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FINAL WATER AND SEWER RATE STUDY

B&V PROJECT NO. 179322.0100

PREPARED FOR

City of Lynwood, CA

JANUARY 11, 2017

©Black & Veatch Holding Company 2011. All rights reserved.

City of Lynwood, CA | WATER AND SEWER RATE STUDY

BLACK & VEATCH CORPORATION | Table of Contents

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Table of Contents 1 Introduction ................................................................................................................................................. 1

1.1 Background ..................................................................................................................................................................... 1

1.2 Scope of Work ................................................................................................................................................................ 1

1.3 Disclaimer ........................................................................................................................................................................ 2

2 Water Rate Study ........................................................................................................................................ 3

2.1 Revenue and Revenue Requirements .................................................................................................................. 3

2.2 Customer and Water Usage Projections .............................................................................................................. 3

2.3 Revenue Under Existing Rates ................................................................................................................................ 4

2.4 Other Revenue ............................................................................................................................................................... 5

2.5 Operating and Maintenance Expenses ................................................................................................................. 5

2.6 Debt Service Requirements ...................................................................................................................................... 7

2.7 Capital Improvement Program ............................................................................................................................... 7

2.8 Projected Operating Results..................................................................................................................................... 8

2.8.1 Debt Service Requirements .................................................................................................................... 9

2.8.2 Test Year Revenue Requirements ..................................................................................................... 11

3 Cost of Service Allocation ....................................................................................................................... 12

3.1 Functional Cost Components ................................................................................................................................ 12

3.2 Allocation to Cost Components ............................................................................................................................ 13

3.2.1 Allocation of Operating and Maintenance Expense ................................................................... 14

3.2.2 Allocation of Capital Investments ..................................................................................................... 14

3.3 Units of Service ........................................................................................................................................................... 16

3.4 Cost of Service Allocations ..................................................................................................................................... 16

3.4.1 Units Costs of Service ............................................................................................................................. 16

3.4.2 Distribution of Costs of Service to Customer Classes................................................................ 16

3.5 Adequacy of Existing Rates to Meet Costs of Service .................................................................................. 19

4 Proposed Rate Adjustments ................................................................................................................. 20

4.1 Existing Rates .............................................................................................................................................................. 20

4.2 Proposed Rates ........................................................................................................................................................... 20

4.2.1 Readiness-to-Serve Charge .................................................................................................................. 21

4.2.2 Fire Service ................................................................................................................................................. 21

4.3 Revenue Recovery Under Proposed Rates ...................................................................................................... 22

4.4 Neighboring Water Utilities .................................................................................................................................. 22

5 Sewer Rate Study ...................................................................................................................................... 24

5.1 Revenue and Revenue Requirements ............................................................................................................... 24

5.2 Customer Account Projections ............................................................................................................................. 24

5.3 Revenue Under Existing Rates ............................................................................................................................. 24

Water and Sewer Rate Study | City of Lynwood, CA

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B&V PROJECT NO. 179322.0100 | JANUARY 25, 2017

5.4 Other Revenue ............................................................................................................................................................ 25

5.5 Operating and Maintenance Expenses .............................................................................................................. 25

5.6 Debt Service Requirements ................................................................................................................................... 26

5.7 Capital Improvement Program ............................................................................................................................ 26

5.8 Projected Operating Results.................................................................................................................................. 27

5.8.1 Test Year Revenue Requirements ..................................................................................................... 30

6 Cost of Service Allocation ....................................................................................................................... 31

6.1 Functional Cost Components ................................................................................................................................ 31

6.2 Allocation to Cost Components ............................................................................................................................ 32

6.2.1 Allocation of Operating and Maintenance Expense ................................................................... 32

6.2.2 Allocation of Capital Investments ..................................................................................................... 32

6.3 Units of Service ........................................................................................................................................................... 34

6.4 Cost of Service Allocations ..................................................................................................................................... 34

6.4.1 Units Costs of Service ............................................................................................................................. 34

6.4.2 Distribution of Costs of Service to Customer Classes................................................................ 34

6.5 Adequacy of Existing Rates to Meet Costs of Service .................................................................................. 36

7 Proposed Rate Adjustments ................................................................................................................. 37

7.1 Existing Rates .............................................................................................................................................................. 37

7.2 Proposed Rates ........................................................................................................................................................... 37

7.3 Revenue Recovery Under Proposed Rates ...................................................................................................... 37

7.4 Neighboring Utilities ................................................................................................................................................ 37


BLACK & VEATCH CORPORATION | Introduction

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1 Introduction This report was prepared for the City of Lynwood (City) to document the development of a

multi-year financial plan, cost of service analysis and rate design for the City’s water and sewer

utilities. The specific objectives of the study were to:

Review and evaluate existing policies and procedures affecting water and sewer rates;

Develop an individual financial plans for water and sewer covering a five-year study period between Fiscal Year (FY) 2017 and FY 2021 for ongoing operations and planned capital improvements;

Allocate the water and sewer projected FY 2017 revenue requirements to the various customer class in accordance with the respective service requirements;

Develop a suitable 5-year rate schedule that produces revenues adequate to meet financial needs while recognizing customer costs of service and state policy considerations such as Proposition 218, the San Juan Capistrano Ruling and the Governor’s Executive Order B-29-15 for water conservation.

