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WORK SESSION
City Council Meeting Agenda
City of Galesburg, Illinois
Erickson Conference Room
March 29, 2021
Members of the public who would prefer to view Galesburg City Council meetings remotely, can view the council
meetings on Comcast channel 7 or stream the meetings live on the City’s website.
5:30 p.m. Roll Call Pledge of Allegiance
21-4032 Approve Temporary Phase 4 Rules for Liquor License Establishments
Discussion Water rate study and policies
Public Comment
Adjournment
CITY OF GALESBURG
COUNCIL LETTER
MARCH 29, 2021
AGENDA ITEM:Temporary Phase 4 Rules for Liquor License Establishments
SUMMARY RECOMMENDATION:The City Manager, City Clerk and City Attorney /
Administrative Services Director recommend approval of the temporary rules.
BACKGROUND:Last year, the City Council approved temporary outdoor liquor license
protocol while the State was in Phase 4 of the Restore Illinois Plan. As the warm weather
approaches, we would like to continue to allow outdoor operations while the State is still in
Phase 4 and is restricting indoor capacity at restaurants and bars. These rules will be reevaluated
if and when the State moves to Phase 5.
BUDGET IMPACT: None
SUPPORTING DOCUMENTS:
1. Temporary Phase 4 Rules for Liquor License Establishments
___________________________________________________________________________________________________________________________________________________________________________________________Prepared by: KRB Page 1 of 1
21-4032
2021 Temporary COVID-19
Liquor License Establishment Protocol
The restrictions on outdoor operations and other regulations of the Galesburg Municipal Code and
administrative regulations issued regulating restaurants and bars for outdoor dining service are
hereby suspended and replaced with these rules during this Phase 4 period until November 1, 2021.
1.All guidelines set forth and attached by the Illinois Department of Commerce & Economic Opportunity
must be followed unless otherwise outlined below.
2.Patrons are not permitted to take alcoholic beverages outside the designated outdoor area.
3.No smoking is allowed within 15 feet of the outdoor area.
4.All seated areas must be arranged so that tables allow for 6 feet between parties.
5.If serving alcohol, the outdoor area must be completely enclosed by a non-permanent barrier at least
four feet high to serve as a defined area.Caution tape and snow fence are not acceptable.
a.This barrier must not allow easy ingress/egress except at the entrance.
b.If using City-owned property, and serving alcohol,a four foot fence must be used.
6.This temporary license shall be limited to that area owned, leased or rented by the license holder on
which the premises is located, unless the City of Galesburg has allowed the sidewalk or City-owned
parking lot to be used.
7.The hours of operation allowed will be 7 a.m. to 1 a.m., Sunday through Thursday; and 7 a.m. to 2 a.m.
on Friday and Saturday.
8.The following rules shall apply for use of City-owned property:
a.Maintain a three-foot wide unobstructed pedestrian walkway at all times on the sidewalk.
b.A five-foot clear zone shall be maintained at a corner location of two public sidewalks.
c.No applicant shall make any permanent installation on the sidewalk.
d.Operate the outdoor dining so that it does not interfere with pedestrian traffic or vehicular
traffic, or access into or from any building.
e.If using City-owned tables, they should not be altered in any way. Any damage, including drilling
holes, will be repaired by the City and charged to the business.
9.If using City-owned sidewalks or parking lots, the City Clerk’s office must receive a copy of your
certificate of liability insurance listing the City as an additional insured.
10.Excessive noise is prohibited.
11.The establishment and employees must regularly monitor the outdoor area for trash and debris
generated as part of your outdoor operation and take immediate action to clean up and remove any of
these items from the outside area or the sidewalk near your premises.
12.Any outdoor dining area found to be in violation of any State,County,or City requirements shall have
immediate modifications made to achieve compliance.If proper changes cannot be made,the seating
area shall be removed.
Dated March 29, 2021
Economics | Strategy | Stakeholders | Sustainability
www.newgenstrategies.net
911-A Commerce Road
Annapolis, MD 21401
Phone: (410) 266-9101
March 18, 2021
Wayne E. Carl, P.E.
Director of Public Works
City of Galesburg
55 W Tompkins St.
Galesburg, IL 61401
Subject: Water Cost of Service and Rate Study Final Report
Dear Mr. Carl:
NewGen Strategies and Solutions, LLC (NewGen) is pleased to submit to the City of Galesburg this final
report detailing our completed Water Cost of Service and Rate Study and including revisions based on
feedback from the City Council work session held on February 22, 2021. This report details the results of
our analysis of the forecasted costs of providing water service to the City’s customers and our
recommendations for recovering these costs over the next five years. The study provides a number of rate
structure alternatives that will maintain the financial health and stability of the City’s water operations
while addressing service affordability for the City’s customers.
We appreciate the opportunity to provide our professional services to the City and would like to express
our sincere appreciation to City staff. The dedication and assistance provided by City staff was essential
to the completion of this study. It has been a distinct pleasure to work with the City of Galesburg.
Should you require additional information regarding the enclosed report, please contact me at 443-951-
4207 or via e-mail at ecallocchia@newgenstrategies.net.
Very truly yours,
Eric Callocchia
Executive Consultant
NewGen Strategies and Solutions, LLC
Table of Contents
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Table of Contents
Executive Summary ............................................................................................................................ 1
Section 1 Project Background and Scope ............................................................................................. 5
Study Background ............................................................................................................................... 5
Study Objectives and Guiding Principles ............................................................................................ 6
Study Approach .................................................................................................................................. 6
Fiscal Year ........................................................................................................................................... 7
Section 2 Water System Revenue Requirements ................................................................................. 9
Major Study Assumptions .................................................................................................................. 9
Operating Budget Escalation Factors ....................................................................................... 9
Minimum Required Water Fund Cash Balance ...................................................................... 10
Operating and Maintenance Expenses ............................................................................................. 10
Existing Debt Obligations .................................................................................................................. 11
Capital Improvement Plan ................................................................................................................ 11
New Total Debt Service Projections ....................................................................................... 14
Miscellaneous Non-Rate Revenues ........................................................................................ 15
Revenue Requirement Projection .................................................................................................... 18
Section 3 Customers and Consumption ............................................................................................. 19
Retail Customers and Consumption ................................................................................................. 19
Wholesale Customers ....................................................................................................................... 21
Other Retail Water Revenue Sources ............................................................................................... 22
Bulk Water Usage ................................................................................................................... 22
Master Meter ......................................................................................................................... 22
Fire Protection Customers ................................................................................................................ 22
Total Revenue Breakdown ............................................................................................................... 23
Section 4 Financial Plan and Recommended Rates ............................................................................ 24
Financial Projections Under Current Rates ...................................................................................... 24
FY 2020 Retail Rates ............................................................................................................... 24
FY 2020 Private Fire Protection Rates .................................................................................... 25
FY 2020 Wholesale Rates ....................................................................................................... 25
Cash Flow and Fund Balance Projections Under Current Rates ............................................ 25
Residential Customer Affordability ........................................................................................ 28
Recommended Revenue Increases .................................................................................................. 30
Projected Rates with No Change in Rate Structure ............................................................... 30
Recommended Rate Structure Alternatives ..................................................................................... 34
Fire Protection Revenue Increases and Rate Alternative ...................................................... 34
Retail and Wholesale Rate Alternative Scenarios .................................................................. 40
Wholesale Rates under Alternative Structures ...................................................................... 40
Facility Fee Alternative 1: Reduced Facility Fee ..................................................................... 41
Facility Fee Alternative 2: Per Unit Facility Fee ...................................................................... 44
CCF Rate Alternative 1: 4 CCF Allowance per Account .......................................................... 47
Table of Contents
ii Thoughtful Decision Making for Uncertain Times
CCF Rate Alternative 2: Per Unit Facility Fee and 4 CCF Allowance per Unit ......................... 49
Cash Flow Under Recommended Revenue Increases ...................................................................... 51
Section 5 Customer Affordability Impacts and Bill Comparisons ........................................................ 54
Residential Customer Affordability Impact ...................................................................................... 54
Regional Bill Comparison .................................................................................................................. 57
Section 6 Long Term Financial Projections......................................................................................... 58
Section 7 Findings and Recommendations ........................................................................................ 60
List of Tables and Exhibits
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
List of Tables and Exhibits
Table E-1 Water Fund Net Revenue Requirement Projection ...................................................................... 1
Exhibit E-2 Expenses vs. Revenues Under Current FY 2020 Rates ................................................................ 2
Exhibit E-3 Projected Water Fund Cash Balance Projection Under Current FY 2020 Rates ......................... 2
Table E-4 Recommended Revenue Increases ............................................................................................... 3
Table 4-33 Projected Monthly Customer Bills – Median Residential Customer (5/8” Meter, 1
Unit, 4 CCF) ........................................................................................................................................ 4
Table 2-1 Operating Budget Escalation Factors ............................................................................................ 9
Table 2-2 Minimum Water Fund Cash Balance Recommendation ............................................................. 10
Table 2-3 Projected Operating and Maintenance Expenses ....................................................................... 11
Table 2-4 Current Debt Service Obligations by Issue .................................................................................. 11
Table 2-5 FY 2020 – FY 2025 Capital Projects ............................................................................................. 12
Exhibit 2-6 Ten-Year Capital Plan Summary by Funding Source ................................................................. 13
Table 2-7 FY 2020 – FY 2030 Debt Financed Capital Projects ..................................................................... 13
Exhibit 2-8 Total Water Debt Service Projections ....................................................................................... 14
Table 2-9 Projected Debt Service Coverage Ratio – Current and Recommended Rates ............................ 15
Table 2-10 Projected Sanitary District Billing Cost ...................................................................................... 16
Table 2-11 Water System Non-Rate Revenues ........................................................................................... 17
Table 2-12 Water Fund Net Revenue Requirement Projection .................................................................. 18
Table 3-1 FY 2019 Retail Customer Meters ................................................................................................ 20
Table 3-2 FY 2019 Retail Customer Usage by Customer Type (CCF) ........................................................... 20
Exhibit 3-3 Percent Breakdown of FY 2019 Usage (Inside City) .................................................................. 21
Table 3-4 FY 2019 Wholesale Customer Meters and Usage ....................................................................... 22
Table 3-5 FY 2019 Inside City Fireline Accounts ......................................................................................... 23
Exhibit 3-6 FY 2019 Revenue Percentage Breakdown ................................................................................ 23
Table 4-1 FY 2020 Retail Rates – Monthly Facility Fees .............................................................................. 24
Table 4-2 FY 2020 Retail Rates – Usage Rate per CCF................................................................................. 24
Table 4-3 FY 2020 Fire Protection Fees ....................................................................................................... 25
Table 4-4 FY 2020 Wholesale Facility Fees and Usage Rate ....................................................................... 25
Exhibit 4-5 Expenses vs. Revenues Under Current FY 2020 Rates .............................................................. 26
Exhibit 4-6 Projected Water Fund Cash Balance Projection Under Current FY 2020 Rates ....................... 27
Exhibit 4-7 – Historical Cost Increases, 2000 - 2018 ................................................................................... 28
Exhibit 4-8 – Residential Customer Affordability Analysis – FY 2020 Rates ............................................... 29
Table 4-9 Recommended Revenue Increases ............................................................................................. 30
Table 4-10 Monthly Fireline Rates – No Rate Structure Change ................................................................ 31
Table 4-11 Projected Facility Fees – No Rate Structure Change ................................................................. 31
Table 4-12 Projected CCF Rates .................................................................................................................. 33
Table 4-13 FY 2020 Wholesale Facility Fees and Usage Rate ..................................................................... 33
Table 4-14 Projected Monthly Customer Bills – No Rate Structure Change .............................................. 33
Exhibit 4-15 The Maine Curve ..................................................................................................................... 36
Table 4-16 FY 2020 Fire Protection Meter Equivalent Calculation ............................................................. 37
Table 4-17 Fire Protection Meter Equivalent Phase-In Plan ....................................................................... 37
Table 4-18 Fire Protection Cost Allocation Calculation .............................................................................. 38
Table 4-19 Recommended Monthly Fireline Rates..................................................................................... 39
Table 4-20 Projected Facility Fees – Alternative 1: Reduced Facility Fee ................................................... 41
List of Tables and Exhibits
iv Thoughtful Decision Making for Uncertain Times
Table 4-21 Projected CCF Rates – Facility Fee Alternative 1: Reduced Facility Fee.................................... 42
Table 4-22 Wholesale Facility Fees and Usage Rates – Alternative 1: Reduced Facility Fee ...................... 42
Table 4-23 Projected Monthly Customer Bills – Facility Fee Alternative 1 ................................................. 43
Table 4-24 FY 2019 Retail Customer Meters vs Units ................................................................................. 44
Table 4-25 Facility Fee Alternative 2: Per Unit Facility Fees – 5/8, 3/4 Meter Size .................................... 45
Table 4-26 Projected CCF Rates – Alternative 2A ....................................................................................... 46
Table 4-27 Projected Wholesale Facility Fees and CCF Rates – Alternative 2A .......................................... 46
Table 4-28 Projected Monthly Customer Bills – Facility Fee Alternative 2 ................................................. 46
Table 4-29 FY 2021 Estimated Retail Customer Usage – 4 CCF Allowance per Account ............................ 48
Table 4-30 Projected CCF Rates under CCF Rate Alternative 1: 4 CCF Allowance per Account ................. 48
Table 4-31 Projected Monthly Customer Bills – CCF Rate Alternative 1 .................................................... 48
Table 4-32 FY 2021 Estimated Retail Customer Usage – 4 CCF Allowance per Unit .................................. 50
Table 4-33 CCF Rates Alternative 2: 4 CCF Allowance per Unit .................................................................. 50
Table 4-34 Projected Monthly Customer Bills – CCF Rate Alternative 2 .................................................... 51
Exhibit 4-35 Expenses vs. Revenues Under Recommended Rate Increases ............................................... 52
Exhibit 4-36 Projected Water Utility Cash Balance Under Recommended Rates ...................................... 53
Exhibit 5-1 Residential Customer Affordability Analysis – FY 2020 Rates .................................................. 54
Exhibit 5-2 Residential Customer Affordability Analysis – FY 2021 Facility Fee Alternative 1.................... 55
Exhibit 5-3 Residential Customer Affordability Analysis – FY 2021 Facility Fee Alternative 2.................... 55
Exhibit 5-4 Residential Customer Affordability Analysis – CCF Rate Alternative 1 ..................................... 56
Exhibit 5-5 Residential Customer Affordability Analysis – CCF Rate Alternative 2 ..................................... 56
Exhibit 5-6 Sample Customer Bill, 5/8” Meter, 1 Unit, 4 CCF Monthly Usage ............................................ 57
Table 6-1 Ten-Year Projected Revenue Increases....................................................................................... 58
Exhibit 6-2 Ten-Year Expense vs. Revenue Projection ................................................................................ 58
Exhibit 6-3 Ten-Year Cash Balance Projection ............................................................................................ 59
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
EXECUTIVE SUMMARY
This section of the report summarized the major findings and proposed results of the study.
Projected Water System Revenue Requirement
The revenue requirement of the City’s water system is the total of the projected Operating, Cash Capital,
and Debt Service (existing and future) costs assuming conservative escalation of the FY 2021 budget and
financing of the City’s Capital improvement plan. The projected revenue requirement assumes that the
City will spend an average of $2.6 million on cash capital spending each year and issue $12.2 million in
new low interest IEPA loan debt over the ten year projection period. Miscellaneous non-rate revenues
assume a reduction in Delinquent Turn On fees to $90,000 per year and a $50,000 increase in the fees
charged to the Galesburg Sanitary District, both beginning in FY 2022.
