final report on revenue requirements, …...final report on revenue requirements, cost of service,...

FINAL

REPORT ON REVENUE REQUIREMENTS, COST OF SERVICE, AND RATES

Water, Wastewater and Stormwater

BLACK & VEATCH PROJECT NO. 400753

PREPARED FOR

Topeka, Kansas

10 JANUARY 2020

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Topeka, Kansas | REPORT ON REVENUE REQUIREMENTS, COST OF SERVICE, AND RATES

BLACK & VEATCH | Introduction i

Table of Contents

Introduction ................................................................................................................................... 1

Purpose ..................................................................................................................................................... 1

Scope ......................................................................................................................................................... 1

Disclaimer ................................................................................................................................................. 2

Summary of Findings and Recommendations ......................................................................... 3

Water Utility ............................................................................................................................................ 3

Revenue under Existing Rates ...................................................................................................... 3

Revenue Requirements .................................................................................................................. 3

Cost of Service Allocations ............................................................................................................. 4

Proposed Rate Adjustments .......................................................................................................... 5

Wastewater Utility ................................................................................................................................ 7

Revenue under Existing Rates ...................................................................................................... 7

Revenue Requirements .................................................................................................................. 7

Cost of Service Allocations ............................................................................................................. 8

Proposed Rate Adjustments .......................................................................................................... 9

Stormwater Utility .............................................................................................................................. 11

Revenue under Existing Rates ................................................................................................... 11

Revenue Requirements ............................................................................................................... 11

Proposed Rate Adjustments ....................................................................................................... 12

Water Utility ............................................................................................................................... 14

Revenue ................................................................................................................................................. 14

Customer Growth .......................................................................................................................... 14

Water Usage .................................................................................................................................... 14

Water Revenue Under Existing Rates ..................................................................................... 14

Other Revenue ................................................................................................................................ 15

Revenue Requirements .................................................................................................................... 21

Operation and Maintenance Expense .................................................................................... 21

Routine Capital Outlay ................................................................................................................. 21

Major Capital Improvements ..................................................................................................... 21

Debt Service Requirements ........................................................................................................ 22

Summary of Revenue and Revenue Requirements ................................................................. 26

Major Capital Improvement Financing ................................................................................... 26

System Operations ........................................................................................................................ 26

REPORT ON REVENUE REQUIREMENTS, COST OF SERVICE, AND RATES | Topeka, Kansas

ii JANUARY 2020

Cost of Service Allocations ............................................................................................................... 30

Cost of Service to be Allocated.................................................................................................. 30

Functional Cost Components ..................................................................................................... 30

Allocation to Cost Components ................................................................................................ 31

Distribution of Costs to Customer Classes ............................................................................. 33

Rate Design ........................................................................................................................................... 37

Existing Rates .................................................................................................................................. 37

Proposed Rates ............................................................................................................................... 37

Subsequent Year Rate Increases ............................................................................................... 38

Wastewater Utility ..................................................................................................................... 43

Revenue ................................................................................................................................................. 43

Customer Growth .......................................................................................................................... 43

Wastewater Billable Flow ........................................................................................................... 43

Wastewater Revenue Under Existing Rates .......................................................................... 43

Other Revenue ................................................................................................................................ 44









Cost of Service Allocations ............................................................................................................... 59

Cost of Service to be Allocated.................................................................................................. 59

Functional Cost Components ..................................................................................................... 59

Allocation to Cost Components ................................................................................................ 60

Distribution of Costs to Customer Classes ............................................................................. 61

Rate Design ........................................................................................................................................... 65

Existing Rates .................................................................................................................................. 65

Proposed Rates ............................................................................................................................... 65

Subsequent Year Rate Adjustments ........................................................................................ 66

Stormwater Utility ..................................................................................................................... 72

Revenue ................................................................................................................................................. 72

Customer Growth .......................................................................................................................... 72


BLACK & VEATCH | Introduction iii

Stormwater Revenue Under Existing Rates .......................................................................... 72

Other Revenue ................................................................................................................................ 73









Rate Design ........................................................................................................................................... 89

Existing Rates .................................................................................................................................. 89

Proposed Rates ............................................................................................................................... 89

Subsequent Year Rate Adjustments ........................................................................................ 89

Combined Utility ........................................................................................................................ 92


iv JANUARY 2020

LIST OF TABLES

Table A - Adopted 2021 – 2023 Water Rates ................................................................................. 6

Table B - Adopted 2021 – 2023 Wastewater Rates ...................................................................... 10

Table C - Adopted 2021 – 2023 Stormwater Rates ...................................................................... 13

Table 1 - Historical and Projected Water Number of Accounts ............................................... 16

Table 2 - Historical and Projected Water Usage ............................................................................ 17

Table 3 - Existing 2020 Water Rates .................................................................................................. 18

Table 4 - Historical and Projected Water Billings Under Existing Rates ................................. 19

Table 5 - Historical and Projected Water Miscellaneous Revenue .......................................... 20

Table 6 - Historical and Projected Water Operation and Maintenance Expense ............... 23

Table 7 - Proposed Water Capital Improvement Program ......................................................... 24

Table 8 - Existing and Proposed Water Long-Term Debt ............................................................ 25

Table 9 - Proposed Water Capital Improvement Financing ....................................................... 28

Table 10 - Proposed Revenue and Revenue Requirements....................................................... 29

Table 11 - Total 2021 Cost of Service to be Recovered from Water Rates ........................... 35

Table 12 - Comparison of 2021 Water Adjusted Cost of Service with Revenue

Under Existing Rates ....................................................................................................... 36

Table 13 - Proposed and Adopted 2021 - 2023 Water Rates .................................................... 39

Table 14 - Comparison of Adjusted Water Cost of Service with Revenues Under

Adopted Rates .................................................................................................................. 40

Table 15 - Comparison of Typical 2021 Monthly Water Bills Under Existing and

Adopted Rates .................................................................................................................. 41

Table 16 - Proposed 2024 - 2026 Water Rates ......................................................................... 42

Table 17 - Historical and Projected Wastewater Number of Accounts ................................. 45

Table 18 - Historical and Projected Wastewater Billable Usage .............................................. 46

Table 19 - Existing 2020 Wastewater Rates .................................................................................... 47

Table 20 - Historical and Projected Wastewater Billings Under Existing Rates ................... 48

Table 21 - Historical and Projected Wastewater Miscellaneous Revenue ........................... 49

Table 22 - Historical and Projected Wastewater Operation and Maintenance

Expense ............................................................................................................................... 52

Table 23 - Proposed Wastewater Capital Improvement Program .......................................... 53

Table 24 - Existing and Proposed Wastewater Long-Term Debt.............................................. 54

Table 25 - Proposed Wastewater Capital Improvement Financing ......................................... 57

Table 26 - Proposed Wastewater Revenue and Revenue Requirements ............................. 58

Table 27 - Total 2021 Cost of Service to be Recovered from Wastewater Rates ............... 63


BLACK & VEATCH | Introduction v

Table 28 - Comparison of 2021 Wastewater Allocated Cost of Service with

Revenue Under Existing Rates ..................................................................................... 64

Table 29 - Adopted 2021 - 2023 Wastewater Rates .................................................................... 67

Table 30 - Comparison of 2021 Allocated Wastewater Cost of Service with

Revenues Under Adopted Rates ................................................................................. 68

Table 31 - Comparison of Typical Monthly 2021 Wastewater Bills Under Existing

and Adopted Rates .......................................................................................................... 69

Table 32 - Comparison of 2021 Typical Monthly Combined Bills Under Existing

and Adopted Rates .......................................................................................................... 70

Table 33 - Proposed 2024 – 2026 Wastewater Rates .................................................................. 71

Table 34 - Historical and Projected Stormwater Billing Units ................................................... 74

Table 35 - Existing 2020 Stormwater Rates .................................................................................... 75

Table 36 - Historical and Projected Stormwater Billings under Existing Rates .................... 76

Table 37 - Historical and Projected Stormwater Miscellaneous Revenue ............................ 77

Table 38 - Historical and Projected Stormwater Operation and Maintenance

Expenses ............................................................................................................................. 80

Table 39 - Proposed Stormwater Capital Improvement Program ........................................... 81

Table 40 - Existing and Proposed Stormwater Long-Term Debt .............................................. 82

Table 41 - Proposed Stormwater Capital Improvement Financing ......................................... 87

Table 42 - Proposed Stormwater Revenue and Revenue Requirements .............................. 88

Table 43 - Proposed and Adopted 2021 - 2023 Stormwater Rates ......................................... 90

Table 44 - Proposed 2024 – 2026 Stormwater Rates .................................................................. 91

Table 45 - Comparison of Combined Projected Revenue Under Existing Rates

with Projected Revenue Requirements .................................................................... 93

Table 46 - Combined Coverage Requirements .............................................................................. 94


BLACK & VEATCH | Introduction 1

Introduction The City of Topeka, Kansas (City) owns and operates water, wastewater, and stormwater systems that

serve customers both inside and outside City limits. The City obtains water from the Kansas River and

treats it at the Topeka Water Treatment Facility. The water utility operates and maintains ten water

towers, nine pump stations, approximately 890 miles of mains, and other water system assets, including

water meters and fire hydrants. The wastewater utility is responsible for the collection and treatment of

wastewater. The City owns and operates the Oakland and North Topeka Wastewater Treatment Plants

and operates the Sherwood Water Pollution Control Plant for Shawnee County (County). The City

maintains approximately 872 miles of sewer mains and 82 pump stations, of which some are owned by

the County and the rest by the City. The stormwater utility operates and maintains approximately 404

miles of storm sewer lines, 25 detention facilities and five (5) levee units.

The City anticipates that the combined costs of proposed water, wastewater, and stormwater systems’

capital improvements, anticipated increases in operation and maintenance expenses, and other financial

obligations over the next six years will exceed the utilities’ current financial capabilities under existing

rates. To provide a plan to meet the anticipated financial obligations of the water, wastewater, and

stormwater utilities on a sound and equitable customer basis, the City authorized this comprehensive

study of revenue requirements, costs of service, and rates for the three utilities.

PURPOSE

The purpose of this report is: (1) to examine the future operating and capital financing requirements of

the water, wastewater, and stormwater utilities; (2) to allocate these requirements to the various

customer classes in accordance with the respective service requirements of each; and (3) to develop

suitable schedules of rates for water, wastewater, and stormwater service that will produce revenues

adequate to meet projected financial needs on a basis which recognizes customer costs of service and

local policy considerations.

SCOPE

This report presents the results of a comprehensive study of projected revenue requirements, costs of

service, and proposed rates for water, wastewater, and stormwater service conducted by Black &

Veatch Management Consulting, LLC (Black & Veatch). Revenues and revenue requirements are

projected for the eight years 2019 through 2026, recognizing anticipated growth in the number of

customers throughout the service area. The study of revenue requirements recognizes projected

operation and maintenance expenses; payment in lieu of taxes; debt service on existing and proposed

debt; and expenditures for routine, major capital improvements, and renewals and replacements met

from annual revenues.

Black & Veatch developed allocated costs of service for each class of customer and type of service based

on considerations of utility revenue needs and projected customer service requirements. In accordance

with allocated costs of service, local policy, and practical considerations, Black & Veatch evaluated rate

adjustment for each customer class.


2 JANUARY 2020

Two manuals provide water and wastewater industry-accepted approaches for developing cost

allocations that provide the basis for fair and equitable utility rates. For the water industry, the manual

is the American Water Works Association (AWWA) “Manual M-1: Principles of Water Rates, Fees, and

Charges” and for the wastewater industry, it is the Water Environment Federation (WEF) “Financing and

Charges for Wastewater Systems.” The analyses summarized in this report reflect Black & Veatch’s

application of these principles.

DISCLAIMER

In conducting our analysis and in forming an option of the projection of future operations summarized in

this report, Black & Veatch has made certain assumptions with respect to conditions, events, and

circumstances that may occur in the future. The methodology utilized by Black & Veatch in performing

the analysis follows generally accepted practices for such projections. Such assumptions and

methodologies are summarized in this report and are reasonable and appropriate for the purpose for

which they are used. While Black & Veatch believes 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.


BLACK & VEATCH | Summary of Findings and Recommendations 3

Summary of Findings and Recommendations

WATER UTILITY

Revenue under Existing Rates

1. The City currently provides treated water and water distribution services to approximately 48,900

customers inside the City, about 4,750 outside the City, five rural districts, and the Metropolitan

Topeka Airport Authority (MTAA). The projected number of water service customers increases

approximately 0.16 percent per year from 2019 through 2026 based on projected growth.

2. The City expects projected sales of treated water to increase from about 5,502,700 thousand gallons

(kgal) in 2019 to about 5,736,800 kgal by 2026. This increase reflects an average growth rate of about

0.08 percent annually, beginning in 2021, based primarily on the projected growth in the customer

base.

3. The City’s current water rates include a monthly service charge and a volume charge. The volume

charge is a uniform volume charge by customer class. It is the current practice of the City to bill outside

City water customers at rates that are 1.75 times those applicable to inside City water customers. The

wholesale rates are volumetric, with a minimum monthly charge. The City’s existing rates became

effective on January 1, 2020.

4. Revenue is currently derived principally from charges for treated water service, with some revenue

also obtained from other miscellaneous charges. Revenue from treated water sales, under existing

rates, is projected to increase from about $35,811,700 in 2020 to about $36,081,900 in 2026.

Miscellaneous water revenues are estimated to stay constant at approximately $2,068,000 from 2019

to 2026.

Revenue Requirements

5. The costs of service to be recovered from water service charges include system operation and

maintenance expense; payment in lieu of taxes; debt service on existing and proposed debt; and

expenditures for routine, major capital improvements, and renewals and replacements met from

annual revenues.

6. Operation and maintenance expenses include annual salaries and wages of personnel, contractual

services, commodities, administrative fees, and routine capital outlay. The City projects future water

utility operation and maintenance expenses to increase from about $23,102,100 in 2019 to

$28,316,100 in 2026.

7. The capital improvement program includes costs associated with major capital projects and costs

associated with annual renewal and replacement of assets. The costs from 2019 to 2026 are estimated

to total $166,568,200 when adjusted for inflation. The City plans to finance the proposed capital

improvements from a combination of available funds on hand, debt financing, annual operating

revenue, other sources, and estimated interest earnings.

8. Increases in water revenue are necessary to meet the projected revenue requirements. The indicated

increases are as follows:


4 JANUARY 2020

EFFECTIVE DATE

REVENUE

INCREASE

January 1, 2021 7.5%

January 1, 2022 7.5%

January 1, 2023 7.5%

January 1, 2024 7.5%

January 1, 2025 7.5%

January 1, 2026 7.5%

9. The City’s Debt Management Fund Policy, which is reflected in Resolution No. 8818, states that the

water utility will maintain 185 days of operation and maintenance expense in the operating fund,

however, the utility’s goal is to maintain at least 300 days of operating expenses. Under the indicated

revenue increases, the water utility achieves 295 days of cash by 2026.

Cost of Service Allocations

10. The annual cost of service for the water system to be met from treated water rates during the

projected 2021 test year is as follows:

TOTAL REVENUE REQUIREMENTS:

Operation and Maintenance Expenses $24,085,200

Debt Service Requirements 11,226,800

Payment in Lieu of Taxes 3,448,900

Capital Outlay / Equipment 400,000

Cash Financing of Capital Projects 1,056,300

Total $40,217,200

REVENUE REQUIREMENTS MET FROM OTHER SOURCES:

Other Revenue $2,068,000

Interest Income 246,900

Funds Available (418,600)

Full Year Rate Adjustment (224,100)

Total $1,672,200

Net Costs to be Met from Charges $38,545,000



11. As a basis for the design of a schedule of water rates, Black & Veatch allocates costs of service to the

classes of customers in accordance with respective service requirements. Table 12 summarizes the

resulting costs of service allocated to customer classes. The allocated costs shown are adjusted to

recognize recovery of inside City public fire protection costs from inside City retail customer classes.

Proposed Rate Adjustments

12. On December 10th, the Topeka City Council approved the water rates for 2021, 2022, and 2023, as

shown in Table A. The rate structure of the adopted rates is similar to the existing structure and

reflects across-the-board rate increases.

13. Table 14 compares the projected 2021 test year revenues at rates to be in effect in 2020 and adopted

2021 rates with adjusted costs of service.

14. Table 15 shows typical water bills for retail water service under existing rates and adopted rates for

2021. Table 32 also shows typical bills for combined water and wastewater service under existing

rates and adopted rates for 2021.

15. Table 16 summarizes the schedules of rates proposed for implementation effective each January 1

from 2024 through 2026.


6 JANUARY 2020

Table A - Adopted 2021 – 2023 Water Rates

Volume In Effective January 2021 Effective January 2022 Effective January 2023

Meter Minimum Inside Outside Inside Outside Inside Outside

Size Charge City City City City City City

gallons

Service Charges - $/Month

1" & Below 13.61 23.82 14.63 25.60 15.73 27.53

1.5" 27.22 47.64 29.26 51.21 31.45 55.04

2" 43.56 76.23 46.83 81.95 50.34 88.10

3" 81.68 142.94 87.81 153.67 94.40 165.20

4" 136.11 238.19 146.32 256.06 157.29 275.26

6" 272.24 476.42 292.66 512.16 314.61 550.57

8" 435.56 762.23 468.23 819.40 503.35 880.86

10" 626.12 1,095.71 673.08 1,177.89 723.56 1,266.23

Wholesale Minimum Charge - $/Month

Jackson Co. #1 600,000 3,336.00 3,588.00 3,858.00

Shawnee CRWD #1-#2 2,992,000 16,636.00 17,892.00 19,239.00

Shawnee CRWD #3&#6 2,598,000 14,445.00 15,536.00 16,705.00

Shawnee CRWD #4 995,000 5,532.00 5,950.00 6,398.00

Shawnee CRWD #8 5,402,000 30,035.00 32,304.00 34,735.00

MTAA 1,139,000 6,333.00 6,811.00 7,324.00

Volume Charge - $/1,000 gallons

Single-Family Residential 5.25 9.19 5.64 9.87 6.06 10.61

Multi-Family Residential 4.26 7.46 4.58 8.02 4.92 8.61

Commercial 3.88 6.79 4.17 7.30 4.48 7.84

Industrial 3.32 5.81 3.57 6.25 3.84 6.72

Industrial II 3.13 5.48 3.36 5.88 3.61 6.32

Irrigation 6.31 11.04 6.78 11.87 7.29 12.76

Wholesale 5.56 5.98 6.43

Adopted



WASTEWATER UTILITY


1. The City currently provides wastewater collection and treatment services to approximately 44,600

customers inside the City and about 4,200 outside the City. The projected number of wastewater

customers increases by approximately 0.08 percent per year from 2019 through 2026 based on

projected growth.

2. The City expects projected billable wastewater flow to increase from about 4,242,000 kgal in 2019 to

4,259,900 kgal by 2026. This increase reflects an average growth rate of about 0.06 percent annually

based primarily on the projected growth in the customer base.

3. The City’s current wastewater rates include a monthly service charge, a uniform volume charge, and

extra strength surcharges for biochemical oxygen demand (BOD) and total suspended solids (TSS).

The uniform volume charge applies to all customer classes. It is the current practice of the City to bill

outside City water customers at rates that are 1.75 times those applicable to inside City water

customers. The City’s existing rates became effective on January 1, 2020.

4. Revenue is currently derived principally from charges for wastewater, with some revenue also

obtained from other miscellaneous charges. Revenue from billable wastewater flow, under existing

rates, is projected to increase from about $32,867,500 in 2020 to about $33,012,400 in 2026.

Miscellaneous wastewater revenues are estimated to stay constant at $1,595,900 from 2019 to 2020

and then increase to $2,895,900 in 2021 and remain constant through 2026. This increase is due to

the expected sales of biogas beginning in 2021.


5. Costs of service to be recovered from wastewater service charges include system operation and


expenditures for routine capital, major capital improvements, and renewals and replacements met



services, commodities, administrative fees, and routine capital outlay. Projected future wastewater

utility operation and maintenance expenses increase from about $13,414,507 in 2019 to $16,420,300

in 2026.


associated with annual renewal and replacement of assets. The costs 2019 to 2026 are estimated to

total $245,366,600 when adjusted for inflation. The City expects to finance the proposed capital


revenue, and estimated interest earnings.

8. Increases in wastewater revenue are needed to meet the projected revenue requirements. The

indicated revenue increases are as follows:


8 JANUARY 2020

EFFECTIVE DATE

REVENUE

INCREASE

January 1, 2021 2%

January 1, 2022 2%

January 1, 2023 2%

January 1, 2024 2%

January 1, 2025 2%

January 1, 2026 2%

9. The City’s Debt Management Fund Policy, which is reflected in Resolution No. 8818, states that the

wastewater utility will maintain 185 days of operation and maintenance expense in the operating

fund, however, the utility’s goal is to maintain at least 300 days of operating expenses. Under the

indicated revenue increases, the wastewater utility achieves this goal throughout the study period.