1.1 BACKGROUND Located in Los Angeles County, the City of Lynwood provides water and sewer services to an

average of 9,150 residential, commercial, municipal, and fire connections. The City provides

drinking water to its residents from local groundwater and import water. Groundwater is pumped

from the Central Groundwater Basin through five active wells located throughout the City. Import

water serves as a supplemental source and is purchased from Metropolitan Water District (MWD)

via Central Basin Municipal Water District (CBMWD). Together these two sources meet the City’s

annual 5,600 acre-feet (AF) demand. The City distributes groundwater and import water through

its 3.0 million gallon reservoir and 90 miles of distribution pipelines. In addition, the City provides

sewer services by collecting and transporting sewage flow over its 81 miles of collection pipelines

to the Sanitation District of Los Angeles County (LACSD). LACSD provides treatment and disposal

services for the City’s residents.

In general, the City operates and maintains the water and sewer utilities as self-supporting

enterprises. As such, consistent with the best management practices of most municipal utilities,

water and sewer rates are developed to provide sufficient levels of revenue to meet all operation

and maintenance expenses, debt service requirements, routine annual replacements of capital

improvements to be funded from current revenues, and other revenue requirements.

1.2 SCOPE OF WORK The purpose of this study was to develop individual water and sewer financial plans that

project operating revenue, expenses and capital financing costs for water and sewer operations

over a five-year planning period beginning July 1, 2016 and ending June 30, 2021. As part of the

plan, future revenues under existing rates, operation and maintenance (O&M) expense, principal

and interest expense on bonded debt, establishment and/or maintenance of reserve funds, and

capital improvement requirements are considered. Annual projections of customers, water use,

revenues, and expenditures have been made using historical data and estimates based on SBx7-7

and Executive Order requirements for the next five years.


2


Using the financial plans, a cost of service analysis and rate design was performed for water

and sewer. The water and sewer’s costs of service were allocated to customer classes utilizing a

cost causative approach endorsed by the American Water Works Association (AWWA) M1 manual

and Water Environment Federation (WEF) Manual of Practice (MoP) No. 27. These allocation

methodologies produce cost of service allocations recognizing the projected customer service

requirements for the City. Proposed rates are designed in accordance with allocated cost of service

and local policy considerations. The extent to which the existing rate structure recovers revenues

from customer classes in accordance with cost of service allocations is also evaluated.

1.3 DISCLAIMER In conducting our study, we reviewed the books, records, agreements, capital improvement

programs, and customer sales and financial projections of the Water and Sewer Enterprise Fund as

we deemed necessary to express our opinion of the operating results and projections. While we

consider such books, records, documents, and projections to be reliable, Black & Veatch has not

verified the accuracy of these documents.

The projections set forth in this report below are intended as “forward-looking statements”.

In formulating these projections, Black & Veatch has made certain assumptions with respect to

conditions, events, and circumstances that may occur in the future. The methodology utilized in

performing the analyses follows generally accepted practices for such projections. Such

assumptions and methodologies are reasonable and appropriate for the purpose for which they are

used. While we believe the assumptions are reasonable and the projection methodology valid,

actual results may differ materially from those projected, as influenced by the conditions, events,

and circumstances that actually occur. Such factors may include the water and sewer utilities ability

to execute the capital improvement program as scheduled and within budget, regional climate and

weather conditions affecting the demand for water and production of sewer and adverse legislative,

regulatory or legal decisions (including environmental laws and regulations) affecting the water

and sewer utilities ability to manage the system and meet water quality requirements.


BLACK & VEATCH CORPORATION | Water Rate Study

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2 Water Rate Study

2.1 REVENUE AND REVENUE REQUIREMENTS The water utility provides drinking water to its residential, commercial and industrial water

customers. To cover the costs associated with providing water services to its customers, the water

utility derives revenue from a variety of sources including readiness to serve charge, water sales

charge, reconnection charges, tap fees, and interest earned from the investment of available funds.

The level of future revenue generated in the study is projected through a combination of an analysis

of historical and future system growth in terms of number of connections and consumption.

With revenue derived from the various sources, the water utility meets the cash

requirements of operation and maintenance; water supply costs; debt service and reserve

payments on bond indebtedness; and recurring annual capital expenditures for replacements,

system betterments, and extensions not debt financed. O&M expenses are those expenditures

necessary to maintain the system in good working order. Water supply costs are those associated

with pumping groundwater via the Water Replenishment District and purchasing import water

from the Central Basin Municipal Water District. Routine annual capital expenditures, which

include equipment replacements, consist of recurring annual replacements, minor extensions, and

betterments which are normally revenue financed. Other capital costs include principal and interest

payments, bond covenant-required payments, and the costs of major capital improvements are paid

directly from annual operating revenues.