Table E-1
Water Fund Net Revenue Requirement Projection
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Operating Expenses $4,615,430 $4,656,735 $4,754,253 $4,853,930 $4,955,816 $5,059,961
Cash Funded Capital 3,403,694 1,360,000 2,220,000 2,755,000 505,000 2,010,000
Existing Debt Service 1,380,749 1,371,149 1,380,199 1,378,699 1,376,099 1,379,724
New Debt Service - - - 134,431 201,647 403,294
Total Rev. Req. $9,399,873 $7,387,884 $8,354,453 $9,122,061 $7,038,562 $8,852,979
Less: Misc. Revenues (550,750) (446,600) (496,600) (496,600) (496,600) (496,600)
Net Rev. Req. $8,849,123 $6,941,284 $7,857,853 $8,625,461 $6,541,962 $8,356,379
Recommended Revenue Increases
Given the revenue requirement projection detailed above and assuming the City does not increase any
water rates or fees from their FY 2020 level, the following exhibits show that revenues would not be able
to cover system expenses in the following five fiscal years and would nearly exhaust the City’s Water Fund
balance in FY 2026.
List of Tables and Exhibits
2 Thoughtful Decision Making for Uncertain Times
Exhibit E-2 Expenses vs. Revenues Under Current FY 2020 Rates
Exhibit E-3 Projected Water Fund Cash Balance Projection Under Current FY 2020 Rates
NewGen’s study identified revenue increases for each of the City’s water rates and fees that would sustain
the City’s water system under the assumed cost increases.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025Millions
Operating Expenses Existing Debt Service
New Debt Service Cash Funded Capital Projects
Total Revenues Under FY 2020 Rates
Table of Contents
Thoughtful Decision Making for Uncertain Times 3
Table E-4
Recommended Revenue Increases
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Cash Flow Shortfall at FY 2020 Revenues ($445,511) ($1,362,080) ($2,129,688) ($46,189) ($1,860,606)
EOY Cash Balance at FY 2020 Revenues $6,571,142 $5,209,063 $3,079,375 $3,033,185 $1,172,579
Recommended Revenue Increases
Fire Protection Fees 1 36.03% 76.89% 47.97% 32.43% 24.50%
Retail Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Retail Usage rates per CCF 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Usage rates per CCF 2 0.00% 3.25% 3.25% 3.25% 3.25%
Cash Flow at Recommended Revenues ($434,203) ($1,107,933) ($1,622,477) $721,144 ($825,853)
EOY Cash at Recommended Revenues $6,582,451 $5,474,517 $3,852,041 $4,573,185 $3,747,331
Fire protection fees are calculated independently of other retail and wholesale charges using industry
standard methodologies and are phased on over the five-year period. Fire protection revenue increases
are directly related to changes in the system’s revenue requirement, and therefore vary from year to year.
Other rates and fees are calculated to smooth out revenue increases over the projection period.
Rate Alternatives and Customer Impacts
NewGen developed several potential changes to the structure of the City’s Retail and Wholesale Facility
Fees and per CCR rates. Each alternative will generate the same amount of revenue as shown in Table E-
4. The alternative rate structures have significant impacts on the distribution of City water costs among
its customers, however in total revenues remain consistent with the study’s revenue increase plan in Table
E-4. The changes to the City’s various retail water rate and fee structures that were developed during the
study are as follows:
Facility Fee Alternative 1: Reduced Facility Fee: While maintaining the existing meter size based
Facility Fees, reduce the 5/8, 3/4 inch meter fee to $8.00 per month, adjust all other Facility Fees and
per CCF rates accordingly.
Facility Fee Alternative 2: Change to a per Unit Facility Fee: Change the City’s Facility Fee structure
to a per unit fee rather than a meter size based fee. Per CCF rates are adjusted as per Table 4-9 with
no change in structure. All revenue from Facility Fees and Unit rates remains the same.
CCF Rate Alternative 1: Change the City’s per CCF Rate structure to include 4 CCF per account for each
customer and charge a per CCF rate for usage above 4 CCF per account.
1 Fire protection fees are independently developed based on a separate cost of service analysis. The FY 2021
revenue increase represents an alignment of the City’s private fire protection fees with industry standards.
2 Wholesale CCF rate increases vary under different alternatives rate structures. Table 4-9 assumes the City
maintain the current rate structure.
List of Tables and Exhibits
4 Thoughtful Decision Making for Uncertain Times
CCF Rate Alternative 2: Change the City’s per CCF Rate structure to include 4 CCF per unit for each
customer and charge a per CCF rate for usage above 4 CCF per unit. This change is only consistent
when in addition to Facility Fee Alternative 2. Otherwise, the City would be inconsistent in the manner
in which it applies its fixed and variable fees. That is, CCF Rate Alternative 2 assumes the adoption of
Facility Fee Alternative 2.
The impact on the City’s median residential customer of each of the alternatives is as follows:
Table 4-33
Projected Monthly Customer Bills – Median Residential Customer (5/8” Meter, 1 Unit, 4 CCF)
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Current Rate Structure $25.91 $25.91 $26.75 $27.62 $28.52 $29.45
5/8, 3/4 Meter $ Change $0.00 $0.84 $0.87 $0.90 $0.93
1 Unit 4 CCF % Change 0.0% 3.2% 3.2% 3.3% 3.3%
Facility Fee Alt. 1 $25.91 $22.00 $22.72 $23.45 $24.22 $25.00
5/8, 3/4 Meter $ Change ($3.91) $0.72 $0.74 $0.76 $0.79
1 Unit 4 CCF % Change (-15.1%) 3.3% 3.3% 3.2% 3.2%
Facility Fee Alt. 2 $25.91 $24.45 $25.24 $26.06 $26.91 $27.78
5/8, 3/4 Meter $ Change ($1.46) $0.79 $0.82 $0.85 $0.87
1 Unit 4 CCF % Change (-5.6%) 3.2% 3.2% 3.2% 3.2%
CCF Alt. 1 $25.91 $15.91 $16.43 $16.96 $17.51 $18.08
5/8, 3/4 Meter $ Change ($10.00) $0.52 $0.53 $0.55 $0.57
1 Unit 4 CCF % Change (-38.6%) 3.2% 3.3% 3.3% 3.3%
CCF Alt. 2 $25.91 $14.45 $14.92 $15.40 $15.90 $16.42
5/8, 3/4 Meter $ Change ($11.46) $0.47 $0.48 $0.50 $0.52
1 Unit 4 CCF % Change (-44.2%) 3.2% 3.2% 3.2% 3.2%
The study found that the City’s water utility is well managed both operationally and financially. Moderate
rate increases are needed to support future cost increases. NewGen identified several rate alternatives
that reduce the cost burden on the City’s low income customers while maintaining revenue sufficiency for
the system as a whole.
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 1
PROJECT BACKGROUND AND SCOPE
Study Background
The City of Galesburg (the City) is located on Interstate 74 in Northwest Illinois
and is approximately 50 miles east of the Mississippi River. The Illinois General
Assembly organized the City under the provisions of an “Act to Incorporate the
City of Galesburg" on February 14, 1857. The City is a home rule municipality
and has operated under the Council-Manager form of government since 1956.
The City Council is comprised of seven Councilmembers and a Mayor. The City
of Galesburg was chartered for the purpose of providing its residents with
several municipal services, including the provision of clean water.
The City obtains its groundwater from an aquifer near Oquawka, Illinois, which
is located along the Mississippi River. Utilizing a collector well and three gravel-
pack wells, the water is pumped approximately 32 miles to Galesburg through
36 inch and 42 inch transmission lines. There are nine million gallons of storage
capacity at the Galesburg Water Plant and two million gallons of overhead
storage in three water towers throughout the City. The average daily water
pumpage is approximately six million gallons with a peak demand of nine and
a half million gallons. The water is pumped through a distribution system of approximately 210 miles of
water mains. The distribution system also consists of approximately 1,400 fire hydrants. The City serves
approximately 12,800 water users with retail, wholesale, and fire protection service.
The City engaged NewGen Strategies and Solutions, LLC (NewGen) complete a water rate study with the
following general objectives:
Develop a long-term financial plan that maintains the financial health of the City’s Water Enterprise
Fund while funding the appropriate level of capital investment in the water system.
Update the rates and fees charged to the City’s customers, including inside city, outside city, and
wholesale rates customers based on defensible industry standards.
Examine the agreements between the City and its wholesale customers and identify any opportunities
to update the rate setting methodology or policies therein.
Examine the policies regarding the charges to multi-unit customers (including mobile home parks),
identify the impacts of modifying these policies, and recommend changes, if appropriate.
Review the methodology of the administrative fee charged to the Galesburg Sanitary District and
recommend any appropriate changes.
This report details the data and methodologies used to develop recommended rates that accomplish the
above stated objectives under the City’s current rate structure and rate structure alternatives.
Section 1
6 Thoughtful Decision Making for Uncertain Times
Study Objectives and Guiding Principles
The following principles were used to guide the rate study and were developed with input from City staff:
The City’s water utility must be financially self-supporting. It is assumed that the cost of operating and
maintaining the water system will be supported by the water fees and charges collected from
customers with no support or subsidy from other City revenues.
The City’s water rates shall be sufficient to ensure the funding of an appropriate level of system
rehabilitation and replacement. It is assumed that the City will continually reinvest in the water system
to replace assets as they reach the end of their useful lives.
The City shall maintain appropriate reserves to provide for contingencies and unplanned expenses.
The City’s water rates shall be kept as low as possible over time. While it is possible to keep rates low
for a period of time by not investing sufficiently in the maintenance of the water system, eventually
the system will deteriorate and require substantial investments leading to the need for significant and
immediate rate increases.
The City’s water service should be affordable for all customers, especially the City’s low income
customers.
The above stated guiding principles create conflicting goals and objectives for the City’s system. Increasing
asset investment creates upward pressure on the City’s water rates. This creates affordability concerns,
and may cause customers to reduce their water usage. The City’s overall costs of providing water service
are largely fixed (i.e. they do not vary substantially with changes in water demand). Any reduced demand
creates upward pressure on rates, which creates a cycle of higher customer bills and additional
affordability concerns. A carefully crafted financial plan and rate structure helps mitigate these impacts.
The results of this study maintain a balance between the increasing costs to run the City’s water
infrastructure and the need to maintain affordable service for City customers.
Study Approach
NewGen’s approach to developing sustainable water rates is governed by the view that the ideal rate
structure must satisfy seven criteria:
Equity requires that rates and charges result in no undue discrimination among customers or
customer classes. Although equity is normally related to the cost of service, it should be realized that
customer acceptance will center on preconceived notions of equity and fairness.
Efficiency refers to the ability of the rate schedule to encourage wise use of the resources devoted to
the services that the utility provides. Efficiency considerations require that:
Rates should reflect the cost of providing service.
Rates should be similar for customers or customer classes served under similar conditions.
Customers should be able to understand the rate schedules so that they can make rational
decisions regarding their purchase of water service.
Revenue Adequacy is the most fundamental of all considerations. Revenue Adequacy recognizes that
it is necessary that rates produce revenues sufficient to operate the system even if there are changes
in demand for service.
Affordability means that the recommended rates must result in bills that are realistically within the
ability of customers to pay.
Project Background and Scope
Thoughtful Decision Making for Uncertain Times 7
Sustainability means that the objective of the rate methodology is to keep rates low over time, not
to merely keep them low for the short-term by omitting or deferring needed expenses such as
maintenance and funding of necessary cash reserves.
Administrative Simplicity recognizes that limits must be placed on the complexity of the rate
schedules to keep them easy to administer and understandable to the public.
Legal and Regulatory Compliance is a prime consideration because rate structures must incorporate
applicable local, state, and federal statutes, as well and any interjurisdictional agreements.
The application of these criteria should recognize that a rate schedule is a form of public policy statement,
setting forth those values that the City considers important. Rate structures must be tailored to
community perceptions, realities, and values.
Fiscal Year
The City operates on a fiscal year beginning January 1st and ending on December 31st each year. All years
shown in this report refer to the fiscal year ending that year. For example, 2021 refers to the fiscal year
beginning January 1, 2021 and ending December 31, 2021.
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 2
WATER SYSTEM REVENUE REQUIREMENTS
The first step of the rate study is to compile the costs of owning and operating the City’s water utility
system. The three cost components of the City’s water system are: Operating and Maintenance, Capital
Improvements, and Debt Service (both existing and future). These three cost components total to the
amount needed each year to run the water system. While the study is based on the latest available actual
data, there are several major assumptions that are included in the study’s cost projections.
Major Study Assumptions
In order to project the operating, debt service, and capital expenses of the City’s water system, several
major assumptions must be made. NewGen’s assumptions are conservative to ensure that the study’s
recommendations reflect a reasonable projection of the costs of the City’s system.
Operating Budget Escalation Factors
NewGen’s cost projections are based on the latest available actual and budgeted data. In order to
reasonably project future costs, escalation and inflation factors must be applied to the City’s budget line
items. NewGen’s financial model includes the following operating and maintenance budget line item
inflation factors in Table 2-1. NewGen used the most up to date historical data related to the three items
projected to increase in the future:
United States Bureau of Labor Statistics (BLS) Employment Cost Index (ECI) current annualized
increase in labor costs as of June 2020.
United States Bureau of Labor Statistics (BLS) Consumer Price Index – Urban (CPI-U) at the end of
2019.
Engineer News Record (ENR) Materials Cost Index (MCI) averages the increased cost of materials over
the past 30 years.
Table 2-1
Operating Budget Escalation Factors
Change Per Year Source
Personnel Services 2.60% BLS ECI – June 2020
Contractual Services 1.50% ENR CPI – December 2019
Commodities 2.00% ENR MCI 30 Year Average
Other Charges 0.00% None
On average, NewGen projects that the Water utility operating budget will increase 2.1% per year over the
five-year projection period.
Section 2
10 Thoughtful Decision Making for Uncertain Times
Minimum Required Water Fund Cash Balance
Maintaining a minimum Water Fund cash balance is an essential component of the proper financial
management of the City’s water system. The wise management of resources and maintenance of a
reasonable cash balance allows the City to be responsive to emergencies and to plan for long term
sustainability. As a part of the water rate study, NewGen developed a formal policy regarding the
minimum fund balance reserves that are appropriate for the City’s water utility fund. There are two
components to the study’s recommended minimum cash balance:
Operating Reserve – The minimum operating reserve balance shall be 90 days of each year’s annual
Operating and Maintenance (O&M) expenses (less debt service and depreciation).
Capital Reserve – The minimum capital reserve balance shall be one year of system asset
depreciation, estimated to be $1,043,128 in FY 2021. This value is arrived at by taking the FY 2021
budgeted depreciation of $975,235 and adding $67,893, which is one fiftieth (1/50) of the estimated
FY 2020 capital investment of $3,394,632. This assumes an average useful life of 50 years for the City’s
water infrastructure.
As the City continues to invest in the water system, this annual depreciation of the system will increase,
which will increase the capital reserve policy minimum. The minimum reserve projection is shown below
in Table 2-2.
Table 2-2
Minimum Water Fund Cash Balance Recommendation
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Operating Reserve $506,537 $524,044 $537,669 $551,649 $565,992 $580,707
Capital Reserve 1,124,930 1,043,309 1,070,509 1,154,909 1,230,009 1,300,109
Total Minimum Cash Balance $1,631,467 $1,567,353 $1,608,178 $1,706,558 $1,796,000 $1,880,816
The minimum cash balance policy drives the financial plan detailed in this report. Rates and fees are set
in order to cover the operating, debt service, and capital needs of the system, as well as to maintain the
minimum cash balance shown above. If at any time the projected rates in a given year would not sustain
the minimum cash balance in the next fiscal year, it is assumed that rates must be increased to achieve
the minimum required balance.