Cost of Service Allocations

10. The annual cost of service for the wastewater system to be met from wastewater revenue during the

projected 2021 test year is as follows:

TOTAL REVENUE REQUIREMENTS:

Operation and Maintenance Expenses $13,913,000

Debt Service Requirements 11,645,100

Payment in Lieu of Taxes 3,540,100

Capital Outlay / Equipment 300,000

Cash Financing of Capital Projects 9,000,000

Total $38,398,200

REVENUE REQUIREMENTS MET FROM OTHER SOURCES:

Other Revenue $2,895,900

Interest Income 344,100

Funds Available 1,663,700

Full Year Rate Adjustment -(54,800)

Total $4,848,900

Net Costs to be Met from Charges $33,549,300



11. As a basis for the design of a schedule of wastewater rates, Black & Veatch allocated the costs of

service to the classes of customers in accordance with respective service requirements. Table 28

summarizes the resulting costs of service allocated to customer classes.


12. On December 10th, the Topeka City Council approved the wastewater rates for 2021, 2022, and 2023,

as shown in Table 29. The rate structure of the adopted rates is similar to the existing structure and

reflects across-the-board rate increases.

13. Table 30 compares the projected 2021 test year revenues under rates to be in effect in 2020 and

adopted 2021 rates with adjusted costs of service.

14. Table 31 shows the typical wastewater bills for retail service under existing rates and adopted rates

for 2021. Table 32 also shows typical bills for combined water and wastewater under existing rates

and adopted rates for 2021.

15. Table 33 presents the schedules of rates proposed for implementation effective each January 1 from

2024 through 2026.


10 JANUARY 2020

Table B - Adopted 2021 – 2023 Wastewater Rates

Effective January 2021 Effective January 2022 Effective January 2023

Meter Inside Outside Inside Outside Inside Outside

Size City City City City City City


1" & Below 11.99 20.98 12.23 21.40 12.47 21.82

1.5" 23.98 41.97 24.46 42.81 24.95 43.66

2" 38.36 67.13 39.13 68.48 39.91 69.84

3" 71.93 125.88 73.37 128.40 74.84 130.97

4" 119.88 209.79 122.28 213.99 124.73 218.28

6" 239.76 419.58 244.56 427.98 249.45 436.54

8" 383.64 671.37 391.31 684.79 399.14 698.50

10" 551.47 965.07 562.50 984.38 573.75 1,004.06


All Customers 5.37 9.40 5.48 9.59 5.59 9.78

Excess Strength Surcharge - $ per mg/l per 1,000 gals

BOD over 300 mg/l 0.00216 0.00378 0.00216 0.00378 0.00216 0.00378

TSS over 300 mg/l 0.00137 0.00240 0.00137 0.00240 0.00137 0.00240

mg/l - milligrams per liter

BOD - Biochemical Oxygen Demand

TSS - Total Suspended Solids

Adopted Rates



STORMWATER UTILITY


1. Currently, the City provides stormwater services to customers in the City of Topeka, including

customers that reside in the North Topeka Drainage District boundaries. Stormwater billings for

customers are per account for single-family residential customers, per living unit multi-family

customers, and per equivalent residential units (ERU), which is equal to 2,018 square feet of

impervious area for non-residential customers. The projected number of single-family residential

accounts within the City of Topeka increases approximately 0.2 percent each year of the study period,

while the projected billing units for all other customer classes remain constant.

2. The City’s current stormwater rates include a monthly service charge by customer class. The basis for

the single-family residential charge is impervious area with a three-step tiered rate structure, while

multi-family residential is based on the number of living units and non-residential pay per ERU. In

recognition that the North Topeka Drainage District levies a tax on residents that live within the

District boundaries, the rate per ERU for residents that are within the boundaries of the North Topeka

Drainage District is discounted $0.83 per ERU compared to all other Topeka residents. The City’s

existing rates became effective on January 1, 2020.

3. Revenue is currently derived principally from charges for stormwater service, with some revenue also

obtained from other miscellaneous charges. Revenue from stormwater billings, under rates to be in

effect in 2020, is projected to increase from about $7,596,100 in 2019 to about $8,036,300 in 2026.


4. Costs of service to be recovered from stormwater service charges include system operation and


expenditures for routine capital, major capital improvements, and renewals and replacements met



services, commodities, administrative fees, and routine capital outlay. Projected future stormwater

utility operation and maintenance expenses increase from about 4,456,200 in 2019 to $5,404,800 in

2026.


associated with annual renewal and replacement of assets. The costs from 2019 to 2026 are estimated

to total $47,612,500 when adjusted for inflation. The City expects to finance the proposed capital


revenue, and estimated interest earnings.


12 JANUARY 2020

7. Increases in stormwater revenue are needed to meet the projected revenue requirements. The

indicated increases are as follows:

EFFECTIVE DATE

REVENUE

INCREASE

January 1, 2021 7.5%

January 1, 2022 7.5%

January 1, 2023 7.5%

January 1, 2024 7.5%

January 1, 2025 7.5%

January 1, 2026 7.5%

8. The City’s Debt Management Fund Policy states that the stormwater utility will maintain 185 days of

operation and maintenance expense in the operating fund, however, the utility’s goal is to maintain

at least 300 days of operating expenses. Under the indicated revenue increases, the stormwater utility

achieves this goal by 2025.


9. On December 10th, the Topeka City Council approved the stormwater rates for 2021, 2022, and 2023,

as shown in Table C. The rate structure of the adopted rates is similar to the existing structure and

reflects across-the-board rate increases for customers not in the North Topeka Drainage District.

10. Table 44 summaries the schedules of rates proposed for implementation effective each January 1

from 2024 through 2026.



Table C - Adopted 2021 – 2023 Stormwater Rates

Rate Component

$/month $/month $/month

TOPEKA RESIDENTS

Residential (per account)

Under 1,500 SF 3.46 3.72 4.00

1,501 to 3,500 SF 5.38 5.78 6.21

Over 3,500 SF 8.36 8.98 9.65

Apartments/Duplexes (per each living unit) 5.38 5.78 6.21

Non - Residential (per ERU) 5.38 5.78 6.21

NORTH TOPEKA (a)


Under 1,500 SF 2.93 3.19 3.46

1,501 to 3,500 SF 4.55 4.95 5.38

Over 3,500 SF 7.07 7.69 8.36



(a) Topeka residents that live within the North Topeka Drainage District.

Adopted Rates

Effective

January 2021

Effective

January 2022

Effective

January 2023


14 JANUARY 2020

Water Utility

REVENUE

The City’s water system consists of a water treatment plant, pumping stations, storage facilities,

and transmission and distribution facilities. The City provides retail service both inside and outside the

City boundary. In addition, wholesale service is provided to five rural districts and the Metropolitan

Topeka Airport Authority (MTAA).

Customer Growth

Table 1 presents a summary of the historical and projected number of water customers served

inside and outside the City for the period 2015 through 2026. The accounts are categorized into six main

retail customer classes: single-family residential; multi-family residential consisting of apartment

buildings, duplexes, and mobile home parks; commercial including businesses, schools, government, and

churches; industrial; irrigation; and private fire service for both inside city and outside city customers.

About 88.1 percent of the retail customers served are single-family residential; multifamily customers

make up about 2.9 percent, commercial customers about 7.0 percent and industrial, irrigation, and private

fire service make up the net of the total.

For the four-year period from 2015 through 2018, the annual growth rate of the total number of

water accounts averaged approximately 0.28 percent. For purposes of projection, this rate is expected to

decrease to 0.16 percent for the next eight years.

Water Usage

Table 2 presents a summary of historical and projected water usage. Projected quantities are

based on the recognition of historical usage quantities and trends. Also considered are projections of the

number of customers and estimated water use per customer, the latter based on analyses of historical

and current rates of use per customer class. Sales volumes for 2019 reflects estimated actual water usage

and indicates a decrease from 2018 of about 8.44 percent due to the extremely wet weather experienced

in the summer of 2019 following drought conditions in 2018. Projected water usage for 2020 is based on

the average water usage for 2015 through 2018 and reflects an increase of 3.75 percent from 2019. Water

usage for the period 2021 through 2026 is projected to increase at an average rate of about 0.08 percent

annually, primarily as a result of levelized projected growth in the number of customers served.

Water Revenue Under Existing Rates

Table 3 presents the existing schedule of rates for water service that went into effect on January

1, 2020. The schedule consists of a monthly service charge plus a volume charge. All customer classes

have a uniform volume charge based on customer classification. It is the current practice of the City to bill

outside City water customers at rates that are 1.75 times those applicable to inside City water customers.

Wholesale rates are based on negotiated agreements with the five rural districts and MTAA. The rates

consist of a volume charge with a minimum monthly charge. The minimum charge is applied should the

wholesale customer not exceed its minimum usage amount.


BLACK & VEATCH | Water Utility 15

Table 4 presents a summary of historical water billings for the period 2015 through 2018 and

projected water billings for the period 2019 through 2026. The projected billings for the period 2020

through 2026 are based on the rates that went into effect on January 1, 2020. The historical water billings

shown in this table are summarized from detailed data provided by the City. Estimates of future water

service billings are based on the projected water customers and water usage shown in Table 1 and Table

2, respectively, and unit rates of charge under the rates shown in Table 3.

Other Revenue

Table 5 presents the historical and projected other water utility income. Revenues from fees for

service, bad debt, rent tower fees, and other miscellaneous income are based on the 2019 adopted

budget. Interest income on the available operating fund balance, calculated at 1.0 percent of the balance

available for investment, is shown in Table 10, Line 10. All other revenue is projected to remain constant

throughout the study period.

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Line Historical Projected

No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Inside City

1 Single-Family Residential 42,438 42,526 42,658 42,735 42,799 42,863 42,928 42,992 43,056 43,121 43,186 43,251

2 Multi-Family Residential 1,521 1,534 1,527 1,516 1,516 1,516 1,516 1,516 1,516 1,516 1,516 1,516

3 Commercial 3,542 3,535 3,499 3,533 3,533 3,533 3,533 3,533 3,533 3,533 3,533 3,533

4 Industrial 23 22 22 10 10 10 10 10 10 10 10 10

5 Industrial II 0 0 0 14 14 14 14 14 14 14 14 14

6 Irrigation 372 406 418 429 429 429 429 429 429 429 429 429

7 Private Fire Service 642 658 662 671 671 671 671 671 671 671 671 671

8 Total Inside City 48,538 48,681 48,786 48,908 48,972 49,037 49,101 49,165 49,230 49,294 49,359 49,424

Outside City


10 Multi-Family Residential 6 5 5 5 5 5 5 5 5 5 5 5

11 Commercial 186 188 189 190 190 190 190 190 190 190 190 190

12 Industrial 2 2 2 2 2 2 2 2 2 2 2 2

13 Industrial II 0 0 0 0 0 0 0 0 0 0 0 0

14 Irrigation 17 20 20 21 21 21 21 21 21 21 21 21

15 Private Fire Service 11 12 14 14 14 14 14 14 14 14 14 14

16 Total Outside City 4,679 4,709 4,743 4,755 4,778 4,800 4,823 4,846 4,869 4,892 4,916 4,939

Wholesale

17 Jackson #1 1 1 1 1 1 1 1 1 1 1 1 1

18 Shawnee #1-#2 1 1 1 1 1 1 1 1 1 1 1 1

19 Shawnee #3 (& #6) 1 1 1 1 1 1 1 1 1 1 1 1

20 Shawnee #4 1 1 1 1 1 1 1 1 1 1 1 1

21 Shawnee #8 1 1 1 1 1 1 1 1 1 1 1 1

22 Douglas #3 1 1 0 0 0 0 0 0 0 0 0 0

23 MTAA 1 1 1 1 1 1 1 1 1 1 1 1

24 Total Outside City 7 7 6 6 6 6 6 6 6 6 6 6

25 Total 53,224 53,397 53,534 53,669 53,756 53,843 53,930 54,017 54,105 54,193 54,281 54,369

% Change 0.32% 0.26% 0.25% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16%

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal

Inside City

1 Single-Family Residential 2,145,864 2,172,413 2,153,930 2,237,057 2,034,300 2,118,800 2,122,000 2,125,200 2,128,400 2,131,600 2,134,800 2,138,000


3 Commercial 1,149,345 1,183,176 1,174,582 1,182,753 1,073,900 1,116,900 1,116,900 1,116,900 1,116,900 1,116,900 1,116,900 1,116,900

4 Industrial 731,075 740,010 843,922 363,560 330,100 343,300 343,300 343,300 343,300 343,300 343,300 343,300

5 Industrial II 0 0 0 529,937 481,200 500,400 500,400 500,400 500,400 500,400 500,400 500,400

6 Irrigation 187,036 208,712 174,721 241,284 219,100 227,800 227,800 227,800 227,800 227,800 227,800 227,800

7 Total Inside City 4,701,827 4,807,942 4,838,632 5,027,482 4,568,000 4,753,800 4,757,000 4,760,200 4,763,400 4,766,600 4,769,800 4,773,000

Outside City



10 Commercial 57,212 59,483 59,527 68,290 62,000 64,500 64,500 64,500 64,500 64,500 64,500 64,500

11 Industrial 155,528 155,519 142,346 165,205 150,000 156,000 156,000 156,000 156,000 156,000 156,000 156,000

12 Industrial II 0 0 0 0 0 0 0 0 0 0 0 0

13 Irrigation 3,665 4,159 3,450 5,561 5,000 5,300 5,300 5,300 5,300 5,300 5,300 5,300


Wholesale

15 Jackson #1 36,054 38,540 38,102 31,757 31,800 31,800 31,800 31,800 31,800 31,800 31,800 31,800

16 Shawnee #1-#2 108,101 112,017 111,574 115,105 115,100 115,100 115,100 115,100 115,100 115,100 115,100 115,100

17 Shawnee #3 (& #6) 145,338 147,387 163,707 180,421 180,400 180,400 180,400 180,400 180,400 180,400 180,400 180,400

18 Shawnee #4 12,298 12,426 12,288 13,011 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000

19 Shawnee #8 82,222 71,180 72,148 89,289 89,300 89,300 89,300 89,300 89,300 89,300 89,300 89,300

20 Douglas #3 6,298 0 0 0 0 0 0 0 0 0 0 0

21 MTAA 19,591 23,983 26,206 22,902 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900


23 Total 5,590,518 5,704,763 5,733,101 6,009,639 5,502,700 5,709,300 5,713,800 5,718,400 5,723,000 5,727,600 5,732,200 5,736,800

% Change 2.04% 0.50% 4.82% -8.44% 3.75% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08%

kgal - 1,000 gallons


18 JANUARY 2020

Table 3 - Existing 2020 Water Rates

Volume In

Rate Minimum Inside Outside

Component Charge City City

gallons $ $

Service Charge - $/Month/Meter Size

1" & Below 12.66 22.16

1.5" 25.32 44.31

2" 40.52 70.91

3" 75.98 132.97

4" 126.61 221.57

6" 253.25 443.19

8" 405.17 709.05

10" 582.44 1,019.27

Private Fire Service Charge - $/Month/Meter Size

4" & Below 12.72 22.26

6" 36.86 64.51

8" 78.37 137.15

10" 140.82 246.44

12" 229.05 400.84


Jackson Co. #1 600,000 3,102.00

Shawnee CRWD #1-#2 2,992,000 15,468.64

Shawnee CRWD #3&#6 2,598,000 13,431.66

Shawnee CRWD #4 995,000 5,144.15

Shawnee CRWD #8 5,402,000 27,928.34

MTAA 1,139,000 3,220.91


Single-Family Residential 4.88 8.54

Multi-Family Residential 3.96 6.93

Commercial 3.61 6.32

Industrial 3.09 5.41

Industrial II 2.91 5.09

Irrigation 5.87 10.27

Wholesale 5.17

Public Fire - Hydrant Maintenance Fee 6.74


Effective January 1, 2020

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

Inside City


2 Multi-Family Residential 1,771,537 1,915,617 1,951,091 2,005,649 1,948,600 2,105,300 2,105,300 2,105,300 2,105,300 2,105,300 2,105,300 2,105,300

3 Commercial 3,980,567 4,291,686 4,489,393 4,766,040 4,601,300 4,971,900 4,971,900 4,971,900 4,971,900 4,971,900 4,971,900 4,971,900

4 Industrial 1,760,785 1,874,532 2,243,254 1,017,640 979,500 1,066,400 1,066,400 1,066,400 1,066,400 1,066,400 1,066,400 1,066,400

5 Industrial II 0 0 0 1,410,476 1,340,800 1,458,900 1,458,900 1,458,900 1,458,900 1,458,900 1,458,900 1,458,900

6 Irrigation 676,941 949,545 978,309 1,394,074 1,331,600 1,444,300 1,444,300 1,444,300 1,444,300 1,444,300 1,444,300 1,444,300

7 Private Fire Service 213,550 227,886 241,067 257,412 268,800 282,200 282,200 282,200 282,200 282,200 282,200 282,200


Outside City



11 Commercial 362,572 394,451 416,610 490,596 471,500 508,800 508,800 508,800 508,800 508,800 508,800 508,800

12 Industrial 652,810 686,161 661,104 799,667 775,600 843,900 843,900 843,900 843,900 843,900 843,900 843,900

13 Industrial II 0 0 0 0 0 0 0 0 0 0 0 0

14 Irrigation 26,316 37,036 38,171 60,264 59,700 65,600 65,600 65,600 65,600 65,600 65,600 65,600

15 Private Fire Service 9,263 9,735 11,313 12,283 12,900 13,500 13,500 13,500 13,500 13,500 13,500 13,500

16 Total Outside City 3,709,132 3,991,735 4,088,359 4,683,918 4,618,200 4,992,500 5,009,600 5,027,600 5,045,500 5,063,600 5,081,700 5,099,700

Public Fire Service

17 Hydrants - Outside City 290,608 307,084 324,246 342,741 365,000 385,100 386,900 388,700 390,600 392,500 394,300 396,200

18 Total Fire Service 290,608 307,084 324,246 342,741 365,000 385,100 386,900 388,700 390,600 392,500 394,300 396,200

Wholesale

19 Jackson #1 144,105 161,653 167,593 145,064 155,800 163,100 163,100 163,100 163,100 163,100 163,100 163,100

20 Shawnee #1-#2 432,181 470,462 491,791 530,469 563,900 590,200 590,200 590,200 590,200 590,200 590,200 590,200

21 Shawnee #3 (& #6) 581,466 618,834 677,309 834,739 883,900 925,000 925,000 925,000 925,000 925,000 925,000 925,000

22 Shawnee #4 49,067 52,308 54,474 61,372 63,700 66,700 66,700 66,700 66,700 66,700 66,700 66,700

23 Shawnee #8 328,455 299,243 317,601 412,211 437,500 457,900 457,900 457,900 457,900 457,900 457,900 457,900

24 Douglas #3 26,374 0 0 0 0 0 0 0 0 0 0 0

25 MTAA 78,232 100,632 115,478 105,557 112,200 117,400 117,400 117,400 117,400 117,400 117,400 117,400


27 Total 27,194,563 29,164,625 30,665,184 33,671,825 33,302,400 35,811,700 35,855,800 35,900,900 35,946,000 35,991,400 36,036,600 36,081,900

% Change 7.24% 5.15% 9.80% -1.10% 7.53% 0.12% 0.13% 0.13% 0.13% 0.13% 0.13%

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Line Historical Budget Projected

No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

1 Inter Gov Jedo 263,622 0 0 0 0 0 0 0 0 0 0 0

2 Fees Serv Merch Sales/Serv 567,402 629,064 830,660 592,146 0 0 0 0 0 0 0 0

3 Fees Serv Merch Cos Material (281,164) (370,133) (453,188) (280,134) 0 0 0 0 0 0 0 0

4 Fees Serv Merch Cos Labor (42,921) (46,283) (103,650) (82,390) 0 0 0 0 0 0 0 0

5 Fees For Services 1,303,644 1,306,235 1,303,609 1,309,848 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000

6 Misc Interest (a) 439,291 577,755 439,347 630,920

7 Chg Fv Interest Investments (99,094) (229,684) 0 0 0 0 0 0 0 0 0 0

8 Interest Constr Restricted 31,821 34,986 36,046 27,647 0 0 0 0 0 0 0 0

9 Misc Interest Coll Of Bad Debt 9,337 6,350 6,149 3,138 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

10 Rents Tower 0 0 0 55,000 98,000 98,000 98,000 98,000 98,000 98,000 98,000 98,000

11 Surcharges Soldier Twnshp Surch. '93 205,389 17,656 0 0 0 0 0 0 0 0 0 0

12 Surcharges Fire Protection 290,608 307,084 324,246 342,741 0 0 0 0 0 0 0 0

13 Recoveries 289 18 0 0 0 0 0 0 0 0 0 0

14 Misc Income 70,646 50,069 50,521 35,472 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

15 Misc Inc Office Serv Charges 571,486 584,519 795,811 800,473 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000

16 Misc Inc Excess Sales Tax Coll 318 (22,642) (64,137) (44,142) 0 0 0 0 0 0 0 0

17 Prior Yr Items 57,040 0 0 0 0 0 0 0 0 0 0 0

18 Prior Period Adjustments (65,873) 0 38,972 (6,159) 0 0 0 0 0 0 0 0

19 Gain Or Loss Cash Over & Short 0 71 0 (591) 0 0 0 0 0 0 0 0

20 Contribu Developers 635,049 1,250,213 208,201 123,330 0 0 0 0 0 0 0 0

21 Other 0 7,121 6,159 10 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

22 Op Trans From General Fund 50 0 0 0 0 0 0 0 0 0 0 0

23 Sale Of Property 0 0 5,739 101 0 0 0 0 0 0 0 0

24 Sale Of Property Personal Prop 14,866 17,053 26,019 28,951 0 0 0 0 0 0 0 0

25 Go Bonds Original Issue 0 (981,060) 0 0 0 0 0 0 0 0 0 0

26 Go Bonds Orig Premium 0 9,047 0 0 0 0 0 0 0 0 0 0

27 Total Miscellaneous Revenue 3,971,808 3,147,437 3,450,504 3,536,360 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000

(a) Projected interest income included in Tables 9 and 10.



