V 65B -274 N b N N J Q Q F N M N H H w T T T v 3 3 c n Y° v n n a m c c n 0 a n n n ° E n a n v v o v o 0 0 n n > a m > > > a a a n V N a a a N y Q y N N N v c v E v E v E a a E v E v E E E E c E E E E c v a v y v v a ¢ « N at N pp t0 Vhf W � O M N 10/� IA c N W ei N N yN y tO pN V T Vml LO Lq N N N N N V v E c ry m N X a 00 c T m T m v D o a v G ¢ E« c c = 3 n I a >¢ w a m E n `o o v a v „'0. a z n c n$ o o `o 1O V V n a\ q V a V a V a n E m c a m L K C vl T V1 K V V 8 O M S1 � O e.l (V e•l m N N V�1 N N O V M N N N N pl O M N N I f1 (!1 VI N � Z - N N N N � h N Vm1 M N o' m N ro e4 � n rl t1yO tO � m m 1(1 m N v°� aoii N e•l � O tp lO N M N N m to m i L v o 0 0 n m ° ry m m v u v c v v a m o o v v v � c u'° y « C U q _ 65B -274 N b N N J Q Q F N M N H H for SEWER RATE STUDY I City of Santa Ana, CA Figure C- 4: Sewer System Map of R &R Strategy Groups ! SS 1 _ I r J I I �I► �� . l Wq pL 0 3,000 6.000 12.000 Ft Sewer Main- Grid02 City of Santa Ana, CA Group A Probability of Failure - -�- Group B = x = . 1 6 r 6 s 10 Water I Wastewater Group 2 9 -$2 $00 $0.0 Group System Analysis - 2012 Group D ? s 5zxe s0a Sa.o Group E 6L 6 519.8 500 $03 ( 1. Group F o > 5Sa sor Soo Y1 GroupG S Sx+.r sxz A�Z�S"OA ' Group H Sas SSA Sol sns WS $101 SoA All Others d s City Boundary S s0A SS.x S" su S10 55A RaaReads $ = saa s" $" $ 6 S" $10 u Sewer Collection System C = si6 sx)A Su 54a Si5 S)A sss ttw snz sva sn.x sns BRE Scoring by Grid 02 ©BLACK &VEATCH , Building aworld of dlffvan<u 65B -275 NOVEMBER 201d City of Santa Ana, CA I SEWER RATE STUDY These inspection and replacement assignments were then adjusted over a five year plan to moderate annual budgeting expenditures. Total inspection and replacement percentages follow those of the strategy group recommendations. Table C 4 below presents initial annual inspection and replacement assumption plans. The inspection plan percentage values indicate the percent of uninspected pipes that remain to be inspected at that time. It assumes that all pipe segments have already been recently inspected or will be under this inspection program. Percentages are the suggested replacement quantities as presented in the R &R summarizations and recommendations table presented above. Table C -4: Annual Inspection and Replacement Assumption Plans - percentages shown are total inspected to date L 0?� 300 O.e 0.0'c 00-, 0.01 100.09: B 0.0% I 0.0% ? 100.0% i 0.0% OA% 100.0 +:: C 0.0% 0.1 0.0% a 30.0% 0.0% 30.05; D 10.0% 10.0% ) 0% £ 10.0% 10.0% 50.0% I 10._ E 2.0% 1.0 % 1.0% 1.0% S.0% 10.0% F 1.0% 0.0% 2.0% , 1.0% 1.0% 5.0% 0.5% 0.5% os% 05% 0.5% MIA H 0.2% 0.2% 0.2% f 0.2% 0.2% 1.0% z 0.0% 0.0% 0.0% 0.0% 0.0% 1 Based on the above assumption plan, an annual inspection and replacement budget was developed. Table C 5 presents the resulting annual budget. Figure C 5 presents these results graphically. The overall assumption plans can be adjusted to create a variety of budgeting scenarios. Note, the City may wish to also include a nominal annual budget for ongoing inspections to address system -wide pipe segments not included in this suggested plan. Table C - 5: Annual Inspection and Replacement Budget Table Year Inspect Replace Total Cum Total Yearl $916,388 $1,911,299 $2,682,147 $2,682,147 Year2 $89,756 $3,026,311 $3,143,122 $5,825,270 Year3 $0 $2,820,191 $2,918,041 $8,743,311 Year4 $0 $3,190,619 $3,211,252 $11,954,563 Years $0 $2,689,157 $2,689,157 $14,643,720 Total $1,006,144 $13,637,576 $14,643,720 BLACK & VEATCH I Appendix C Inspection and Replacement Cost .akz3lanon 65B -276 100.0% 0 0.0% [ o o o% j 0 0.0% 0 0 -0% 1 100.0% B 1 1000% 0 0.0% 0 0.0% r 0 0.0% 0 0.0% 1 100.0% ,. c 1 1000% o o.o% 0 0.0% o o.o% o o.o% 3 300.0% 0 0 0.0% i i 100.0% 0 0.0% 0 0.0% 0 0.0% 1 100.0% E 0 0.0% 1 1000% 0 0.0% 1 0 0.0% 0 0.0% 1 100.0% F 1 100.0% 1 1 0 0.0% 0 0.0% 0 0.0% 1 100.0% 100.0%_.. l l 0% 1 1 - 0 0.0% 0 0.096 1 100.0% H 1 100.0% 0 0.0% 0 0.0% 0 0.0% O OA% _ _ 100.0% z o oo % 0 0.0% 0 0.0% 0 0.0% 0 0.0% 1 1 ' 00-, 0.01 100.09: B 0.0% I 0.0% ? 100.0% i 0.0% OA% 100.0 +:: C 0.0% 0.1 0.0% a 30.0% 0.0% 30.05; D 10.0% 10.0% ) 0% £ 10.0% 10.0% 50.0% I 10._ E 2.0% 1.0 % 1.0% 1.0% S.0% 10.0% F 1.0% 0.0% 2.0% , 1.0% 1.0% 5.0% 0.5% 0.5% os% 05% 0.5% MIA H 0.2% 0.2% 0.2% f 0.2% 0.2% 1.0% z 0.0% 0.0% 0.0% 0.0% 0.0% 1 Based on the above assumption plan, an annual inspection and replacement budget was developed. Table C 5 presents the resulting annual budget. Figure C 5 presents these results graphically. The overall assumption plans can be adjusted to create a variety of budgeting scenarios. Note, the City may wish to also include a nominal annual budget for ongoing inspections to address system -wide pipe segments not included in this suggested plan. Table C - 5: Annual Inspection and Replacement Budget Table Year Inspect Replace Total Cum Total Yearl $916,388 $1,911,299 $2,682,147 $2,682,147 Year2 $89,756 $3,026,311 $3,143,122 $5,825,270 Year3 $0 $2,820,191 $2,918,041 $8,743,311 Year4 $0 $3,190,619 $3,211,252 $11,954,563 Years $0 $2,689,157 $2,689,157 $14,643,720 Total $1,006,144 $13,637,576 $14,643,720 BLACK & VEATCH I Appendix C Inspection and Replacement Cost .akz3lanon 65B -276 Based on the above assumption plan, an annual inspection and replacement budget was developed. Table C 5 presents the resulting annual budget. Figure C 5 presents these results graphically. The overall assumption plans can be adjusted to create a variety of budgeting scenarios. Note, the City may wish to also include a nominal annual budget for ongoing inspections to address system -wide pipe segments not included in this suggested plan. Table C - 5: Annual Inspection and Replacement Budget Table Year Inspect Replace Total Cum Total Yearl $916,388 $1,911,299 $2,682,147 $2,682,147 Year2 $89,756 $3,026,311 $3,143,122 $5,825,270 Year3 $0 $2,820,191 $2,918,041 $8,743,311 Year4 $0 $3,190,619 $3,211,252 $11,954,563 Years $0 $2,689,157 $2,689,157 $14,643,720 Total $1,006,144 $13,637,576 $14,643,720 BLACK & VEATCH I Appendix C Inspection and Replacement Cost .akz3lanon 65B -276 BLACK & VEATCH I Appendix C Inspection and Replacement Cost .akz3lanon 65B -276 118 SEWER RATE STUDY I City of Santa Ana, CA Figure C- 5: Annual Inspection and Replacement Budget Graph $3,500.000 $3,000,000 _7Cum Total Inspect —l— Replace —* —Total $16,000,000 $14,000,000 - _- $2,500,000 $12,000,000 N $10,000,000 $2 DOD 000 u $8,000,000 C $1,500.000 75 E $6,000,000 $1,000,000 $4,000,000 $500,000 $2,000,000 $0 $o Year 1 Year 2 Year 3 Year 4 Year 5 CIP PROJECT IDENTIFICATION Once all individual pipe segments were assigned to appropriate R &R strategy groups, the segments were combined