Operating and Maintenance Expenses
The operating and maintenance (O&M) expenses of the City’s water system are organized into several
categories:
Personnel Services
Contractual Services
Commodities
Other Charges
It should be noted that the rate study is predicated on the cash basis of utility rate setting. The City uses
an operating budget structure that includes system depreciation. While recording and accounting for
system depreciation is an important exercise, the study accounts for the annual cash outlays that are
planned for the system. Therefore, while we exclude depreciation from the O&M costs, we include cash
outlays and new debt service in the City’s Capital Improvement Plan (CIP). The study ensures that the City
will generate enough revenues each year to fund the actual investments needed in the system, which
typically exceed the annual depreciation of existing assets.
Water System Revenue Requirements
Thoughtful Decision Making for Uncertain Times 11
The latest available O&M budget is the FY 2021 requested budget. The FY 2021 requested operating
budget totals about $4.65 million as shown in Table 2-3 below.
Table 2-3
Projected Operating and Maintenance Expenses
Actual
FY 2019
Adopted
FY 2020
Request
FY 2021
Projected
FY 2022
Projected
FY 2023
Projected
FY 2024
Projected
FY 2025
Personnel Services $1,975,368 $2,054,290 $2,125,290 $2,180,548 $2,237,242 $2,295,410 $2,355,091
Contractual Services 1,919,768 1,625,845 1,645,940 1,670,629 1,695,689 1,721,124 1,746,941
Commodities 630,766 928,080 878,590 896,162 914,085 932,367 951,014
Other Charges 116,262 7,215 6,915 6,915 6,915 6,915 6,915
Total O&M Expenses $4,642,164 $4,615,430 $4,656,735 $4,754,253 $4,853,930 $4,955,816 $5,059,961
% Change (-0.6%) 0.9% 2.1% 2.1% 2.1% 2.1%
The rates and fees developed in this study are sufficient to cover the increasing operating and
maintenance costs of the water utility.
Existing Debt Obligations
From time to time, the City issues debt to fund a short term capital financing needs. As of 2020, the City
is obligated to pay three outstanding debt issues – Series 2015 (GO Refunding Bonds), Series 2017 (GO
Refunding Bonds, and a 2009 IEPA loan. Table 2-4 shows the projected loan payments over the five-year
study planning period.
Table 2-4
Current Debt Service Obligations by Issue
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
GO Refunding Bonds Series 2015 $622,013 $619,413 $626,513 $623,013 $624,213 $624,963
GO Refunding Series 2017 717,331 710,331 712,281 714,281 710,481 713,356
2009 IEPA 41,406 41,406 41,406 41,406 41,406 41,406
Total Annual Debt Service $1,380,749 $1,371,149 $1,380,199 $1,378,699 $1,376,099 $1,379,724
The 2009 IEPA loan will be paid off in FY 2031. The Series 2015 GO bonds will be paid off in FY 2032. The
Series 2017 GO bonds will be paid off in FY 2033. The rates and fees developed in this report are sufficient
to fund the above stated debt obligations now and through their maturities.
Capital Improvement Plan
A major component of owning a sustainable water utility is the planning for the rehabilitation and
replacement of the City’s assets. The City’s Capital Improvement Plan (CIP) is a detailed list of projects
including when they are planned to be completed and how much they are projected to cost. NewGen’s
study includes funding for all CIP projects. The City can either pay cash for projects as they are completed
(referred to as PAYGO funding), or the City may issue new debt to finance projects over a long term,
typically 20 to 30 years. Table 2-5 details the projects included in the City’s current CIP, developed by City
Section 2
12 Thoughtful Decision Making for Uncertain Times
staff. The three highlighted projects are assumed to be financed with low interest Illinois Environmental
Protection Agency (IEPA) loans. All other projects are assumed to be PAYGO funded – that is, the City will
outlay cash for those projects in the year in which they are planned without taking on any additional debt.
Table 2-5
FY 2020 – FY 2025 Capital Projects
Project Cost Year Financing
Filter Room Rehab Treatment Plant $958,000 FY 2020 PAYGO
Service Vehicle Replacement 20,000 FY 2020 PAYGO
Service Vehicle Replacement 20,000 FY 2020 PAYGO
Gravel Pack #5 1,088,214 FY 2020 PAYGO
Boat And Motor 28,480 FY 2020 PAYGO
Roadway Reconstruction (Oquawka) 100,000 FY 2020 PAYGO
S. Seminary Street 879,000 FY 2020 PAYGO
Street Division Building 85,000 FY 2020 PAYGO
Historian Plus Software Upgrade 25,000 FY 2020 PAYGO
Gravel Pack Well #6 1,200,000 FY 2021 PAYGO
Equipment Purchase 50,000 FY 2021 PAYGO
Pump Rehab 60,000 FY 2021 PAYGO
Storage Building 70,000 FY 2021 PAYGO
Frank Street Water Main 120,000 FY 2021 PAYGO
Maple Ave. Water Main 400,000 FY 2022 PAYGO
Filter Room Repair 200,000 FY 2022 PAYGO
Aeration/Mixing Project 900,000 FY 2022 PAYGO
Inspection Of 5 Miles Pipeline 450,000 FY 2022 PAYGO
Equipment Purchases 110,000 FY 2022 PAYGO
Cherry St. Water Main 100,000 FY 2022 PAYGO
New Automatic Meters 3,000,000 FY 2022 IEPA Loan
Enterprise Ave. Water Main 200,000 FY 2023 PAYGO
Losey St. Water Main 600,000 FY 2023 PAYGO
Equipment Purchases 50,000 FY 2023 PAYGO
Co. Hwy 14 Water Main 200,000 FY 2023 PAYGO
Pump Room Reconstruction (Oquawka) 1,300,000 FY 2023 PAYGO
Parking Lot Rehab - Main Plant 100,000 FY 2023 PAYGO
Knox & Prairie St. Water Mains 800,000 FY 2025 PAYGO
Henderson St. & Lincoln Pk Water Main 750,000 FY 2025 PAYGO
Equipment Purchases 50,000 FY 2024 PAYGO
Transmission Line - Design 150,000 FY 2024 PAYGO
Grand Avenue Watermain Replacement 3,000,000 FY 2024 IEPA Loan
Equipment Purchases 120,000 FY 2025 PAYGO
Ranney Well Inspection 35,000 FY 2025 PAYGO
Transmission Line - Construction 3,000,000 FY 2026 IEPA Loan
Water System Revenue Requirements
Thoughtful Decision Making for Uncertain Times 13
In addition to the above projects, the City plans water main replacement projects of $245,000 each year
and miscellaneous water capital projects of $60,000 each year, each being PAYGO funded. The City’s FY
2020 through FY 2030 CIP is included in the rate study model. Exhibit 2-6 shows the annual variation of
the City’s planned CIP spending and the funding source assumed to develop the study’s financial
projections.
Exhibit 2-6 Ten-Year Capital Plan Summary by Funding Source
In addition to the projects detailed in Table 2-5, the study assumes that the City would finance (via IEPA
loans) two additional transmission main replacement projects in FY 2028 and FY 2031, costing $3.0 million
and $3.2 million respectively. A summary of the loan financed projects included in the above chart is
shown in Table 2-7.
Table 2-7
FY 2020 – FY 2030 Debt Financed Capital Projects
Project Cost Year
New Automatic Meters $3,000,000 FY 2022
Grand Avenue Watermain Replacement $3,000,000 FY 2024
Transmission Line - Construction $3,000,000 FY 2026
Transmission Line - Construction $3,000,000 FY 2028
Transmission Line - Construction $3,200,000 FY 2031
The financial plan and rates developed during the study are projected to fully recover the cost of the
above stated capital plan, including all cash outlays and additional debt service. The additional debt
service projected for the loan financed projects is detailed in the next section of this report.
$3.40
$1.36
$4.22
$3.76 $3.51
$2.01
$4.99
$0.67
$3.72
$0.54 $0.46
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Millions
Cash Funded Projects Debt Funded Projects Average Capital Spending: $2.6 Million
Section 2
14 Thoughtful Decision Making for Uncertain Times
New Total Debt Service Projections
The loan funded projects described in the previous section will result in debt payments that will need to
be paid by the City’s water utility. The total projected debt service built into the study’s financial plan are
shown in Exhibit 2-8.
Exhibit 2-8 Total Water Debt Service Projections
The projected debt service payments shown above are fully funded in the financial plan and
recommended rates contained within this report.
Debt Service Coverage Ratio
An important metric that should be evaluated when determining the financial prudence of issuing new
debt is a system’s Debt Service Coverage Ratio (DSCR). A system’s DSCR is the ratio of the system’s annual
debt service payment to its annual revenues net of operating expenses. The standard debt service
coverage ratio that is considered sufficient is 1.20, however utilities with the highest credit ratings often
maintain debt service coverage ratios above 2.703.
The City’s DSCR projections given the capital financing assumptions included in the study are shown in
Table 2-9 below.
3 Barnes, Glenn. “Key Financial Indicators for Water and Wastewater Systems: Debt Service Coverage Ratio.” UNC
Environmental Science Center - The Environmental Finance Blog [Chapel Hill, NC], 23 Apr. 2015,
efc.web.unc.edu/2015/04/23/debt-service-coverage-ratio.
$1.38 $1.37 $1.38 $1.51 $1.58
$1.78 $1.78
$1.99 $1.99
$2.19 $2.19
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Millions
Existing Debt Service New Debt Service
Water System Revenue Requirements
Thoughtful Decision Making for Uncertain Times 15
Table 2-9
Projected Debt Service Coverage Ratio – Current and Recommended Rates
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Existing Debt Service $1,380,749 $1,371,149 $1,380,199 $1,378,699 $1,376,099 $1,379,724
New Debt Service - - - 134,431 201,647 403,294
Total Projected Debt Service $1,380,749 $1,371,149 $1,380,199 $1,513,131 $1,577,747 $1,783,019
DSCR at FY 2020 Rates 1.76 1.67 1.62 1.41 1.29 1.08
Under the City’s current FY 2020 water rates, the City’s annual revenues would not be able to support the
proposed capital plan while maintaining a sufficient DSCR. There must be a balance between meeting key
financial performance metrics such as DSCR and the impact on the City’s water customers. The financial
plan and rates developed as a part of this study support the capital plan and maintain a favorable DSCR
of 1.50 or greater even with the increases in debt service due to the City’s capital improvement plan.
Maintaining a DSCR above 1.50 reflects a sustainable debt financing plan that does unduly increase the
City’s water rates.
Miscellaneous Non-Rate Revenues
The City accounts for certain Water Fund revenues that are unrelated to the various retail, wholesale, and
fire protection rates and fees charged to customers. These non-rate revenues may be highly volatile from
year to year, and the City only budgets for a conservative amount each year. In order to determine the
annual revenue needs of the water system, these non-rate revenues need to be taken into account. There
are two key non-rate revenues that NewGen investigated as a part of the study – the billing fee charged
by the City to the Galesburg Sanitary District and the City’s estimated Delinquent Turn On Fees.
Galesburg Sanitary District Billing Agreement
One key non-rate revenue source for the City’s Water Fund is the fee the City charges the Galesburg
Sanitary District (GSD). The City contracts with the Sanitary District to collect the District’s charges on City
utility bills and remits payment to the Sanitary District, less an administrative. Currently, the fee is 3.0%
of Sanitary District revenues collected. There are various methods used to identify a cost basis for such
arrangements. One methodology is to estimate the cost of staff time, materials, postage, etc. that is
needed to process payments to the Sanitary District and to provide customer service for billing questions.
In 2017, the City developed an estimated annual cost of providing billing services for the GSD. NewGen
projected the 2017 costs into future dollars for the purpose of calculating the current cost of this service
provided by the City. Table 2-10 provides a detailed breakdown of the City’s billing costs.
Section 2
16 Thoughtful Decision Making for Uncertain Times
Table 2-10
Projected Sanitary District Billing Cost
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Finance Personnel $262,995 $266,940 $270,944 $275,008 $279,133 $283,320
Water Personnel $491,844 $499,222 $506,710 $514,311 $522,026 $529,856
Five Vehicles (Meter reading) $10,457 $10,614 $10,773 $10,934 $11,098 $11,265
Radio Read Meters (MXUs) $89,928 $91,277 $92,646 $94,036 $95,447 $96,878
Springbrook Maintenance $18,093 $18,365 $18,640 $18,920 $19,204 $19,492
Copier (20%) $345 $350 $356 $361 $366 $372
Postage (Monthly Billing) $67,373 $68,384 $69,409 $70,451 $71,507 $72,580
Statements $4,606 $4,675 $4,745 $4,817 $4,889 $4,962
NeoPost Equipment $1,669 $1,694 $1,719 $1,745 $1,771 $1,798
PO Box Rental $328 $333 $338 $343 $348 $354
Total Annual Cost $947,639 $961,854 $976,282 $990,926 $1,005,790 $1,020,877
One Third of Annual Cost $315,880 $320,618 $325,427 $330,309 $335,263 $340,292
GSD Monthly Cost $26,323 $26,718 $27,119 $27,526 $27,939 $28,358
Average # of Monthly GSD Bills 12,229 12,229 12,229 12,229 12,229 12,229
Monthly Cost per GSD Bill $2.15 $2.18 $2.22 $2.25 $2.28 $2.32
The total annual cost is for the water system as a whole. This total is divided by three to account for the
fact that the water bill includes three distinct charges – water, refuse, and sanitary sewer. The one third
amount represents the annual cost to the City of providing billing services to each utility included on its
bills.
NewGen recommends that the City engage the Galesburg Sanitary District regarding an increase in the
fee paid to the City. It should be noted that the customer base of the City water system and the GSD are
largely the same – therefore, any increase in the fee charged by the City to the GSD will ultimately end up
in the money being collected by the same customers. Therefore, NewGen is recommending only to
increase the GSD fee to 5.0% of revenues from 3.0% of revenues. It is estimated that this will generate
$50,000 more in revenue each year.
The projections in this report include the assumption that the fees charged to the GSD will increase by
$50,000 in FY 2022 and remain at the FY 2022 level for the remainder of the projection period.
Delinquent Turn On Fees
It is typical for a water utility to charge for Turn On service – that is, the cost of sending a utility worker to
a customer’s property to physically turn on water service to that customer. The City’s currently charges a
one time, non-refundable Turn On fee of $27.00 for new water accounts at the time each account is
established. The City considers a water account delinquent if there is an unpaid previous balance and an
unpaid current charges balance for services after the due date listed on a customer’s monthly bill. If
Water System Revenue Requirements
Thoughtful Decision Making for Uncertain Times 17
delinquent, a fee of $55.00 is added to the account and the customer’s water service is discontinued. The
account balance, including the $55.000 Delinquent Turn On Fee must be paid in full to restore the
customer’s water service. The City collected $239,195 in Delinquent Turn On Fees in 2019.
In response to the COVID-19 pandemic, the City instituted a moratorium on delinquent water account
turn offs, and therefore did not collect Delinquent Turn On Fees for a majority of FY 2020. It is estimated
that the City’s FY 2020 Delinquent Turn On Fee revenue will be $76,000. At the time of this report, the
COVID-19 pandemic continues, and the City estimates that Delinquent Turn On Fee revenue will remain
lower than it has been historically. FY 2021 through FY 2030 estimated Delinquent Turn On Fee revenue
is included in the study at $90,000 per year.