REVENUE REQUIREMENTS

The revenue required to provide adequately for the continued operation of the water utility must

be enough to meet the cash requirements for system operations. Revenue requirements include (1)

system operation and maintenance expense, (2) payment in lieu of taxes, (3) debt service on existing and

proposed loans and bonds, (4) expenditures for routine capital, and (5) major capital improvements and

renewal and replacement (R&R) met from annual revenues. Projections of the cash requirements to meet

these system expenditures for the period through 2026 are developed in this section.

Operation and Maintenance Expense

The elements of operation and maintenance expenses for the water utility include the annual

expenses associated with pumping, treatment, storage, transmission and distribution, meters and

services, and billing collection and accounting.

Operation and maintenance expenses include personnel such as salaries & wages and benefits,

commodities such as materials and supplies, contract services such as fuel and electrical power costs,

administrative fees, and other costs. Administrative fees recover the costs associated with the

administrative support functions that the City provides to the water utility. Annual operation and

maintenance expenses are met principally from annual operating revenue. A summary of historical and

projected operation and maintenance expense for the period 2015 through 2026 is presented in Table 6.

Operation and maintenance expenses shown for 2019 reflects budgeted amounts. Projections for the

years 2020 through 2026 are based on budgeted 2019 expense amounts adjusted to recognize allowances

for known cost increases, the estimated effects of inflation, and anticipated system growth.

The future water utility operating costs are projected to increase from about $22,702,100 in 2019

to about $27,916,100 in 2026, as shown in Line 12.

Routine Capital Outlay

Expenditures for routine capital additions include those costs that tend to be routinely incurred

each year for normal replacement, extensions, and minor improvements. Since these costs are a

continuing expense to be met each year, the utility should finance these expenditures from current water

revenues. The projected capital outlay is shown on Line 13 of Table 6.

Major Capital Improvements

Table 7 presents a summary of the projected major capital improvement program for the period

2019 through 2026. The capital improvement program consists of two categories of projects; major capital

projects, which are based on the City’s planned Capital Improvement Plan (CIP), and renewal and

replacement (R&R) projects which the City identified using models developed by Black & Veatch. Major

capital projects typically represent new facilities that are added to the system, while R&R projects are

renewal and replacement of the existing facilities already in the system. The total capital improvement

costs for the study period are estimated to total $166,568,200 when adjusted to include a 2 percent

allowance for inflation beginning in 2020.


22 JANUARY 2020

Debt Service Requirements

Table 8 represents a summary of the historical and proposed long term debt service payments.

The water utility has eight existing revenue bond issuances and six existing state revolving loans. The City

plans on continuing the practice of issuing revenue bonds to help pay for both major capital projects and

R&R projects. It is common practice for utilities to debt finance large capital improvement projects. By

financing the cost of the projects, the City can fund large projects immediately and spread the payment

over a specified time frame, thereby helping to offset the impact on current rate-payers. Debt service is

projected to increase from $8,409,000 in 2019 to $18,641,900 in 2026 as a result of additional revenue

bond issues.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

1 Business Services 3,346,611 2,513,196 2,892,795 3,085,885 3,349,900 3,450,400 3,553,700 3,660,400 3,770,000 3,883,000 3,999,300 4,119,000

2 Project Management 324,105 427,310 506,637 392,079 464,900 478,900 493,300 508,000 523,200 538,900 555,100 571,600

3 Customer Care 1,468,105 1,622,334 1,628,624 1,910,593 2,435,000 2,508,300 2,583,400 2,661,000 2,740,700 2,822,800 2,907,400 2,994,500

4 Meter Maintenance 1,329,233 1,055,405 1,819,807 2,243,404 2,084,200 2,147,300 2,211,700 2,278,100 2,346,300 2,416,600 2,488,800 2,563,400

5 Utility Billing 787,560 783,459 784,340 843,648 865,700 891,700 918,400 945,900 974,200 1,003,300 1,033,300 1,064,300

6 Maintenance Distribution 5,997,998 5,961,285 5,084,237 6,340,559 6,266,100 6,454,300 6,647,600 6,847,000 7,052,600 7,264,100 7,481,700 7,706,000

7 Operation Treatment 3,479,719 3,878,756 4,117,076 4,490,202 3,895,900 4,013,000 4,133,200 4,257,200 4,384,800 4,516,000 4,651,000 4,790,500

8 Operation Scada 275,723 217,327 328,259 378,850 455,100 468,800 482,700 497,200 512,000 527,300 542,800 559,100

9 Maintenance Plant 2,204,072 2,373,090 2,087,660 1,950,929 2,553,600 2,630,500 2,709,300 2,790,300 2,873,900 2,959,900 3,048,800 3,140,300

10 Maintenance Pump Station/Storage 489,371 589,623 285,158 326,966 331,700 341,700 351,900 362,400 373,100 384,200 395,600 407,400

11 Backflow 0 0 0 31,115 0 0 0 0 0 0 0 0

12 Total Operating Costs 19,702,497 19,421,786 19,534,595 21,994,231 22,702,100 23,384,900 24,085,200 24,807,500 25,550,800 26,316,100 27,103,800 27,916,100

13 Capital Outlay 16,772 329,323 320,476 498,065 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000

14 Total Operation & Maintenance Expense 19,719,269 19,751,109 19,855,071 22,492,296 23,102,100 23,784,900 24,485,200 25,207,500 25,950,800 26,716,100 27,503,800 28,316,100

% Change 0.16% 0.53% 13.28% 2.71% 2.96% 2.94% 2.95% 2.95% 2.95% 2.95% 2.95%

(a) Includes Administrative Fees transferred to the General Fund.

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Line Projected (a)

No. Description 2019 2020 2021 2022 2023 2024 2025 2026 (b) Total

$ $ $ $ $ $ $ $ $

Capital Improvement Program by Function Category - Inflated

Source of Supply

1 Land and Land Rights 0 0 0 0 0 0 0 0 0

2 Pumping Equipment 0 0 320,400 333,300 346,800 360,900 375,500 390,700 2,127,600

3 Raw Water Supply 0 3,611,800 0 0 0 0 0 0 3,611,800

4 Raw Water Storage 0 0 0 0 0 0 0 0 0

Treatment


6 Structures and Improvements 0 0 0 0 0 0 0 0 0

7 Pumping Equipment 0 0 0 0 0 0 0 0 0

8 Water Treatment Equipment 1,000,000 1,428,000 10,690,100 4,654,500 4,842,500 24,055,900 8,057,100 8,325,100 63,053,200

9 Other Plant and Miscellaneous Equipment 2,988,300 592,900 0 0 0 0 0 0 3,581,200

Transmission & Distribution


11 Distribution Pumping 788,800 510,000 0 0 0 0 0 0 1,298,800

12 Treated Water Storage 0 3,366,000 352,500 5,401,400 381,400 396,800 413,000 429,600 10,740,700

13 Distribution Mains 3,500,000 4,182,000 3,780,800 3,933,600 4,092,500 4,257,700 4,429,800 4,608,800 32,785,200

14 Transmission Mains 0 1,690,100 2,932,600 5,796,400 6,222,500 3,302,500 3,436,000 3,574,800 26,954,900

15 Meters and Meter Installations 2,000,000 2,040,000 2,906,400 3,023,700 3,145,900 3,273,000 3,405,200 1,181,500 20,975,700

16 Hydrants 0 0 126,300 131,500 136,800 142,300 148,200 154,000 839,100

17 General Plant 600,000 0 0 0 0 0 0 0 600,000

18 Total - Inflated 10,877,100 17,420,800 21,109,100 23,274,400 19,168,400 35,789,100 20,264,800 18,664,500 166,568,200

Capital Improvement Program Summary by Type - Inflated

19 Major Capital 2,813,300 9,177,900 10,546,300 12,285,000 7,735,100 23,894,000 7,888,700 5,788,700 80,129,000

20 Renewal & Replacement 8,063,800 8,242,900 10,562,800 10,989,400 11,433,300 11,895,100 12,376,100 12,875,800 86,439,200

21 Total - Inflated 10,877,100 17,420,800 21,109,100 23,274,400 19,168,400 35,789,100 20,264,800 18,664,500 166,568,200

(a) Project costs include costs associated with proposed debt service issuance expense and reserve fund requirement.

(b) Reflects allowance for unidentified future projects.



Table 8 - Existing and Proposed Water Long-Term Debt

Line Annual Debt Service Requirements

No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $

Existing Revenue Bonds

1 Series 2018-A Revenue Bonds 1,800,900 1,797,900 1,800,300 1,797,700 1,800,700 1,798,400 1,798,100 1,799,400

2 Series 2017-A Revenue Bonds 336,200 335,400 336,100 336,400 336,400 336,100 335,400 336,100

3 Series 2016-B Taxable Revenue Bonds 364,700 0 0 0 0 0 0 0

4 Series 2016-A Revenue Bonds 652,400 889,300 887,000 891,000 890,100 1,328,400 1,031,000 854,100

5 Series 2014-A Revenue Bonds 2,331,000 2,339,700 901,300 668,300 667,900 668,600 1,154,200 1,260,400

6 Series 2013-A Revenue Bonds 1,327,200 1,327,500 3,737,900 4,303,200 4,316,800 4,315,200 4,322,200 4,317,100

7 Series 2012A Revenue Bonds 350,000 351,400 350,400 349,400 350,800 349,700 1,249,100 1,250,000

8 Series 2011-A Revenue Bonds 0 0 0 0 0 0 0 0

9 Total Existing Revenue Bonds 7,162,400 7,041,200 8,013,000 8,346,000 8,362,700 8,796,400 9,890,000 9,817,100

Existing State Revolving Loans

10 SRF Loan: 2371 539,700 539,700 539,700 539,700 539,700 539,700 539,700 539,700

11 SRF Loan: 2372 144,200 144,200 144,200 144,200 144,200 144,200 144,200 144,200

12 SRF Loan: 2417 214,000 214,000 214,000 214,000 214,000 214,000 214,000 214,000

13 SRF Loan: 2418 101,200 101,200 101,200 101,200 101,200 101,200 101,200 101,200

14 SRF Loan: 2419 124,600 124,600 124,600 124,600 124,600 124,600 124,600 124,600

15 SRF Loan: 2420 122,900 122,900 122,900 122,900 122,900 122,900 122,900 122,900

16 Total Existing State Revolving Loans 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600

Proposed Revenue Bonds

17 2019 13,984,000 0 1,299,000 1,289,800 1,239,900 1,186,500 1,346,200 529,900 509,300

18 2020 12,381,000 0 677,400 677,400 677,400 677,400 677,400 677,400

19 2021 21,600,000 0 1,181,800 1,181,800 1,181,800 1,181,800 1,181,800

20 2022 21,100,000 0 1,154,400 1,154,400 1,154,400 1,154,400

21 2023 21,800,000 0 1,192,700 1,192,700 1,192,700

22 2024 30,900,000 0 1,787,000 1,787,000

23 2025 18,600,000 0 1,075,600

24 2026 17,500,000 0

25 Total Proposed Revenue Bonds 0 1,299,000 1,967,200 3,099,100 4,200,100 5,552,500 6,523,200 7,578,200

Proposed State Revolving Loans

26 2019 0 0 0 0 0 0 0 0 0

27 2020 0 0 0 0 0 0 0 0

28 2021 0 0 0 0 0 0 0

29 2022 0 0 0 0 0 0

30 2023 0 0 0 0 0

31 2024 0 0 0 0

32 2025 0 0 0

33 2026 0

34 Total Proposed State Revolving Loans 0 0 0 0 0 0 0 0

35 Total Debt Service 8,409,000 9,586,800 11,226,800 12,691,700 13,809,400 15,595,500 17,659,800 18,641,900

Original Loan

Amount


26 JANUARY 2020

SUMMARY OF REVENUE AND REVENUE REQUIREMENTS

Total revenue requirements of the water utility recognized for purposes of this report include

operation and maintenance expense; payment in lieu of taxes; debt service costs on existing and proposed

debt; and expenditures for routine capital, major capital improvements, and renewals and replacements

met from annual revenues.

Major Capital Improvement Financing

Table 9 presents the capital improvement financing plan, which summarizes the projected source

and application of funds over the study period. This plan anticipates that proposed capital improvements

will be financed from a combination of available funds on hand, debt financing, annual operating revenue,

other sources, and estimated interest earnings.

A beginning of year balance of funds on hand is shown on Line 1, but the majority are encumbered

funds that are dedicated to past projects and, therefore, not available to assist funding in the capital

financing plan. Any excess amount available is used to the extent possible. One of the major sources of

financing is debt issuance in the form of revenue bonds as shown on Line 2. It is anticipated that projected

major capital projects will be funded with future revenue bonds. Proposed revenue bonds assume a 3.55

percent interest rate over a 30-year period as provided by the City’s financial advisor. Other Sources of

income shown on Line 3 represents a one-time payment from the General Fund to help pay for a project

that is split between the water utility and the General Fund. Cash financing of capital improvements from

annual revenues is expected to total $9,541,300 for the study period as indicated on Line 4. The City has

a goal to fund a minimum of 10 percent of R&R projects with cash and the remaining amount with future

revenue bonds. Other sources of funds available to meet major capital improvement expenditures include

interest income on capital funds which is shown on Line 5 and recognizes an assumed 1.0 percent annual

interest rate. Line 6 shows the total of all funds available to finance the capital improvement program.

The application of funds shows previously encumbered cash shown on Line 7. The inflated major

capital improvements and R&R expenditures are shown on Lines 8 and 9. Projected debt issuance costs

and reserve fund requirements associated with any projected debt issues are shown on Lines 10 and 11.

These costs associated with debt financing were included in the project costs in Table 7. As such, Lines 8

through 11 represent a total of $166,568,200, as previously summarized in Table 7. Prior revenue bonds

refunded from the 2019 issue are shown in Line 12. Line 13 shows the total of all fund applications, and

the resulting end of year balance is shown on Line 14. The City targets to maintain a cash balance of 25

percent of next year’s major capital improvements and R&R as shown in Line 15.

System Operations

Table 10 shows the application of estimated future revenues under existing rates and estimated

additional revenue from the proposed rate increases to meet projected obligations for the period 2019

through 2026. This table summarizes the financing of operation and maintenance expenses, payment in

lieu of taxes, debt service requirements on existing and proposed loans, routine capital outlay, and the

transfer of operating funds for major capital improvement and R&R financing.



Line 1 shows projected revenue under existing rates, as previously presented in Table 4. Lines 2

through 7 show indicated increases in revenues associated with rate increases assumed to be in effect the

dates shown. The date and magnitude of the increases shown for each year were selected based on

consideration of four principal criteria, which include: (1) total revenue necessary to meet cash

requirements, (2) total revenue required to provide minimum debt coverage requirements, (3) maintain

a minimum 185-day balance with the target of 300 days, and (4) establishment of rate increases on a

generally levelized basis intended to minimize the impact of burdensome rate adjustments required in

any single year. Projected revenue from the indicated revenue increases assumes a one-month lag before

the rates become fully effective.

Other revenue available for system operations, shown on Lines 9 and 10, consists of other revenue

previously shown in Table 5 and interest income. Interest income includes interest earnings on the

operating fund and recognizes an assumed 1.0 percent annual interest rate. Projected total revenue from

system operations is shown on Line 11.

Operation and maintenance expenses previously projected in Table 6, is shown on Line 12. The

water utility pays a payment in lieu of taxes (PILOT) to the City’s general fund. This payment, which is

shown on Line 13, is based on 9 percent of the revenue shown on Line 8. The PILOT rate is based on a

combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets.

The resulting percentage may change over time based on the governing body and City administration.

Debt service requirements on currently outstanding revenue bonds and state revolving loans are

presented on Lines 16 and 19. Estimated debt service requirements on proposed revenue bonds and loans

projected to be issued to help finance major capital program expenditures are shown on Lines 17 and 20.

The total projected debt service is shown on Line 22. Capital outlay for routine capital additions to be

financed from revenue is shown on Line 23. Line 24 reflects the projected transfer of accumulated net

earnings from system operations to assist in major capital and R&R financing.

Line 25 indicates the estimated net annual balance from operations remaining at the end of each

year of the study period. The $13,615,700 net balance of operating funds available at the beginning of

2019, shown on Line 26, is comprised of the 2018 end of year balance in the water utility fund. The

cumulative end of year balance is shown on Line 27.

The City’s policy requires the water utility to maintain a cash reserve equal to 185 days of

operation and maintenance expenses to provide for unforeseen fluctuations in revenues and expenses.

As of December 31, 2019, the water utility is expected to have a balance equal to approximately 189 days.

The projected number of days is shown on Line 28 and is based on the end of year balance shown on Line

27 and projected operation and maintenance expense and payment in lieu of taxes shown on Line 12 and

13. The utility’s goal is to maintain at least 300 days of cash on hand. Under the proposed financial plan,

the water utility reaches 295 days of cash on hand by 2026.

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Line Fiscal Year Ending December 31,

No. Description 2019 2020 2021 2022 2023 2024 2025 2026 Total

$ $ $ $ $ $ $ $ $

Sources of Funds

1 Funds Available at Beginning of Year (a) 21,811,800 3,577,100 3,633,000 5,271,600 4,293,500 8,180,800 4,598,900 4,271,700 21,811,800

2 Revenue Bond Proceeds (b) 13,984,100 12,381,000 21,600,000 21,100,000 21,800,000 30,900,000 18,600,000 17,500,000 157,865,100

3 Other Sources 0 3,611,800 0 0 0 0 0 0 3,611,800

4 Cash Financing of Capital Projects (c) 1,100,000 1,428,000 1,056,300 1,099,000 1,143,300 1,189,400 1,237,700 1,287,600 9,541,300

5 Interest Income 275,000 55,900 91,400 97,300 112,400 117,800 99,900 101,500 951,200

6 Total Sources of Funds 37,170,900 21,053,800 26,380,700 27,567,900 27,349,200 40,388,000 24,536,500 23,160,800 193,781,200

Application of Funds

7 Previously Encumbered Capital 18,803,300 0 0 0 0 0 0 0 18,803,300

8 Major Capital Improvements 2,403,800 8,432,400 9,355,700 11,054,900 6,765,000 21,651,100 7,083,700 5,183,100 71,929,700


10 Issuance Expense 184,900 176,900 223,000 220,500 224,000 269,500 208,000 202,500 1,709,300

11 Reserve Fund Requirement 1,398,400 1,238,100 2,160,000 2,110,000 2,180,000 3,090,000 1,860,000 1,750,000 15,786,500

12 Revenue Bond Redemption 3,913,400 0 0 0 0 0 0 0 3,913,400

13 Total Application of Funds 33,593,800 17,420,800 21,109,100 23,274,400 19,168,400 35,789,100 20,264,800 18,664,500 189,284,900

14 End of Year Balance 3,577,100 3,633,000 5,271,600 4,293,500 8,180,800 4,598,900 4,271,700 4,496,300 4,496,300

15 Target Balance (25% of next year's CIP) 4,001,000 4,682,000 5,236,000 4,191,000 8,107,000 4,549,000 4,178,000 4,391,000

(a) Cash balance represents the difference between Temp Notes issued and Spent in 2018.

(b) Reflects actual 2019 bond proceeds.

(c) Assumes a mininum of 10% cash financing of Renewal and Replacement projects.

(d) Previously issued Temp Notes paid back with Revenue Bond Proceeds.

(e) Previously expensed funds reimbursed by proposed bonds.