2.2 CUSTOMER AND WATER USAGE PROJECTIONS The water utility has three major customer classes. These customer classes are: 1)

Residential, which consists of all single family accounts and multi-family accounts with less than

four dwelling units; 2) Commercial, which consists of multi-family accounts with four or more

dwelling units and all other non-residential classes1; and 3) Fire, which consists of private fire lines

that serve customers with specific fire protection needs.2

Based on a detailed review of historical growth patterns and planning estimates in the City’s

2010 Urban Water Management Plan, the number of customer connections is projected to increase

by an average of 0.25 percent for the study period. The City is fairly built-out with most of the

growth coming from high density expansion and commercial growth. Shown in Table 2-1 are the

projected customer accounts.

1 These non-residential classes are commercial, industrial, hospitals, schools and municipal customers. 2 Fire customers may be residential or commercial.


4


Table 2-1 Number of Water Customer Connections

Projected water sales consumption for the study period is shown in Table 2-2. In determining

the projected water sales consumption, historical patterns of water usage were analyzed in

conjunction with the mandatory reduction issued by the Governor of California through

Executive Orders. The Executive Orders affect each water utility throughout the State differently.

Based on historical consumption within the City, the City was assigned a 16 percent water

consumption reduction compared to the same time in Calendar Year (CY) 2013 for FY 2016.

Given that the City’s residents have understood and implemented cutback measures, it anticipated

that consumption will rebound slowly in the study period. It is expected that FY 2017 consumption

will increase by 4.75%, in FY 2018 by 2.25% and FY 2019 to FY 2021 by 0.25% per year.

Table 2-2 Billed Water Consumption

2.3 REVENUE UNDER EXISTING RATES The primary source of revenue for the water utility is derived from readiness to serve and

water sales. The level of future revenue is projected based on an analysis of historical and projected

system growth in terms of number of accounts and water consumption conducted in section 2.2.

Using the accounts and water consumption, the applicable rates shown in Table 2-3 are applied to

determine the total readiness to serve and water sales revenue.

Fiscal Year Ending June 30,

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

(connections) (connections) (connections) (connections) (connections)

Customer Class

1 Residential 7,764 7,783 7,802 7,821 7,841

2 Commercial 1,339 1,343 1,347 1,351 1,355

3 Fire Service 78 78 78 78 78

4 Total 9,181 9,204 9,227 9,250 9,274

Line

No. Description


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

(HCF) (HCF) (HCF) (HCF) (HCF)

Customer Class

1 Residential 1,131,905 1,157,630 1,160,524 1,163,425 1,166,334

2 Commercial 909,315 929,981 932,306 934,637 936,974

3 Total (HCF) 2,041,220 2,087,611 2,092,830 2,098,062 2,103,308

4 Total (AF) 4,686 4,792 4,804 4,816 4,829

Line

No. Description



5

Table 2-3 Existing Water Rates

Table 2-4 represents a summary of projected readiness to serve and water sales revenue

under existing rates. As shown, the revenue generated is anticipated to slowly increase over the

study period in conjunction with the increase in number of accounts and water consumption. The

projected water revenue increases from $8,053,400 in FY 2017 to $8,256,000 in FY 2021.

Table 2-4 Revenue under Existing Water Rates

2.4 OTHER REVENUE In addition to revenue from rates, the water utility obtains revenue from other operating

sources. Other revenue sources include; reconnection charges, tap fees, interest earned from the

investment of available funds and miscellaneous revenues. In total, these revenues represent less

than 1 percent of total water revenues. It is anticipated that these revenues will remain relatively

constant for the duration of the study period.

2.5 OPERATING AND MAINTENANCE EXPENSES Table 2-5 summarizes the water utility’s projected operating and maintenance expense for

the study period. Within the eight major line items, expenses are further separated by costs

categories such as salaries and benefits, contracts and professional services, services and supplies,

utilities, etc. These O&M categories are projected to increase between 1.0 and 10.0 percent per year

depending on the type of category. Table 2-6 shows the escalation factors.

($/monthly) ($/monthly)

3/4" 14.73 NA

1" 22.10 3.46

1.5" 44.18 5.19

2" 66.27 10.39

3" 125.16 15.58

4" 220.88 20.77

6" 294.50 31.15

8" 515.39 41.54

10" NA 51.92

Commodity Charge ($/HCF)

All Customers 2.92 NA

Ready To

Serve Charge Fire Line Fees

FY 2016

Meter Size


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Customer Class

1 Residential 4,756,300 4,834,900 4,846,800 4,858,900 4,871,100

2 Commercial 3,273,100 3,335,100 3,343,700 3,352,300 3,360,900

3 Fire Service 24,000 24,000 24,000 24,000 24,000

4 Total 8,053,400$ 8,194,000$ 8,214,500$ 8,235,200$ 8,256,000$

Line

No. Description


6


Table 2-5 Water Operating and Maintenance Expenses


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

O&M Expenses

1 City Manager

2 Administration 57,800 60,700 63,500 66,500 69,600

3 Finance & Administration

4 Water Bill ing/Collections 476,100 494,900 514,500 535,100 557,000

5 Human Resources

6 General Services 43,716 45,800 47,800 49,900 52,200

7 Employee Personnel Services 43,716 45,800 47,800 49,900 52,200

8 Public Works

9 Water Util ity 4,716,900 4,946,900 5,285,100 5,434,900 5,590,400

10 Sewer Service 0 0 0 0 0

11 Technology & Media Support Services

12 Marketing Division 0 0 0 0 0

13 Information Technology 233,700 241,100 248,700 256,700 265,000

14 Total 5,571,932$ 5,835,200$ 6,207,400$ 6,393,000$ 6,586,400$

Line

No. Description



7

Table 2-6 Water O&M Expenses Escalators

The largest O&M expenditure that the water utility incurs is associated with water supply