Projected Miscellaneous Non-Rate Revenues
The following Table 2-11 shows the revenues that are credited to the water utility but are not dependent
on the rates charged to the systems users.
Table 2-11
Water System Non-Rate Revenues
Actual
FY 2019
Adopted
FY 2020
Request
FY 2021
Projected
FY 2022
Projected
FY 2023
Projected
FY 2024
Projected
FY 2025
Interest Income $261,668 $150,000 $30,000 $30,000 $30,000 $30,000 $30,000
Unrealized Gain (4,618) - - - - - -
Penalties 117,120 118,000 118,000 118,000 118,000 118,000 118,000
Turn-On-Fees 45,927 44,000 44,000 44,000 44,000 44,000 44,000
Delinquent Turn On Fees 239,195 76,000 90,000 90,000 90,000 90,000 90,000
Meter Resale 24,696 20,000 20,000 20,000 20,000 20,000 20,000
Pop Commission 180 250 100 100 100 100 100
Misc. Revenue 5,396 4,000 4,000 4,000 4,000 4,000 4,000
Federal Reimbursements 30,599 - - - - - -
Lab Fees 15,640 12,000 12,000 12,000 12,000 12,000 12,000
Tap Fees 11,534 10,000 8,000 8,000 8,000 8,000 8,000
Penalties/Accounting 8,160 4,500 5,000 5,000 5,000 5,000 5,000
Lien Fees 5,731 5,000 5,500 5,500 5,500 5,500 5,500
Sanitary Service Fees 110,173 107,000 110,000 160,000 160,000 160,000 160,000
Misc. Other Revenue 3 - - - - - -
Total Misc. Revenue $871,405 $550,750 $446,600 $496,600 $496,600 $496,600 $496,600
In accordance with NewGen’s conservative approach to developing future projections, miscellaneous
revenues are projected to remain flat throughout the projection period after FY 2022.
Section 2
18 Thoughtful Decision Making for Uncertain Times
Revenue Requirement Projection
Based on the latest available operating, debt service, and capital expense data and the methodologies
and assumptions detailed above, NewGen developed a net revenue requirement forecast for the City’s
water system, shown in Table 2-12.
Table 2-12
Water Fund Net Revenue Requirement Projection
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Operating Expenses $4,615,430 $4,656,735 $4,754,253 $4,853,930 $4,955,816 $5,059,961
Cash Funded Capital 3,403,694 1,360,000 2,220,000 2,755,000 505,000 2,010,000
Existing Debt Service 1,380,749 1,371,149 1,380,199 1,378,699 1,376,099 1,379,724
New Debt Service - - - 134,431 201,647 403,294
Total Rev. Req. $9,399,873 $7,387,884 $8,354,453 $9,122,061 $7,038,562 $8,852,979
Less: Misc. Revenues (550,750) (446,600) (496,600) (496,600) (496,600) (496,600)
Net Rev. Req. $8,849,123 $6,941,284 $7,857,853 $8,625,461 $6,541,962 $8,356,379
The net revenue requirement is the basis upon which all rates and fees are calculated for the City’s system.
Although the net revenue requirement varies from year to year, the financial plan developed during the
study takes a long-term perspective in order to maintain stable rates and sufficient reserves.
Before a financial plan can be developed for the City’s system, a detailed analysis of the system’s customer
base must be completed. The City’s water customer base defines the number of accounts, units, and
metered water that can be charged to generate revenues to fund the net revenue requirement. The next
section of this report details the City’s water customers and their use of the water system.
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 3
CUSTOMERS AND CONSUMPTION
The City has several distinct types of water customers, each with separate, but sometimes related, rates
and fees:
Inside City Retail
Outside City Retail
Pipeline Retail
Outside City Wholesale
Inside City Sprinklers
Outside City Sprinklers
Inside City Firelines
Outside City Firelines (with water service)
Outside City Firelines (without water service)
Bulk Water
The latest full year of customer and consumption data available for the study is FY 2019. Each subsection
in Section 3 details the FY 2019 data used to develop the revenue and rate projections during NewGen’s
study.
Retail Customers and Consumption
The City serves about 12,480 retail customers, both inside and outside the City. The City’s current rate
structure includes a monthly Facility Fee and a consumption rate per metered water unit, with a unit being
one hundred cubic feet, or CCF (748 gallons).
Inside City retail customers make up a majority of the City’s water users. Outside City customers are still
retail in nature (i.e. mostly homes and businesses), although they are located outside the City’s municipal
boundary.
Pipeline customers are a special type of customer that has granted the City easements to run water
infrastructure through their property. Therefore, the City charges them a lower rate than Outside City
customers that have not granted such easements.
Sprinkler meter customers are residential and business customers that have elected to install a separate
meter to account for water used to irrigate. The water usage registered by these meters is charged the
same rate as retail consumption. The sprinkler meter consumption is also used to calculate a customer’s
sewer usage by deducting the sprinkler usage from the retail meter usage.
The number of City water customers by meter size is shown in Table 3-1 below.
Section 3
20 Thoughtful Decision Making for Uncertain Times
Table 3-1
FY 2019 Retail Customer Meters
Meter Size (inches) Inside City Outside City Pipeline Sprinklers
5/8, 3/4 11,773 204 11 77
1"-2" 313 8 17 32
2"-4" 139 7 1 2
4"-6" 6 - - 0
6"+ 2 1 - 0
Total Meters 12,234 220 29 111
Table 3-2 shows the billable water usage breakdown of the City’s FY 2019 retail customers.
Table 3-2
FY 2019 Retail Customer Usage by Customer Type (CCF)
Customer Type Inside City Inside City Sprinklers Outside City Pipeline
Commercial 321,486 6,278 7,652 8
Residential 670,478 5,135 12,306 2,745
Government 198,869 165 4 1,336
Industry 8,379 - 25,196 -
Total Usage 1,199,212 11,578 45,158 4,089
Government water usage is not that of the City of Galesburg. Government usage includes institutions such
as schools and universities, the United State Social Security Administration building, Knox County Jail, and
similar properties. Water usage of properties owned by the City of Galesburg is accounted for separately,
but not billed and therefore not included in the above tables. A percentage breakdown of Inside City retail
water revenue is shown in Exhibit 3-3.
Customers and Consumption
Thoughtful Decision Making for Uncertain Times 21
Exhibit 3-3 Percent Breakdown of FY 2019 Usage (Inside City)
The number of retail customers and the retail usage is assumed to remain constant for the five-year
projection period.
Wholesale Customers
The City provides wholesale treated water service to five municipalities and one subdivision each with
separate agreements:
Village of East Galesburg
City of Abington
City of Knoxville
Village of Little York
Village of Henderson
Westport Subdivision
Wholesale service agreements are common in the water industry. The City has invested in major supply,
treatment, and transmission infrastructure and has the capacity to provide service beyond its own retail
system. Wholesale customers have limited access to the City’s system, typically through larger capacity
meters. The City provides potable water to these customers, however these customers do not make use
of the City’s local distribution system, and therefore do not pay the full retail rate. Currently, the
Wholesale customers pay a monthly Facility Fee based on meter size and a unit rate per CCF equal to 68%
of the Inside City rate. Table 3-4 shows the number of Wholesale accounts and FY 2019 billable wholesale
usage.
27.1%
55.8%
16.4%
0.7%Commercial
Residential
Government
Industry
Section 3
22 Thoughtful Decision Making for Uncertain Times
Table 3-4
FY 2019 Wholesale Customer Meters and Usage
Meter Size (inches) Wholesale Customers
5/8, 3/4 1
1"-2" 1
2"-4" 2
4"-6" 3
6"+ 3
Total Meters 10
Total Usage (CCF) 309,392
Other Retail Water Revenue Sources
The City has two other sources of water revenue that are retail in nature but do not fit within its retail fee
structure.
Bulk Water Usage
The City makes water available on a temporary basis in two ways. The City maintains a Bulk Water station
where City residents can purchase bulk water on an as-needed basis. The City also provides temporary
bulk water meters that can be attached to City fire hydrants. These temporary meters are typically used
for construction needs. The rate charged in both cases for bulk water is $1.25 per 100 gallons. There is no
Facility Fee related to bulk water service. NewGen’s study includes increases in the bulk water fee that
are equal to the recommended increase in retail usage rates. The annual revenue generated by bulk water
sales is about $10,000, which is small relative to the City’s other service rates and fees. The study assumes
that any rate increase adopted for retail rates per CCF would also apply to the City’s Bulk Water rate per
CCF.
Master Meter
The City has a special case master meter agreement with an owner of a mobile home park located within
the City. This customer is charged a single master meter Facility Fee of $200.00 per month for a single
meter at the point where water enters the mobile home park, which contains 62 units. Metered water
usage is based solely on this meter. This arrangement is a special case, and therefore no increases in this
Master Meter fee is included in NewGen’s study. NewGen recommends re-evaluating this special
arrangement based on the policies adopted by the City Council as a result of this study.
Fire Protection Customers
The City provides fire protection throughout its service area. A majority of the fire protection is provided
to the public via approximately 1,400 public fire hydrants. The cost of public fire protection is accounted
for in the City’s retail water rates, as the cost of this service should be borne by the entire retail system.
However, the City provides private fire protection to private customers via Fireline connections. A Fireline
Customers and Consumption
Thoughtful Decision Making for Uncertain Times 23
is the portion of a water line preceding a backflow prevention assembly (BPA), supplying water to a fire
sprinkler system or private fire hydrant. The City’s private Fireline customers are shown in Table 3-5
below.
Table 3-5
FY 2019 Inside City Fireline Accounts
Meter Size (inches) Accounts
2" 2
3" 1
4" 52
6" 80
8" 31
10" 4
12" -
Total Accounts 170
The City publishes Fireline fees for Outside City customers and Outside City customers without Water
Service, however there are currently no connections in those customer classes. The number of Inside City
Fireline customers is assumed to remain constant for the five-year projection period.
Total Revenue Breakdown
The percentage breakdown of the City’s 2019 Water Fund revenue is shown in Exhibit 3-6.
Exhibit 3-6 FY 2019 Revenue Percentage Breakdown
A majority of the City’s Water Fund revenues come from retail rates, with almost half of total revenues
coming from residential customers. Non-Rate revenues account for about 11% of the City’s water
revenues. It is important to understand this revenue profile when evaluating customer impacts because
a change in residential bills many more users than a large change in other fees due to the proportional
magnitude of the City’s revenue sources.
18.5%
10.5%
3.2%
48.8%
7.3%
0.5%
11.1%
Commercial
Government
Industrial
Residential
Wholesale
Firelines
Misc.
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 4
FINANCIAL PLAN AND RECOMMENDED RATES
Financial Projections Under Current Rates
NewGen developed cash flow and cash balance projections assuming the revenue requirements detailed
in Section 2 of this report and that the City does not increase any water rates or fees. This establishes a
baseline projection to which revenue increase alternatives can be compared.
In order to project revenues under the current water rates and fees, NewGen compiled each rate and fee
charged by the City in FY 2020. The City’s FY 2020 rates are summarized below.
FY 2020 Retail Rates
The City’s current (FY 2020) water rates have two components. The first component is a Facility Fee that
is charged on a monthly basis and based on the meter size of each retail customer. This is a fixed fee,
meaning that no volume of water is included in this Facility Fee. If a customer does not use any water in
a given month, then their bill would consist only of the Facility Fee. Table 4-1 details the FY 2020 Facility
Fees for the City’s retail customers.
Table 4-1
FY 2020 Retail Rates – Monthly Facility Fees
Meter Size (inches) Inside City Outside City Pipeline Sprinklers
5/8, 3/4 $15.91 $31.82 $15.91 $3.18
1"-2" $33.05 $66.10 $33.05 $6.61
2"-4" $66.10 $132.20 $66.10 $13.22
4"-6" $165.35 $330.70 $165.35 $33.07
6"+ $413.40 $826.80 $413.40 $82.68
The second component of the City’s current retail rates is a usage rate per hundred cubic feet, or CCF (748
gallons) that is charged to each unit of metered consumption for all retail customers. The FY 2020 CCF
rate structure of the City’s system is shown in Table 4-2.
Table 4-2
FY 2020 Retail Rates – Usage Rate per CCF
Inside City 4 Outside City Pipeline
Rate per CCF $2.50 $5.00 $2.75
4 The Inside City CCF rate is also charged to sprinkler usage.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 25
FY 2020 Private Fire Protection Rates
The FY 2020 private fire protection rates charged by the City are summarized below in Table 4-3.
Table 4-3
FY 2020 Fire Protection Fees
Meter Size
(inches) Inside City Outside City
(with water)
Outside City
(without water)
2" $8.75 $14.00 $24.50
3" $10.50 - -
4" $12.25 $21.00 $31.50
6" $15.75 $28.00 $24.25
8" $19.25 $36.75 $49.00
10" $24.50 $45.50 $57.57
12" $29.75 $56.00 $68.25
FY 2020 Wholesale Rates
The rates charged to the City’s wholesale customers are shown in Table 4-4 below. The Wholesale Facility
Fees are identical to the Outside City retail Facility Fees. The Wholesale unit rate per CCF is currently set
at 68% of the Inside City unit rate per CCF.
Table 4-4
FY 2020 Wholesale Facility Fees and Usage Rate
Meter Size (inches) Monthly Facility Fee
5/8, 3/4 $31.82
1"-2" $66.10
2"-4" $132.20
4"-6" $330.70
6"+ $826.80
Usage Rate per CCF $1.70
Cash Flow and Fund Balance Projections Under Current Rates
The revenue generated by the FY 2020 rates alone cannot sustain the City Water Fund’s annual revenue
requirements in any of the next five fiscal years (FY 2021 – FY 2025). The expenses shown in the following
charts include the projected operating, existing debt, new debt, and cash funded capital projects
discussed in Section 2 of this report. The projected revenues assume that the City does not increase any
water rates or fees in any fiscal year. The projected revenues and expenses are shown in Exhibit 4-5.
Section 4
26 Thoughtful Decision Making for Uncertain Times
Exhibit 4-5 Expenses vs. Revenues Under Current FY 2020 Rates
For the past three years since FY 2017 the City’s Water Fund cash balance has fluctuated between $9.3
million and $7.4 million. As of December 31, 2019, the Water Fund cash balance was $9.37 million. If the
City were not to raise rates in any of the next five years, then current reserves would need to be relied
upon to support the water system’s capital plan. However, the projected cash deficits would nearly
exhaust the water utility’s cash balance by FY 2026 as shown in Exhibit 4-6.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025Millions
Operating Expenses Existing Debt Service
New Debt Service Cash Funded Capital Projects
Total Revenues Under FY 2020 Rates
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 27
Exhibit 4-6 Projected Water Fund Cash Balance Projection Under Current FY 2020 Rates
The current revenues generated by the City’s FY 2020 water rates and the City’s Water Fund cash reserves
cannot support the projected operating, capital, debt service, and reserve requirements of the water
system. Cash reserves can be relied upon in the short term (three to five years) to mitigate large, one-
time rate increases, however, incremental rate increases over that time period are necessary to increase
revenues so that the City’s water operating and capital needs are met and the City maintains adequate
Water Fund reserves.
Based on the expenses projected in Section 2 of this report, the City’s water customers and usage detailed
in Section 3, and the City’s FY 2020 water rates detailed previously in this section, NewGen’s rate study
has determined that revenue increases are necessary to sustain the City’s water system. A key focus of
the study is the impact any revenue increases will have on customers – particularly those who can afford
cost increases the least.