Table 10 - Proposed Revenue and Revenue Requirements


No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $

1 Revenue from Existing Rates (a) 33,302,400 35,811,700 35,855,800 35,900,900 35,946,000 35,991,400 36,036,600 36,081,900

Increased Revenue (b)

2 7.50% Effective January 1, 2021 2,465,100 2,692,600 2,696,000 2,699,400 2,702,700 2,706,100

3 7.50% Effective January 1, 2022 2,653,300 2,898,200 2,901,800 2,905,400 2,909,100

4 7.50% Effective January 1, 2023 2,855,900 3,119,400 3,123,400 3,127,300

5 7.50% Effective January 1, 2024 3,074,000 3,357,600 3,361,800

6 7.50% Effective January 1, 2025 3,308,600 3,614,000

7 7.50% Effective January 1, 2026 3,561,300

8 Total Revenue from Rates 33,302,400 35,811,700 38,320,900 41,246,800 44,396,100 47,786,000 51,434,300 55,361,500

9 Other Revenue 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000 2,068,000

10 Interest Income (c) 215,100 227,500 246,900 274,600 309,800 357,400 408,500 464,100

11 Total Revenue 35,585,500 38,107,200 40,635,800 43,589,400 46,773,900 50,211,400 53,910,800 57,893,600

12 Operation & Maintenance Expense 22,702,200 23,384,900 24,085,200 24,807,500 25,550,800 26,316,100 27,103,800 27,916,100

13 Payment in Lieu of Taxes 3,195,200 3,223,100 3,448,900 3,712,200 3,995,600 4,300,700 4,629,100 4,982,500

14 Payment in Lieu of Taxes Rate (d) 9.59% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%

15 Net Revenue 9,688,100 11,499,200 13,101,700 15,069,700 17,227,500 19,594,600 22,177,900 24,995,000


16 Existing Revenue Bonds 7,162,400 7,041,200 8,013,000 8,346,000 8,362,700 8,796,400 9,890,000 9,817,100

17 Proposed Revenue Bonds 0 1,299,000 1,967,200 3,099,100 4,200,100 5,552,500 6,523,200 7,578,200

18 Total Revenue Bond Debt Service 7,162,400 8,340,200 9,980,200 11,445,100 12,562,800 14,348,900 16,413,200 17,395,300

19 Existing State Revolving Fund Loans 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600

20 Proposed State Revolving Fund Loans 0 0 0 0 0 0 0 0

21 Total State Revolving Loan Debt Service 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600 1,246,600


23 Capital Outlay/Equipment 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000

24 Cash Financing of Capital Projects 1,100,000 1,428,000 1,056,300 1,099,000 1,143,300 1,189,400 1,237,700 1,287,600

25 Net Balance (220,900) 84,400 418,600 879,000 1,874,800 2,409,700 2,880,400 4,665,500

26 Beginning Fund Balance (e) 13,615,700 13,394,800 13,479,200 13,897,800 14,776,800 16,651,600 19,061,300 21,941,700

27 End of Year Balance 13,394,800 13,479,200 13,897,800 14,776,800 16,651,600 19,061,300 21,941,700 26,607,200

Operating Reserve Fund

28 Number of Days - Actual (f) 189 185 184 189 206 227 252 295

29 Number of Days - Target 185 185 185 185 185 185 185 185

(a) Projected revenue in 2020 and beyond relects adopted rates to be effective January 1, 2020.

(b) Assumes 1 month lag before rates are fully effective.

(c) Includes interest earnings on the Operating Fund and Bond Reserve Fund.

(d)

(e) Beginning balance consists of funds in the Operating Reserve Fund.

(f) Reflects number of days of operation & maintenance expense and PILOT.

The Payment in Lieu of Taxes rate is based on a combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets. The resulting percentage may change over

time based on the governing body and City administration.


30 JANUARY 2020

COST OF SERVICE ALLOCATIONS

Cost of service allocations provide a means of determining the proportionate responsibility of

each customer class for the service provided. Cost responsibilities are based upon allocations of various

elements of costs of service according to the relative service requirements of respective customer classes.

Factors considered in determining service requirements include the volume of water used, relative peak

capacity requirements place on the system, the number and size of services to customers, and any

proprietary interest in the system investment.

Cost of Service to be Allocated

The cost of service to be allocated to the various customer classes consists of the total revenue

requirements less income received from other sources. For allocation purposes, this cost of service is

expressed as an annual requirement for a specific test year. For purposes of this study, the year ending

December 31, 2021, has been selected as generally typical of conditions anticipated during the study

period. This net cost, totaling $38,545,000, consists of $25,659,200 of net operation and maintenance

expense and $12,885,800 of net capital costs. These costs are derived from Table 10 and summarized on

Line 12 of Table 11.

Costs of service are apportioned among customer classes in this report on a utility basis, that is,

in terms of operating expense, depreciation, and return. For a municipality, the total of depreciation

expense and return is equal to the capital cost portion of the total cost of service.

Depreciation is the loss, not restored by current maintenance, which occurs in utility plant in

service due to decay, inadequacy, and obsolescence. The depreciation expense associated with water

service is estimated for this report recognizing depreciation rates presently in use by the water utility. This

results in a projected test year depreciation of $5,664,900.

Return is the balance of annual costs of service remaining after operating expense and

depreciation are deducted, which amounts to $7,220,900 in the test year. This return provides for

payment of the interest portion of debt service and capital improvement costs beyond that provided by

the depreciation allowance.

The test year cost of service, expressed on a utility basis, is summarized in Lines 13 through 16 of

Table 11.

Functional Cost Components

The various cost elements of water service are assigned to functional cost components as the first

step in the subsequent distribution of the cost of service to the customer classes. The principal functional

cost components consist of base costs, extra capacity costs, and customer cost.

Base costs are those which vary directly with the quantity of water used, as well as those costs

associated with serving customers under average load conditions without the elements necessary

to meet water use variations or peak demands. Base costs include purchased water and treatment

chemicals, and other operating and capital costs of the water system associated with serving

customers to the extent required for a constant, or average annual rate of use.



Extra capacity costs represent those operating costs incurred due to demands in excess of

average, and capital-related costs for additional plant and system capacity beyond that required

for the average rate of use. Total extra capacity costs are subdivided into costs associated with

maximum day and maximum hour demands.

Customer costs are defined as costs that tend to vary in proportion to the number of customers

connected to the system. These include meter reading, billing, collection and accounting costs,

and maintenance and capital charges associated with meters and services.

Fire costs assigned to fire protection include operating expenses and capital costs associated with

public and private fire protection.

The separation of costs of service into these principal categories provides the means of further

allocating such costs to the various customer classes based on the respective base, extra capacity,

customer, and fire service requirements of each customer class.

The City provides water service to both retail and wholesale customers. While the system is

designed for both types of customers, the wholesale customers do not benefit from all City fixed assets;

therefore, costs are further separated into Common-to-All, which includes retail and wholesale customers

and Retail Only which is just retail customers. Retail only costs are primarily distribution main costs.

Allocation to Cost Components

The water utility is comprised of various facilities, each designed and operated to fulfill a given

function. In order to provide adequate service to its customers always, the utility must be capable of

providing not only the total amount of water used but also supplying water at the maximum rates of

demand.

Since all customers do not exert their maximum demand for water at the same time, capacities

of the various water system components are designed to meet the peak coincidental demands that all

classes of customers, as a whole, place on the system. For every water service facility on the system, there

is an underlying average demand, or uniform rate of usage exerted by the customers for which the base

cost component is applicable. For those facilities designed solely to meet average day demand, costs are

allocated 100 percent to the base cost component. Extra capacity requirements associated with

coincidental demands in excess of average use are further related to maximum daily and maximum hourly

demands.

Analysis of the total system’s historical maximum day and maximum hour demands to average

day demands results in appropriate ratios for the allocation of capital costs and operating expenses to

base and extra capacity cost components. A maximum day to average day ratio of 1.75 is used based on

experienced demands in the City’s water system. This ratio indicates that approximately 57.10 (1/1.75)

percent of the capacity of facilities designed and operated to meet maximum day demand is required for

average day or base usage. The remaining 42.90 ([1.75-1]/1.75) percent is required for maximum day

extra capacity requirements.

The costs associated with facilities required to meet maximum hour demand are allocable to base,

maximum day extra capacity, and maximum hour extra capacity. A maximum hour to annual average day


32 JANUARY 2020

water use ratio of 2.60 is used based on the experienced demands of the water system. This ratio indicates

that approximately 38.50 (1/2.60) percent of the capacity of facilities designed and operated to meet

maximum hour demand is required for average day or base usage while 28.80 ([1.75-1]/2.60) percent is

utilized for maximum day extra capacity uses, and the remaining 32.70 ([2.60-1.75]/2.60) percent is

required to meet maximum hour extra capacity demand in excess of maximum day demand.

The estimated test year value of water system facilities is allocated to appropriate cost functions

as the basis for further distribution to the various customer classes.

Allocation of Net Plant Investment

As the basis for allocating capital costs to customer classes, the net plant investment in the water

system is first allocated to functional cost components. Accumulated depreciation and contribution plant

are deducted from gross plant investment in arriving at the next plant investment for allocation of all

capital costs except depreciation. The estimated test year net plant investment in existing water facilities

consists of plant in service as of December 31, 2018, the 2018 construction work in progress, and the

estimated cost of proposed capital improvements expected to be in service by the end of 2021.

Plant investment is allocated to cost components on a design basis recognizing the principal

component governing the design of the facility. Source of water supply assets is often sized principally to

meet annual supply requirements in total, and therefore, investment in this asset is allocated 100 percent

to the base component. The distribution pumping equipment and transmission mains are designed

primarily to meet maximum day requirements and are, therefore, allocated to 57.1 percent to the base

cost function and 42.9 percent to the maximum day extra capacity cost component. Treated water

storage, shown on Line 13, principally serves to meet maximum hour extra capacity requirements in

excess of maximum day demands. Therefore, an estimated 90 percent of the value of these facilities is

allocated directly to the maximum hour extra capacity cost component, with the balance assigned to the

base cost function. The distribution mains principally serve to meet the maximum hour requirements and

therefore allocated to 38.5 percent to the base cost function, 28.8 percent to the maximum day extra

capacity cost component, and 32.7 percent to the maximum hour extra capacity cost component.

Customer meters are allocable to the meters and services cost function, hydrants and private fire

service are direct fire protection related facilities. General plant includes facilities not directly allocable to

a specific cost function, the value of which is allocated in proportion to the total of the preceding items of

plant value.

The test year return on investment costs, totaling $7,220,900, are assigned to the functional cost

components based on the allocation of plant investment.

Allocation of Depreciation Expense

Depreciation expense is an annual allowance for loss in service value of system facilities not

restored by current maintenance due to factors that result in the ultimate retirement of property. The

depreciation expense is based upon the total investment in facilities and would provide for the eventual

recovery of the original cost of construction of the water system. Depreciation is based on an annual

percentage allowance of depreciable plan investment currently used by the City. The annual depreciation



expense on plant expected to be in service is estimated at $5,664,900 in 2021. Depreciation expense for

the various plant categories is allocated to cost components on the same basis as utilized in allocating net

plant investment.

Allocation of Operating Expense

Test year net operation and maintenance expenses are allocated to functional cost components

in the same manner as plant investment. The distribution pumping equipment and transmission mains

are designed primarily to meet maximum day requirements and are, therefore, allocated to 57.1 percent

to the base cost function and 42.9 percent to the maximum day extra capacity cost component. The

distribution mains principally serve to meet the maximum hour requirements and therefore allocated to

38.5 percent to the base cost function, 28.8 percent to the maximum day extra capacity cost component,

and 32.7 percent to the maximum hour extra capacity cost component.

SCADA is allocated based on all pumping, treatment, and transmission and distribution expenses

while general plant is allocated on a similar basis, excluding power and chemicals. Expenses associated

with meters and services, billing and collection and fire protection are allocated 100 percent to their direct

cost components. Payment in lieu of taxes is allocated based on the total operation and maintenance.

The net total operation and maintenance expense to be recovered from charges for water service

is derived by deducting expenses met from other revenue from the total operating and maintenance

expense. Other revenue is allocated based on all other operating expense.

Distribution of Costs to Customer Classes

The total cost responsibility of each class of service may be established by developing unit costs

of service for each cost function and assignment of those costs to the customer classes based on the

respective service requirement to each. To properly recognize the cost of service, each customer class is

allocated its share of base, extra capacity, customer, and fire service costs.

Customer Classifications

For purposes of the cost of service analysis and rate design, the water system’s customers are

classified to reflect groups of customers with similar service requirements who can be served at a similar

average cost and the classification used by the City for record-keeping purposes. The specific categories

for inside and outside City retail services include single-family residential, multi-family residential,

commercial, industrial, and irrigation. Wholesale represents five rural districts and MTAA. Fire protection

consists of public and private fire protection. Public fire protection reflects public fire hydrants and private

fire protection reflects connections for fire suppression units inside private buildings.

Units of Service

In allocating the responsibility for costs of service, base, extra capacity, and customer costs may

be distributed to customer classes according to the respective service requirements of the classes.

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 associated with

meeting peak rates of water use and are distributed to customer classes based on their respective system


34 JANUARY 2020

capacity requirements in excess of average requirement rates. Customer costs, which consist of meter

related costs and billing, collection, and accounting costs, are allocated based on the number of equivalent

meters and bills, respectively. Fire service costs are those associated with public hydrants and private

connections.

Fire protection costs are either direct or demand related. Direct costs are specifically identified as

fire protection costs in the allocation of operating and capital costs to cost components. Units of service

for direct fire protection costs are represented by the number of hydrants and private fire connections in

the system. Demand related fire protection costs represent the portion of extra capacity costs related to

meeting potential fire demands. Fire demand quantities have been assigned to public and private fire

protection based on the number of equivalent 6-inch hydrants.

Customer Class Costs of Service

Unit costs are developed by dividing the total cost allocated to each functional cost component

by the total applicable units of service. The customer class responsibility for service is obtained by applying

unit costs of service to the number of units for which the customer class is responsible.

Table 12 shows the allocated and adjusted cost of service by customer class, revenue under

existing rates, and the indicated revenue adjustment by each class. Costs associated with inside public fire

protection are not recovered through direct charges; therefore, the cost of service for these classes is

reallocated to all other inside City retail customers in proportion to their allocated cost of service, as

shown in Column 2. The test year adjusted cost of service, reflecting the reallocation of these costs, is

shown in Column 3. The indicated increase or decrease in revenue required to meet the adjusted cost of

service is shown in Column 5.



Table 11 - Total 2021 Cost of Service to be Recovered from Water Rates

Line O&M Capital

No. Description Expense Costs Total

$ $ $


1 Operation & Maintenance Expense 24,085,200 24,085,200

2 Debt Service Requirements 11,226,800 11,226,800

3 Payment in Lieu of Taxes 3,448,900 3,448,900

4 Capital Outlay / Equipment 400,000 400,000

5 Cash Financing of Capital Projects 1,056,300 1,056,300

6 Total 27,534,100 12,683,100 40,217,200

Revenue Requirements Met from Other Sources

7 Other Revenue 2,068,000 2,068,000

8 Interest Income 246,900 246,900

9 Fund Available (286,600) (132,000) (418,600)

10 Full Year Rate Adjustment (153,400) (70,700) (224,100)

11 Total 1,874,900 (202,700) 1,672,200

12 Net Costs to be met from Water Sales Charges 25,659,200 12,885,800 38,545,000

Restatement of Net Costs (Utility Basis)

13 Operation & Maintenance 25,659,200 25,659,200

14 Depreciation 5,664,900 5,664,900

15 Return on Investment 7,220,900 7,220,900

16 Total Cost of Service to be Recovered from Rates 25,659,200 12,885,800 38,545,000


36 JANUARY 2020

Table 12 - Comparison of 2021 Water Adjusted Cost of Service with Revenue Under Existing Rates

(1) (2) (3) (4) (5)

Allocation of Indicated

Line Allocated Cost Public Fire Adjusted Cost Revenue Under Revenue

No. Customer Class of Service Protection of Service Existing Rates Increase

$ $ $ $ %

Inside City

1 Single-Family Residential 15,191,600 1,312,200 16,503,800 16,810,000 (1.82)

2 Multi-Family Residential 1,992,400 172,000 2,164,400 2,105,300 2.81

3 Commercial 6,337,900 547,000 6,884,900 4,971,900 38.48

4 Industrial 1,393,800 120,000 1,513,800 1,066,400 41.95

5 Industrial II 2,029,100 175,000 2,204,100 1,458,900 51.08

6 Irrigation 1,240,800 107,000 1,347,800 1,444,300 (6.68)

7 Total Inside City 28,185,600 2,433,200 30,618,800 27,856,800 9.91

Outside City

8 Single-Family Residential 3,564,500 0 3,564,500 3,557,300 0.20

9 Multi-Family Residential 22,700 0 22,700 20,500 10.73

10 Commercial 733,800 0 733,800 508,800 44.22

11 Industrial 1,298,200 0 1,298,200 843,900 53.83

12 Industrial II 0 0 0 0 0.00

13 Irrigation 63,600 0 63,600 65,600 (3.05)

14 Total Outside City 5,682,800 0 5,682,800 4,996,100 13.74

Wholesale

15 Jackson #1 95,900 0 95,900 163,100 (41.20)

16 Shawnee #1-#2 425,100 0 425,100 590,200 (27.97)

17 Shawnee #3 (& #6) 647,300 0 647,300 925,000 (30.02)

18 Shawnee #4 41,300 0 41,300 66,700 (38.08)

19 Shawnee #8 315,600 0 315,600 457,900 (31.08)

20 MTAA 82,100 0 82,100 117,400 (30.07)

21 Total Wholesale 1,607,300 0 1,607,300 2,320,300 (30.73)

Fire Protection

Inside City

22 Public 2,433,200 (2,433,200) 0 0 0.00

23 Private 266,300 0 266,300 282,200 (5.63)

Outside City

24 Public 357,100 0 357,100 386,900 (7.70)

25 Private 12,700 0 12,700 13,500 (5.93)

26 Total Fire Protection 3,069,300 (2,433,200) 636,100 682,600 (6.81)

27 Total System 38,545,000 0 38,545,000 35,855,800 7.50



RATE DESIGN

The principal consideration in the derivation of water rate schedules is the establishment of

equitable charges to customers served, commensurate with the cost of providing that service. The only

method of assessing entirely equitable rates would be the determination of each customer’s bill based

upon his service requirements. Since this may be impractical when dealing with thousands of customers,

rates are normally designed to fit average conditions for groups of customers having similar service

requirements. Practicability also requires that the rates be reasonably simple in application and subject

to as few misinterpretations as possible.

Existing Rates

The existing schedule of rates for water service that went into effect on January 1, 2020, is shown

in Table 3. The rates consist of a monthly service charge plus a uniform volume charge by customer class.

It is the current practice of the City to bill outside City water customers at rates that are 1.75 times those

applicable to inside City water customers. Wholesale rates are based on a negotiated agreement with the

five rural districts and MTAA. The rates consist of a volume charge with a minimum monthly charge.

Proposed Rates

The revenue requirements and cost of service allocations described in this report provide the basis

for recommending adjustments to existing water rates. The revenue requirements section shows the need

for adjustment and the level of revenue required. The allocations section provides the unit costs of service

used in the rate design process and gives a basis for determining whether resultant rates will develop

revenues that recover costs of service from customer classes in proportion to service required and provide

the total level of revenue required.

As previously indicated in Table 10, the recommended revenue adjustments needed to fund

operations and capital expenditures fully are 7.5 percent per year for 2021 to 2026.

In developing proposed schedules of water rates, it must be recognized that the cost of service

study is the result of engineering estimates, based to some extent upon judgment and experience, and

detailed results should not be used as literal and exact answers but as guides to the necessity for and

nature of rate adjustments. Judgment must be considered in the final choice of rates and factors such as

previous rate levels, the economic impact on the customer, public reaction to the extent of changes, and

local practice in the past are commonly recognized in making rate adjustments. It is emphasized that all

factors beyond the cost of service considerations are strictly a matter of local policy.

Considerations recognized in the derivation of the proposed schedules of water rates

subsequently presented herein, developed based on discussions with City representatives, include the

indicated desire to (1) develop rate modifications so that the total revenues recovered from water charges

will be at least adequate to recover the respective revenue requirements of the utility, (2) recover test

year revenue from each class of water customer approximately equal to the allocated costs of providing

service, (3) have the rate adjustments for the years 2021 through 2026 provide a smooth and reasonable

increase, and (4) mitigate the impact on customers to the extent possible. In attempting to meet these

policy criteria, and as a result of the collaborative efforts of the City staff, schedules of proposed rates for


38 JANUARY 2020

water service were developed and presented to the governing body by City staff and recommended for

implementation. The impact that the proposed rates had on customers was an issue for the governing

body, and therefore, to address concerns regarding affordability, the governing body approved lower

revenue increases than were originally proposed. Table 13 presents both the proposed rates for 2021,

2022, and 2023, which were presented to the governing body and the rates ultimately adopted by the

governing body on December 10, 2019. The adopted rates assume across-the-board increases and will

achieve the following:

Maintain the monthly service charge by meter size. The service charge will apply to all inside and

outside City customers.

Maintain a uniform volumetric charge per 1,000 gal by customer class.

Maintain the wholesale volumetric charge per 1,000 gal with a minimum monthly charge should

the minimum usage not be exceeded.

Maintain the City’s current practice to bill outside City water customers at rates that are 1.75

times those applicable to inside City water customers.

