06.13.24 Water and Sewer Rate Presentation to Council FY25 — File 24-0913

WATER & SEWER FY25 RATE PRESENTATION MAYOR KATJANA BALLANTYNE JUNE 13, 2024 Demetrios G. Vidalis PE, SHEP Director of Water & Sewer Water & Sewer Department 1

2 WHAT ARE THE WATER AND SEWER BUDGETS COMPRISED OF? Massachusetts Water Resources Authority Fees Operational Costs Ongoing Maintenance and Repairs Infrastructure Improvements Water & Sewer Bill Payments

3 HOW MUCH WILL THE CITY PAY THE MWRA? WATER 50% Cost of water supply from MWRA: $10.7M SEWER 55% Cost of wastewater treatment by MWRA: $17.7M +13% MWRA Water Assessment Cost for FY25 -2% MWRA Sewer Assessment Cost for FY25

4 AGING INFRASTRUCTURE

5 WHAT ARE WE WORKING TO PREVENT?

6 IMPROVEMENT PROJECTS FY25 Sewer Projects Amount Project Status Spring Hill Sewer Separation $1.5M Near Completion Sewer System Evaluation Study $1.5M Annual Program Poplar St Pump Station $110M In Construction Morrison Ave Flood Relief TBD In Design Mystic River Outfall and Sewer Separation TBD In Design Sewer Improvements $5M Annual Program Water Projects Amount Project Status Lead Service Line Replacement $200K Annual Program Spring Hill $200K Near Completion City Wide Meter Replacement $200K Near Completion Water Improvements $7.3M Annual Program

7 POPLAR STREET PUMP STATION FINANCING STRATEGY • Total authorization: $102M • Apply $10M from ARPA (American Rescue Plan Act) • Utilize $5M from sewer stabilization fund • Accept up to $2.5M federal earmark • Borrow remainder in tranches through bonding • Bond Authorization of $89M

MWRA 53% Capital Investments 16% Debt Service 16% Personnel 7% Maintainence 8% MWRA Capital Investments Debt Service Personnel Maintainence EXPENSES 8 WATER & SEWER DEPT FY25 COMBINED BUDGETS FIXED FIXED FIXED

$28.4M MWRA $8.3M Capital Investments $8.5M Debt Service $4M Personnel $4.1M Maintainence MWRA Capital Investments Debt Service Personnel Maintainence EXPENSES 9 WATER & SEWER DEPT FY25 COMBINED BUDGETS FIXED FIXED FIXED 85% $45.2M

$1.7M Interest and Liens $50.2M Usage and Base Charges $0.1M Service Fees $1.4M Retained Earnings Interest and Liens Usage and Base Charges Service Fees Retained Earnings 10 WATER & SEWER DEPT FY25 COMBINED BUDGETS NOTE: Projected revenue does not include grant funds, as they are set aside to directly support their applicable projects. REVENUE

In this scenario, ramifications of this shortfall could result in some or all of the following: • Curtailed essential maintenance and repairs—exposing our community to increased risks of flooding, sinkholes, and leaking valves • Halted contracted capital improvements • Hiring freezes • Delays to crucial ratepayer assistance program implementation • Stalled community outreach and education efforts • Damage to the city's prestigious AAA bond rating • Increased customer service turnaround times Without action now, we face even more substantial rate increases in the future. 11 WITHOUT RATE INCREASES: $3 MILLIION SHORTFALL

12 PROPOSED RATE ADJUSTMENTS FOR FISCAL YEAR 2025 Base Charges No Change Water Rates Sewer Rates 5% Increase Average Increase 6% 9.5% Increase

13 PROPOSED RATE INCREASE IMPACTS Total Units per Bill (in CCF) FY 2024 Annually FY 2025 Annually $ Change/Year (FY25 – FY24) $ Change/ Household PER BILL % Change 15 (average condo unit) $1,012 $1,067 $54 $18.05 5.3% 18 (average 1-family home) $1,236 $1,305 $69 $22.98 5.6% 30 (average 2-family home) $2,131 $2,259 $128 $21.34 6.0% 42 (average 3-family home) $3,025 $3,212 $187 $20.80 6.2% 110 (average 8-unit building) $8,249 $8,782 $532 $22.18 6.5% Total Change in Annual Costs for Various Billing Units (including base & volumetric charges)

14 FY25 WATER AND SEWER PROPOSED RESIDENTIAL RATES Tier Tier Range (per CCF) Water Sewer Combined Discount Rate 0-8 $6.06 $11.82 $17.88 Tier 1 9-13 $6.76 $13.15 $19.91 Tier 2 14-67 $9.72 $16.77 $26.49 Tier 3 68-133 $10.18 $17.59 $27.77 Tier 4 Over 133 $10.59 $18.21 $28.80 FY25 Residential Volumetric Charges ($/Billing Unit)

15 FY25 WATER AND SEWER PROPOSED COMMERCIAL RATES Tier Tier Range (per CCF) Water Sewer Combined Tier 1 0-13 $6.76 $13.15 $19.91 Tier 2 14-67 $9.72 $16.77 $26.49 Tier 3 68-133 $10.18 $17.59 $27.77 Tier 4 Over 133 $10.59 $18.21 $28.80 FY25 Commercial Volumetric Charges ($/Billing Unit)

16 Average 2-Family Home Difference Somerville FY24 $ 710.22 $ - - Medford FY24 $ 675.30 $ (34.92) -4.9% Malden FY24 $ 743.42 $ 33.20 4.7% Average 3-Family Home Difference Somerville FY24 $ 1,008.42 $ - - Medford FY24 $ 1,007.82 $ (0.60) -0.1% Malden FY24 $ 1,098.74 $ 90.32 9.0% Average 8-Unit Building Difference Somerville FY24 $ 2,749.82 $ - - Medford FY24 $ 2,892.10 $ 142.28 5.2% Malden FY24 $ 3,112.22 $ 362.40 13.2% FY24 COMMUNITY COMPARISON OF MULTI-FAMILY PROPERTIES

17 FINANCIAL ASSISTANCE AND RESOURCES AVAILABLE FOR RESIDENTS • Continuation of policy of no water shut-offs for non-payment • 25% discount for seniors and others (e.g., clauses 17D and 41C) • Visit the Assessor’s office page on the city Website https://www.somervillema.gov/dep artments/finance/assessing • We are also currently working with a consultant on additional affordability options and policies that can help our ratepayers starting as soon as Jan, 2025 • All financial assistance resources will be shared proactively with the community via all city communications channels

18 CITY-WIDE METER REPLACEMENT PROGRAM UPDATE • 90% of the City’s meters have been replaced. • Less than 6% of ratepayers have seen a significant increase due to catch-up reads from low estimates. • The Water & Sewer Department is currently reviewing and adjusting disputed bills by recalculating charges to align with previous fiscal rates and providing residents with credit. • To date we have adjusted 170 bills totaling roughly $480,000 credited back to residents.