Section 4
28 Thoughtful Decision Making for Uncertain Times
Residential Customer Affordability
Water service affordability is an increasingly relevant topic throughout the United States. As the country’s
water infrastructure ages, the rehabilitation and replacement of water assets continues to cost more each
year. Simultaneously, household incomes remain largely stagnant. Therefore, as a percentage of
household spending, water service continues to rise. A key focus of NewGen’s study was the cost impact
of any recommended revenue increases on the City’s residential, low-income customers.
Industry Wide Challenges
According to AWWA’s 2020 State of the Water Industry Report, the five most important issues facing the
industry are currently:
Renewal and replacement of aging water and wastewater infrastructure
Financing for capital improvements
Long-term water supply availability
Public understanding of the value of water systems and services
Watershed/source water protection
Like all water utilities across the country, the City is affected by several, if not
all, of these inter-related issues. Utility infrastructure installed decades ago
continues to age. Water and wastewater main breaks have become a
common daily occurrence. Energy and chemical prices continue to increase, and compliance with tighter
federal (CWA, SDWA) and state (Illinois EPA) regulations continues to require more costly and complex
distribution, collection, and treatment solutions.
The following chart shows the country-wide inflation adjusted increases in three indices tracked by the
Bureau of Labor and Statistics: Median Household Income, the Consumer Price Index, and the Water and
Sewer Service Cost Index:
Exhibit 4-7 – Historical Cost Increases, 2000 - 2018
Index: 2000 = 100; Bureau of Labor Statistics (BLS), Bureau of the Census
Median Household Income
146
Consumer Price Index
142100
Water and Sewer Service Cost Index
234
2000 2003 2006 2009 2012 2015
Year
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 29
A key focus area of NewGen’s study was the affordability of the City’s water service for residential
customers. Prior to the study, NewGen compiled income data from the United States Census Bureau to
evaluate the affordability of the City’s FY 2020 rates. There are several assumptions built into the
affordability analysis:
The metric used to evaluate the affordability of water service within the City was the United States
Environmental Protection Agency’s guidance that water service is “affordable” if it costs no more than
2.5% of a household’s income.
It is assumed that the distribution of income of residents within the City matches the distribution of
income of the City’s water users. They City’s 2019 household income data is sourced from the U.S.
Census Bureau's American Community Survey.5
The U.S. states of California 6 and Texas 7 have each identified 50 gallons per day per capita (gpcd) as
indoor efficiency standards to meet essential needs for drinking, cooking, cleaning, and sanitation.
For the purposes of arriving at a round number of CCFs, this analysis used 46 gpcd.
In 2019 the City had 2.14 persons per household 8, resulting in an estimated indoor monthly water
usage of 4.0 CCF (46 gpcd x 2.14 persons = 2,953 gallons per 30 day month, or 3.95 CCF rounded to 4
CCF). This is also the City’s actual FY 2019 median inside city residential monthly usage based on
actual 2019 billing data.
The result of the analysis at the City’s current FY 2020 rates is shown in Exhibit 4-8.
Exhibit 4-8 – Residential Customer Affordability Analysis – FY 2020 Rates
At the current FY 2020 rates, approximately 19% of the City’s residential customers are either exceeding
or approaching the EPA affordability guideline of 2.5% of household income spent on water, assuming
5 U.S. Census Bureau's American Community Survey, Report DP03: Selected Economic Characteristics table.
6 California State Water Resources Control Board. 2018. “Water Efficiency Legislation will Make California More
Resilient to Impacts of Future Droughts,” Fact Sheet. Sacramento, CA: State Water Resources Control Board
7 Texas Water Development Board. 2004. Water Conservation Implementation Task Force Report to the 79th
Legislature. Austin, TX: Texas Water Development Board
8 https://www.census.gov/quickfacts/fact/table/galesburgcityillinois,US#
Section 4
30 Thoughtful Decision Making for Uncertain Times
that household uses 4 CCF per month. A foundational element of developing an alternative rate structure
was to address this affordability issue.
Recommended Revenue Increases
In order to increase revenues that will sustain the water system, NewGen recommends the following
revenue increases for the City’s water rates and fees. The percentages in Table 4-9 represent only the
increase in revenues for each rate component, regardless of rate structure. Each rate alternative NewGen
developed during the study raises the same revenue. A full discussion of rate alternatives and the specific
rate changes and bill impacts will follow.
Table 4-9
Recommended Revenue Increases
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Cash Flow Shortfall at FY 2020 Revenues ($445,511) ($1,362,080) ($2,129,688) ($46,189) ($1,860,606)
EOY Cash Balance at FY 2020 Revenues $6,571,142 $5,209,063 $3,079,375 $3,033,185 $1,172,579
Recommended Revenue Increases
Fire Protection Fees 9 36.03% 76.89% 47.97% 32.43% 24.50%
Retail Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Retail Usage rates per CCF 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Usage rates per CCF 10 0.00% 3.25% 3.25% 3.25% 3.25%
Cash Flow at Recommended Revenues ($434,203) ($1,107,933) ($1,622,477) $721,144 ($825,853)
EOY Cash at Recommended Revenues $6,582,451 $5,474,517 $3,852,041 $4,573,185 $3,747,331
Assuming that the City increase its water revenues consistent with the table above, the result is that the
City is able to fund the system’s projected operating, capital, and debt service expenses while also
maintaining the recommended reserves. The determination of which rate structure can be used to
generate the above stated revenue increases and cash flow will be discussed in the next sections of this
report.
Projected Rates with No Change in Rate Structure
The City may choose only to increase the FY 2020 rates by the recommended percentages above. In that
case, all City rates would increase uniformly for all Facility Fees, Usage rates, and Fireline charges.
9 Fire protection fees are independently developed based on a separate cost of service analysis. The rate plan
reflects a five-year phase-in to align the rates with the study’s analysis.
10 Wholesale CCF rate increases vary under different alternatives rate structures. Table 4-9 assumes the City
maintain the current rate structure.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 31
Projected Fireline Fees with No Change in Rate Structure
If the City adopts the revenue increase in Fireline charges as stated above without altering the Fireline
rate structure to better align with industry standards, the following Fireline fees would generate the
revenue sufficient to cover the fire protection services provided by the City, phased-in over a five year
period.
Table 4-10
Monthly Fireline Rates – No Rate Structure Change
Meter Size (inches) # of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City
2" 2 $8.75 $11.90 $21.05 $31.15 $41.26 $51.37
3" 1 $10.50 $14.28 $25.27 $37.39 $49.51 $61.64
4" 52 $12.25 $16.66 $29.48 $43.62 $57.76 $71.91
6" 80 $15.75 $21.43 $37.90 $56.08 $74.26 $92.46
8" 31 $19.25 $26.19 $46.32 $68.54 $90.77 $113.01
10" 4 $24.50 $33.33 $58.95 $87.23 $115.52 $143.82
12" - $29.75 $40.47 $71.59 $105.93 $140.27 $174.64
The Outside City Firelines and Outside City Firelines with No Water Service customer classes would
maintain their rate differential of 2.0 and 2.8 respectively. That is, Outside Firelines would pay twice the
rates shown in Table 4-10 and Outside City Firelines with No Water Service would pay 2.8 times the rates
in table 4-10. A full discussion of the recommended Fireline rates is provided in the next section of this
report.
Projected Facility Fees with No Change in Rate Structure
If the City adopts the recommended revenue increases in each year from FY 2021 through FY 2025, then
the City’s retail Facility Fees would be as shown in Table 4-11.
Table 4-11
Projected Facility Fees – No Rate Structure Change
Meter Size (inches) # of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City
5/8, 3/4 11,773 $15.91 $16.43 $16.96 $17.51 $18.08 $15.91
1"-2" 313 $33.05 $34.12 $35.23 $36.38 $37.56 $33.05
2"-4" 139 $66.10 $68.25 $70.47 $72.76 $75.12 $66.10
4"-6" 6 $165.35 $170.72 $176.27 $182.00 $187.92 $165.35
6"+ 2 $413.40 $426.84 $440.71 $455.03 $469.82 $413.40
Section 4
32 Thoughtful Decision Making for Uncertain Times
Table 4-11
Projected Facility Fees – No Rate Structure Change
Meter Size (inches) # of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Outside City
5/8, 3/4 204 $31.82 $32.85 $33.92 $35.02 $36.16 $31.82
1"-2" 8 $66.10 $68.25 $70.47 $72.76 $75.12 $66.10
2"-4" 7 $132.20 $136.50 $140.93 $145.51 $150.24 $132.20
4"-6" - $330.70 $341.45 $352.54 $364.00 $375.83 $330.70
6"+ 1 $826.80 $853.67 $881.42 $910.06 $939.64 $826.80
Pipeline
5/8, 3/4 11 $15.91 $16.43 $16.96 $17.51 $18.08 $15.91
1"-2" 17 $33.05 $34.12 $35.23 $36.38 $37.56 $33.05
2"-4" 1 $66.10 $68.25 $70.47 $72.76 $75.12 $66.10
4"-6" - $165.35 $170.72 $176.27 $182.00 $187.92 $165.35
6"+ - $413.40 $426.84 $440.71 $455.03 $469.82 $413.40
Inside City Sprinklers
5/8, 3/4 77 $3.18 $3.28 $3.39 $3.50 $3.61 $3.18
1"-2" 32 $6.61 $6.82 $7.05 $7.28 $7.51 $6.61
2"-4" 2 $13.22 $13.65 $14.09 $14.55 $15.02 $13.22
4"-6" - $33.07 $34.14 $35.25 $36.40 $37.58 $33.07
6"+ - $82.68 $85.37 $88.14 $91.01 $93.96 $82.68
The City has no Outside City Sprinkler customers.
Projected CCF Rates with No Change in Rate Structure
If the City were to not change the retail per CCF rate structure, then the following rates shown in Table 4-
12 are projected to fully support the future operating, capital, debt service, and reserve requirements of
the system.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 33
Table 4-12
Projected CCF Rates
# of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City 12,234 $2.50 $2.50 $2.58 $2.67 $2.75 $2.84
Outside City 220 $5.00 $5.00 $5.16 $5.33 $5.50 $5.68
Pipeline 29 $2.75 $2.75 $2.84 $2.93 $3.03 $3.13
Projected Wholesale Rates with No Change in Rate Structure
The City’s Wholesale water customers would continue to pay the Outside City Facility Fees and 68% of the
Inside City rate per CCF, as shown in Table 4-13.
Table 4-13
FY 2020 Wholesale Facility Fees and Usage Rate
Meter Size (inches) # of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Facility Fee
5/8, 3/4 1 $31.82 $31.82 $32.85 $33.92 $35.02 $36.16
1"-2" 1 $66.10 $66.10 $68.25 $70.47 $72.76 $75.12
2"-4" 2 $132.20 $132.20 $136.50 $140.93 $145.51 $150.24
4"-6" 3 $330.70 $330.70 $341.45 $352.54 $364.00 $375.83
6"+ 3 $826.80 $826.80 $853.67 $881.42 $910.06 $939.64
Usage Rate per CCF $1.70 $1.70 $1.76 $1.81 $1.87 $1.93
Customer Bill Impact of Increased Rates with No Change in Rate Structure
Table 4-14 shows the customer bill impact for several different types of customers if the City were to
adopt the revenue increases shown in Table 4-9 but were not to alter any of the rate structures of its
various fees.
Table 4-14
Projected Monthly Customer Bills – No Rate Structure Change
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Single Person $20.91 $20.91 $21.59 $22.29 $23.02 $23.76
5/8, 3/4 Meter $ Change $0.00 $0.68 $0.70 $0.72 $0.75
1 Unit 2 CCF % Change 0.0% 3.2% 3.3% 3.3% 3.2%
Section 4
34 Thoughtful Decision Making for Uncertain Times
Table 4-14
Projected Monthly Customer Bills – No Rate Structure Change
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Median Residential $25.91 $25.91 $26.75 $27.62 $28.52 $29.45
5/8, 3/4 Meter $ Change $0.00 $0.84 $0.87 $0.90 $0.93
1 Unit 4 CCF % Change 0.0% 3.2% 3.2% 3.3% 3.3%
Family of Four $38.41 $38.41 $39.66 $40.95 $42.28 $43.65
5/8, 3/4 Meter $ Change $0.00 $1.25 $1.29 $1.33 $1.37
1 Unit 9 CCF % Change 0.0% 3.3% 3.2% 3.3% 3.3%
Family of Six $58.41 $58.41 $60.31 $62.27 $64.29 $66.38
5/8, 3/4 Meter $ Change $0.00 $1.90 $1.96 $2.02 $2.09
1 Unit 17 CCF % Change 0.0% 3.3% 3.3% 3.2% 3.3%
Large Healthcare $3,966.10 $3,966.10 $4,095.00 $4,228.09 $4,365.50 $4,507.38
2"-4" Meter $ Change $0.00 $128.90 $133.09 $137.41 $141.88
1 Unit 1560 CCF % Change 0.0% 3.2% 3.2% 3.3% 3.2%
Large Government $37,566.10 $37,566.10 $38,787.00 $40,047.58 $41,349.12 $42,692.97
2"-4" Meter $ Change $0.00 $1,220.90 $1,260.58 $1,301.55 $1,343.85
1 Unit 15,000 CCF % Change 0.0% 3.3% 3.3% 3.2% 3.3%
Typical Wholesale $27,332.20 $27,332.20 $28,220.50 $29,137.66 $30,084.64 $31,062.39
2"-4" Meter $ Change $0.00 $888.30 $917.17 $946.97 $977.75
1 Unit 16,000 CCF % Change 0.0% 3.3% 3.2% 3.2% 3.3%
Recommended Rate Structure Alternatives
The first rate alternative that this report will detail is the industry standard approach to calculating the
City’s fire protection fees. Regardless of the City’s action on the Retail and Wholesale Facility Fees and
CCF Rates, NewGen recommends that the City immediately adjust private Fireline Fees based on the
industry standard methodology detailed in this section.
Fire Protection Revenue Increases and Rate Alternative
NewGen recommends an industry standard approach to allocating fire protection costs within the City’s
system. The standard methodology for allocating these costs is detailed in the American Water Works
Association (AWWA) Manual M1 – Principles of Water Rates, Fees and Charges (M1). Chapter IV.8 of M1
is titled Rates for Fire Protection Service. The methodology recommended by NewGen utilizes the Maine
Curve, developed by the Maine Public Utilities Commission in 1961, that gives the percentage of a water
system’s revenue requirements that can be attributed to fire protection service.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 35
Recommended Fire Protection Cost Allocation Methodology
In order to determine the proper dollar amount to allocate to private fire protection customers of a water
system, it is necessary to determine the total fire protection costs of the utility system. This is done by
using system pumping data in gallons per minute (gpm). These costs are then allocated to public and
private fire protection costs based on the customer base of each class of service. Then, rates can be
developed to fully collect the costs of providing both public and private fire protection. The data points
needed to determine the total cost of providing fire protection are:
Total System Fire Protection Meter Equivalents based on National Fire Protection Association (NFPA)
Fire Flow Demand Factors
Average System Water Pumped (in gpm)
Peak System Water Pumped (in gpm)
Population Served (in thousands)
The above data points allow for the calculation of the Required Fire Flow (RFF) of the system based on the
fire flow requirement formula determined by the National Board of Fire Underwriters (NBFU), now known
as Insurance Services Office (ISO):
Where P is the population served by the utility in thousands. This value is then compared the system’s
peak hourly flow based on actual FY 2019 pumping data. In FY 2019, the system’s maximum pumping day
occurred in January 2019 with a total of 8,153,000 gallons pumped. Averaged to a per minute rate. this
equates to 5,662 gallons per minute. The total system pumped 2,364,875,000 gallons in FY 2019, equating
to a 4,499 gpm average.
