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1. What are the primary reasons we have to raise our rates every year?

1. Water utility is a financially self-supporting enterprise, and water rates are the main source of revenue for the water fund. Rates need to be set at levels adequate to fund the cost of providing service. 
2. Cost of service, which includes providing operational and maintenance of the system; groundwater pumping and treatment costs from the City’s wells; operational and conveyance costs of treated surface water supplied by MID’s Modesto Regional Water Treatment Plant; required state mandated water-related studies and planning documents.
3. Cost of compliance with new public water supply regulations designed to protect public health and deliver safe and reliable drinking water, in particular groundwater contamination treatment in City wells, for both existing and future customers.
4. Construction projects to correct existing deficiencies and aging infrastructure, including replacement of 50+ year-old wells; replacement of old leaky and undersized steel water pipelines with PVC pipes; installation of water treatment at well sites to meet State and Federal water quality standards; replacement of undersized and deficient water mains.
5. Maintains reliability and sustainability of the City’s water system.
6. Meet City’s financial policies and maintaining 25% operational reserves.

2. Do we have to have a rate increase every year or can we stagger them more and have every other year?

• Rate increases are necessary to ensure that the City has adequate funds to operate and maintain its extensive water system. As these costs increase, these must be passed onto the customer. The City strives to ensure that any rate increases are gradual over a period of time in order to minimize impacts to our customers. Customers could see relatively larger increases every other year (or so) if the rate increases are staggered or deferred.
• The proposed rate increases are uniform over the next 5 years, which provides predictability, avoids wide rate fluctuations and mitigates any larger rate increases in the future.
• If adopted, 4.5% is the maximum rate increase that the City will implement annually. However, should the City receive any alternative funding, City Staff can reassess the impact to the water fund, and recommend a lower rate increase.

3. What happens if we don’t raise the rates every year?

• The proposed rate increases of 4.5% annually over the next 5 years is less than the projected inflationary increases of 5.0%. Delaying or deferring rate increases could result in larger rate increases in the future, in order to catch up with increasing inflation and cost of service.
• City may not be able to meet its financial policies, including reductions in water fund reserves for emergencies, negatively impact both the City’s debt coverage ratio (need to maintain a 2.0 or greater) and the City’s bond credit rating (which will increase the cost of debt issuance)
• The City would need to reprioritize maintenance and construction projects due to the reduction of funding. Some water system projects would be deferred.
• Level of service and response times could also be decreased. Emergency and regulatory-required projects would be prioritized over minor repairs and proactive maintenance.
• Deferring necessary regulatory and system required projects would cost the rate payers more in the future. This could include closing City water wells due to contamination, which would impact the City’s water system redundancy and reliability, especially in droughts.
• Reduction in various water programs, including water conservation rebates and Water Wise consultations, which actually help ratepayer reduce water usage and save money on their water bill.

4. Where do we get our water from?

• The City of Modesto’s water supply is from City owned groundwater wells and treated surface water purchased from the Modesto Irrigation District.
• Treated surface water and groundwater from the City’s wells are used conjunctively in our water service areas.
• The City currently has a total of 91 wells (77 active, 14 inactive (due to water quality). 18 wells have been destroyed since 2016, all due to water quality issues)
• On average the city provides its customers a 50/50 blend of well water and treated surface water

5. Do we buy or sell our water? If so, from/to whom?

• The City purchases surface water that is treated at the Modesto Regional Water Treatment Plant from the Modesto Irrigation District.
• The City only supplies Modesto’s ratepayers with water. Water is not exported to any other customers

6. Do we have water quality issues and if so, what are they, how serious, how do they get addressed?

• All drinking water supplied by the City must meet both stringent State and Federal guidelines. If a particular City groundwater well has water quality issues, the City will either economically provide treatment for the water, or turn the well off.
• There are currently 14 inactive wells that are currently offline due to various contaminant issues (High Nitrates, 1,2,3-trichloropropane (TCP), 1,2,-dibromo-3-chloropropane (DBCP), etc.). The City is actively working on providing respective treatment solutions to each of the inactive wells to bring them back online and meeting the necessary state and federal water regulations.

7. Is our drinking water safe and reliable? How does the City verify that?

• The City’s drinking water is safe and reliable. All water supplied by the City meets the stringent State and Federal drinking water requirements.
• As required by state and federal regulations, the City continuously monitors the City’s groundwater quality through extensive testing and performs proactive maintenance daily to ensure all customers receive high quality drinking water at sufficient water pressures 24 hours per day, 365 days per year.