costs. The City pays a replenishment assessment to the Water Replenishment District for

groundwater it pumps. In addition, the City purchases imported water from MWD via CBMWD

when the local groundwater supply is not sufficient to meet the City’s water demands. In order to

minimize its costs, the City tries to obtain water leases from other agencies not using their full

groundwater allocations. In the past, the City has been successful in obtaining leases such as the

current lease with the City of Bell Gardens. The lease does come with a cost, but it is significantly

less than purchasing imported water. Currently, the City is 99 percent groundwater reliant. The

City uses import water when maintenance is performed on a well.

With the uncertainty in local and imported water supply costs, the City anticipates that water

costs will increase at a rate of 7 percent per year over the study period. The increase will mainly

affect the variable fees from WRD and CBMWD. The fixed fee from CBMWD is relatively small and

therefore remains relatively constant.

2.6 DEBT SERVICE REQUIREMENTS Table 2-7 represents the water utility’s existing debt service obligations. This table shows the

combined principal and interest requirements on the existing debt over the study period. It is

common practice for utilities to utilize debt to finance large capital improvement projects. By

financing the cost of the projects, the City is able to fund large projects immediately and spread the

payment over a specified time frame, thereby helping to offset the impact on rate-payers.

Table 2-7 Existing Water Debt Service

2.7 CAPITAL IMPROVEMENT PROGRAM The City’s Capital Improvement Program (CIP) for FY 2017 through FY 2021 is summarized

in Table 2-8. The City developed this multi-year CIP covering its commitments identified in the

Escalation

Factor

1 Salaries and Wages 3.0%

2 Fringe Benefits 7.0%

3 OPEB 10.0%

4 Materials & Supplies 1.0%

5 Contract Services 1.0%

6 Utilities 3.0%

7 Equipment 1.0%

8 Administrative 2.0%

Line

No. O&M Expense Category


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Revenue Bonds

1 2008A Revenue Bonds 638,100 642,100 635,400 639,900 638,700

2 2009A Revenue Bonds 361,200 361,800 362,200 362,400 362,200

3 2014A Revenue Bonds 410,600 407,400 403,900 405,200 406,100

4 Total 1,409,900$ 1,411,300$ 1,401,500$ 1,407,500$ 1,407,000$

Line

No. Description


8


2005 Water Master Plan and the 2015 Needs Assessment. The 2015 Needs Assessment reexamined

the projects listed in the Water Master Plan and reprioritized the schedule accordingly. Based on

the Water Master Plan and Needs Assessment, it was determined that the City needs to address a

total of $30.9 million in capital needs.

While the City is cognizant of its needs, the City developed the capital program in Table 2-8

which reflects planned projects that can be designed and or constructed over the study period. The

City is projecting a $22.9 million capital improvement program, which includes both capital and

replacement projects. Major capital projects identified include water main rehabilitations, new

water wells with treatment, and Advance Meter Infrastructure (AMI).

AMI provides the water utility to communicate with the water meter in real time, which

provides operational, customer service and financial benefits to both the utility and customer.

Benefits includes but not limited to: increased meter reading accuracy, improved utility asset

management, easier water theft detection, early detection of meter failures, billing accuracy

improvements, faster service restoration, flexible billing cycles, and providing the customer the

ability to examine usage on real time-based case. The City received an estimate cost of $4.5 million

for implementation which would occur over 3 years in FY 2018 to FY 2020.

Table 2-8 Water Capital Improvement Projects by Function

2.8 PROJECTED OPERATING RESULTS The revenue requirements of the water utility consist of system O&M expense, water supply

costs, debt service requirements, and transfers (capital contributions).

In the analysis, it was important to identify the state of the water utility under no revenue

increases, known as the status quo scenario. Under this scenario, the water utility will not impose

any revenue increases over the study period. As shown in Figure 2-1, the status quo conditions

means that the water utility will operate at an annual deficit position thus tapping into its operating

reserves. In addition, since the water utility has debt service commitments, the City would need to

reduced capital improvements or implement some type of rate increase.


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Capital Projects

1 Source of Supply 3,428,400 932,900 1,900,000 2,516,500 3,000,000

2 Transmission & Distribution 429,200 2,628,000 3,028,000 3,028,000 1,225,000

3 General Plant 642,400 100,000 0 0 0

4 Total 4,500,000$ 3,660,900$ 4,928,000$ 5,544,500$ 4,225,000$

Line

No. Description



9

Figure 2-1 Status Quo

In order to avoid deficit positions, the water utility examined various options for revenue

increases that would meet the revenue requirements. Based on the goals and objectives, the City

arrived at the revenue adjustments shown in the operating cash flow on Table 2-9. The operating

cash flow transitions the water utility to positive cash flow and meets its debt coverage

requirement over the study period.