The ratio of the Peak System Flow to the Required Fire Flow is used to determine the percentage of total
system costs that are incurred for fire protection (both public and private). The methodology used to
determine that percentage is dictated by the Maine Curve:
A graphical representation of the Maine Curve is shown in Exhibit 4-15 below:
Section 4
36 Thoughtful Decision Making for Uncertain Times
Ratio of Peak Hour Rate (gpm) / Fire Demand (gpm) % of Gross Revenue to Public Fire Protection Exhibit 4-15 The Maine Curve11
The ratio of Peak System Flow to the Required Fire Flow is shown on the x-axis of the chart above. Where
that ratio intersects the Maine Curve determines the percentage of total system costs (gross revenue) to
allocate to fire protection.
These costs are then allocated to public fire hydrants, public fire hydrants, and Firelines based on
equivalent flow factors. The equivalent flow factors are derived by taking the Fireline size in inches raised
to the power of 2.63.12 The City does not currently serve any Outside City Fireline customers, therefore
the analysis shows only Inside City Fireline customers and public fire hydrants.
11 AWWA. 2017. Manual M1: Principles of Water Rates, Fees, and Charges, Seventh Edition. Denver, CO: American
Water Works Association. at p. 159
12 AWWA. 2017. Manual M1: Principles of Water Rates, Fees, and Charges, Seventh Edition. Denver, CO: American
Water Works Association. at p. 163
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 37
Table 4-16
FY 2020 Fire Protection Meter Equivalent Calculation
Meter Size (inches) Inside City Firelines
Current Meter Factors Current Equivalent Lines in Service
AWWA Flow
Factors
AWWA Equivalent Lines
in Service
2" 2 1.00 2 6.19 12
3" 1 1.20 1 17.98 18
4" 52 1.40 72 38.32 1,977
6" 80 1.80 145 111.31 8,951
8" 31 2.20 67 237.21 7,255
10" 4 2.80 11 426.58 1,742
12" - 3.40 - 689.04 -
Totals 170 299 19,955
Public Fire Hydrants 1,435 N/A N/A 111.31 159,731
The current meter factors are based on the ratio of the current Fireline fee to the 2” meter fee. The
updated flow factors are based on AWWA industry standard methodology. Based on feedback from the
City Council, we developed a phased-in approach to aligning the City’s existing Fireline meter equivalents
with the industry standard in order to lessen the one time impact on these customers. The phased-in
meter equivalent plan is shown in Table 4-17 below.
Table 4-17
Fire Protection Meter Equivalent Phase-In Plan
Meter Size (inches)
FY 2020 Factors
(Current)
Year 1
FY 2021
Year 2
FY 2022
Year 3
FY 2023
Year 4
FY 2024
Year 5
FY 2025
(AWWA)
2" 1.00 2.04 3.08 4.11 5.15 6.19
3" 1.20 4.56 7.91 11.27 14.63 17.98
4" 1.40 8.78 16.17 23.55 30.94 38.32
6" 1.80 23.70 45.60 67.51 89.41 111.31
8" 2.20 49.20 96.20 143.20 190.21 237.21
10" 2.80 87.56 172.31 257.07 341.82 426.58
12" 3.40 140.53 277.66 414.79 551.91 689.04
To further smooth out the impact on fire protection rates, our study assumed a five-year averaging of the
system revenue requirement for the purposes of calculating fire protection revenues. This has the impact
of smoothing out the rate increases without the variability of the annual revenue requirement. Over the
five year period, revenues remain the same in total. The full calculation of the AWWA cost allocation for
the City’s fire protection service is shown in Table 4-18.
Section 4
38 Thoughtful Decision Making for Uncertain Times
Table 4-18
Fire Protection Cost Allocation Calculation
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Five-Year Average Rev. Req. $8,151,188 $8,151,188 $8,151,188 $8,151,188 $8,151,188
Population Served 13 30,197 30,197 30,197 30,197 30,197
Total System Pumpage (gallons) 2,364,875,000 2,364,875,000 2,364,875,000 2,364,875,000 2,364,875,000
Average Gallons per Day (gpd) 6,479,110 6,479,110 6,479,110 6,479,110 6,479,110
Average Gallons per Minute (gpm) 4,499 4,499 4,499 4,499 4,499
Peak Flow (gpm) 5,662 5,662 5,662 5,662 5,662
Required Fire Flow (gpm) 5,297 5,297 5,297 5,297 5,297
Maine Formula Ratio 1.07 1.07 1.07 1.07 1.07
Fire Protection Allocation of RR 20.34% 20.34% 20.34% 20.34% 20.34%
Total Fire Protection Expenses $1,658,067 $1,658,067 $1,658,067 $1,658,067 $1,658,067
Public Hydrant Equivalents 159,731 159,731 159,731 159,731 159,731
Fireline Equivalents 19,955 19,955 19,955 19,955 19,955
Allocated – Public Fire Hydrants $1,473,933 $1,473,933 $1,473,933 $1,473,933 $1,473,933
Allocated – Firelines $184,134 $184,134 $184,134 $184,134 $184,134
The public hydrants allocation is assumed to be collected in the City’s retail water rates. The remaining
cost is allocated to private Firelines based on flow demand factors.
Recommended Fire Protection Rates
Based on the above calculations, which include a phase-in of fire protection increases, the recommended
fire protection rates and revenues are shown in Table 4-19.
13 July 1, 2019 estimate from US Census data,
https://www.census.gov/quickfacts/fact/table/galesburgcityillinois,US/PST045219
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 39
Table 4-19
Recommended Monthly Fireline Rates
Meter Size (inches) # of Connections Current FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City
2" 2 $8.75 $8.75 $8.75 $8.75 $8.75 $8.75
3" 1 $10.50 $10.50 $10.50 $10.50 $11.25 $13.83
4" 52 $12.25 $12.25 $12.43 $18.11 $23.79 $29.47
6" 80 $15.75 $18.23 $35.07 $51.91 $68.75 $85.59
8" 31 $19.25 $37.83 $73.98 $110.12 $146.26 $182.40
10" 4 $24.50 $67.33 $132.50 $197.68 $262.85 $328.02
12" - $29.75 $108.06 $213.51 $318.96 $424.40 $529.85
The incremental difference between the meter size charges are significantly different year-to-year under
the recommended methodology. This is due to the alignment of the Fireline charges with the AWWA
recommended flow factors, which has different impacts on each meter size. In fact, some meter size fees
are not adjusted until the recommended AWWA meter equivalent impact results in a higher fee. The 2”
meter fee remains consistent throughout the five-year period.
The above fees represent an industry standard approach to the calculation of private fire protection fees.
The revenue generated by the above fees would increase the City’s current fire protection from about
$31,000 in FY 2020 to about $184,000 in FY 2025. Although this increase is substantial, the methodologies
used to develop the fees is based on actual pumping, population, and flow capacity data. The phase-in
also lessens the annual impact on fees.
The additional revenue generated by the recommended Fireline fees above would reduce the revenue
needed to be generated by the City’s retail water customers. The rates and projections contained
throughout the next sections of this report assume the adoption of the recommended Fireline charges in
Table 4-19.
Section 4
40 Thoughtful Decision Making for Uncertain Times
Retail and Wholesale Rate Alternative Scenarios
NewGen developed several potential changes to the structure of the City’s retail and wholesale Facility
Fees and per CCR rates. Each alternative will generate the same amount of revenue as recommended in
Table 4-9. The alternative rate structures have significant impacts on the distribution of City water costs
among its customers, however in total revenues remain consistent with the rate increase plan in Table 4-
9. There were several changes to the City’s various retail water rate and fee structures that were
developed during the study. They are as follows:
Facility Fee Alternative 1: Reduced Facility Fee: While maintaining the existing meter size based
Facility Fees, reduce the 5/8, 3/4 inch meter fee to $8.00 per month, adjust all other Facility Fees and
per CCF rates accordingly.
Facility Fee Alternative 2: Change to a per Unit Facility Fee: Change the City’s Facility Fee structure
to a per unit fee rather than a meter size based fee. Per CCF rates are adjusted as per Table 4-9 with
no change in structure. All revenue from Facility Fees and Unit rates remains the same.
CCF Rate Alternative 1: Change the City’s per CCF Rate structure to include 4 CCF per account for each
customer and charge a per CCF rate for usage above 4 CCF per account.
CCF Rate Alternative 2: Change the City’s per CCF Rate structure to include 4 CCF per unit for each
customer and charge a per CCF rate for usage above 4 CCF per unit. This change is only consistent
when in addition to Facility Fee Alternative 2. Otherwise, the City would be inconsistent in the manner
in which it applies its fixed and variable fees. That is, CCF Rate Alternative 2 assumes the adoption of
Facility Fee Alternative 2.
This section will detail the alternative methods above individually and show the customer bill impact for
a variety of City water customers.
Wholesale Rates under Alternative Structures
Typically, the rates charged to wholesale water customers are separate and distinct from those charged
to retail customers. This allows a water supplier to tailor individual wholesale rates based on negotiated
contracts. While Galesburg’s wholesale water customers have separate contracts, the contracts share
language regarding the price of water service. All of the City’s wholesale contracts include a statement
that the wholesale customer “shall be subject to the rate charged by Galesburg for users outside the city
limits of Galesburg.” The City of Knoxville’s contract limits the rate increase imposed by the City of
Galesburg to 5.0% per year or the percent increase the City adopted for Inside City customers, whichever
is less. These contractual requirements create a direct link between the retail rates and wholesale rates.
NewGen would typically recommend a separate methodology to calculate wholesale water rates. Given
the contractual limitations on the changes possible to the City’s wholesale rates, NewGen did not calculate
or develop any wholesale rate alternatives that differ from the current methodology.
NewGen recommends continuing to charge Wholesale customers using the current methodology, with a
Facility Fee per unit equal to that of Outside City customers and a reduced per CCF rate. This methodology
recognizes that the Wholesale customers do not use a significant portion of the City’s retail system, such
as the City’s local distribution system. Wholesale rates depend on the changes in retail rates because of
the contractual language in the City’s wholesale agreements. Therefore, as this report details the several
rate alternatives described above, wholesale rates will be presented for each alternative.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 41
Facility Fee Alternative 1: Reduced Facility Fee
Facility Fee Alternative 1 included a reduction in the Inside City 5/8. 3/4 inch meter size Facility fee from
$15.91 per month to $8.00 per month in FY 2021. Facility Fees are then increased according to the revenue
increases recommended in Table 4-9. All meter size and Inside/Outside/Pipeline differentials remain
unchanged.
Table 4-20
Projected Facility Fees – Alternative 1: Reduced Facility Fee
Meter Size (inches) # of Connections Current FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City
5/8, 3/4 11,773 $15.91 $8.00 $8.26 $8.53 $8.81 $9.09
1"-2" 313 $33.05 $16.62 $17.16 $17.72 $18.29 $18.89
2"-4" 139 $66.10 $33.24 $34.32 $35.43 $36.58 $37.77
4"-6" 6 $165.35 $83.14 $85.84 $88.63 $91.52 $94.49
6"+ 2 $413.40 $207.87 $214.63 $221.60 $228.80 $236.24
Outside City
5/8, 3/4 204 $31.82 $16.00 $16.52 $17.06 $17.61 $18.18
1"-2" 8 $66.10 $33.24 $34.32 $35.43 $36.58 $37.77
2"-4" 7 $132.20 $66.47 $68.63 $70.86 $73.17 $75.55
4"-6" - $330.70 $166.29 $171.69 $177.27 $183.03 $188.98
6"+ 1 $826.80 $415.74 $429.25 $443.20 $457.60 $472.48
Pipeline
5/8, 3/4 11 $15.91 $8.00 $8.26 $8.53 $8.81 $9.09
1"-2" 17 $33.05 $16.62 $17.16 $17.72 $18.29 $18.89
2"-4" 1 $66.10 $33.24 $34.32 $35.43 $36.58 $37.77
4"-6" - $165.35 $83.14 $85.84 $88.63 $91.52 $94.49
6"+ - $413.40 $207.87 $214.63 $221.60 $228.80 $236.24
Inside City Sprinklers
5/8, 3/4 77 $3.18 $1.60 $1.65 $1.70 $1.76 $1.82
1"-2" 32 $6.61 $3.32 $3.43 $3.54 $3.66 $3.78
2"-4" 2 $13.22 $6.65 $6.86 $7.09 $7.32 $7.55
4"-6" - $33.07 $16.63 $17.17 $17.73 $18.30 $18.90
6"+ - $82.68 $41.57 $42.93 $44.32 $45.76 $47.25
The reduced Facility Fees would result in a decrease in Facility Fee revenue of about $1.3 million in FY
2021. This revenue must be recovered by increased CCF rates in order to maintain the financial plan
projection recommended in this report.
Section 4
42 Thoughtful Decision Making for Uncertain Times
Per CCF Rate Impact of Facility Fee Alternative 1
In order to maintain the recommended total system revenue under Facility Fee Alternative 1, the City’s
per CCF rates must be adjusted as follows in Table 4-21.
Table 4-21
Projected CCF Rates – Facility Fee Alternative 1: Reduced Facility Fee
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City $2.50 $3.50 $3.61 $3.73 $3.85 $3.98
Outside City $5.00 $7.00 $7.23 $7.46 $7.70 $7.96
Pipeline $2.75 $3.85 $3.98 $4.10 $4.24 $4.38
The large increases in per CCF Rates under Facility Fee Alternative 1 are necessary to maintain revenues
consistent with the financial plan developed as a part of this study.
Wholesale Rate Impact of Facility Fee Alternative 1
The changes in the Facility Fee and per CCF rates under Facility Fee Alternative 1 would result in the
Wholesale Facility Fees and unit rates per CCF are shown in Table 4-22.
Table 4-22
Wholesale Facility Fees and Usage Rates – Alternative 1: Reduced Facility Fee
Meter Size (inches) Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Facility Fee
5/8, 3/4 1 $31.82 $16.00 $16.52 $17.06 $17.61 $18.18
1"-2" 1 $66.10 $33.24 $34.32 $35.43 $36.58 $37.77
2"-4" 2 $132.20 $66.47 $68.63 $70.86 $73.17 $75.55
4"-6" 3 $330.70 $166.29 $171.69 $177.27 $183.03 $188.98
6"+ 3 $826.80 $415.74 $429.25 $443.20 $457.60 $472.48
Usage Rate per CCF $1.70 $1.79 $1.84 $1.90 $1.96 $2.03
The Wholesale rate increase complies with the language in the Knoxville contract limiting increases to the
lower of the Inside City rate increase or 5.0%.
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 43
Customer Bill Impact of Facility Fee Alternative 1: Reduced Facility Fee
The combined impact of a reduction in the monthly Facility Fee and the increase in the per CCF rates
necessary under Facility Fee Alternative 1 would have the following impact on the sample customers
beginning in FY 2021.