into potential CIP projects. The assignment process was partially based on the strategy group recommendations as presented in the previous section. Project identification also considered logical continuous segments of pipe, similar pipe diameters, and geographic proximity. The size of inspection projects were based on the City's request to inspect approximately 30,000 feet per project. To assist in this project identification process, an interactive, GIS -based tool called iCIP was used. Interactive Capital Improvement Planning (iCIP) is a combination of GIS -based tools and processes used by Black & Veatch to supplement and enhance the capital improvement planning process. It includes an interactive and fully customizable GIS -based cost - estimating tool that can assist planning engineers in determining inspect or repair and replacement (R &R) costs. Users can graphically see the results of their decisions and have full control of the factors that support that process. CIP projects can be added, removed or modified graphically; cost calculations are updated automatically. This iCIP tool evolved from Esri's cost estimating template designed with input from the water, wastewater, and storm water user community. It was enhanced by Black & Veatch to provide additional functionality and flexibility. It was also configured specifically for this study to address City- specific considerations such as input file and field names, replacement strategies and cost lookup values. GIS Analysts and Planning Engineers collaborated together using iCIP to identify and refine proposed pipe inspection and replacement projects based on one suggested scenario. In total, ten individual inspection projects were identified to address the City's sewer mains that had no inspection data. Figure C 6 presents a map showing suggested inspection projects. 65B -277 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure C- 6: Sewer System Map Showing Suggested Inspection Projects 0 3,000 6,000 Inspection Projects — Inspect 01 — Inspect 02 — Inspect 03 — Inspect 04 — Inspect 05 — Inspect 06 — Inspect 07 2- Inspect08 Inspect 09 Inspect 10 Sewer Main Sewer Main ;_... City Boundary RailRoads i � L r ,,-. -1 �ll I 1 t• 12,000 Ft N w F �V./S City of Santa Ana, CA Water / Wastewater System Analysis - 2012 Y\ Sewer Collection System Inspection Projects BLACK &VEATCH Bulldlno a world of dlNeunar BLACK & VEATCH 1 Appendix C Inspection and Replaceme;S ( ost Calsulatlon 65B -278 120 f u)Y I City of Santa Ana, CA Table C 6 presents a summary of the suggested inspection projects listing total footages per project. It also indicates the footages by strategy group. As indicated, Inspection Project 01 includes all of the Group A and B pipe segments (highest risk). Therefore, this project should be completed as soon as practical. Projects 02 and 06 include fewer of the higher risk pipe so are candidates for delaying until years two or three if desired. Table C 7 presents the same information, but summarizes inspection costs. Table C- 6: Summary of Inspection Project Footages Inspect Project Inspect 01 Group 5,118 Group 472 Group 54 Group 13 Group 6,374 Group 16,858 Group 2,760 Group Grand 31,649 Inspect 02 919 28,840 1,749 31,508 Inspect 03 844 1,258 3,423 18,390 84 23,999 Inspect 04 2 319 377 7,801 17,320 288 