The operating cash flow is separated into revenue and revenue requirements. In line 1 is the

revenue under existing rates while lines 2 through 7 is the additional revenue generated from the

required annual revenue increases. Lines 9 through 13 represent other revenues, which include

reconnection charges, tap fees, interest earned from the investment of available funds and

miscellaneous revenues. Line 14 represents the repayment of the inter-fund transfer from the

sewer utility. In line 16, the total revenues generated from existing rates, revenue from increases

and other operating revenue is summarized.

The revenue requirements for O&M, water supply, debt service, and capital projects have

been previously discussed. These revenue requirements are shown on lines 17 through 26 of

Tables 2-9. Line 27 represents that total revenue requirement that will need to be met through

revenue. The net cumulative balance is indicated in line 30. The City will transition from a minimum

16 percent of O&M expenses as an operating reserve balance to an industry standard of 90 days of

O&M expenses (25 percent of O&M). The recommended revenue adjustments allow the water

utility to reach a positive balance in FY 2022 while still incorporating capital improvement.

2.8.1 Debt Service Requirements

Based on the operating cash flow, it is shown in line 32 that the City will not meet its debt

service coverage requirement in FY 2017 and as noted by the City’s Financial Advisor, will be in

technical default. The City has directed Black & Veatch to proceed with not meeting the debt

coverage requirements in FY 2017 as the City has informed Bond Counsel and its Financial Advisor

that it intends immediate restoration of compliance with the described rate covenant through rate

increases.

-$20,000,000

-$15,000,000

-$10,000,000

-$5,000,000

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Projected Revenue and Revenue Requirements

O&M Expenses Water Supply Costs Debt ServiceCapital Projects Transfers RevenueOperating Reserves


10


With implementation of the proposed revenue adjustments and monitoring of O&M expenses,

the City should be able to meet the coverage ratio of 1.25x in FY 2018 and forward. The exact debt

service coverage ratio for each year is subject to verification by the City’s Financial Advisor. Figure

2-2 presents the major components of the operating cash flow.

Table 2-9 Water Operating Cash Flow


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Revenue

Rate Revenue

1 Revenue from Existing Rates 8,053,400 8,194,000 8,214,500 8,235,200 8,256,000

Year

Months

Effective Rate Adj

2 FY 2017 2 15.0% 201,300 1,229,100 1,232,200 1,235,300 1,238,400

3 FY 2018 6 15.0% 706,700 1,417,000 1,420,600 1,424,200

4 FY 2019 6 15.0% 814,800 1,633,700 1,637,800

5 FY 2020 6 15.0% 939,400 1,883,500

6 FY 2021 6 15.0% 1,083,000

7 Increased Revenue Due to Adjustments 201,300 1,935,800 3,464,000 5,229,000 7,266,900

8 Subtotal 8,254,700$ 10,129,800$ 11,678,500$ 13,464,200$ 15,522,900$

Other Operating Revenue

9 Water Reconnection Charge 21,500 21,500 21,500 21,500 21,500

10 Tap & Meter Fee Charges 100 100 100 100 100

11 Miscellaneous Revenue 1,800 1,800 1,800 1,800 1,800

12 Interest Income 60,800 63,100 56,600 31,900 39,600

13 Subtotal 84,200$ 86,500$ 80,000$ 55,300$ 63,000$

Transfers

14 From Sewer Util ity 19,500 19,500 19,500 19,500 19,500

15 Subtotal 19,500$ 19,500$ 19,500$ 19,500$ 19,500$

16 Total Revenue 8,358,400$ 10,235,800$ 11,778,000$ 13,539,000$ 15,605,400$

Revenue Requirements

Operating & Maintenance

17 O&M Expenses 5,571,932 5,835,200 6,207,400 6,393,000 6,586,400

18 Water Supply 1,713,100 1,970,100 2,110,700 2,261,600 2,423,400

19 Subtotal 7,285,032$ 7,805,300$ 8,318,100$ 8,654,600$ 9,009,800$

Debt Service

20 Existing Revenue Bonds 1,409,900 1,411,300 1,401,500 1,407,500 1,407,000

21 Proposed Revenue Bonds 0 0 0 0 0

22 Subtotal 1,409,900$ 1,411,300$ 1,401,500$ 1,407,500$ 1,407,000$

Transfers

23 To Capital Projects Fund 4,500,000 3,660,900 4,928,000 5,544,500 4,225,000

24 To Sewer Util ity 0 0 0 0 0

25 To Other Fund 0 0 0 0 0

26 Subtotal 4,500,000$ 3,660,900$ 4,928,000$ 5,544,500$ 4,225,000$

27 Total Revenue Requirements 13,194,932$ 12,877,500$ 14,647,600$ 15,606,600$ 14,641,800$

28 Net Annual Cash Balance (4,836,532) (2,641,700) (2,869,600) (2,067,600) 963,600

29 Beginning Fund Balance 14,585,484 9,748,952 7,107,252 4,237,652 2,170,052

30 Net Cumulative Fund Balance 9,748,952$ 7,107,252$ 4,237,652$ 2,170,052$ 3,133,652$

31 Working Capital Reserves - Target (90 days of O&M)1,796,300$ 1,924,600$ 2,051,000$ 2,134,000$ 2,221,600$

32 Debt Service Coverage - Senior (1.25x) 0.76 1.72 2.47 3.47 4.69

Line

No. Description



11

Figure 2-2 Operating Cash Flow

2.8.2 Test Year Revenue Requirements

In analyzing the water utility’s cost of service for allocation to its customer classes, the annual