Table 4-23
Projected Monthly Customer Bills – Facility Fee Alternative 1
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Single Person $20.91 $15.00 $15.49 $15.99 $16.51 $17.05
5/8, 3/4 Meter $ Change ($5.91) $0.49 $0.50 $0.52 $0.54
1 Unit 2 CCF % Change (-28.3%) 3.3% 3.2% 3.3% 3.2%
Median Residential $25.91 $22.00 $22.72 $23.45 $24.22 $25.00
5/8, 3/4 Meter $ Change ($3.91) $0.72 $0.74 $0.76 $0.79
1 Unit 4 CCF % Change (-15.1%) 3.3% 3.3% 3.2% 3.2%
Family of Four $38.41 $39.50 $40.78 $42.11 $43.48 $44.89
5/8, 3/4 Meter $ Change $1.09 $1.28 $1.33 $1.37 $1.41
1 Unit 9 CCF % Change 2.8% 3.2% 3.3% 3.3% 3.2%
Family of Six $58.41 $67.50 $69.69 $71.96 $74.30 $76.71
5/8, 3/4 Meter $ Change $9.09 $2.19 $2.27 $2.34 $2.41
1 Unit 17 CCF % Change 15.6% 3.3% 3.2% 3.2% 3.3%
Large Healthcare $3,966.10 $5,493.24 $5,671.77 $5,856.10 $6,046.42 $6,242.93
2"-4" Meter $ Change $1,527.14 $178.53 $184.33 $190.32 $196.51
1 Unit 1560 CCF % Change 38.5% 3.2% 3.3% 3.2% 3.2%
Large Government $37,566.10 $52,533.24 $54,240.57 $56,003.39 $57,823.50 $59,702.76
2"-4" Meter $ Change $14,967.14 $1,707.33 $1,762.82 $1,820.11 $1,879.26
1 Unit 15,000 CCF % Change 39.8% 3.3% 3.2% 3.3% 3.2%
Typical Wholesale $27,332.20 $28,626.47 $29,556.83 $30,517.43 $31,509.25 $32,533.30
2"-4" Meter $ Change $1,294.27 $930.36 $960.60 $991.82 $1,024.05
1 Unit 16,000 CCF % Change 4.7% 3.3% 3.3% 3.2% 3.3%
Although the Wholesale customer’s bill appears to increase disproportionately to the Inside City
customers, the CCF rate charged to the Inside City is actually increased by 40.0%, whereas the wholesale
rate is only increased 5.0%. The bill impact is due to the reduction in the Facility Fee, which does not
impact Wholesale customers as much as small Inside City customers. The nominal rate increases are
consistent with the Wholesale contract language.
Section 4
44 Thoughtful Decision Making for Uncertain Times
Facility Fee Alternative 2: Per Unit Facility Fee
Currently the City charges monthly Facility Fees based on each customer’s meter size. As a part of this
study, the City requested an evaluation of an alternative fixed charge methodology that was based on
each customer’s units. A “unit” is a measure of equivalent demand for each customer. For instance, a 2”
meter serving an apartment building may serve 12 units under one meter. The policy of charging per
meter or per unit has varying impacts on single and multi-unit customers.
While NewGen’s evaluation was focused on multi-unit customers, if the City were to alter the Facility Fee
for one group of customers, then we recommend applying the change to all customers. Therefore,
NewGen developed a unit based Facility Fee that recovers the same revenue as the current meter based
Facility Fees. First, an accounting of the system’s units must be done. The total system units compared to
accounts by meter size is shown in Table 4-24.
Table 4-24
FY 2019 Retail Customer Meters vs Units
Customer Class Accounts Units
Inside City
5/8, 3/4 11,773 12,280
1"-2" 313 1,059
2"-4" 139 1,314
4"-6" 6 10
6"+ 2 2
Totals 12,234 14,666
Inside City Sprinklers
5/8, 3/4 77 77
1"-2" 32 32
2"-4" 2 2
4"-6" - -
6"+ - -
Totals 111 111
Outside City
5/8, 3/4 204 204
1"-2" 8 8
2"-4" 7 42
4"-6" - -
6"+ 1 1
Totals 220 255
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 45
Table 4-24
FY 2019 Retail Customer Meters vs Units
Customer Class Accounts Units
Pipeline
5/8, 3/4 11 11
1"-2" 17 17
2"-4" 1 1
4"-6" - -
6"+ - -
Totals 29 29
In general, larger meters tend to serve more units per account.
The advantage of charging a Facility Fee based on units is that multi-unit accounts are better accounted
for in terms of their reservation of system capacity. Also, under a unit based Facility Fee, it does not matter
if the City bills a master meter based on the number of units it serves, or each unit separately. The total
revenue generated by a per unit fee from such a group of units is identical.
The disadvantage of a unit based Facility Fee is that larger, one unit meters are underrepresented in terms
of their reservation of system capacity. If a larger meter does not service multiple units, then its
contribution to the fixed costs of the system are understated under a unit based Facility Fee. However,
including a per-unit allowance for billable consumption offsets this impact, and generates more revenue
from billable water consumption of larger meters. NewGen’s CCF Rate Alternative 1 includes this
modification and will be discussed later in this report.
NewGen developed a per unit Facility Fee alternative that charges each unit the same monthly amount.
The alternative maintains the differential between inside City, outside City, and pipeline customers and
generates the same amount of revenue as the current fees charged to those customers. The updated per
Unit Facility Fees for5/8, 3/4 Meter Sizes are shown in Table 4-25. All meter size and
Inside/Outside/Pipeline differentials remain unchanged.
Table 4-25
Facility Fee Alternative 2: Per Unit Facility Fees – 5/8, 3/4 Meter Size
# of Units FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City 14,666 $15.91 $14.45 $14.92 $15.40 $15.90 $16.42
Outside City 255 $31.82 $28.90 $29.83 $30.80 $31.80 $32.84
Pipeline 29 $15.91 $14.45 $14.92 $15.40 $15.90 $16.42
Inside City Sprinkler 111 $3.18 $2.89 $2.98 $3.08 $3.18 $3.28
Outside City Sprinkler - $6.36 $5.78 $5.96 $6.16 $6.36 $6.56
Section 4
46 Thoughtful Decision Making for Uncertain Times
CCF Rate und Facility Fee Alternative 2
The change in Facility Fees under Alternative 2 would generate the same Facility Fee revenue as the
unmodified Facility Fee structure. Therefore, the City’s CCF rates would remain the same as if the City
maintained the meter size based Facility Fees. Table 4-26 shows the CCF rates for retail customers under
Facility Fee Alternative 2.
Table 4-26
Projected CCF Rates – Alternative 2A
# of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City 14 12,234 $2.50 $2.50 $2.58 $2.67 $2.75 $2.84
Outside City 220 $5.00 $5.00 $5.16 $5.33 $5.50 $5.68
Pipeline 29 $2.75 $2.75 $2.84 $2.93 $3.03 $3.13
Wholesale Rates Under Facility Fee Alternative 2
The City’s Wholesale rates would still comply with the contractual language setting the Facility Fee to the
Outside City Facility Fee and the CCF rate to 68% of the Inside City CCF rate, as shown in Table 4-27.
Table 4-27
Projected Wholesale Facility Fees and CCF Rates – Alternative 2A
# of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Facility Fee per Unit 10 $31.82 $28.90 $29.83 $30.80 $31.80 $32.84
Usage Rate per CCF $1.70 $1.79 $1.84 $1.90 $1.96 $2.03
Customer Bill Impact of Facility Fee Alternative 2: Per Unit Facility Fee
The following Table 4-28 shows the impact of modifying the City’s Facility Fee structure to a per unit
monthly fee.
Table 4-28
Projected Monthly Customer Bills – Facility Fee Alternative 2
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Single Person $20.91 $19.45 $20.08 $20.73 $21.40 $22.10
5/8, 3/4 Meter $ Change ($1.46) $0.63 $0.65 $0.67 $0.70
1 Unit 2 CCF % Change (-7.0%) 3.2% 3.2% 3.2% 3.2%
14 Includes Inside City Sprinkler customers
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 47
Table 4-28
Projected Monthly Customer Bills – Facility Fee Alternative 2
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Median Residential $25.91 $24.45 $25.24 $26.06 $26.91 $27.78
5/8, 3/4 Meter $ Change ($1.46) $0.79 $0.82 $0.85 $0.87
1 Unit 4 CCF % Change (-5.6%) 3.2% 3.2% 3.2% 3.2%
Family of Four $38.41 $36.95 $38.15 $39.39 $40.67 $41.99
5/8, 3/4 Meter $ Change ($1.46) $1.20 $1.24 $1.28 $1.32
1 Unit 9 CCF % Change (-3.8%) 3.2% 3.2% 3.2% 3.2%
Family of Six $58.41 $56.95 $58.80 $60.71 $62.68 $64.72
5/8, 3/4 Meter $ Change ($1.46) $1.85 $1.91 $1.97 $2.04
1 Unit 17 CCF % Change (-2.5%) 3.2% 3.2% 3.2% 3.2%
Large Healthcare $3,966.10 $3,914.45 $4,041.67 $4,173.02 $4,308.64 $4,448.67
2"-4" Meter $ Change ($51.65) $127.22 $131.35 $135.62 $140.03
1 Unit 1560 CCF % Change (-1.3%) 3.2% 3.2% 3.2% 3.2%
Large Government $37,566.10 $37,514.45 $38,733.67 $39,992.51 $41,292.27 $42,634.27
2"-4" Meter $ Change ($51.65) $1,219.22 $1,258.84 $1,299.76 $1,342.00
1 Unit 15,000 CCF % Change (-0.1%) 3.2% 3.2% 3.2% 3.2%
Typical Wholesale $27,332.20 $27,228.90 $28,113.83 $29,027.53 $29,970.93 $30,944.98
2"-4" Meter $ Change ($103.30) $884.94 $913.70 $943.39 $974.05
1 Unit 16,000 CCF % Change (-0.4%) 3.2% 3.2% 3.2% 3.2%
Although it appears that all customer bills would decrease in FY 2021, the increased costs would be to
customers with more than one unit.
CCF Rate Alternative 1: 4 CCF Allowance per Account
Affordability of water service for small users is an increasingly becoming a concern for water utilities. One
way to target small water users, who tend to be single person or small family households, is to provide
water service of a certain level at a reduced cost or at no cost. The reduced cost is sometimes called a
“lifeline rate”. To provide water at no cost is typically called a “minimum allowance” or simple an
“allowance”. The alternative developed for the City as a part of NewGen’s study is a 4 CCF allowance per
account. That is, each account would not pay for the first 4 CCFs of water consumption each month. All
customers at or below 4 CCF per month would only pay the monthly Facility Fee.
Of course, this means that the monthly billable CCFs of the City’s customer base will be reduced.
Therefore, in order to produce the same amount of CCF rate revenue, the rate charged per CCF over the
4 CCF allowance must increase. Table 4-29 shows the breakdown of usage assuming the City does not bill
any customer for the first 4 CCF of water consumption.
Section 4
48 Thoughtful Decision Making for Uncertain Times
Table 4-29
FY 2021 Estimated Retail Customer Usage – 4 CCF Allowance per Account
Inside City 15 Outside City Pipeline Wholesale Totals % of Total
Up to 4 CCF per Account 411,704 7,128 836 437 420,105 27%
Over 4 CCF per Account 799,086 38,176 3,253 308,955 1,149,470 73%
Total Usage 1,210,790 45,304 4,089 309,392 1,569,575 100%
CCF Rates under CCF Rate Alternative 1
Table 4-28 shows that about 27% of the system’s usage would not be billed under CCF Rate Alternative 1.
Therefore, the per CCF rate applied to usage above 4 CCF per account per month will be higher than the
projected rate under the current per CCF structure. Table 4-30 shows the CCF rates necessary to support
the system if the City were to adopt a 4 CCF allowance per account per month.
Table 4-30
Projected CCF Rates under CCF Rate Alternative 1: 4 CCF Allowance per Account
# of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City 16 12,234 $2.50 $3.71 $3.83 $3.96 $4.09 $4.22
Outside City 220 $5.00 $7.43 $7.67 $7.92 $8.18 $8.44
Pipeline 29 $2.75 $4.09 $4.22 $4.36 $4.50 $4.64
Wholesale 10 $1.70 $1.79 $1.84 $1.90 $1.96 $2.03
The CCF rates above generate the same revenue as the CCF rates under the current rate structure when
applied to usage above 4 CCF per month per account.
Customer Bill Impact of CCF Rate Alternative 1: 4 CCF Allowance per Account
The table below assumes that the City maintain its current Facility Fee structure and increase Facility Fees
consistent with the financial plan in this report.
Table 4-31
Projected Monthly Customer Bills – CCF Rate Alternative 1
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Single Person $20.91 $15.91 $16.43 $16.96 $17.51 $18.08
5/8, 3/4 Meter $ Change ($5.00) $0.52 $0.53 $0.55 $0.57
1 Unit 2 CCF % Change (-23.9%) 3.2% 3.3% 3.3% 3.3%
15 Includes Inside City Sprinkler usage
16 Includes Inside City Sprinkler customers
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 49
Table 4-31
Projected Monthly Customer Bills – CCF Rate Alternative 1
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Median Residential $25.91 $15.91 $16.43 $16.96 $17.51 $18.08
5/8, 3/4 Meter $ Change ($10.00) $0.52 $0.53 $0.55 $0.57
1 Unit 4 CCF % Change (-38.6%) 3.2% 3.3% 3.3% 3.3%
Family of Four $38.41 $34.48 $35.60 $36.76 $37.95 $39.19
5/8, 3/4 Meter $ Change ($3.93) $1.12 $1.16 $1.19 $1.23
1 Unit 9 CCF % Change (-10.2%) 3.2% 3.3% 3.2% 3.3%
Family of Six $58.41 $64.19 $66.28 $68.43 $70.66 $72.95
5/8, 3/4 Meter $ Change $5.78 $2.09 $2.15 $2.22 $2.30
1 Unit 17 CCF % Change 9.9% 3.2% 3.3% 3.3% 3.2%
Large Healthcare $3,966.10 $5,845.21 $6,035.18 $6,231.33 $6,433.84 $6,642.94
2"-4" Meter $ Change $1,879.11 $189.97 $196.14 $202.52 $209.10
1 Unit 1560 CCF % Change 47.4% 3.2% 3.3% 3.3% 3.2%
Large Government $37,566.10 $55,762.49 $57,574.77 $59,445.95 $61,377.95 $63,372.73
2"-4" Meter $ Change $18,196.39 $1,812.28 $1,871.18 $1,931.99 $1,994.78
1 Unit 15,000 CCF % Change 48.4% 3.3% 3.3% 3.2% 3.3%
Typical Wholesale $27,332.20 $28,685.06 $29,617.32 $30,579.89 $31,573.73 $32,599.88
2"-4" Meter $ Change $1,352.86 $932.26 $962.56 $993.85 $1,026.15
1 Unit 16,000 CCF % Change 4.9% 3.3% 3.3% 3.2% 3.3%
The inclusion of 4 CCF per month has the impact of reducing the total water bill for small users of the
City’s system. However, the impact on large water users is disproportionately higher due to the increased
per CCF rate for usage above 4 CCF per month. Large water users will exceed 4 CCF quickly and pay the
higher per CCF rate on most of their monthly usage. Similarly to the reduced Facility Fee option, this
alternative disproportionately impacts Inside City customers when compared to Wholesale customers,
but the nominal rate increases are consistent with the Wholesale agreements.
CCF Rate Alternative 2: Per Unit Facility Fee and 4 CCF Allowance per Unit
Should the City adopt the Facility Fee Alternative 2, then there would be a consistent basis to apply a CCF
allowance per Unit for each account. The current Facility Fee structure does not account for the number
of units behind each meter – therefore, an allowance for usage per unit would not be appropriate. Facility
Fee Alternative 2 accounts for the number of units behind each meter, and therefore a per unit allowance
would account for the fixed portion of each customer’s bill in a consistent manner.