A comparison of the estimated 2021 test year revenue under adopted rates to the adjusted cost

of service for each of the customer classes is shown in Table 14. Column 1 shows the estimated test year

revenue from each class anticipated to be received under the schedule of adopted rates for retail service

previously presented in Table 13. Column 3 shows the relationship between projected revenue under the

adopted rates in Column 1 to the adjusted cost of service in Column 2. This comparison indicates the

adopted rates for 2021 will recover revenues from customer groups reasonably commensurate with the

cost of service. The indicated revenue adjustment in Column 5 indicates the relationship between revenue

projected under existing rates and revenue projected under adopted rates.

A comparison of water bills at various levels of water usage under existing and adopted 2021 rates

is shown in Table 15, which illustrates the impact of the adopted rates on different levels of customer

bills. The average residential customer using 5,000 gallons of water per month will see an increase of

$2.80 per month in 2021.

Subsequent Year Rate Increases

In addition to the schedule of rates ultimately adopted for application effective January 1 of 2021,

2022 and 2023, shown in Table 13, schedules of rates proposed for implementation effective each January

1 from 2024 to 2026 are presented in Table 16. These rates are designed to provide for the recovery of

total revenue requirements previously projected herein for 2024, 2025, and 2026.

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Volume In Proposed Adopted Proposed Adopted Proposed Adopted

Meter Minimum Inside Outside Inside Outside Inside Outside Inside Outside Inside Outside Inside Outside

Size Charge City City City City City City City City City City City City

gallons


1" & Below 13.80 24.15 13.61 23.82 15.04 26.32 14.63 25.60 16.39 28.68 15.73 27.53

1.5" 27.60 48.30 27.22 47.64 30.08 52.64 29.26 51.21 32.79 57.38 31.45 55.04

2" 44.17 77.30 43.56 76.23 48.15 84.26 46.83 81.95 52.48 91.84 50.34 88.10

3" 82.82 144.94 81.68 142.94 90.27 157.97 87.81 153.67 98.39 172.18 94.40 165.20

4" 138.00 241.50 136.11 238.19 150.42 263.24 146.32 256.06 163.96 286.93 157.29 275.26

6" 276.04 483.07 272.24 476.42 300.88 526.54 292.66 512.16 327.96 573.93 314.61 550.57

8" 441.64 772.87 435.56 762.23 481.39 842.43 468.23 819.40 524.72 918.26 503.35 880.86

10" 634.86 1,111.01 626.12 1,095.71 692.00 1,211.00 673.08 1,177.89 754.28 1,319.99 723.56 1,266.23


Jackson Co. #1 600,000 3,384.00 3,336.00 3,690.00 3,588.00 4,020.00 3,858.00

Shawnee CRWD #1-#2 2,992,000 16,874.88 16,636.00 18,400.80 17,892.00 20,046.40 19,239.00

Shawnee CRWD #3&#6 2,598,000 14,652.72 14,445.00 15,997.70 15,536.00 17,406.60 16,705.00

Shawnee CRWD #4 995,000 5,611.80 5,532.00 6,119.25 5,950.00 6,666.50 6,398.00

Shawnee CRWD #8 5,402,000 30,467.28 30,035.00 33,222.30 32,304.00 36,193.40 34,735.00

MTAA 1,139,000 6,423.96 6,333.00 7,004.85 6,811.00 7,631.30 7,324.00


Single-Family Residential 5.32 9.31 5.25 9.19 5.80 10.15 5.64 9.87 6.32 11.06 6.06 10.61

Multi-Family Residential 4.32 7.56 4.26 7.46 4.71 8.24 4.58 8.02 5.13 8.98 4.92 8.61

Commercial 3.93 6.88 3.88 6.79 4.28 7.49 4.17 7.30 4.67 8.17 4.48 7.84

Industrial 3.37 5.90 3.32 5.81 3.67 6.42 3.57 6.25 4.00 7.00 3.84 6.72

Industrial II 3.17 5.55 3.13 5.48 3.46 6.06 3.36 5.88 3.77 6.60 3.61 6.32

Irrigation 6.40 11.20 6.31 11.04 6.98 12.22 6.78 11.87 7.61 13.32 7.29 12.76

Wholesale 5.64 5.56 6.15 5.98 6.70 6.43



40 JANUARY 2020

Table 14 - Comparison of Adjusted Water Cost of Service with Revenues Under Adopted Rates

(1) (2) (3) (4) (5)

Proposed

Revenue Under Revenue Indicated

Line Adopted Adjusted Cost as a % of Revenue Under Revenue

No. Customer Class Rates of Service COS Existing Rates Adjustment

$ $ % $ %

Inside City

1 Single-Family Residential 18,079,200 16,503,800 109.5 16,810,000 7.6

2 Multi-Family Residential 2,264,500 2,164,400 104.6 2,105,300 7.6

3 Commercial 5,343,700 6,884,900 77.6 4,971,900 7.5

4 Industrial 1,145,800 1,513,800 75.7 1,066,400 7.4

5 Industrial II 1,569,200 2,204,100 71.2 1,458,900 7.6

6 Irrigation 1,552,600 1,347,800 115.2 1,444,300 7.5

7 Total Inside City 29,955,000 30,618,800 97.8 27,856,800 7.5

Outside City

8 Single-Family Residential 3,826,300 3,564,500 107.3 3,557,300 7.6

9 Multi-Family Residential 22,000 22,700 96.9 20,500 7.3

10 Commercial 546,700 733,800 74.5 508,800 7.4

11 Industrial 906,300 1,298,200 69.8 843,900 7.4

12 Industrial II 0 0 0.0 0 0.0

13 Irrigation 70,400 63,600 110.7 65,600 7.3

14 Total Outside City 5,371,700 5,682,800 94.5 4,996,100 7.5

Wholesale

15 Jackson #1 175,400 95,900 182.9 163,100 7.5

16 Shawnee #1-#2 634,700 425,100 149.3 590,200 7.5

17 Shawnee #3 (& #6) 994,800 647,300 153.7 925,000 7.5

18 Shawnee #4 71,700 41,300 173.6 66,700 7.5

19 Shawnee #8 492,400 315,600 156.0 457,900 7.5

20 MTAA 126,300 82,100 153.8 117,400 7.6

21 Total Wholesale 2,495,300 1,607,300 155.2 2,320,300 7.5

Fire Protection

Inside City

22 Public 0 0 0.0 0 0.0

23 Private 303,400 266,300 113.9 282,200 7.5

Outside City

24 Public 416,200 357,100 116.5 386,900 7.6

25 Private 14,500 12,700 114.2 13,500 7.4

26 Total System 38,556,100 38,545,000 100.0 35,855,800 7.5



Table 15 - Comparison of Typical 2021 Monthly Water Bills Under Existing and Adopted Rates

Water Existing Adopted Rates

Description Use Rates Amount Increase Increase

kgal $ $ $ %

Inside City

Single Family:

1" 0 12.66 13.61 0.95 7.50

1" 1 17.54 18.86 1.32 7.53

1" 3.0 27.30 29.36 2.06 7.55

1" 5 37.06 39.86 2.80 7.56

1" 7 46.82 50.36 3.54 7.56

1" 10 61.46 66.11 4.65 7.57

Multifamily:

1" 0 12.66 13.61 0.95 7.50

1" 5 32.46 34.91 2.45 7.55

1" 10 52.26 56.21 3.95 7.56

1" 50 210.66 226.61 15.95 7.57

Commercial:

1" 0 12.66 13.61 0.95 7.50

1" 20 84.86 91.21 6.35 7.48

1" 50 193.16 207.61 14.45 7.48

2" 100 401.52 431.56 30.04 7.48

2" 250 943.02 1,013.56 70.54 7.48

4" 150 668.11 718.11 50.00 7.48

4" 300 1,209.61 1,300.11 90.50 7.48

6" 250 1,155.75 1,242.24 86.49 7.48

6" 400 1,697.25 1,824.24 126.99 7.48

Irrigation:

1" 3 30.27 32.54 2.27 7.50

1" 5 42.01 45.16 3.15 7.50

2" 50 334.02 359.06 25.04 7.50

2" 100 627.52 674.56 47.04 7.50

Outside City

Single Family:

1" 0 22.16 23.82 1.66 7.49

1" 1 30.70 33.01 2.31 7.52

1" 3 47.78 51.39 3.61 7.56

1" 5 64.86 69.77 4.91 7.57

1" 7 81.94 88.15 6.21 7.58

1" 10 107.56 115.72 8.16 7.59

Commercial:

1" 0 22.16 23.82 1.66 7.49

1" 20 148.56 159.62 11.06 7.44

1" 50 338.16 363.32 25.16 7.44

2" 100 702.91 755.23 52.32 7.44

2" 375 2,440.91 2,622.48 181.57 7.44



42 JANUARY 2020

Table 16 - Proposed 2024 - 2026 Water Rates

Volume In Proposed January 2024 Proposed January 2025 Proposed January 2026

Meter Minimum Inside Outside Inside Outside Inside Outside

Size Charge City City City City City City

(gallons) $ $ $ $ $ $


1" & Below 16.91 29.59 18.18 31.82 19.54 34.20

1.5" 33.81 59.17 36.35 63.61 39.08 68.39

2" 54.12 94.71 58.18 101.82 62.54 109.45

3" 101.48 177.59 109.09 190.91 117.27 205.22

4" 169.09 295.91 181.77 318.10 195.40 341.95

6" 338.21 591.87 363.58 636.27 390.85 683.99

8" 541.10 946.93 581.68 1,017.94 625.31 1,094.29

10" 777.83 1,361.20 836.17 1,463.30 898.88 1,573.04


Jackson Co. #1 600,000 4,146.00 4,458.00 4,794.00

Shawnee CRWD #1-#2 2,992,000 20,675.00 22,231.00 23,906.00

Shawnee CRWD #3&#6 2,598,000 17,952.00 19,303.00 20,758.00

Shawnee CRWD #4 995,000 6,875.00 7,393.00 7,950.00

Shawnee CRWD #8 5,402,000 37,328.00 40,137.00 43,162.00

MTAA 1,139,000 7,870.00 8,463.00 9,101.00


Single-Family Residential 6.51 11.39 7.00 12.25 7.53 13.18

Multi-Family Residential 5.29 9.26 5.69 9.96 6.12 10.71

Commercial 4.82 8.44 5.18 9.07 5.57 9.75

Industrial 4.13 7.23 4.44 7.77 4.77 8.35

Industrial II 3.88 6.79 4.17 7.30 4.48 7.84

Irrigation 7.84 13.72 8.43 14.75 9.06 15.86

Wholesale 6.91 7.43 7.99


BLACK & VEATCH | Wastewater Utility 43

Wastewater Utility

REVENUE

The City’s wastewater system consists of sewer collection mains, treatment plants, pumping

stations, manholes, structures, and other facilities. The City provides retail service both inside and outside

the City boundary.

Customer Growth

Table 17 presents a summary of the historical and projected number of wastewater customers

served inside and outside the City for the period 2015 through 2026. The accounts are categorized into

four main retail customer classes: single-family residential, multi-family residential consisting of

apartment buildings, duplexes, and mobile home parks; commercial including businesses, schools,

government, and churches; and industrial for both inside city and outside city customers. About 89.8

percent of the retail customers served are single-family residential; multifamily customers make up about

3.1 percent, commercial customers about 7.0 percent, and industrial make up the net of the total.


wastewater accounts averaged approximately 0.09 percent. For purposes of projection, this rate is

expected to decrease to 0.08percent for the next eight years.

Wastewater Billable Flow

Table 18 presents a summary of historical and projected wastewater billable flow. Projected

quantities are based on the recognition of historical usage quantities and trends. Also considered are

projections of the number of customers and estimated wastewater flow per customer, the latter based

on analyses of historical and current rates of use per customer class. Billable flow for this period is

projected to increase approximately 0.06% per year beginning in 2019, primarily as a result of levelized

projected growth in the number of customers served.

Wastewater Revenue Under Existing Rates

Table 19 presents the existing schedule of rates for wastewater service that went into effect on

January 1, 2020. The schedule consists of a monthly service charge, a uniform volume charge, and extra

strength surcharges for biochemical oxygen demand (BOD) in excess of 300 milligrams per liter (mg/l) and

total suspended solids (TSS) in excess of 300 mg/l. It is the current practice of the City to bill outside City

water customers at rates that are 1.75 times those applicable to inside City wastewater customers.

Table 20 presents a summary of historical wastewater billings for the period 2015 through 2018

and projected wastewater billings for the period 2019 through 2026. The projected billings for the period

2020 through 2026 are based on the rates that went into effect on January 1, 2020. The historical

wastewater billings shown in this table are summarized from detailed data provided by the City. Estimates

of future wastewater service billings are based on the projected wastewater customers and billable flow

quantities shown in Table 17 and Table 18, respectively, and unit rates of charge under the rates shown

in Table 19.


44 JANUARY 2020

Other Revenue

Table 21 presents the historical and projected other wastewater utility income. Revenues from

fees for permits, grease and septage hauling, fees for service, rent of land, and other miscellaneous

income are based on the 2019 adopted budget. Interest income on the available operating fund balance,

calculated at 1.0 percent of the balance available for investment, is shown in Table 26, Line 10. All other

revenue is projected to remain constant throughout the study period.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Inside City

1 Single Family Residential 39,556 39,604 39,706 39,765 39,785 39,805 39,825 39,845 39,865 39,884 39,904 39,924


3 Commercial 3,504 3,342 3,282 3,286 3,288 3,289 3,291 3,293 3,294 3,296 3,298 3,299

4 Industrial 19 19 19 20 20 20 20 20 20 20 20 20

5 Total Inside City 44,593 44,493 44,528 44,575 44,597 44,618 44,640 44,661 44,683 44,704 44,726 44,748

Outside City


7 Multi-Family Residential 25 25 25 25 25 25 25 25 25 25 25 25

8 Commercial 118 120 122 121 121 121 121 121 121 121 121 121


10 Total 48,639 48,609 48,691 48,770 48,808 48,846 48,884 48,922 48,960 48,998 49,036 49,074

% Change -0.06% 0.17% 0.16% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08%

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal kgal

Inside City

1 Single Family Residential 1,715,146 1,671,847 1,692,519 1,685,998 1,686,800 1,687,700 1,688,500 1,689,400 1,690,200 1,691,100 1,691,900 1,692,800


3 Commercial 1,127,600 1,112,569 1,089,060 1,089,992 1,090,500 1,091,100 1,091,600 1,092,200 1,092,700 1,093,300 1,093,800 1,094,400

4 Industrial 481,332 533,217 561,101 735,099 735,500 735,800 736,200 736,600 736,900 737,300 737,700 738,000


Outside City



8 Commercial 46,554 51,207 49,533 57,828 57,900 57,900 57,900 57,900 58,000 58,000 58,000 58,100


10 Total 4,051,628 4,047,378 4,077,783 4,239,424 4,242,000 4,244,500 4,247,000 4,249,600 4,252,100 4,254,800 4,257,300 4,259,900

% Change -0.10% 0.75% 3.96% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06%



Table 19 - Existing 2020 Wastewater Rates

Rate Inside Outside

Component City City

$ $

Service Charge - $/Month

1" & Below 11.75 20.56

1.5" 23.51 41.14

2" 37.61 65.82

3" 70.52 123.41

4" 117.53 205.68

6" 235.06 411.36

8" 376.12 658.21

10" 540.66 946.16


All Customers 5.26 9.21


BOD over 300 mg/l 0.002161 0.003782

TSS over 300 mg/l 0.001371 0.002399




Effective January 1, 2020

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

Inside City


2 Multi-Family Residential 2,178,077 2,306,907 2,460,403 2,525,560 2,687,000 2,811,200 2,811,200 2,811,200 2,811,200 2,811,200 2,811,200 2,811,200

3 Commercial 5,275,409 5,471,535 5,634,344 5,957,863 6,300,800 6,596,200 6,599,400 6,602,900 6,605,900 6,609,500 6,612,600 6,616,200

4 Industrial 1,956,103 2,354,481 2,528,692 3,576,540 3,730,300 3,902,600 3,904,700 3,906,800 3,908,400 3,910,600 3,912,700 3,914,300


Outside City



8 Commercial 381,335 437,437 446,742 541,108 570,200 596,400 596,500 596,500 597,400 597,500 597,500 598,500


10 Excess Strength Surcharge 1,104,361 1,075,247 903,641 1,184,567 1,515,900 1,515,900 1,515,900 1,515,900 1,515,900 1,515,900 1,515,900 1,515,900

11 Total 24,483,162 25,686,926 26,795,961 29,392,238 31,442,200 32,867,500 32,891,500 32,915,200 32,939,200 32,964,200 32,988,000 33,012,400

% Change 4.92% 4.32% 9.69% 6.97% 4.53% 0.07% 0.07% 0.07% 0.08% 0.07% 0.07%



Table 21 - Historical and Projected Wastewater Miscellaneous Revenue


50 JANUARY 2020


The revenue required to provide adequately for the continued operation of the wastewater utility

must be enough to meet the cash requirements for system operations. Revenue requirements include (1)



rehabilitation and repair (R&R) met from annual revenues. Projections of the cash requirements to meet



The elements of operation and maintenance expenses for the wastewater utility include the

annual expenses associated with collection, pumping, treatment, SCADA, meters and services, and billing

collection and accounting.


commodities such as materials and supplies, and contract services such as fuel and electrical power costs,


administrative support functions that the City provides to the wastewater utility. Annual operation and

maintenance expenses are met principally from annual operating revenue. A summary of projected

operation and maintenance expenses for the period 2019 through 2026 is presented in Table 22.

Operation and maintenance expenses shown for 2019 reflect budgeted amounts. Projections for the years

2020 through 2026 are based on budgeted 2019 expense amounts adjusted to recognize allowances for

known cost increases, the estimated effects of inflation, and anticipated system growth.

The future wastewater utility operating costs are projected to increase from about $13,114,507

in 2019 to about $16,120,300 in 2026, as shown in Line 14.




continuing expense to be met each year, the utility should finance these expenditures from current

wastewater revenues. The projected capital outlay is shown on Line 15 of Table 22.







renewal and replacement of the existing facilities already in the system. The total improvement costs for

the study period are estimated to be $245,366,600 when adjusted to include a 2 percent allowance for

inflation beginning in 2020.





The wastewater utility has ten existing revenue bond issuances and three existing state revolving loans.

The City plans to continue the practice of issuing revenue bonds to help pay for both major capital projects

and R&R projects. It is common practice for utilities to debt finance large capital improvement projects.

