Rate Study Developments
The City of Fullerton Water Utility has been, since November 2010, in the process of conducting a water rate study. During several public meetings in 2010, concerns were expressed regarding the annual transfer from the Water Fund to the General Fund, and whether this transfer complies with Proposition 218.Historically, this transfer has been set at 10% of the utilities gross revenues and is in lieu of franchise fees and property taxes.However, Proposition 218 states that fees and charges shall not exceed the cost of providing the service for which the fee or charges are imposed.To examine whether the City’s current methodology complies with Proposition 218, the City has done a comprehensive study to determine the direct and indirect cost of service provided by the City’s General fund to the Water Fund.
Rate Study Background
The goal of the study is to ensure that the revenues cover the cost of services, meet the debt coverage requirements, and provide revenue for capital improvements.
The City of Fullerton has approximately 31,000 water service connections and maintains 420 miles of potable water mains with 11 wells and 15 reservoirs on 12 pressure zones.
Why do a Rate Study?
The main reason is insufficient funds to meet the rising costs for needed improvements to city water infrastructure (pipelines, reservoirs, pump station equipment and wells).For example, the City’s 105-year old water system needs $60 million to replace aging water mains that have reached their useful life (70 years). Postponing this replacement could cause service disruptions that may cost more money, along with inconvenience to the community.The graph below shows the aging water pipeline by decade in the City.
Funding for Capital Improvement Projects
Need for Reliable Infrastructure
Monthly Rate Comparisons
The chart below shows the City of Fullerton’s current single family residential water rate compared to nearby Cities. While the cost structure and facilities vary between utilities, rate comparisons provide the City a barometer of its rates in relation to surrounding communities.The figure below compares the estimated monthly bill (July, 2013) for 14,000 gallons of water consumption.