revenue requirements for FY 2017 is selected as the Test Year (TY) requirements to demonstrate

the development of cost-of-service water rates. Based on achieving the water utility’s principal

goals within the study period, the cash flow in Tables 2-9 serves as the basis for the cost of service

analyses.

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021


O&M Expenses Water Supply Costs Debt ServiceCapital Projects Transfers RevenueOperating Reserves


12


3 Cost of Service Allocation The revenue requirements to be derived from rates for water utility are synonymous with the

definition of the Cost of Service (COS). In developing equitable rate structures, revenue

requirements are allocable to the various customer classifications according to the service

rendered. Allocations of these requirements to customer classes should take into account the

quantity of water consumed, peak flows, number of customers, and other relevant factors. The total

costs of service to be recovered from water user rates for the TY 2017 are summarized in Tables 3-

1.

Table 3-1 Water Cost of Service

Shown in line 5 is the total revenue requirement that corresponds with the Table 2-9 line 27.

In order to derive the revenue requirement that will need to be recovered by the rates, it is

necessary to deduct revenues from other sources as shown in lines 8 and 11. Line 8 represents the

other operating revenues not associated with rates. Line 11 represents the net annual cash balance

for the water utility during the Test Year. In this case, the $3,829,832 indicates that the water utility

is projecting a negative cash balance for the year even after you receive the partial rate increase in

May. Line 12 represents the total costs that are to be recovered from rates.

3.1 FUNCTIONAL COST COMPONENTS The cost of providing water service should be analyzed by system function in order to

properly allocate the costs to the various classes of customers and subsequently design rates. As a

basis for allocating costs of service among customer classes, costs may be separated into the

following four basic functional cost components: (1) “Base”; (2) “Extra Capacity”; (3) “Customer”;

and (4) “Direct Assignment”.

Base costs represent operating and capital costs of the system associated with service to customers to the extent required for a constant, or average annual rate of use.

Operating Capital Total

Expense Cost Cost

($) ($) ($)


1 O&M Expenses 5,571,932 0 5,571,932

2 Water Supply 1,713,100 0 1,713,100

3 Debt Service 0 1,409,900 1,409,900

4 Transfers 0 4,500,000 4,500,000

5 Subtotal 7,285,032$ 5,909,900$ 13,194,932$

Less Revenue Requirements Met from Other Sources

6 Other Operating Revenue 84,200 0 84,200

7 Transfers 19,500 0 19,500

8 Subtotal 103,700$ 0$ 103,700$

Adjustments

9 Adj for Annual Cash Balance 4,836,532 0 4,836,532

10 Adj to Annualize Rate Increase (1,006,700) 0 (1,006,700)

11 Subtotal 3,829,832$ 0$ 3,829,832$

12 COS to be Recovered from Rates 3,351,500$ 5,909,900$ 9,261,400$

Line

No. Description


BLACK & VEATCH CORPORATION | Cost of Service Allocation

13

Extra Capacity costs represent those operating costs incurred in meeting demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use.

Customer costs are defined as those that tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collecting and accounting, and maintenance and capital costs associated with meters and services.

Directly assigned costs are costs specifically identified as those incurred to serve a specific customer group(s).

The separation of costs of service into these principal categories facilitates allocating such

costs to the various customer classes on the basis of the respective service requirements of each

class.

3.2 ALLOCATION TO COST COMPONENTS Each element of cost is allocated to functional cost components on the basis of the

parameter(s) having the most significant influence on the magnitude of that element of cost. O&M

expense items are allocated directly to appropriate cost components, while the allocation of capital

and replacement costs is based upon a detailed allocation of related capital investment. The

separation of costs into functional components provides a means for distributing such costs to the

various classes of customers on the basis of their respective responsibilities for each particular type

of service.

Black & Veatch performed the following steps to derive the allocation percentages for

apportioning the City’s O&M and capital costs. As noted above, elements that are allocated directly

to their cost component include customer costs and direct assigned costs.

For volume-related cost allocations, the first step in determining the allocation percentages is

to assign system peaking factors. The base element is equal to the average daily demand (ADD) and

assigned a value of 1.0. The City’s maximum day (max day) demand is estimated to be 1.80 times

the ADD. Thus, the max day is assigned a value of 1.80. The maximum instantaneous usage is

approximated by the maximum hourly (max hour) usage and is estimated to be 2.70 times the ADD.