26,107 Inspect 05 534 320 28,126 365 29,345 Inspect 06 106 4,905 21,835 26,846 Inspect 07 499 1,237 85 22,002 21 23,844 Inspect 08 8,607 2,619 16,776 28,002 Inspect 09 76 0 11,725 1,263 15,904 186 29,838 Inspect 10 1,653 5,189 3,558 8,526 162 990 20,077 Total 5,118 472 12,953 19,846 23,845 185,057 22,459 1,464 271,215 Table C- 7: Summary of Inspection Project Costs Inspect Inspect 01 . • $22,073 Group $1,682 Group $113 Group $28 Group $13,530 Group $79,905 Group $14,668 Group Grand $132,000 Inspect 02 $1,378 $171,674 $7,304 $180,356 Inspect 03 $1,267 $3,127 $14,445 $64,164 $202 $83,205 Inspect 04 $4 $599 $585 $24,582 $64,094 $628 $90,492 Inspect 05 $801 $650 $116,983 $1,846 $120,279 Inspect 06 $219 $8,430 $120,948 $129,597 Inspect 07 $749 $2,394 $168 $77,734 $62 $81,106 Inspect 08 $12,910 $3,942 $48,325 $65,177 Inspect 09 $1,832 $22,233 $2,203 $47,065 $454 $73,787 Inspect 10 $3,108 1 $9,878 $5,948 $28,409 $390 $2,413 $50,145 Total $22,073 $1,682 $20,784 $38,477 $51,279 $779,788 $88,566 $3,495 $1,006,144 As previously addressed, recommended replacements or refurbishments should not be performed without further investigation and /or inspection. Based on the severity of BRE scores, pipes in Strategy Groups A and B were listed for 100% replacement. Therefore, replacement projects were prepared for these pipe segments; as shown in Figure C 7. Assets within the remaining Strategy Groups were listed for replacement as an assumed percentage of pipe lengths within each group. Until actual re- inspection results are available, it is impossible to know which specific segments need attention. Therefore, detailed replacement projects were not identified for those assets. 65B -279 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STU DY Figure C- 7: Map of CIP Replacement Projects for Groups A and B ._.. t.» i 0 1,250 2.500 5.000 Ft Sewer Main - Replace Projects ,all other values> — A Group Pipes — B Group Pipes 1st St — B Group Pipes Daisy Ave — B Group Pipes Edinger Ave City Boundary -- RailRoads BLACK & VEATCH J Appendix C: Inspection and Replacement Cast CalculaFion 65B -280 N W�F ��ss City of Santa Ana, CA Water / Wastewater System Analysis - 2012 n Sewer Collection System Replacement Projects (A -B) BLACK &VEATCH [wilding a world of dlNemncer t22 SEWER RATE STUDY I City of Santa Ana, CA Table C 8 presents a summary of the expected replacement footages and costs for the Group A and B projects. Table C- 8: Summary of Group A and B Replacement Projects CIP Replacement Project Project A Group Pipes Footage No of Segments 5,118 Replacement 10 Costs 2 29J919 B Group Pipes 1st St 472 1 $159,863 B Group Pipes Daisy Ave 396 1 $62,231 B Group Pipes Edinger Ave 125 1 $24,464 Total 6,111 13 92.542,477 [INTENTIONALLY LEFT BLANK] 65B -281 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Appendix D: City -Owned Mains Analysis BLACK & VEATCH I Appendix D: City -Owned Mains Analysis 65B -282 124 SEWER RATE STUDY I City of Santa Ana, CA REVISED ANALYSIS At the request of the City, a revised Sewer System CIP Analysis was performed for Santa Ana after the draft report was developed. The revised results reflect the removal of all OCSD -owned sewer mains. None of the initial pipe statistics, cohorts, PoF / CoF criteria or prioritization factors were changed. The non -City owned mains