Wastewater (Sewer) Rate Update

Background

The original Wastewater Treatment Plant was constructed in 2002 (Phase 1). An expansion to the plant occurred in 2016 to service existing demands and population to roughly 10,000 (Phase 2). A Master Plan was initiated by Jacobs in August 2019 for the Collection System and Wastewater Treatment Plant (WWTP). The WWTP portion of the Master Plan completed in July 2020 demonstrated the need for WWTP expansion (Phase 3). State regulatory requirements also play a role in this needed expansion and the plant’s ability to properly treat the incoming wastewater. This Phase 3 expansion would double the existing plant’s hydraulic capacity (0.9 MGD to 1.8 MGD), provide treatment ability to meet State regulatory requirements, come online in early 2024, and provide future service to a population of roughly 25,000. Design of Phase 3 expansion was initiated with Jacobs in December 2020 for roughly $4.9M. (This includes design fees and construction management fees.) Design decisions are currently being made as the team approaches the 30 percent level with that package expected to be delivered early May 2021.

Funding Scenarios

Staff created a spreadsheet model which allowed the team to input funding scenarios and see the results immediately. More than 50 different scenarios were explored. The goal is to find a balance between impact fees, sewer base rate, usage rates and maintain fund balance without chasing away development, over burdening current users, and the ability to service the debt. Because the water and sewer plans are so closely related, the team originally used the same number of taps over the next 3 to 4 years (through 2024 when the new water and wastewater plants are commissioned) based on the assumption that the water plant (including the Conventional, Nano, RO, and Microfiltration facilities) will continue to support the water demands moving forward.

In addition, after the water plant discussion and the consideration of several pieces of debt being stacked within a fund, the team discussed the need to be financially responsible to the current and future citizens of Wellington. The concept of the sinking fund was added to the scenarios so that we have the funding in place to pay off the existing loan prior to Phase 4 of the WWTP coming on board. For example, if the population base reaches 25,000 in 2033 as originally estimated by Jacobs, the loan balance outstanding will be approximately $15,000,000. The goal and fiscally responsible plan would be to pay off the existing debt in addition to saving some of the impact fees for the future plant expansion and funding. The model allows for the sinking fund to be added at different times with different amounts being used to service the debt.

The team has selected three scenarios to demonstrate the results. The first example would be to do nothing. The tap fees, base rate and user fees remain the same. This scenario would not allow us to make the debt service for even one year. Scenario two displays the option of increasing the tap fees to $9,700 with annual increases of $300 programmed, and an average flat base rate increased to $46 per month and average usage rate increased to $15 per month. This scenario works; however, the initial increase results in the average user paying $61 per month. Scenario three displays the recommended option the team believes demonstrates the best compromise while achieving Town goals. This scenario involves increasing tap fee to $9,700 with annual increases of $300 programmed in addition to gradual increases in both the base rate and usage rate. This scenario recommends the base rate initially increases to $36 per month and the usage rate increases to $13 per month for a total average residential monthly bill of $49 which is significantly less than scenario 2. Over time small increases are anticipated which allow the users to plan accordingly. In addition, the sinking fund does not begin until 2026 yet still would provide pay off ability of the Phase 3 SRF loan in about 2036 and fund portions of the Phase 4 expansion.

Explore the Financial Model - We Want Your Feedback! 

The Wastewater Treatment Plant (WWTP) Financial Model spreadsheet (Microsoft Excel) that was presented by Town staff during the Board of Trustee's work session on April 20 is available for download below.  The model predicts impacts to the Town's sewer fund through year 2024 based on user input parameters.  The first page on the spreadsheet entitled, "Input" shows all the primary inputs that are used in the model.  The second page, "Growth" shows estimated growth projections.  Population estimates (based on 3.2 persons per household), growth taper rates, and estimated number of new home permits are presented on this page.  Please note that these growth projection numbers are subject to change.  The page, "Analysis" contains tabulations and calculations of revenues, expenditures, and financial results within the Town's sewer fund.  Values on this page are used to produce the working chart on page, "Rates" where the Town's current impact fees, sewer base rates, and sewer usage rates (per 1,000 gallons) are indicated.  The green shaded cells on this page can be modified by the user to explore different rate scenarios.  Changes enter by the user and those results to the sewer fund will be graphically displayed on the chart.  The cells in row 6 will indicate whether the required reserves are met or not.  The required reserves, indicated by the orange line on the chart, reflect 110 percent of annual debt services as part of the Town's required reserve policy.  Except for the green cells on the "Rates" page, all cells are locked to prevent accidental entries or unintended changes to any of the formulas.  

Download Excel File: Wastewater Treatment Plant Financial Model

Disclaimer: This Financial Model spreadsheet is being provided herein with the expressed understanding that the Town of Wellington is releasing this product at the user's own risk.  It is the end users who are expected to take all steps necessary to ensure proper use and understanding of this product and that all information is being interpreted and applied properly.