Thus, max hour is assigned a value of 2.70. These peaking factors are based on the City’s 2005

Water Master Plan.

Cost components that are solely base-related, are allocated 100 percent to base. Cost

components that are designed to meet max day requirements, such as reservoirs, are allocated to

base and max day factors as follows:

Base = (1.0/1.8) x 100 = 55.6%

Max Day = (1.8 – 1.0)/1.8 x 100 = 44.4%

Cost components that are designed to meet max hour design requirements, such as

Distribution, are allocated in a similar fashion, as follows:

Base = (1.0/2.70) x 100 = 37.0%

Max Day = (1.80 – 1.0)/2.70 x 100 = 29.6%

Max Hour = (2.70 – 1.80)/2.70 x 100 = 33.3%


14


3.2.1 Allocation of Operating and Maintenance Expense

In the allocation of O&M expense, costs are allocated directly to cost components to the

extent possible. Expenses such as City Manager, Finance, Human Resources and Technology &

Media are allocated on the basis of customer while water billing is allocated on the basis of meters

and customer. Public works which represents water operations is allocated based on max hour

design requirements as described in Section 3.2. Table 3-2 represents the allocation of O&M to the

functional cost components. Upon allocation to function cost components, revenues from other

sources as shown in Table 3-1 lines 8 and 11 are subtracted.

3.2.2 Allocation of Capital Investments

In the allocation of capital expenses, costs are allocated to cost components to the extent

possible. Capital expenses are made up of two components: capital expenditures and debt service.

Capital expenditures represent future capital investment into the water system. These costs are

allocated on the basis of total existing assets. A distribution of the new water investment is shown

in Table 3-3. Debt service represents payment for old capital investment made into the system.

Since there was not definitive records showing the exact projects paid for by existing debt, and

because there is a fixed element of cost associated with debt service, debt costs are allocated 30

percent to customers and 70 percent to volume (base).



15

Table 3-2 Allocation of Water O&M Expenses

Table 3-3 Allocation of Water Capital Costs

Common to All Customers

Base Extra Capacity Customer Fire

Base Max. Day Max. Hour Meters Cust/Bill. Protection

($) ($) ($) ($) ($) ($) ($)

Operating Expenses

1 City Manager 57,800 0 0 0 0 57,800 0

2 Finance & Administration 476,100 0 0 0 95,200 380,900 0

3 Human Resources 87,400 0 0 0 0 87,400 0

4 Public Works 6,430,000 2,027,800 1,905,200 2,143,300 321,500 0 32,200

5 Technology & Media Support Services 233,700 0 0 0 0 233,700 0

6 Transfers 0 0 0 0 0 0 0

7 Subtotal 7,285,000$ 2,027,800$ 1,905,200$ 2,143,300$ 416,700$ 759,800$ 32,200$

Less Other Revenue

8 Miscellaneous Revenues 103,700 28,900 27,100 30,500 5,900 10,800 500

9 Other Adjustments 3,829,800 1,066,000 1,001,600 1,126,800 219,100 399,400 16,900

10 Net Operating Expenses 3,351,500$ 932,900$ 876,500$ 986,000$ 191,700$ 349,600$ 14,800$

Line

No. Description Total Costs




($) ($) ($) ($) ($) ($) ($)

Plant Assets

1 Source of Supply 1,332,000 1,332,000 0 0 0 0 0

2 Pumping 437,500 243,000 194,500 0 0 0 0

3 Treatment 216,500 120,300 96,200 0 0 0 0

4 T&D 2,143,700 793,900 635,200 714,600 0 0 0

5 Meters & Service 216,500 0 0 0 216,500 0 0

6 Hydrants 21,600 0 0 0 0 0 21,600

7 General Plant 132,200 75,400 28,000 21,600 6,500 0 700

8 Net Capital Expenses 4,500,000$ 2,564,600$ 953,900$ 736,200$ 223,000$ 0$ 22,300$

Line



16


3.3 UNITS OF SERVICE The total cost responsibility for each customer class may be established by developing unit

costs of service for each cost function and subsequently assigning those costs to the customer

classes based on the respective service requirements of each. To properly recognize the cost of

service, each customer class is allocated its share of base, maximum day and maximum hour costs.

The number of units of service required by each customer class provides a means for the

proportionate distribution of costs previously allocated to respective cost categories. Table 3-4 is a

summary of the estimated units of service for the various customer classes.

Base costs vary with the volume of water used and are distributed to customer classes on that

basis. Extra Capacity costs are those associated with meeting maximum rates of water use, and is

distributed to customer classes on the basis of the respective class capacity requirements in excess

of average rates of use. Customer costs, which consist of meter related, billing, collection and

accounting costs, are allocated to the various classes on the basis of the number of bills and

equivalent meters. Equivalent meter ratios are established by the American Water Works

Association annual M6; “Water Meters - Selection, Installation, Testing and Maintenance”. The

estimated number of equivalent meters for each customer class is based on the total number of

various sizes of meters serving respective classes and the ratio of the cost of meters for the various

sizes to the cost of 5/8-inch meters. Private fire protection costs are allocated on the basis of

equivalent fire hydrants.