By financing the cost of the projects, the City can fund large projects immediately and spread the payment

over a specified time frame, thereby helping to offset the impact on current rate-payers. Debt service is

projected to increase from $9,161,000 in 2019 to $11,869,900 in 2026 as a result of additional revenue

bond issues.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

1 Business Services 3,017,315 2,442,046 2,838,420 2,914,543 2,983,765 3,073,200 3,165,400 3,260,700 3,358,400 3,459,100 3,562,800 3,669,400


3 Maintenance Pump Station 1,896,595 1,647,464 1,692,970 1,955,605 1,729,949 1,782,100 1,835,600 1,890,900 1,947,600 2,005,700 2,065,700 2,127,500

4 Maintenance Oakland Plant 626,013 748,073 720,327 766,639 742,869 765,200 788,200 811,800 836,000 860,800 886,300 912,500

5 Maintenance North Topeka Plant 526,973 690,217 631,647 678,022 564,136 581,200 598,500 616,400 634,700 653,800 673,100 693,000

6 Lab 372,790 369,574 389,967 418,128 389,827 401,900 413,900 426,100 438,600 451,400 464,400 478,100

7 Operations Biosolids 468,687 557,204 615,058 750,558 687,660 708,300 729,400 751,000 773,400 796,500 820,200 844,600

8 Operations Oakland Plant 2,013,908 2,336,330 2,076,618 1,864,623 2,081,086 2,143,300 2,207,300 2,273,300 2,341,400 2,411,300 2,483,200 2,557,400

9 Operations North Topeka Plant 1,227,454 1,117,224 1,344,638 1,369,204 1,398,023 1,440,000 1,483,000 1,527,500 1,573,400 1,620,400 1,668,900 1,718,600

10 Shawnee Co Contracts 358,999 369,502 349,526 394,085 312,427 321,700 331,200 341,000 351,000 361,300 372,000 383,100

11 Maintenance Collection 2,044,426 2,078,122 2,006,581 1,963,118 1,988,185 2,048,100 2,109,500 2,172,600 2,237,600 2,304,800 2,373,600 2,444,700

12 Utilities & Transportation Admin 5,017 22,986 0 0 (0) 0 0 0 0 0 0 0

13 Other Contracts 0 0 0 9,808 0 0 0 0 0 0 0 0

14 Total Operating Expenses 12,706,743 12,480,968 12,812,909 13,198,923 13,114,507 13,508,600 13,913,000 14,329,900 14,758,600 15,199,700 15,653,100 16,120,300

15 Capital Outlay 0 418,719 253,717 120,915 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000


% Change 1.52% 1.29% 1.94% 0.71% 2.94% 2.93% 2.93% 2.93% 2.93% 2.93% 2.93%


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Line Projected (a)

No. Description 2019 2020 2021 2022 2023 2024 2025 (b) 2026 (b) Total

$ $ $ $ $ $ $ $ $


Collection and Pumping


2 Structures and Improvements 1,500,000 765,000 0 0 0 0 0 0 2,265,000

3 Collection Sewers 5,000,000 39,642,000 14,003,700 14,440,300 13,809,600 13,151,100 11,338,200 11,748,400 123,133,300

4 Lift Stations 625,000 0 3,637,900 3,784,800 3,937,700 4,096,800 4,262,300 3,441,900 23,786,400

5 Other Plant and Misc Equipment 0 0 0 0 0 0 0 0 0

Treatment Plants 0


7 Mechanical Bar Screens 0 0 0 0 0 0 0 0 0

8 Grit Removal 0 0 0 0 0 0 0 0 0

9 Pumping 0 0 0 0 0 0 0 0 0

10 Disinfection 0 0 5,708,100 0 0 0 0 0 5,708,100

11 Aeration Equipment 0 6,362,100 0 0 0 0 0 0 6,362,100

12 Sludge Handling 1,500,000 2,550,000 22,888,800 0 0 0 0 0 26,938,800

13 Other Plant and Misc Equipment 1,000,000 510,000 0 1,457,500 0 0 0 0 2,967,500

14 SCADA 810,000 619,700 632,000 644,700 657,600 0 0 0 3,364,000

15 General Treatment 675,000 688,500 11,834,600 4,762,700 4,955,200 9,019,600 9,305,100 9,600,700 50,841,400

16 General Plant 0 0 0 0 0 0 0 0 0

17 Total - Inflated 11,110,000 51,137,300 58,705,100 25,090,000 23,360,100 26,267,500 24,905,600 24,791,000 245,366,600


18 Major Capital 2,985,000 44,507,200 41,461,500 7,194,100 4,786,200 6,989,400 4,895,500 4,020,400 116,839,300


20 Total - Inflated 11,110,000 51,137,300 58,705,100 25,090,000 23,360,100 26,267,500 24,905,600 24,791,000 245,366,600




54 JANUARY 2020

Table 24 - Existing and Proposed Wastewater Long-Term Debt

Line Annual Debt Service Requirements

No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $





4 Series 2014-A Revenue Bonds 2,140,700 2,146,100 1,089,700 919,200 918,600 920,200 1,166,500 1,185,700



7 Series 2011-A Revenue Bonds - - - - - - - -

8 Series 2010-B Taxable Revenue Bonds 3,200 88,200 - - - - - -

9 Series 2010-B Recovery Zone Eco-Devo Bonds 476,800 476,800 476,800 476,800 476,800 476,800 476,800 476,800

10 Series 2010-A Build America Revenue Bonds 47,500 47,500 47,500 47,500 47,500 162,500 157,200 282,000

11 Total Existing Revenue Bonds 4,032,000 4,140,300 3,052,800 2,894,800 2,896,100 3,047,000 3,671,800 3,804,100

Existing State Revolving Loans

12 SRF Loan: C20-1271-01 286,400 143,200 0 0 0 0 0 0

13 SRF Loan: C20-1272-02 4,264,900 4,264,900 4,264,900 4,264,900 4,264,900 0 0 0

14 SRF Loan: C20-1272-04 577,700 577,700 577,700 577,700 577,700 577,700 577,700 577,700

15 Total Existing State Revolving Loans 5,129,000 4,985,800 4,842,600 4,842,600 4,842,600 577,700 577,700 577,700


16 2019 13,587,800 0 1,192,900 1,184,900 1,142,000 1,096,500 1,233,200 533,700 515,800

17 2020 46,878,700 0 2,564,800 2,564,800 2,564,800 2,564,800 2,564,800 2,564,800

18 2021 16,700,000 0 913,700 913,700 913,700 913,700 913,700

19 2022 15,100,000 0 826,200 826,200 826,200 826,200

20 2023 14,300,000 0 782,400 782,400 782,400

21 2024 16,800,000 0 971,500 971,500

22 2025 15,800,000 0 913,700

23 2026 15,800,000 0

24 Total Proposed Revenue Bonds 0 1,192,900 3,749,700 4,620,500 5,401,200 6,320,300 6,592,300 7,488,100

Proposed State Revolving Loans

25 2019 0 0 0 0 0 0 0 0 0

26 2020 0 0 0 0 0 0 0 0

27 2021 0 0 0 0 0 0 0

28 2022 0 0 0 0 0 0

29 2023 0 0 0 0 0

30 2024 0 0 0 0

31 2025 0 0 0

32 2026 0 0

33 Total Proposed State Revolving Loans 0 0 0 0 0 0 0 0


Original Loan

Amount




Total revenue requirements of the wastewater utility recognized for purposes of this report

include operation and maintenance expense; payment in lieu of taxes; debt service costs on existing and

proposed debt; and expenditures for routine capital, major capital improvements, and renewals and

replacements met from annual revenues.


Table 25 presents the capital improvement financing plan, which summarizes the projected

source and application of funds over the study period. This plan anticipates that proposed capital

improvements will be financed from a combination of available funds on hand, debt financing, annual

operating revenue, and estimated interest earnings.






percent interest rate over a 30-year period as provided by the City’s financial advisor. Cash financing of

capital improvements from annual revenues is expected to total $59,413,500for the study period as

indicated on Line 3. The City has a goal to fund a minimum of 10 percent of R&R projects with cash and

the remaining amount with future revenue bonds. Other sources of funds available to meet major capital

improvement expenditures include interest income on capital funds, which is shown on Line 3 and

recognizes an assumed 1.0 percent annual interest rate. Line 5 shows the total of all funds available to

finance the capital improvement program.




These costs associated with debt financing were included in the project costs in Table 23. As such, Lines 9

through 12 represent a total of $245,366,600, as previously summarized in Table 23. Prior revenue bonds

refunded from the 2019 issue are shown in Line 11. Line 12 shows the total of all fund applications, and

the resulting end of year balance is shown on Line 13. The City targets to maintain a cash balance of 25

percent of next year’s major capital improvements and R&R as shown in Line 14.

System Operations









56 JANUARY 2020




a minimum 185-day balance with a target of 300 days, and (4) establishment of rate increases on a








Operation and maintenance expense, previously projected in Table 22, is shown on Line 12. The

wastewater utility pays a payment in lieu of taxes (PILOT) to the City’s general fund. This payment, which

is shown in Line 13, is based on 10.58 percent of the revenue shown on Line 8. The PILOT rate is based on

a combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets.





The total debt service is shown on Line 22. Capital outlay for routine capital additions to be financed from

revenue is shown on Line 23. Line 24 reflects the projected transfer of accumulated net earnings from

system operations to assist in major capital and R&R financing.



2019, shown on Line 26, is comprised of the 2018 end of year balance in the wastewater utility fund. The


The City’s policy requires the wastewater utility to maintain a cash reserve equal to 185 days of


As of December 31, 2019, the Wastewater Fund is expected to have a balance equal to approximately 464

days. The projected number of days is shown on Line 28 and is based on the end of year balance shown

on Line 27 and projected operation and maintenance expense and payment in lieu of taxes shown on Line

12 and 13. The utility’s goal is to maintain at least 300 days of cash on hand, which is achieved throughout

the study period.

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Sources of Funds



3 Cash Financing of Capital Projects (c) 1,175,000 3,238,500 9,000,000 9,500,000 9,500,000 9,000,000 9,000,000 9,000,000 59,413,500

4 Interest Income 515,500 418,800 305,900 140,600 144,800 149,100 151,200 155,800 1,981,700




7 Major Capital Improvements 2,570,800 40,123,000 40,141,800 6,706,500 4,455,000 6,489,400 4,546,800 3,732,700 108,766,000



10 Reserve Fund Requirement 1,358,800 4,687,900 1,670,000 1,510,000 1,430,000 1,680,000 1,580,000 1,580,000 15,496,700







(c) Assumes a minimum of 10% cash financing on Renewal and Replacement projects.

(d) Previously issued Temp Notes paid back with Revenue Bond Proceeds.

(e) Previously expensed funds reimbursed by proposed bonds.


58 JANUARY 2020

Table 26 - Proposed Wastewater Revenue and Revenue Requirements


No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $



2 2.00% Effective January 1, 2021 603,000 658,300 658,800 659,300 659,800 660,200

3 2.00% Effective January 1, 2022 615,500 672,000 672,500 673,000 673,500

4 2.00% Effective January 1, 2023 628,300 685,900 686,400 686,900

5 2.00% Effective January 1, 2024 641,300 700,100 700,700

6 2.00% Effective January 1, 2025 654,600 714,700

7 2.00% Effective January 1, 2026 668,200


9 Other Revenue 1,595,900 1,595,900 2,895,900 2,895,900 2,895,900 2,895,900 2,895,900 2,895,900


11 Total Revenue 33,258,500 34,764,500 36,734,500 37,423,100 38,117,300 38,844,400 39,602,300 40,368,300




15 Net Revenue 16,820,800 17,782,100 19,281,400 19,479,700 19,670,300 19,879,600 20,106,100 20,325,100





19 Existing State Revolving Fund Loans 5,129,000 4,985,800 4,842,600 4,842,600 4,842,600 577,700 577,700 577,700


21 Total State Revolving Loan Debt Service 5,129,000 4,985,800 4,842,600 4,842,600 4,842,600 577,700 577,700 577,700




25 Net Balance 6,184,800 3,924,600 (1,663,700) (2,678,200) (3,269,600) 634,600 (35,700) (844,800)









(d)

(e) Beginning balance consists of funds in the Oeprating Reserve Fund.


The Payment in Lieu of Taxes rate is based on a combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets. The resulting percentage may change

over time based on the governing body and City administration.



COST OF SERVICE ALLOCATIONS

Cost of service allocations provide a means of determining the proportionate responsibility of

each customer class for the service provided. Cost responsibilities are based upon allocations of various

elements of costs of service according to the relative service requirements of respective customer classes.

Factors considered in determining service requirements include the quantity of wastewater flow, relative

peak capacity requirements placed on the system, the strength of the wastewater flow, number and size

of services to customers, and any proprietary interest in the system investment.

Cost of Service to be Allocated

The cost of service to be allocated to the various customer classes consists of the total revenue

requirements less income received from other sources. For allocation purposes, this cost of service is

expressed as an annual requirement for a specific test year. For purposes of this study, the year ending

December 31, 2021, has been selected as generally typical of conditions anticipated during the study

period. This net cost, totaling $33,549,300, consists of $13,481,800 of net operation and maintenance

expense and $20,067,500 of net capital costs. These costs are derived from Table 26 and summarized on

Line 12 of Table 27.

Depreciation is the loss, not restored by current maintenance, which occurs in utility plant in

service due to decay, inadequacy, and obsolescence. The depreciation expense associated with

wastewater service is estimated for this report recognizing depreciation rates presently in use by the

wastewater utility. This results in a projected test year depreciation of $7,350,800.

Return is the balance of annual costs of service remaining after operating expense and

depreciation are deducted, which amounts to $12,716,700 in the test year. This return provides for

payment of the interest portion of debt service and capital improvement costs beyond that provided by

the depreciation allowance.

The test year cost of service, expressed on a utility basis, is summarized in Lines 13 through 16 of

Table 27.

Functional Cost Components

The various cost elements of wastewater service are assigned to functional cost components as

the first step in the subsequent distribution of the cost of service to the customer classes. The principal

functional cost components consist of volume, capacity, strength, and customer.

Volume costs are those which vary directly with the quantity of wastewater flow. They consist of

operational costs related to those facilities and the expense of volume-related treatment

chemicals and purchased power. It also consists of capital costs related to investment in system

facilities, which are sized based on or required because of wastewater volume.

Capacity related costs include capital costs related to investment in system facilities, which are

sized based on, or required because of, maximum rates of wastewater flow, and the operation

and maintenance expense related to those facilities.

Strength related costs include capital costs related to investment in system facilities, which are

designed to handle and treat specific strength constituents, specifically Biological Oxygen Demand


60 JANUARY 2020

(BOD) and Total Suspended Solids (TSS). It also includes operation and maintenance expense

related to those facilities.

Customer costs are those that tend to vary in proportion to the number of customers served.

These include the wastewater utility share of meters, customer-related billing, collection, and

accounting expenses.

The separation of costs of service into these principal components provides the means of further

allocating such costs to the various customer classes based on the respective total volume, capacity,

strength, and customer cost requirements of each customer class.

Allocation to Cost Components

In establishing the costs associated with each functional cost component, the net capital portion

of the test year cost of service is distributed to cost functions based on an allocation of the estimated test

year value of wastewater system facilities. Net operating expense is similarly allocated to cost functions

based on the projected test year expense estimated for each wastewater system component.

Allocation of Net Plant Investment

The estimated test year value of wastewater system facilities is allocated to appropriate cost

functions as the basis for further distribution to the various customer classes.

As the basis for allocating capital costs to customer classes, the net plant investment in the

wastewater system is first allocated to functional cost components. Accumulated depreciation and

contribution plant are deducted from gross plant investment in arriving at the next plant investment for

allocation of all capital costs except depreciation. The estimated test year net plant investment in existing

wastewater facilities consists of plant in service as of December 31, 2018, the 2018 construction work in

progress, and the estimated cost of proposed capital improvements expected to be in service by the end

of 2021.

Plant investment is allocated to a functional cost component, or components, primarily in

accordance with the function which determines the amount of investment. For example, the investment

in the collection system is related to the maximum rates of wastewater flow and, therefore, is allocated

to the capacity cost component. Pumping stations are also designed to meet peak hydraulic flows and are

allocated to the capacity cost component as well. Treatment plant investment is allocated to volume to

recognize that the investment is related to the treatment of variable rates of flow and to strength in

recognition that investment is related to the treatment of different constituents in the wastewater flow.

Administration and general costs include facilities not directly allocable to a specific cost function, the

value of which is allocated in proportion to the total of all other facilities.

The test year return on investment costs, totaling $12,716,700, are assigned to the functional cost

components based on the allocation of plant investment.

Allocation of Depreciation Expense

Depreciation expense is an annual allowance for loss in service value of system facilities not

restored by current maintenance due to factors that result in the ultimate retirement of property. The



depreciation expense is based upon the total investment in facilities and would provide for the eventual

recovery of the original cost of construction of the water system. Depreciation is based on an annual

percentage allowance of depreciable plan investment currently used by the City. The annual depreciation

expense on plant expected to be in service is estimated at $7,350,800 in 2021. Depreciation expense for

the various plant categories is allocated to cost components on the same basis as utilized in allocating net

plant investment.

Allocation of Operating Expense

Test year operation and maintenance expenses are allocated to functional cost components in

the same manner as plant investment. Treatment plant expense is allocated based on volume and

strength plant investment. Power and all other costs associated with the collection system are allocated

to the capacity cost component. Expenses associated with meters and services and customer billing and

collection are allocated 100 percent to each meter cost component and customer billing and collection

component, respectively.

The Shawnee County contract is allocated based on volume. Administration and general costs

include facilities not directly allocable to a specific cost function, the value of which is allocated to cost

components in proportion to the total of all other facilities except power and chemical costs. Payment in

lieu of taxes is allocated based on the total operation and maintenance.

The net total operation and maintenance expense to be recovered from charges for wastewater

service is derived by deducting expenses met from other revenue from the total operating and

maintenance expense. Other revenue is allocated based on total operating expense.

Distribution of Costs to Customer Classes

The total cost responsibility of each class of service may be established by developing unit costs

of service for each cost function and assignment of those costs to the customer classes based on the

respective service requirement to each. To properly recognize the cost of service, each customer class is

allocated its share of volume, capacity, and customer costs.

Customer Classifications

For purposes of the cost of service analysis and rate design, the wastewater system’s customers

are classified to reflect groups of customers with similar service requirements who can be served at a

similar average cost and the classification used by the City for record-keeping purposes. The specific

categories for inside and outside City retail services include single-family residential, multi-family

residential, commercial, and industrial.

Units of Service

In allocating the responsibility for costs of service, volume, capacity, strength, and customer costs

may be distributed to customer classes according to the respective service requirements of the classes.

The cost of service responsibility for volume costs varies with the volume of wastewater flow

contributed to the wastewater system is distributed to customer classes on that basis. Capacity related

costs are those costs associated with providing maximum capacity for wastewater flows and are


62 JANUARY 2020

distributed to customer classes based on the estimated maximum rates of wastewater flow. Strength

related costs are those costs associated with treating wastewater flow for specific constituents. Customer

costs, which consist of meter, billing, collection, and accounting costs, are allocated based on equivalent

meters and the number of monthly bills.

Wastewater flow collected and treated by the utility is made up of two elements (1) sanitary

wastewater flow and (2) infiltration/inflow (I/I) of groundwater and surface water into the sewers.

Contributed wastewater volume is that portion of the billable annual water use of each class estimated

to enter the sanitary sewer system. The balance of wastewater flow processed by the treatment plants is

assumed to comprise I/I. Based on a review of historical influent wastewater flow at the Oakland and

North Topeka WWTP’s and billed volume, it is estimated that the test year amount of flow entering the

sewers as I/I will average approximately 37 percent of the total volume transported by the wastewater

system.

Each customer class should bear its proportionate share of the costs associated with I/I, as the

wastewater system must be adequate to convey and process the total wastewater flow. Recognizing that

the major cost responsibility for I/I is allocated on an individual connection basis, two-thirds of the

projected I/I volume associated with the wastewater collection system is allocated to customer classes

based on the number of customers with the remaining one-third allocated on the basis of contributed

volume entering the treatment plant through the sanitary sewer system.

Capacity requirements are based on estimated contributed wastewater flow and I/I rate of flow.

The capacity units include a peak rate of contributed flow of 1.5 times the average and peak rate of I/I of

4.0 times the average.

Customer Class Costs of Service

Unit costs are developed by dividing the total cost allocated to each functional cost component

by the total applicable units of service. The customer class responsibility for service is obtained by applying

unit costs of service to the number of units for which the customer class is responsible.

Table 28 shows the allocated cost of service by customer class, revenue under existing rates, and the

indicated revenue adjustment by each class. The test year allocated cost of service is shown in Column

1. The indicated increase or decrease in revenue required to meet the allocated cost of service is shown

in Column 3.



Table 27 - Total 2021 Cost of Service to be Recovered from Wastewater Rates

Line O&M Capital

No. Description Expense Costs Total

$ $ $



2 Debt Service Requirements 11,645,100 11,645,100

3 Payment in Lieu of Taxes 3,540,100 3,540,100

4 Capital Outlay / Equipment 300,000 300,000

5 Cash Financing of Capital Projects 9,000,000 9,000,000

6 Total 17,453,100 20,945,100 38,398,200

Revenue Requirements Met from Other Sources

7 Other Revenue 2,895,900 2,895,900

8 Interest Income 344,100 344,100

9 Funds Available 756,200 907,500 1,663,700

10 Full Year Rate Adjustment (24,900) (29,900) (54,800)

11 Total 3,971,300 877,600 4,848,900

12 Net Costs to be met from Wastewater Sales Charges 13,481,800 20,067,500 33,549,300

Restatement of Net Costs (Utility Basis)


14 Depreciation 7,350,800 7,350,800

15 Return on Investment 12,716,700 12,716,700

16 Total Cost of Service to be Recovered from Rates 13,481,800 20,067,500 33,549,300


64 JANUARY 2020

Table 28 - Comparison of 2021 Wastewater Allocated Cost of Service with Revenue Under Existing Rates

(1) (2) (3)

Indicated

Line Allocated Cost Revenue Under Revenue

No. Customer Class of Service Existing Rates Increase

$ $ %

Inside City

1 Single Family Residential 15,217,100 14,579,300 4.4

2 Multi-Family Residential 2,641,100 2,811,200 (6.1)

3 Commercial 6,080,400 6,599,400 (7.9)

4 Industrial 3,732,700 3,904,700 (4.4)

5 Total Inside City 27,671,300 27,894,600 (0.8)

Outside City

6 Single Family Residential 2,897,800 2,786,100 4.0

7 Multi-Family Residential 94,000 98,400 (4.5)

8 Commercial 548,600 596,500 (8.0)

9 Industrial 0 0 0.0

10 Total Outside City 3,540,400 3,481,000 1.7

Excess Strength Surcharge

11 Surcharge Customers 2,337,600 1,515,900 54.2

12 Total Excess Strength Surcharge 2,337,600 1,515,900 54.2

13 Total System 33,549,300 32,891,500 2.0



RATE DESIGN

The principal consideration in the derivation of wastewater rate schedules is the establishment

of equitable charges to customers served, commensurate with the cost of providing that service. The only

method of assessing entirely equitable rates would be the determination of each customer’s bill based

upon his service requirements. Since this may be impractical when dealing with thousands of customers,

rates are normally designed to fit average conditions for groups of customers having similar service

requirements. Practicability also requires that the rates be reasonably simple in application and subject

to as few misinterpretations as possible.