were removed after the full prioritization process to allow comparison of results. The following sections provide the summarized results of the "revised" analysis starting at the conclusion of the Business Risk Exposure (BRE) calculation. Business Risk Exposure (BRE) Figure D 1 provides a "heat map" graph showing the resulting distribution of PoF vs. CoF scores by miles of City -owned mains. Combined, these represent the BRE score. Higher probability of failure assets are plotted near the right. Higher consequences of failure assets are plotted near to the top. A partial table of sewer main pipeline segments ranked by BRE score is included in the Replacement Prioritization section below. Figure D -1: Sewer System BRE Heat Map Graphic by Miles of City -Owned Sewer Mains 10 OJ 9 i 3 g LA_ 7 4- O 6 a U C 5 GJ O 4 v N 3 C O 2 V 1 Probability of Failure 1 2 3 4 5 6 7 8 9 10 0:2 0.2 2.3 4.6 0.3 0.3 0.4 0.6 1 0.2 ` 1.8 2.7 1.9 14.3 2.4 2.5 [ 2.9 i 5.2 2.4 f 0.6 0.3 1 0.4 0.5 3.2 0.7 ( 0.6 0.5 1.1 0.7 0.3 0.2 0.4 ` 4.9 C 1.1 1.1 1.1 2.5 0.2 0.3 0.8 8.3 1.5 1.7 f 1.9 2.2 1.5 I 0.3 0.2 0.3 2.7 28.4 4.6 4.5 5.0 ` 6.0 3.5 ( 1.2 I 0.3 f 1.0 10.2 .9 26.2 19.0 19.1 31.3 11.0 5.5 Total Miles: 397.2 Inspection and Replacement Cost Calculation Figure D 2 shows the distribution of BRE scores (across the bottom) against the total estimated replacement costs for City -owned mains. The cumulative replacement cost line is also provided. 65B -283 NOVEMBER 2014 City of Santa Ana, CA I SEWER RATE STUDY Figure D - 2: BRE Scores and costs for City -Owned Sewer Collection System (2012 dollars) $100 0 0 `o a $80 to E c $60 E i $40 $20 _CUmUlative Cost 8 p m m m m m m 3 m S n n A n n w B 3 u S n�. R h m a V 3 a 4 A A A m A A N ry ry BRE Scare $350 $300 o° $250 0 0 E $200 m V $150 a $100 $50 E V A variation of the previous heat map graphic is provided in Figure D 3. This version is based on cost ratherthan pipe length. [INTENTIONALLY LEFT BLANK] BLACK & VEATCH j Appendix D. City -Owned Mains Analy;i 65B -284 SEWER RATE STUDY I City of Santa Ana, CA Figure D - 3: BRE Heat Map Graphic by City -Owned Main Replacement Cost (2012 dollars) Probability of Failure 1 2 3 4 5 6 7 8 9 10 [INTENTIONALLY LEFT BLANK] 65B -285 10 _. L 9 $0.2 .0 $0.5 $0 1).0 0. •� 8 f $3.6 f $0.4 $0.7 0.0 $3.4 $0. .0 $0. LL y,,, 7 $0.2 ( $6.1 $0.4 $0.8 $0.1 $3.8 $0.1 .0 - 0- O - 41 6 1 $2.0 $15.7 $2.5 $2.7 $3.0 $5.5 $2.2 ( $0.6 $0.3 $0.4 Ll 1 EEE 41 5 $0.5 $3.4 I $0.7 $0.6 I $0.5 $1.0 $0.6 $0.2 $0.2 jft Cr 4 $0.4 $5.2 ( $1.2 $1.2 ( $1.0 $2.4 $0.2 $0.2 $0.0 $0.1 Q) _ I I 3 $0.8 $8.4 l $1.5 $1.6 $1.8 k $2.1 f $1.4 I $0.2 $0.1 $0.3 �I (� 2 $2.6 $27.8 ( $4.4 $4.3 $4.5 $5.7 $3.1 ( $1.1 $0.3 $0.8 1 $9.2 -118.7 I$24.1 $17.1 $17.1 [ $28.7 1 $9.5 ` $4.8 $1.11 $2.0 $15.7 $189.2 $35.2 $29.0 $28.1 $53.1 $17.1 $7.2 $2.0 $3.7 Millions of Dollars Total Cost: $380.1 [INTENTIONALLY LEFT BLANK] 65B -285 City of Santa Ana, CA I SURER RATE STUDY BRE Replacement Prioritization Using the results of the BRE analysis and replacement costing table, each sewer main pipe segment was ranked from highest to lowest risk and assigned a replacement cost estimate. Table D 1 below is a revised table (with the non -City owned mains removed) for all pipes having a BRE score of 50 or above. The rank IDs were left as they were initially assigned to easily indicate which pipes were removed. Table D -1: Partial List of Sewer Mains Ranked by BRE Score with Non -City owned Mains Removed 0. e ® ®®� • , ® •� •. e ME ME ® M 1 3383 VCP 6 1927 1930 0.04 5 10.0 5.8 58.4 $35,352 Pre 2 3964 VCP 6 1925 1930 0.06 5 10.0 5.8 58.4 $47,949 Pre 3 7740 VCP 6 1927 1930 0.03 5 10.0 5.8 58.4 $24,820 Pre 4 2638 VCP 6 1929 1930 0.01 5 10.0 5.0 50.4 $9,122 Pre 5 2840 VCP 6 1939. 