8. What happens to our water and our rates in the event of another drought?

• The City, along with its regional partners, are continuously monitoring our precious water supplies, both surface and groundwater. The City coordinates with MID to receive information for our annual treated surface water allocation.
• This information is used, in conjunction with the City’s groundwater level and supply information, to determine if any City water restrictions are necessary.
• During dry years, the City may elect to adjust its watering schedules, and reduce the days allowed for outdoor watering.
• If the State of California’s governor declares a statewide drought, the City will reduce outdoor watering and implement a drought water rate.
• This drought water rate is a higher cost per unit of water (1 CCF = 748 gallons) and is only applied during a declared drought emergency. This higher rate helps recovers costs due to reduced water usage by our customers. Once the drought is declared over, water rates will return to a non-drought rate.

9. Why do some surrounding cities have lower rates?

• The average base rate will increase by $1.72 for a one-inch meter, going from $36.83 to $38.55.
• The cost of water per unit (volumetric), measured in hundred cubic feet, will increase by $0.09 from $2.02 per hundred cubic feet to $2.11 per hundred cubic feet.
• A measurement of one hundred cubic feet (CCF) is equal to 748 gallons of water so each customer will be paying $2.11 for each 748 gallons of water used.
• Average residential water usage (1-inch meter) is equal to 15 CCF, 1 CCF equals 748 gallons
  • Water Bill Calculation is equal to the Fixed cost plus the variable rate
  • Current Bill = $36.83 + (15 CCF x $2.02/CCF) = $67.13
  • Proposed Increase = $38.55 + (15 CCF x $2.11/CCF) = $70.20 ($3.07 increase)

10. Is there assistance to help with this increase?

Yes, the City of Modesto offers a Utility Billing Assistance program for eligible applicants. Once approved, the customer receives a reduction of $45.00 off of their monthly charges. To qualify, the applicant must be listed on the City of Modesto utility account and must be enrolled in one of the following eligible assistance programs:

• CARES (MID, TID, PG&E)
• CalWorks
• CalFresh
• General Assistance
• Medi-Cal
• California Supplemental Nutrition Program for Women, Infants, and Children (WIC)
• State Supplementary Payments (SSP)
• Supplemental Security Income (SSI)

Staff is proposing to increase the Utility Billing Assistance program amount from $35.00 to $45.00.  For those that qualify, this amount should adequately cover the average monthly water usage increases. 

The City is also a Direct Pay partner for the State of California Low Income Household Water Assistance Program. This program offers low-income households a one-time payment of up to $2,000 on a past due utility bill or up to $1,030 on a current utility bill. To apply or for more information, customers can visit the California Department of Community Services and Development website or call 1-866-675-6623.

11. How much will monthly rates increase for the average customer?

• The average base rate will increase by $1.72 for a one-inch meter, going from $36.83 to $38.55.
• The cost of water per unit (volumetric), measured in hundred cubic feet, will increase by $0.09 from $2.02 per hundred cubic feet to $2.11 per hundred cubic feet.
• A measurement of one hundred cubic feet (CCF) is equal to 748 gallons of water so each customer will be paying $2.11 for each 748 gallons of water used.
• Average residential water usage (1-inch meter)= 15 CCF, 1 CCF = 748 gallons
  • Water Bill Calculation = Fixed cost + variable rate
  • Current Bill = $36.83 + (15 CCF x $2.02/CCF) = $67.13
  • Proposed Increase = $38.55 + (15 CCF x $2.11/CCF) = $70.20 ($3.07 increase)

Current and Proposed Water Rate Comparison

Volumetric Rates	Current	Proposed October 1, 2023	Proposed October 1, 2024	Proposed October 1, 2025	Proposed October 1, 2026	Proposed October 1, 2027
Non-Drought ($/CCF)	$2.02	$2.11	$2.20	$2.30	$2.40	$2.51
Drought ($/CCF)	n/a	$2.45	$2.56	$2.68	$2.80	$2.93

Monthly Fixed Charge

Meter Size	Current	Proposed October 1, 2023	Proposed October 1, 2024	Proposed October 1, 2025	Proposed October 1, 2026	Proposed October 1, 2027
5/8"	$25.44	$26.43	$27.62	$28.86	$30.16	$31.52
3/4"	$25.44	$26.43	$27.62	$28.86	$30.16	$31.52
1"	$36.83	$38.55	$40.28	$42.09	$43.98	$45.96
1.5"	$65.32	$68.85	$71.95	$75.19	$78.57	$82.11
2"	$99.50	$105.21	$109.94	$114.89	$120.06	$125.46
3"	$207.73	$220.35	$230.27	$240.63	$251.46	$262.78
4"	$367.24	$390.03	$407.58	$425.92	$445.09	$465.12
6"	$748.90	$796.05	$831.87	$869.30	$908.42	$949.30
8"	$1,375.53	$1,462.65	$1,528.47	$1,597.25	$1,669.13	$1,744.24
10"	$2,173.05	$2,311.05	$2,415.05	$2,523.73	$2,637.30	$2,755.98
12"	$2,856.63	$3,038.25	$3,174.97	$3,317.84	$3,467.14	$3,623.16