NewGen developed a CCF rate alternative that includes a four (4) CCF allowance per unit for all customers.
Usage over the 4 CCF per unit allowance would be charged at a flat rate per CCF.
Section 4
50 Thoughtful Decision Making for Uncertain Times
CCF Rates under CCF Rate Alternative 2
If the City adopts Facility Fee Alternative 2, then there would be an opportunity to develop a per Unit CCF
allowance for each account. NewGen developed an alternative unit rate structure that provides an
allowance for usage included in the monthly per unit Facility Fee. This allowance is allocated on a per Unit
basis, so that all customers are treated equally. NewGen developed the allowance based on the median
inside and outside City residential usage, which is four (4) CCF per month.
Table 4-32
FY 2021 Estimated Retail Customer Usage – 4 CCF Allowance per Unit
Inside City 17 Outside City Pipeline Wholesale Totals % of Total
Up to 4 CCF per Unit 478,502 7,886 836 437 487,661 31%
Over 4 CCF per Unit 732,288 37,418 3,253 308,955 1,081,914 69%
Total Usage 1,210,790 45,304 4,089 309,392 1,569,575 100%
Because there are more Units than there are Accounts, a larger percentage of the City’s usage falls under
4 CCFs per Unit than under 4 CCFs per account. Table 4-31 shows the per unit percentage to be 31%, which
is 4% higher than the usage under 4 CCF per Account from CCF Rate Alternative 1. Therefore, per CCF rate
must be even higher under CCF Rate Alternative 2.
NewGen’s CCF Rate Alternative 2 rate design assumes that each water account will not be charged for the
first 4 CCF per unit each month. Each CCF above the minimum amount would be charged at the following
rates shown in Table 4-33.
Table 4-33
CCF Rates Alternative 2: 4 CCF Allowance per Unit
# of Customers FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City 18 12,234 $2.50 $4.03 $4.16 $4.29 $4.43 $4.58
Outside City 220 $5.00 $8.05 $8.32 $8.59 $8.87 $9.15
Pipeline 29 $2.75 $4.43 $4.57 $4.72 $4.88 $5.03
Wholesale 10 $1.70 $1.79 $1.84 $1.90 $1.96 $2.03
The revenues generated by the rates above is identical to the projections under the current rate structure.
Customer Bill Impact of CCF Rate Alternative 2
The CCF Rate Alternative 2 is only recommended if the City also chooses to apply Facility Fees on a per
unit basis. Therefore, the bill impacts shown in Table 4-34 include both Facility Fee Alternative 2 and CCF
Rate Alternative 2 impacts.
17 Includes Inside City Sprinkler usage
18 Includes Inside City Sprinkler customers
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 51
Table 4-34
Projected Monthly Customer Bills – CCF Rate Alternative 2
Sample Customer FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Single Person $20.91 $14.45 $14.92 $15.40 $15.90 $16.42
5/8, 3/4 Meter $ Change ($6.46) $0.47 $0.48 $0.50 $0.52
1 Unit 2 CCF % Change (-30.9%) 3.2% 3.2% 3.2% 3.2%
Median Residential $25.91 $14.45 $14.92 $15.40 $15.90 $16.42
5/8, 3/4 Meter $ Change ($11.46) $0.47 $0.48 $0.50 $0.52
1 Unit 4 CCF % Change (-44.2%) 3.2% 3.2% 3.2% 3.2%
Family of Four $38.41 $34.58 $35.71 $36.87 $38.06 $39.30
5/8, 3/4 Meter $ Change ($3.83) $1.12 $1.16 $1.20 $1.24
1 Unit 9 CCF % Change (-10.0%) 3.2% 3.2% 3.2% 3.2%
Family of Six $58.41 $66.80 $68.97 $71.21 $73.52 $75.91
5/8, 3/4 Meter $ Change $8.39 $2.17 $2.24 $2.31 $2.39
1 Unit 17 CCF % Change 14.4% 3.2% 3.2% 3.2% 3.2%
Large Healthcare $3,966.10 $6,280.54 $6,484.66 $6,695.41 $6,913.01 $7,137.68
2"-4" Meter $ Change $2,314.44 $204.12 $210.75 $217.60 $224.67
1 Unit 1560 CCF % Change 58.4% 3.2% 3.2% 3.2% 3.2%
Large Government $37,566.10 $60,404.11 $62,367.24 $64,394.18 $66,486.99 $68,647.81
2"-4" Meter $ Change $22,838.01 $1,963.13 $2,026.93 $2,092.81 $2,160.83
1 Unit 15,000 CCF % Change 60.8% 3.2% 3.2% 3.2% 3.2%
Typical Wholesale $27,332.20 $28,581.76 $29,510.66 $30,469.76 $31,460.02 $32,482.47
2"-4" Meter $ Change $1,249.56 $928.91 $959.10 $990.27 $1,022.45
1 Unit 16,000 CCF % Change 4.6% 3.2% 3.2% 3.2% 3.2%
Similarly to the reduced Facility Fee option, this alternative disproportionately impacts Inside City
customers when compared to Wholesale customers, but the nominal rate increases are consistent with
the Wholesale agreements.
Cash Flow Under Recommended Revenue Increases
Each of the proposed rate alternatives discussed previously result in approximately the same amount of
revenue each year. Therefore, the financial projections are identical for each scenario, assuming that the
City increases revenues consistent with the financial plan in Table 4-9. Exhibit 4-35 shows the projected
expenses and revenues under the proposed revenue increase plan.
Section 4
52 Thoughtful Decision Making for Uncertain Times
Exhibit 4-35 Expenses vs. Revenues Under Recommended Rate Increases
Although the revenues projected in FY 2021 through FY 2025 do not fully fund the annual revenue
requirement in most years, the City’s Water Fund cash reserves are sufficient to support the system as
revenues are increases incrementally over the five year projection. The phasing in of revenue increases
by supporting the system with existing reserves allows the City to slowly increase water revenues over
time rather than all at once. This reduces the one-time cost increase on customers. Exhibit 4-36 shows
the City’s historical cash balance based on the City’s FY 2017 through FY 2019 financial statements and
projected cash balance of the City’ water fund under the recommended revenue increases.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025Millions
Operating Expenses Existing Debt Service
New Debt Service PAYGO Capital Projects
Total Revenues (FY 2020 Rates)Total Revenues (Financial Plan)
Financial Plan and Recommended Rates
Thoughtful Decision Making for Uncertain Times 53
Exhibit 4-36 Projected Water Utility Cash Balance Under Recommended Rates
The City’s Water Fund cash reserves can support the system during the revenue increase phase in period
of FY 2021 through FY 2025.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Projected
FY 2020
Projected
FY 2021
Projected
FY 2022
Projected
FY 2023
Projected
FY 2024
Projected
FY 2025
Projected
FY 2026Millions
End of Year Water Cash Balance Minimum Recommended Cash Balance
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 5
CUSTOMER AFFORDABILITY IMPACTS AND BILL COMPARISONS
A major consideration when developing any utility financial plan is the impact on the system’s customer
bills. The recommendations detailed in this report will result in revenue increases, and therefore cost
increases to many of the system’s customers. This section will outline the impact on the system’s
customers and a comparison the total customer bill as compared to surrounding utilities. Each chart in
this section assumes a customer with a 5/8, 3/4” meter, 1 Unit, and 4 CCF usage per month.
Residential Customer Affordability Impact
The impact on low income City water customers of the alternative rate structure is shown below in Exhibit
5-2. The usage and income assumptions remain the same as the analysis of the City’s current FY 2020
rates.
Exhibit 5-1 Residential Customer Affordability Analysis – FY 2020 Rates
As previously stated, the analysis estimates that a significant proportion of the City’s water customer base
is exceeding or approaching the EPA guideline of unaffordable water service. Each alternative rate
structure developed during the study addresses this issue for most of the City’s low water users.
Exhibit 5-2 shows the result of the affordability analysis assuming the City adopt only Facility Fee
Alternative 1: Reduced Facility Fees.
Customer Affordability Impacts and Bill Comparisons
Thoughtful Decision Making for Uncertain Times 55
Exhibit 5-2 Residential Customer Affordability Analysis – FY 2021 Facility Fee Alternative 1
While Facility Fee Alternative 1 does reduce the cost burden on a median Residential customer, customers
with a household income less than $10,000 per year are still nearing the EPA unaffordability guideline of
2.5% of household income spent on water service.
Exhibit 5-3 Residential Customer Affordability Analysis – FY 2021 Facility Fee Alternative 2
Facility Fee Alternative 2, which would charge all customers a per unit Facility Fee, does little to reduce
the cost burden on the City’s lowest income customers. There is only a 0.18% difference in the cost burden
(in terms of % of household income) on the City’s lowest income customers.
Section 5
56 Thoughtful Decision Making for Uncertain Times
Exhibit 5-4 Residential Customer Affordability Analysis – CCF Rate Alternative 1
CCF Rate Alternative 1, which would provide an allowance of 4 CCF per month to each water account,
has a noticeable impact on the affordability of water service for the City’s lowest income residents. In
fact, these residents would only pay the Facility Fee each month under this alternative.
Exhibit 5-5 Residential Customer Affordability Analysis – CCF Rate Alternative 2
CCF Rate Alternative 2 also includes Facility Fee Alternative 2. By implementing a per unit Facility Fee and
including 4 CCF of water usage for each unit, the cost of water service further falls for the City’s median
residential customer.
Customer Affordability Impacts and Bill Comparisons
Thoughtful Decision Making for Uncertain Times 57
Regional Bill Comparison
The following exhibit shows a comparative bill for a median Inside City retail customer (5/8” meter, 1 Unit,
4 CCF monthly usage) in surrounding water service areas.
Exhibit 5-6 Sample Customer Bill, 5/8” Meter, 1 Unit, 4 CCF Monthly Usage
While regional comparisons may provide some context, the ranking of individual customer bills is not a
consideration when developing a financial plan and rate structure. The City’s cash needs are independent
of the rates in the surrounding jurisdictions, and this comparison is provided for information only.
$6.03
$12.52
$16.02
$16.53
$17.10
$20.01
$20.02
$20.16
$20.78
$26.16
$28.72
$37.04
$40.87
$14.45
$15.91
$22.00
$24.45
$25.91
$26.75
Average, $21.65
$- $5 $10 $15 $20 $25 $30 $35 $40 $45
Canton
Abingdon
Galesburg (CCF Rate Alt. 2 FY 2021)
Galesburg (CCF Rate Alt. 1 FY 2021)
Knoxville
Aqua - Oak Run
Moline
Illinois American Water - Pekin
Illinois American Water - Peoria / Sterling/Alton
Macomb
Rock Island
Galesburg (Facility Fee Alt. 1 FY 2021)
Galesburg (Facility Fee Alt. 2 FY 2021)
Galesburg (Current FY 2020)
Normal
Galesburg (Existing Structure FY 2022)
Kewanee
Monmouth
Windwood Water (Westport)
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 6
LONG TERM FINANCIAL PROJECTIONS
This report details the short term, five-year impacts of the various revenue and rate structure options
developed as a part of NewGen’s study. It is recommended that the City re-evaluate rate increases based
on previous year actual data every year, and re-evaluate rate structures every three to five years as a part
of a full rate study. The charts below assume that the City implements the revenue increases shown in
Table 6-1 below.
Table 6-1
Ten-Year Projected Revenue Increases
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
FY
2029
FY
2030
Facility Fees 0.0% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%
Unit Rates 0.0% 3.3% 3.3% 3.2% 3.2% 3.3% 3.2% 3.3% 3.3% 3.3%
Fireline Fees 36.0% 76.9% 48.0% 32.4% 24.5% 1.7% 0.0% 0.0% 0.0% 0.0%
The projected revenue increase needs are subject change based on future rate evaluations, given changes
in cost escalation, customer base, customer demand patterns, and capital financing needs. There may be
material differences in future conditions that are unknown at this time. Using the latest data available and
the conservative assumptions detailed in this report, the ten-year expense vs. revenue and cash balance
projections are shown in Exhibits 6-2 and 6-3.
Exhibit 6-2 Ten-Year Expense vs. Revenue Projection
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Millions
Operating Expenses Existing Debt Service
New Debt Service PAYGO Capital Projects
Total Revenues (FY 2020 Rates)Total Revenues (Financial Plan)
Long Term Financial Projections
Thoughtful Decision Making for Uncertain Times 59
Exhibit 6-3 Ten-Year Cash Balance Projection
With gradual revenue increases beginning in FY 2022, the City will be able to draw down on reserves in
the early years of the projections. As revenues increase to match expenses, the City balances annual
revenues and expenses and maintains cash reserves in the out years of the projections.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
FY
2029
FY
2030Millions
End of Year Water Cash Balance Minimum Recommended Cash Balance
Economics | Strategy | Stakeholders | Sustainability Thoughtful Decision Making for Uncertain Times
Section 7
FINDINGS AND RECOMMENDATIONS
The following findings and recommendations are based on our analysis and the feedback from City staff
and elected officials during the rate study work session held on February 22, 2021.
Findings
The City’s water system is well managed financially and operationally.
The City’s planned capital spending is appropriate for the size and value of the City’s system and
reflects a sufficient level of investment in the City’s water infrastructure.
The City’s FY 2020 water rates and fees are not adequate to fully fund the future operating, capital,
and reserve requirements of the City’s system.
The City’s fire protection rates are not aligned with industry standard Fireline fee calculation
methodology.
The City’s cost to provide billing service to the Galesburg Sanitary District (GSD) is higher than the
current revenue generated by the City’s fee to the GSD.
Based on the above stated findings, NewGen recommends several action items to address the necessary
revenue increases and alignment of the City’s water rates and fees with industry standards.
Recommendations
Increase water rates and fees by the following amounts in each of the next five years:
Table 7-1
Recommended Revenue Increases
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Fire Protection Fees 36.03% 76.89% 47.97% 32.43% 24.50%
Retail Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Retail Usage rates per CCF 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Facility Fees 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Usage rates per CCF 0.00% 3.25% 3.25% 3.25% 3.25%
Wholesale Usage rates per CCF 0.00% 3.25% 3.25% 3.25% 3.25%
Adjust the fee charged to the GSD for billing services from 3.0% of revenues collected to 5.0%.
Phase-In increases to Fireline fees over the next five years as follows:
Findings and Recommendations
Thoughtful Decision Making for Uncertain Times 61
Table 7-2
Recommended Monthly Fireline Rates
Meter Size (inches) # of Connections Current FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Inside City
2" 2 $8.75 $8.75 $8.75 $8.75 $8.75 $8.75
3" 1 $10.50 $10.50 $10.50 $10.50 $11.25 $13.83
4" 52 $12.25 $12.25 $12.43 $18.11 $23.79 $29.47
6" 80 $15.75 $18.23 $35.07 $51.91 $68.75 $85.59
8" 31 $19.25 $37.83 $73.98 $110.12 $146.26 $182.40
10" 4 $24.50 $67.33 $132.50 $197.68 $262.85 $328.02
12" - $29.75 $108.06 $213.51 $318.96 $424.40 $529.85
Evaluate the potential Facility Fee and CCF rate alternatives in this report and, if the determination is
made to adopt any changes:
Reach out to any customer or customer classes that may be impacted by the change in
rate structure.
Test the new rate structure within the City’s billing software to ensure that the revenue
generated by the new fees is close to the projected revenues contained in this report.
Identify low-income customers and programs that may assist them in addressing water service
affordability, particularly if the City does not adopt any change in its rate structure.