19306 0.07 5 10.0 5.0 50.4 $60,187 6 3381 VCP 6 1939 1930s 0.07 5 10.0 5.0 50.4 $60,208 7 3382 VCP 6 1927 1P9e0 0.07 5 10.0 5.0 50.4 $60,172 8 5745 VCP 8 - 1927 930 0.01 5 10.0 5.0 50.4 $10,068 Pre 9 1437 VCP 30 1969 1960s 0.06 3 6.0 8.4 50.2 $135,702 10 1438 VCP 30 1969 1960s 0.03 3 6.0 8.4 50.2 $66,034. 11 1439 VCP 27 1969 1960s 0.13 3 6.0 8.4 50.2 $251,067 R &R Strategy Groups and CIP Budgeting The risk prioritization table just presented identifies pipe segments having the highest BRE score. Since this score is based on the product of PoF times CoF factors, it gives equal consideration for both factors. Typically, different R &R strategies are applied to address these two considerations. Based on the BRE heat map graphic results, the ranked assets were then grouped into logical R &R strategies. Figure D 4 shows the same BRE heat map graphic as before, but color coded by strategy group. Table D 2 defines each of these groupings and provides additional summarizations and recommendations. BLACK & VEATCH I Appendix D: City -Owned Mains Ana!ysii 65B -286 SEWER RATE STUDY I City of Santa Ana, CA Figure D - 4: BRE Heat Map Graphic by Cost and R &R Strategy Groups for City -Owned Mains Probability of Failure 1 2 3 4 5 6 7 8 9 10 10 L 9 �M 8 LL 4- 7 O 6 V i 5 W 4 Cr (L) 3 N 2 O U 1 tzx $0.0 $0.0 $0.0 C 0.0 $0.0 $0.0 $0.0 Y Z $0.0 $0.2 $0.0 $0.0 $0.0 $0.5 $0.0 $0.0 $0.0 $3.6 $0.4 $0.7 $0.0 $3.4 $0.0 $0.0 $0.0 $0.0 $0.2 $6.1 $0.4 $0.8 $0.1 $3.8 $0.1 $0.0 $0.0 $0.0 $2.0 $15.7 $2.5 $2. 3.0 ; $5.5 $2.2 $0.6 $0.3 $0.4 $0.5 $3.4 $0.7 $0.6 $0.5 $1.0 $0.6 $0.2 $0.2 $0.1 $0.4 $5.2 $1.2 $1.2 $1.0 $2.4 $0.2 $0.2 $0.0 $0.1 $0.8 $8.4 $1.5 $1.6 $1.8 $2.1 $1.4 $0.2 $0.1 $0.3 $2.6 $27.8 $4.4 $4.3 $4.5 $5.7 $3.1 $1.1 $0.3 $0.8 $9.2 $118.7 $24.1 $17.1 $17.1 $28.7 $9.5 $4.8 $1.1 $2.0 Millions of Dollars Total Cost: $380.1 [INTENTIONALLY LEFT BLANK] 6513-287 `_ l Extremely Critical Highly Critical Critical - Likelihood Imminent Failure Potential Failure Critical - Consequence High Consequence High Consequence Unknown Low Criticality B C D E F H 7 Y Z [INTENTIONALLY LEFT BLANK] 6513-287 `_ l \ 65B-288 k ! } 2 M \ \ \ \ • + \ k / a 7 4 «§ < <99 /ff4 /! ) 65B-288 k ! } 130 S RA [E STl7JY I City of Santa Ana, CA Sewer System Capital Improvements Program Table D 3 presents the resulting annual budget. The overall assumption plans can be adjusted to create a variety of budgeting scenarios. Note, the City may wish to also include a nominal annual budget for ongoing inspections to address system -wide pipe segments not included in this suggested plan. Table D - 3: City -Owned Sewer System Capital Improvements Program [ *] Year1 $541,700 $788,700 $1,330,400 $1,330,400 Year2 $541,700 $788,700 $1,330,400 $2,660,800 Year3 $261,000 $875,400 $1,136,400 $3,797,200 Year $1,521,600 $1,521,600 $5,318,800 Year $1,521,600 $1,521,600 $6,840,400 Total $1,344,400 $5,496,000 $6,840,400 65B -289 NOVEMBER 2014 65B -290