Existing Rates

The existing schedule of rates for wastewater service that went into effect on January 1, 2020, is

shown in Table 19. The rates consist of a monthly service charge plus a uniform volume charge. It is the

current practice of the City to bill outside City wastewater customers at rates that are 1.75 times those

applicable to inside City wastewater customers.

Proposed Rates

The revenue requirements and cost of service allocations described in this report provide the basis

for recommending adjustments to existing wastewater rates. The revenue requirements section shows

the need for adjustment and the level of revenue required. The allocations section provides the unit costs

of service used in the rate design process and gives a basis for determining whether resultant rates will

develop revenues that recover costs of service from customer classes in proportion to service required

and provide the total level of revenue required.

As previously indicated in Table 26, the recommended revenue adjustments needed to fund

operations and capital expenditures fully are 2 percent per year for 2021 to 2026.

In developing proposed schedules of wastewater rates, it must be recognized that the cost of

service study is the result of engineering estimates, based to some extent upon judgment and experience,

and detailed results should not be used as literal and exact answers but as guides to the necessity for and

nature of rate adjustments. Judgment must be considered in the final choice of rates and factors such as

previous rate levels, the economic impact on the customer, public reaction to the extent of changes, and

local practice in the past are commonly recognized in making rate adjustments. It is emphasized that all

factors beyond the cost of service considerations are strictly a matter of local policy.

Considerations recognized in the derivation of the proposed schedules of wastewater rates


indicated desire to (1) develop rate modifications so that the total revenues recovered from wastewater

charges will be at least adequate to recover the respective revenue requirements of the utility, (2) recover

test year revenue from each class of wastewater customer approximately equal to the allocated costs of

providing service, (3) have the rate adjustments for the years 2021 through 2026 provide a smooth and

reasonably increase, and (4) mitigate the impact on customers to the extent possible. In attempting to

meet these policy criteria, and as a result of the collaborative efforts of the City staff, schedules of

proposed rates for wastewater service were developed and presented to the governing body by City staff


66 JANUARY 2020

and recommended for implementation. The governing body approved the revenue increases proposed

by the City. Table 29 presents the proposed rates for 2021, 2022, and 2023, which were adopted by the

governing body on December 10th. The adopted rate schedules assume across-the-board increases and

will achieve the following:

Maintain the monthly service charge by meter size. The service charge will apply to all inside and

outside City customers.

Maintain a uniform volumetric charge per 1,000 gal for all customer classes.

Maintain the City’s current practice to bill outside City water customers at rates that are 1.75

times those applicable to inside City water customers.

A comparison of the estimated 2021 test year revenue under adopted rates to the adjusted cost

of service for each of the customer classes is shown in Table 30. Column 1 shows the estimated test year

revenue from each class anticipated to be received under the schedule of adopted rates for retail service

previously presented in Table 28. Column 3 shows the relationship between projected revenue under the

adopted rates in Column 1 to the allocated cost of service in Column 2. This comparison indicates the

adopted rates will recover revenues from customer groups reasonably commensurate with the cost of

service. The indicated revenue adjustment in Column 5 indicates the relationship between revenue

projected under existing rates and revenue projected under adopted rates.

To illustrate the impact of the adopted rates on different levels of customer’s bills, a comparison

of wastewater bills at various levels of water usage under existing and adopted rates is shown in Table 31.

The average residential customer using 5,000 gallons of water per month will see an increase of $0.79 per

month in 2021. The combined water and wastewater charges for typical bills under the adopted water

and wastewater rates for 2021 are shown in Table 32 and reflect an increase of $3.59 based on 5,000

gallons of water usage.

Subsequent Year Rate Adjustments

In addition to the schedule of rates adopted for application effective January 1 of 2021, 2022, and

2023, shown in Table 29, schedules of rates proposed for implementation effective each January 1 from

2024 to 2026 are presented in Table 33. These rates are designed to provide for the recovery of total

revenue requirements previously projected herein for 2024, 2025 and 2026.



Table 29 - Adopted 2021 - 2023 Wastewater Rates





1" & Below 11.99 20.98 12.23 21.40 12.47 21.82

1.5" 23.98 41.97 24.46 42.81 24.95 43.66

2" 38.36 67.13 39.13 68.48 39.91 69.84

3" 71.93 125.88 73.37 128.40 74.84 130.97

4" 119.88 209.79 122.28 213.99 124.73 218.28

6" 239.76 419.58 244.56 427.98 249.45 436.54

8" 383.64 671.37 391.31 684.79 399.14 698.50

10" 551.47 965.07 562.50 984.38 573.75 1,004.06


All Customers 5.37 9.40 5.48 9.59 5.59 9.78


BOD over 300 mg/l 0.00216 0.00378 0.00216 0.00378 0.00216 0.00378

TSS over 300 mg/l 0.00137 0.00240 0.00137 0.00240 0.00137 0.00240




Adopted Rates


68 JANUARY 2020

Table 30 - Comparison of 2021 Allocated Wastewater Cost of Service with Revenues Under Adopted Rates

(1) (2) (3) (4) (5)

Proposed

Revenue Under Revenue Indicated

Line Adopted Allocated Cost as a % of Revenue Under Revenue

No. Customer Class Rates of Service COS Existing Rates Adjustment

$ $ % $ %

Inside City

1 Single Family Residential 15,217,100 14,880,100 97.8 14,579,300 2.1

2 Multi-Family Residential 2,641,100 2,869,900 108.7 2,811,200 2.1

3 Commercial 6,080,400 6,736,600 110.8 6,599,400 2.1

4 Industrial 3,732,700 3,986,400 106.8 3,904,700 2.1

5 Total Inside City 27,671,300 28,473,000 102.9 27,894,600 2.1

Outside City

6 Single Family Residential 2,897,800 2,843,700 98.1 2,786,100 2.1

7 Multi-Family Residential 94,000 100,400 106.8 98,400 2.0

8 Commercial 548,600 608,700 111.0 596,500 2.0

9 Industrial - - 0.0 - 0.0

10 Total Outside City 3,540,400 3,552,800 100.4 3,481,000 2.1

Excess Strength Surcharge

11 Surcharge Customers 2,337,600 1,515,900 64.8 1,515,900 0.0

12 Total Excess Strength Surcharge 2,337,600 1,515,900 64.8 1,515,900 0.0

13 Total System 33,549,300 33,541,700 100.0 32,891,500 2.0



Table 31 - Comparison of Typical Monthly 2021 Wastewater Bills Under Existing and Adopted Rates



kgal $ $ $ %

Inside City

Residential

1" 0 11.75 11.99 0.24 2.04

1" 1 17.01 17.36 0.35 2.06

1" 3.0 27.53 28.10 0.57 2.07

1" 5 38.05 38.84 0.79 2.08

1" 7 48.57 49.58 1.01 2.08

1" 10 64.35 65.69 1.34 2.08

Commercial

1" 0 11.75 11.99 0.24 2.04

1" 20 116.95 119.39 2.44 2.09

1" 50 274.75 280.49 5.74 2.09

2" 100 563.61 575.36 11.75 2.08

2" 250 1,352.61 1,380.86 28.25 2.09

4" 150 906.53 925.38 18.85 2.08

4" 300 1,695.53 1,730.88 35.35 2.08

6" 250 1,550.06 1,582.26 32.20 2.08

6" 400 2,339.06 2,387.76 48.70 2.08

Outside City

Residential

1" 0 20.56 20.98 0.42 2.04

1" 1 29.77 30.38 0.61 2.05

1" 3 48.19 49.18 0.99 2.05

1" 5 66.61 67.98 1.37 2.06

1" 7 85.03 86.78 1.75 2.06

1" 10 112.66 114.98 2.32 2.06

Commercial

1" 0 20.56 20.98 0.42 2.04

1" 20 204.76 208.98 4.22 2.06

1" 50 481.06 490.98 9.92 2.06

2" 100 986.82 1,007.13 20.31 2.06

2" 375 3,519.57 3,592.13 72.56 2.06



70 JANUARY 2020

Table 32 - Comparison of 2021 Typical Monthly Combined Bills Under Existing and Adopted Rates



kgal $ $ $ %

Inside City

Residential

1" 0 24.41 25.60 1.19 4.88

1" 1 34.55 36.22 1.67 4.83

1" 3.0 54.83 57.46 2.63 4.80

1" 5 75.11 78.70 3.59 4.78

1" 7 95.39 99.94 4.55 4.77

1" 10 125.81 131.80 5.99 4.76

Commercial

1" 0 24.41 25.60 1.19 4.88

1" 20 201.81 210.60 8.79 4.36

1" 50 467.91 488.10 20.19 4.31

2" 100 965.13 1,006.92 41.79 4.33

2" 250 2,295.63 2,394.42 98.79 4.30

4" 150 1,574.64 1,643.49 68.85 4.37

4" 300 2,905.14 3,030.99 125.85 4.33

6" 250 2,705.81 2,824.50 118.69 4.39

6" 400 4,036.31 4,212.00 175.69 4.35

Irrigation

1" 3 30.27 32.54 2.27 7.50

1" 5 42.01 45.16 3.15 7.50

2" 50 334.02 359.06 25.04 7.50

2" 100 627.52 674.56 47.04 7.50

Outside City

Residential

1" 0 42.72 44.80 2.08 4.87

1" 1 60.47 63.39 2.92 4.83

1" 3 95.97 100.57 4.60 4.79

1" 5 131.47 137.75 6.28 4.78

1" 7 166.97 174.93 7.96 4.77

1" 10 220.22 230.70 10.48 4.76

Commercial

1" 0 42.72 44.80 2.08 4.87

1" 20 353.32 368.60 15.28 4.32

1" 50 819.22 854.30 35.08 4.28

2" 100 1,689.73 1,762.36 72.63 4.30

2" 375 5,960.48 6,214.61 254.13 4.26




Table 33 - Proposed 2024 – 2026 Wastewater Rates

Proposed January 2024 Proposed January 2025 Proposed January 2026




1" & Below 12.72 22.26 12.97 22.70 13.23 23.15

1.5" 25.45 44.54 25.96 45.43 26.48 46.34

2" 40.71 71.24 41.52 72.66 42.35 74.11

3" 76.34 133.60 77.87 136.27 79.43 139.00

4" 127.22 222.64 129.76 227.08 132.36 231.63

6" 254.44 445.27 259.53 454.18 264.72 463.26

8" 407.12 712.46 415.26 726.71 423.57 741.25

10" 585.23 1,024.15 596.93 1,044.63 608.87 1,065.52


All Customers 5.70 9.98 5.81 10.17 5.93 10.38


BOD over 300 mg/l 0.00216 0.00378 0.00216 0.00378 0.00216 0.00378

TSS over 300 mg/l 0.00137 0.00240 0.00137 0.00240 0.00137 0.00240





72 JANUARY 2020

Stormwater Utility

REVENUE

The City’s stormwater system consists of pipe, stormwater inlets, manholes, detention facilities,

ditches, channels, dam, and levee facilities, including berms, floodwall and pump stations. The City

provides service to customers in the city of Topeka including customers that reside in the North Topeka

Drainage District boundaries.

Customer Growth

Table 34 presents a summary of the historical and projected number of stormwater customers

served in Topeka for the period 2015 through 2026. The accounts are categorized into three main

customer classes: single-family residential, multi-family residential, which includes apartments and

duplexes, and non-residential, which include businesses, schools, government, churches, and industrial.


single-family residential accounts in Topeka and within the North Topeka Drainage District averaged

approximately 0.24 percent and -0.65 percent, respectively. The annual growth rate of the total number

of living units for multi-family residential in Topeka and within the North Topeka Drainage District

averaged approximately -0.29 percent and -0.24 percent, respectively. The annual growth rate of the total

number of equivalent residential units (ERUs) for non-residential customers that reside in Topeka and

within the North Topeka Drainage District averaged approximately 0.79 percent and 1.06 percent,

respectively. For the purposes of projection, the only customer class expected to see an increase is Topeka

residential at 0.20 percent for the next eight years. All other customer classes are expected to remain flat

for the duration of the study.

Stormwater Revenue Under Existing Rates

Table 35 presents the existing schedule of rates for stormwater service that went into effect on

January 1, 2020. The schedule consists of a monthly service charge for all customer classes based on

customer classification. The single-family residential charge is tiered based on impervious area while

multi-family residential pay per living unit and non-residential pay per ERU. An ERU represents 2,018 feet

of impervious area. In recognition that the North Topeka Drainage District levies a tax on residents that

live within the District boundaries, the rate per ERU for residents that are within the boundaries of the

North Topeka Drainage District is discounted $0.83 compared to all other residents.

Table 36 presents a summary of historical stormwater billings for the period 2015 through 2018,

projected stormwater billings for 2019 through 2026. The projected billings for the period 2020 through

2026 are based on the rates that went into effect on January 1, 2020. The historical stormwater billings

shown in this table are summarized from detailed data provided by the City. Estimates of future

stormwater service billings are based on the projected stormwater customers shown in Table 34 and unit

rates of charge under the rates shown in Table 35.


BLACK & VEATCH | Stormwater Utility 73

Other Revenue

Table 37 presents the historical and projected other stormwater utility income. Based on the

2019 adopted budget, there is no projected miscellaneous revenue throughout the study period.

Interest income on the available operating fund balance, calculated at 1.0 percent of the balance

available for investment, is shown in Table 42, Line 10.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

TOPEKA

Single Family Residential (a)

1 Under 1,500 SF 2,941 2,928 2,938 2,928 2,934 2,940 2,946 2,951 2,957 2,963 2,969 2,975

2 1,501 to 3,500 SF 35,812 35,904 36,005 36,017 36,089 36,161 36,234 36,306 36,379 36,451 36,524 36,597

3 Over 3,500 SF 1,529 1,561 1,603 1,640 1,643 1,647 1,650 1,653 1,656 1,660 1,663 1,666

4 Total Single Family Residential (a) 40,282 40,393 40,546 40,585 40,666 40,748 40,829 40,911 40,992 41,074 41,157 41,239

% Change 0.3% 0.4% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

5 Multi Family Residential (b) 12,609 12,667 12,588 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500

6 Non-Residential (c) 68,335 68,631 69,182 69,952 69,952 69,952 69,952 69,952 69,952 69,952 69,952 69,952

7 Total Non-Residential 80,944 81,298 81,770 82,452 82,452 82,452 82,452 82,452 82,452 82,452 82,452 82,452

% Change 0.4% 0.6% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

NORTH TOPEKA (d)

Single Family Residential (a)

8 Under 1,500 SF 231 224 223 221 221 221 221 221 221 221 221 221

9 1,501 to 3,500 SF 1,838 1,839 1,817 1,790 1,790 1,790 1,790 1,790 1,790 1,790 1,790 1,790

10 Over 3,500 SF 115 116 118 117 117 117 117 117 117 117 117 117

11 Total Single Family Residential (a) 2,184 2,179 2,158 2,128 2,128 2,128 2,128 2,128 2,128 2,128 2,128 2,128

% Change -0.2% -1.0% -1.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

12 Multi Family Residential (b) 283 271 270 281 281 281 281 281 281 281 281 281

13 Non-Residential (c) 10,414 10,531 10,534 10,746 10,746 10,746 10,746 10,746 10,746 10,746 10,746 10,746

14 Total Non-Residential 10,697 10,802 10,804 11,027 11,027 11,027 11,027 11,027 11,027 11,027 11,027 11,027

% Change 1.0% 0.0% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

(a) Per Account

(b) Per Living Unit

(c) Per Equivalent Residential Unit (ERU) which is equal to 2,018 square feet of impervious area.

(d) Topeka customers that reside in the North Topeka Drainage District boundary.



Table 35 - Existing 2020 Stormwater Rates

Rate Component

Effective

January 1, 2020

$/month

TOPEKA RESIDENTS

Under 1,500 SF

1,501 to 3,500 SF 3.22

Over 3,500 SF 5.00

Apartments/Duplexes (per each living unit) 7.77

Non - Residential (per ERU) 5.00

NORTH TOPEKA (a)

Under 1,500 SF

1,501 to 3,500 SF 2.69

Over 3,500 SF 4.17

Apartments/Duplexes (per each living unit) 6.48

Non - Residential (per ERU) 4.17


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No. Description 2015 2016 2017 2018 2019 2020 (a) 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

Topeka

1 Revenue from Existing Rates (a)

2 Under 1,500 SF 96,921 96,479 96,824 101,156 107,600 113,100 113,300 113,600 113,800 114,000 114,200 114,500

3 1,501 to 3,500 SF 1,819,970 1,824,684 1,829,838 1,922,274 2,048,200 2,160,300 2,164,700 2,169,000 2,173,300 2,177,700 2,182,000 2,186,400

4 Over 3,500 SF 121,860 124,372 127,753 136,769 145,300 152,900 153,200 153,500 153,800 154,100 154,400 154,700

5 Subtotal - Residential 2,038,751 2,045,535 2,054,415 2,160,199 2,301,100 2,426,300 2,431,200 2,436,100 2,440,900 2,445,800 2,450,600 2,455,600

6 Non-Residential

7 Multi Family Residential 643,064 646,040 641,995 670,183 709,400 746,800 746,800 746,800 746,800 746,800 746,800 746,800

8 Non-Residential 3,485,097 3,500,179 3,528,261 3,758,560 3,970,100 4,179,100 4,179,100 4,179,100 4,179,100 4,179,100 4,179,100 4,179,100

9 Subtotal - Non - Residential 4,128,161 4,146,219 4,170,256 4,428,743 4,679,500 4,925,900 4,925,900 4,925,900 4,925,900 4,925,900 4,925,900 4,925,900

10 Topeka Total 6,166,912 6,191,754 6,224,671 6,588,942 6,980,600 7,352,200 7,357,100 7,362,000 7,366,800 7,371,700 7,376,500 7,381,500

North Topeka (b)

11 Single Family Residential

12 Under 1,500 SF 6,129 5,943 5,922 6,243 6,700 7,100 7,100 7,100 7,100 7,100 7,100 7,100

13 1,501 to 3,500 SF 75,430 75,486 74,568 78,691 83,800 89,200 89,200 89,200 89,200 89,200 89,200 89,200

14 Over 3,500 SF 7,357 7,425 7,555 8,006 8,500 9,100 9,100 9,100 9,100 9,100 9,100 9,100

15 Subtotal - Residential 88,916 88,853 88,045 92,940 99,000 105,400 105,400 105,400 105,400 105,400 105,400 105,400

16 Non-Residential

17 Multi Family Residential 11,596 11,115 11,095 11,900 13,200 14,000 14,000 14,000 14,000 14,000 14,000 14,000

18 Non-Residential 427,392 432,193 432,326 464,674 503,300 535,400 535,400 535,400 535,400 535,400 535,400 535,400

19 Subtotal - Non - Residential 438,988 443,308 443,421 476,574 516,500 549,400 549,400 549,400 549,400 549,400 549,400 549,400

20 North Topeka (b) Total 527,904 532,161 531,467 569,514 615,500 654,800 654,800 654,800 654,800 654,800 654,800 654,800

21 Total 6,694,816 6,723,914 6,756,138 7,158,456 7,596,100 8,007,000 8,011,900 8,016,800 8,021,600 8,026,500 8,031,300 8,036,300

% Change 0.43% 0.48% 5.95% 6.11% 5.41% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06%

(a) Relects adopted rates to be effective January 1, 2020.

(b) Topeka customers that reside in the North Topeka Drainage District boundary.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

1 Fees For Services 0 499 665 0 0 0 0 0 0 0 0 0

2 Misc Interest (a) 113,921 139,581 100,895 140,748

3 Chg Fv Interest Investments (74,534) (111,624) 0 0 0 0 0 0 0 0 0 0

4 Rents 500 0 250 0 0 0 0 0 0 0 0 0

5 Recoveries 0 0 0 550 0 0 0 0 0 0 0 0

6 Prior Yr Items 12 0 0 0 0 0 0 0 0 0 0 0

7 Contribu Developers 1,133,937 37,973 372,517 1,014,086 0 0 0 0 0 0 0 0

8 Other 0 0 0 0 0 0 0 0 0 0 0 0

9 Sale Of Property 0 0 0 0 0 0 0 0 0 0 0 0

10 Sale Of Property Personal Prop 141,944 0 32,500 0 0 0 0 0 0 0 0 0

11 Go Bonds Original Issue 0 (120,012) 0 0 0 0 0 0 0 0 0 0

12 Go Bonds Orig Premium 0 1,597 0 0 0 0 0 0 0 0 0 0

13 Total Miscellaneous Revenue 1,315,781 (51,987) 506,826 1,155,384 0 0 0 0 0 0 0 0

% Change -104.0% -1074.9% 128.0% -100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

(a) Projected interest income included in Tables 41 and 42.


78 JANUARY 2020


The revenue required to provide adequately for the continued operation of the stormwater utility

must be enough to meet the cash requirements for system operations. Revenue requirements include (1)



renewal and replacement (R&R) met from annual revenues. Projections of the cash requirements to meet



The elements of operation and maintenance expenses for the stormwater utility include the

annual expenses associated with collection, ditches, levees, drainage, BMPs, NPDES, and billing collection

and accounting.


commodities such as materials and supplies, and contract services such as fuel and electrical power costs,


administrative support functions that the City provides to the stormwater utility. Annual operation and

maintenance expenses are met principally from annual operating revenue. A summary of projected

operation and maintenance expenses for the period 2019 through 2026 is presented in Table 38.

Operation and maintenance expenses shown for 2019 reflect budgeted amounts. Projections for the years

2020 through 2026 are based on budgeted 2019 expense amounts adjusted to recognize allowances for

known cost increases, the estimated effects of inflation, and anticipated system growth.

The future stormwater utility operating costs are projected to increase from about $4,156,200 in

2019 to about $5,104,800 in 2026, as shown in Line 9.




continuing expense to be met each year, the utility should finance these expenditures from current

stormwater revenues. The projected capital outlay is shown on Line 10 of Table 38.







renewal and replacement of the existing facilities already in the system. The total improvement costs for

the study period are estimated to be $47,612,500 when adjusted to include a 2 percent allowance for

inflation beginning in 2020.





The stormwater utility has six existing revenue bond issuances. The City plans on continuing the practice

of issuing revenue bonds to help pay for both major capital projects and R&R projects. It is common

practice for utilities to debt finance large capital improvement projects. By financing the cost of the

projects, the City can fund large projects immediately and spread the payment over a specified time

frame, thereby helping to offset the impact on rate-payers. Debt service is projected to increase from

$806,300 in 2019 to $3,142,300 in 2026 as a result of additional revenue bond issues.

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No. Description 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $ $ $ $ $

1 Business Services 797,260 802,113 1,059,602 1,143,331 1,173,300 1,208,400 1,244,800 1,282,100 1,320,500 1,360,000 1,400,700 1,442,500


3 Maintenance Collections 1,254,429 1,666,095 1,283,469 1,297,246 1,563,600 1,610,700 1,658,900 1,708,700 1,759,700 1,812,300 1,866,400 1,922,000

4 Maintenance Ditches 158,327 152,189 144,245 179,057 237,900 245,100 252,300 259,600 267,100 274,700 282,600 290,600

5 Maintenance Levee 191,705 64,436 82,952 105,389 168,600 173,800 179,000 184,400 189,900 195,500 201,300 207,300

6 Bmp Management 131,229 114,077 148,417 144,550 147,200 151,400 155,700 160,100 164,600 169,200 173,900 178,700

7 Maintenance Drainage 99,359 76,900 73,420 15 201,000 207,000 213,200 219,600 226,200 233,000 240,000 247,200

8 Npdes 210,298 131,544 162,913 183,681 189,000 194,700 200,400 206,200 212,200 218,400 224,800 231,300

9 Total Operating Costs 3,504,509 3,944,506 3,237,535 3,511,333 4,156,200 4,281,000 4,409,000 4,540,500 4,675,600 4,814,600 4,957,800 5,104,800

10 Capital Outlay 20,885 498,635 221,441 16,858 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000


% Change 12.6% -17.9% 8.5% 18.4% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%


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Line Projected (a)

No. Description 2019 2020 2021 2022 2023 2024 2025 2026 (b) Total

$ $ $ $ $ $ $ $ $


1 Mains 3,200,000 2,040,000 2,400,600 2,497,700 2,598,500 2,703,600 2,812,700 2,926,400 21,179,500

2 Inlets/Manholes 300,000 306,000 895,700 931,800 969,500 1,008,800 1,049,400 1,091,900 6,553,100

3 Levees 200,000 4,896,000 499,200 519,200 540,200 562,100 584,800 608,500 8,410,000

4 Pump Stations 0 0 323,600 336,600 350,300 364,300 379,200 394,300 2,148,300

5 Ditches 300,000 306,000 508,800 523,000 537,600 552,700 568,300 584,300 3,880,700

6 Rivers/Streams 0 0 384,500 400,100 416,300 433,000 450,600 468,800 2,553,300

7 Best Management Practices 250,000 255,000 371,700 381,600 391,600 401,900 412,400 423,400 2,887,600

8 Total - Inflated 4,250,000 7,803,000 5,384,100 5,590,000 5,804,000 6,026,400 6,257,400 6,497,600 47,612,500


9 Major Capital 550,000 561,000 572,200 583,700 595,300 607,200 619,400 631,800 4,720,600


11 Total - Inflated 4,250,000 7,803,000 5,384,100 5,590,000 5,804,000 6,026,400 6,257,400 6,497,600 47,612,500




82 JANUARY 2020

Table 40 - Existing and Proposed Stormwater Long-Term Debt

Line Original Loan Annual Debt Service Requirements

No. Description Amount 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $








7 Total Existing Revenue Bonds 806,300 914,200 937,100 943,700 944,800 1,142,500 1,575,200 1,499,300


8 2019 5,698,000 0 654,100 648,800 618,300 585,100 683,500 182,000 169,800

9 2020 6,426,000 0 351,600 351,600 351,600 351,600 351,600 351,600

10 2021 2,700,000 0 147,700 147,700 147,700 147,700 147,700

11 2022 4,100,000 0 224,300 224,300 224,300 224,300

12 2023 4,300,000 0 235,300 235,300 235,300

13 2024 4,600,000 0 251,700 251,700

14 2025 4,800,000 0 262,600

15 2026 4,400,000 0

16 Total Proposed Revenue Bonds 0 654,100 1,000,400 1,117,600 1,308,700 1,642,400 1,392,600 1,643,000

17 Total Debt Service 806,300 1,568,300 1,937,500 2,061,300 2,253,500 2,784,900 2,967,800 3,142,300




Total revenue requirements of the stormwater utility recognized for purposes of this report

include operation and maintenance expense; payment in lieu of taxes; debt service costs on existing and

proposed debt; and expenditures for routine capital, major capital improvements, and renewals and

replacements met from annual revenues.


Table 41 presents the capital improvement financing plan, which summarizes the projected

source and application of funds over the study period. This plan anticipates that proposed capital

improvements will be financed from a combination of available funds on hand, debt financing, annual

operating revenue, and estimated interest earnings.






percent interest rate over a 30-year period as provided by the City’s financial advisor. Cash financing of

capital improvements from annual revenues is expected to total $11,927,000 for the study period as

indicated on Line 3. The City has a goal to fund a minimum of 10 percent of R&R projects with cash and

the remaining amount with future revenue bonds. Other sources of funds available to meet major capital

improvement expenditures include interest income on capital funds, which is shown on Line 4 and

recognizes an assumed 1.0 percent annual interest rate. Line 5 shows the total of all funds available to

finance the capital improvement program.




The costs associated with debt financing were included in the project costs shown in Table 39. As such,

Lines 7 through 10 represent a total of $47,612,500, as previously summarized in Table 39. Prior revenue

bonds refunded from the 2019 issue are shown in Line 11. Line 12 shows the total of all fund applications,

and the resulting end of year balance is shown on Line 13. The City targets to maintain a cash balance of

25 percent of next year’s major capital improvements and R&R as shown in Line 14.

System Operations

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Sources of Funds



3 Cash Financing of Capital and R&R (c) 1,050,000 1,377,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 11,927,000

4 Interest Income 117,400 56,700 41,000 35,800 37,100 38,800 40,700 42,200 409,700




7 Major Capital Improvements 457,700 504,200 529,800 526,700 537,200 546,900 558,100 575,700 4,236,300



10 Reserve Fund Requirement 569,800 642,600 270,000 410,000 430,000 460,000 480,000 440,000 3,702,400




















a minimum 185-day balance with a target of 300 days, and (4) establishment of rate increases on a








Operation and maintenance expense, previously projected in Table 38, is shown on Line 12. The

stormwater utility pays a payment in lieu of taxes (PILOT) to the City’s general fund. This payment, which

is shown in Line 13, is based on 9.8 percent of the revenue shown on Line 8. The PILOT rate is based on a

combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets.





The total projected debt service is shown on Line 22. Capital outlay for routine capital additions to be

financed from revenue is shown on Line 23. Line 24 reflects the projected transfer of accumulated net

earnings from system operations to assist in major capital and R&R financing.



2019, shown on Line 26, is comprised of the 2018 end of year balance in the stormwater utility fund. The


The City’s policy requires the stormwater utility to maintain a cash reserve equal to 185 days of


As of December 31, 2019, the stormwater utility is expected to have a balance equal to approximately

323 days. The projected number of days is shown on Line 28 and is based on the end of year balance

shown on Line 27 and projected operation and maintenance expense and payment in lieu of taxes shown


86 JANUARY 2020

on Line 12 and 13. The utility’s goal is to maintain at least 300 days of cash on hand, which is achieved by

2026.

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Sources of Funds



3 Cash Financing of Capital and R&R (c) 1,050,000 1,377,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 11,927,000

4 Interest Income 117,400 56,700 41,000 35,800 37,100 38,800 40,700 42,200 409,700




7 Major Capital Improvements 457,700 504,200 529,800 526,700 537,200 546,900 558,100 575,700 4,236,300



10 Reserve Fund Requirement 569,800 642,600 270,000 410,000 430,000 460,000 480,000 440,000 3,702,400









88 JANUARY 2020

Table 42 - Proposed Stormwater Revenue and Revenue Requirements


No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $



2 7.50% Effective January 1, 2021 550,800 551,200 601,600 602,000 602,300 602,700

3 7.50% Effective January 1, 2022 589,100 592,800 647,100 647,500 647,900

4 7.50% Effective January 1, 2023 633,600 637,700 696,100 696,500

5 7.50% Effective January 1, 2024 681,500 685,900 748,800

6 7.50% Effective January 1, 2025 733,100 737,800

7 7.50% Effective January 1, 2026 788,600


9 Other Revenue 0 0 0 0 0 0 0 0


11 Total Revenues 7,651,700 8,070,400 8,627,500 9,223,100 9,920,500 10,672,400 11,482,800 12,356,000


13 Payment in Lieu of Taxes 748,100 788,600 843,300 901,900 970,100 1,043,500 1,122,400 1,207,300


15 Net Revenue 2,747,400 3,000,800 3,375,200 3,780,700 4,274,800 4,814,300 5,402,600 6,043,900


16 Existing Revenue Bonds 806,300 914,200 937,100 943,700 944,800 1,142,500 1,575,200 1,499,300

17 Proposed Revenue Bonds 0 654,100 1,000,400 1,117,600 1,308,700 1,642,400 1,392,600 1,643,000

18 Total Revenue Bond Debt Service 806,300 1,568,300 1,937,500 2,061,300 2,253,500 2,784,900 2,967,800 3,142,300

19 Existing State Revolving Fund Loans 0 0 0 0 0 0 0 0


21 Total State Revolving Loan Debt Service 0 0 0 0 0 0 0 0

22 Total Debt Service 806,300 1,568,300 1,937,500 2,061,300 2,253,500 2,784,900 2,967,800 3,142,300



25 Net Balance 591,100 (244,500) (362,300) (80,600) 221,300 229,400 634,800 601,600









(d)

(e) Beginning balance consists of funds in the Operating Reserve Fund.


The Payment in Lieu of Taxes rate is based on a combination of a franchise fee on gross revenue and a mill levy based on the value of the utility's assets. The resulting percentage may

change over time based on the governing body and City administration.



RATE DESIGN

Existing Rates

The existing schedule of rates for stormwater service that went into effect January 1, 2020, is

shown in Table 35. The rates consist of a monthly service charge by customer class. The single-family

residential charge is based on impervious area with a three-step tiered rate structure. Multi-family

residential is based on the number of living units and non-residential pay per ERU. The rate per ERU for

Topeka residents that live within the North Topeka Drainage District is discounted $0.83 compared to all

other Topeka residents

Proposed Rates

The revenue requirements described in this report provide the basis for recommending

adjustments to existing stormwater rates. The revenue requirements section shows the need for

adjustment and the level of revenue required. As previously indicated in Table 42, the recommended

revenue adjustments needed to fund operations and capital expenditures fully are 7.5 percent per year

for 2021 to 2026.

Considerations recognized in the derivation of the proposed schedules of stormwater rates


indicated desire to (1) develop rate modifications so that the total revenues recovered from stormwater

charges will be at least adequate to recover the respective revenue requirements of the utility, (2) have

the rate adjustments for the years 2021 and 2026 provide a smooth and reasonably increase and (3)

mitigate the impact on customers to the extent possible. In attempting to meet these policy criteria, and

as a result of the collaborative efforts of the City staff, schedules of proposed rates for stormwater service

were developed and presented to the governing body by City staff and recommended for implementation.

The impact that the proposed rates had on customers was an issue for the governing body, and therefore,

to address concerns regarding affordability, the governing body approved lower revenue increases than

were originally proposed. Table 43 presents both the proposed rates for 2021, 2022, and 2023, which

were presented to the governing body and the rates ultimately adopted by the governing body on

December 10, 2019. The adopted rates assume across-the-board increases and will achieve the following:

Maintain the monthly service charge by customer class. The single-family residential charge is

tiered based on impervious area.

Multi-family residential and non-residential pay per ERU.

The adopted rates reflect the City’s current practice to bill Topeka residents that live within the

North Topeka Drainage District at rates that is $0.83 per ERU less than those rates applicable to

all other Topeka residents.

Subsequent Year Rate Adjustments

In addition to the schedule of rates adopted for application effective January 1, 2021, 2022, and

2023, shown in Table 43, schedules of rates proposed for implementation effective each January 1 from

2024 to 2026 are presented in Table 44. These rates are designed to provide for the recovery of total

revenue requirements previously projected herein for 2024, 2025 and 2026.


90 JANUARY 2020

Table 43 - Proposed and Adopted 2021 - 2023 Stormwater Rates

Rate Component

Proposed

Rates

Adopted

Rates

Proposed

Rates

Adopted

Rates

Proposed

Rates

Adopted

Rates

$/month $/month $/month $/month $/month $/month

TOPEKA RESIDENTS


Under 1,500 SF 3.51 3.46 3.83 3.72 4.17 4.00

1,501 to 3,500 SF 5.45 5.38 5.94 5.78 6.47 6.21

Over 3,500 SF 8.47 8.36 9.23 8.98 10.05 9.65

Apartments/Duplexes (per each living unit) 5.45 5.38 5.94 5.78 6.47 6.21

Non - Residential (per ERU) 5.45 5.38 5.94 5.78 6.47 6.21

NORTH TOPEKA (a)


Under 1,500 SF 2.98 2.93 3.29 3.19 3.63 3.46

1,501 to 3,500 SF 4.62 4.55 5.11 4.95 5.64 5.38

Over 3,500 SF 7.18 7.07 7.94 7.69 8.76 8.36

Apartments/Duplexes (per each living unit) 4.62 4.55 5.11 4.95 5.64 5.38

Non - Residential (per ERU) 4.62 4.55 5.11 4.95 5.64 5.38


Effective January 2021 Effective December 2022 Effective December 2023



Table 44 - Proposed 2024 – 2026 Stormwater Rates

Rate Component

Proposed

January 2024

Proposed

January 2025

Proposed

January 2026

$/month $/month $/month

TOPEKA


Under 1,500 SF 4.30 4.62 4.97

1,501 to 3,500 SF 6.68 7.18 7.72

Over 3,500 SF 10.38 11.16 12.00



NORTH TOPEKA (a)


Under 1,500 SF 3.77 4.09 4.44

1,501 to 3,500 SF 5.85 6.35 6.89

Over 3,500 SF 9.09 9.87 10.71



(a) Topeka customers that reside in the North Topeka Drainage District boundary.


92 JANUARY 2020

Combined Utility The water, wastewater, and stormwater charges recommended herein are designed to meet the

cost of service for each year of the study period from 2019 through 2026.

Table 45 is a combined statement of operations for the three utilities. It shows the projected

revenue of the combined utilities, including the proposed revenue increases.

Resolution No. 8818 reflects the City’s Debt Management Policy which was adopted by the

governing body on October 4, 2016, and requires that rates and charges for services furnished by or

through the combined water, water pollution control, and stormwater utility facilities be maintained at

levels that are reasonably expected to yield net revenues equal to at least 125 percent of the annual

principal and interest requirements of all outstanding revenue bonds. Net revenue is defined as gross

revenue less operation and maintenance expense, payments on SRF loans and any required deposits to

the Rebate Fund. Gross revenue is equal to total operating and non-operating revenues excluding grants,

bond proceeds and insurance proceeds.

To produce sufficient revenue to cash finance a portion of the R&R program and to enhance the

marketability of its revenue bond offerings, the City has established a coverage goal of 140 percent to be

maintained by each division on an ongoing basis. This level is well in excess of the 125 percent minimum

required by the bond resolution. As shown on Line 3 of Table 46, the combined utility annual coverage is

projected to exceed the 125 percent minimum coverage in all years of the study period and exceed 140

percent beginning in 2024.

In addition to the coverage requirement on outstanding revenue bonds, the City must maintain

rates that are reasonably expected to yield net revenues equal to at least 100 percent of annual principal

and interest requirements on all outstanding SRF loans. Net revenue is defined as gross revenue less

operation and maintenance expenses and payment in lieu of taxes. The City has established a coverage

goal of 120 percent to be maintained by each division on an ongoing basis. As shown on Line 7 of Table

46, the combined utility annual coverage on SRF loans is projected to exceed the 120 percent goal in all

years of the study period.

In order to issue additional revenue bonds, the City must have sufficient revenues to provide the

level of debt service coverage specified in the covenants of the City’s existing revenue bond resolution.

As indicated on Line 11 of Table 46, net revenues of the utility exceed the minimum additional revenue

bond coverage requirement of 125 percent for each year of the study period.


BLACK & VEATCH | Combined Utility 93

Table 45 - Comparison of Combined Projected Revenue Under Existing Rates with Projected Revenue Requirements


No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $



2 5.14% Effective January 1, 2021 3,618,900 3,902,100 3,956,400 3,960,700 3,964,800 3,969,000

3 5.21% Effective January 1, 2022 3,857,900 4,163,000 4,221,400 4,225,900 4,230,500

4 5.28% Effective January 1, 2023 4,117,800 4,443,000 4,505,900 4,510,700

5 5.35% Effective January 1, 2024 4,396,800 4,743,600 4,811,300

6 5.42% Effective January 1, 2025 4,696,300 5,066,500

7 5.49% Effective January 1, 2026 5,018,100


9 Other Revenue 3,663,900 3,663,900 4,963,900 4,963,900 4,963,900 4,963,900 4,963,900 4,963,900


11 Total Revenue 76,495,700 80,942,100 85,997,800 90,235,600 94,811,700 99,728,200 104,995,900 110,617,900



14 Net Revenue 29,256,300 32,282,100 35,758,300 38,330,100 41,172,600 44,288,500 47,686,600 51,364,000





18 Existing State Revolving Fund Loans 6,375,600 6,232,400 6,089,200 6,089,200 6,089,200 1,824,300 1,824,300 1,824,300


20 Total State Revolving Loan Debt Service 6,375,600 6,232,400 6,089,200 6,089,200 6,089,200 1,824,300 1,824,300 1,824,300


22 Capital Outlay/Equipment 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000


24 Net Balance 6,555,000 3,764,500 (1,607,400) (1,879,800) (1,173,500) 3,273,700 3,479,500 4,422,300

25 Beginning Fund Balance (d) 32,056,800 38,611,800 42,376,300 40,768,900 38,889,100 37,715,600 40,989,300 44,468,800



27 Number of Days - Actual (e) 298 318 296 273 257 270 283 301





(d) Beginning balance consists of funds in the Operating Reserve Fund.

(e) Reflects number of days of operation & maintenance expense and PILOT.

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No. Description 2019 2020 2021 2022 2023 2024 2025 2026

$ $ $ $ $ $ $ $

Rate Covenant Coverage

1 Net Water Revenues Available for Revenue Bonds 30,147,200 33,535,200 37,501,400 40,468,500 43,737,500 51,573,500 55,456,900 59,652,400

2 Annual Revenue Bond Debt Service 17,129,700 21,474,100 24,809,400 27,110,900 29,202,800 28,325,400 31,469,400 33,654,100

3 Debt Service Coverage 176% 156% 151% 149% 150% 182% 176% 177%

4 Rate Covenant (Min. Required) 125% 125% 125% 125% 125% 125% 125% 125%

5 Net Water Revenues Available for KDHE Revolving Loans29,256,300 32,282,100 35,758,300 38,330,100 41,172,600 44,288,500 47,686,600 51,364,000

6 Annual KDHE Revolving Loans Debt Service 18,376,300 20,227,500 23,562,800 25,864,300 27,956,200 27,078,800 30,222,800 32,407,500



Additional Bonds Coverage

9 Net Revenues Available for Debt Service 30,147,200 33,535,200 37,501,400 40,468,500 43,737,500 51,573,500 55,456,900 59,652,400

10 Maximum Annual Debt Service 19,626,861 21,951,356 26,049,556 28,152,206 29,202,706 30,246,080 32,477,697 33,928,338



final report on revenue requirements, …...final report on revenue requirements, cost of service,...

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