The extra capacity units are determined based on a capacity factor between maximum day

and maximum hour to average day. Generally, residential customers experience a higher maximum

to average demand ratio than the industrial customer class. Maximum hour usage information by

individual customer class is not available. As such, assumptions for maximum day and maximum

hour ratios for each customer class have been made based on experience with other water utilities

with similar characteristics.

3.4 COST OF SERVICE ALLOCATIONS The costs of service are distributed to the various customer classes by applying the unit costs

of service to respective service requirements. The total unit costs of service applied to the

respective requirements for each customer class results in the total cost of service for each

customer class.

3.4.1 Units Costs of Service

The Test Year unit cost of service for each functional cost component is based on the total

cost divided by the applicable units of service as shown in Tables 3-5. In lines 1 and 2, the total

costs represent the cost to be recovered from rates shown in Table 3-1 lines 12. Line 5 on Table 3-5

represents the unit costs that are used in allocating the costs to the specific customer classes.

3.4.2 Distribution of Costs of Service to Customer Classes

The customer class responsibility for service is obtained by applying the unit costs of service

to the number of units for which the customer class is responsible. This process is illustrated in

Tables 3-6, in which the unit costs of service are applied to the customer class units of service.



17

Table 3-4 Water Units of Service

Table 3-5 Water Unit Cost of Service

Line Consumption Maximum Day Maximum Hour Fire

No. Description Annual Avg. Day Factor Total Extra Factor Total Extra Meters Bills Protection

(HCF) (HCF/day) (HCF/day) (HCF/day) (HCF/day) (HCF/day) (EMs) (Bills) (EHs)

1 All Customer 2,041,220 5,592 220% 12,303 6,711 364% 20,356 8,053 12,365 109,236

2 Subtotal 2,041,220 5,592 12,303 6,711 20,356 8,053 12,365 109,236

3 Public Fire 675 675 5,397 4,722 1,100

4 Private Fire 47 47 378 331 936 77

5 Subtotal 722 722 5,775 5,053 936 1,177

6 Total Water System 2,041,220 5,592 13,025 7,433 26,132 13,107 12,365 110,172 1,177




($) ($) ($) ($) ($) ($) ($)

Unit Cost of Service

1 Net Operating Expense 3,351,500 932,900 876,500 986,000 191,700 349,600 14,800

2 Capital Costs 4,500,000 2,564,500 953,900 736,200 223,100 0 22,300

3 Debt Service 1,409,900 986,900 0 0 0 423,000 0

4 Total 9,261,400$ 4,484,300$ 1,830,400$ 1,722,200$ 414,800$ 772,600$ 37,100$

5 Units of Service (Total) 2,041,220 7,433 13,107 12,365 110,172 1,177

6 Cost per Unit 2.20$ 246.26$ 131.40$ 33.55$ 7.01$ 31.52$

per Unit per HCF per HCF/Day per HCF/Day Per Eq. Meter per Bill per Eq. Hyd

Line



18


Table 3-6 Distribution of Water Cost to Customer Classes




($) ($) ($) ($) ($) ($) ($)

per HCF per HCF/Day per HCF/Day Per Eq. Meter per Bill per Eq. Hyd

1 Cost per Unit 2.20$ 246.26$ 131.40$ 33.55$ 7.01$ 31.52$

Customer Class

All Customers

2 Units 2,041,220 6,711 8,053 12,365 109,236 0

3 Allocation of costs of service 8,376,000 4,484,300 1,652,700 1,058,200 414,800 766,000 0

Public Fire

4 Units 0 675 4,722 0 0 1,100

5 Allocation of costs of service 821,300 0 166,100 620,500 0 0 34,700

Private Fire

6 Units 0 47 331 0 936 77

7 Allocation of costs of service 64,100 0 11,600 43,500 0 6,600 2,400

8 Total 9,261,400$ 4,484,300$ 1,830,400$ 1,722,200$ 414,800$ 772,600$ 37,100$

Line




19

3.5 ADEQUACY OF EXISTING RATES TO MEET COSTS OF SERVICE Presented in Tables 3-7 is a comparison of the allocated cost of service and revenue under

existing rates by individual customer class and for the system in total. The indicated revenue

increase required over existing rates for each user class indicates where the emphasis should be

directed in the subsequent rate design of water service user rates.

The 15.0 percent, overall increase is considered necessary to meet the projected revenue

requirements for the FY 2017 Test Year. This overall level of revenue needs to be produced by the

proposed rates developed and presented in subsequent sections of this report.

Table 3-7 Comparison of Water Cost of Service to Existing Revenue

Line Allocated Beneficial Use Adjusted Rev under Indicated

No. Description COS Allocation COS Exst Rates Rev Increase

($) ($) ($) ($) (%)

Customer Class

1 All Customers 8,376,000 821,300 9,197,300 8,029,400 14.5%

2 Public Fire 821,300 (821,300) 0 0 0.0%

3 Private Fire 64,100 0 64,100 24,000 167.1%

4 Total 9,261,400$ 0$ 9,261,400$ 8,053,400$ 15.0%

Ta

ble

3-4

. Un

it o

f S

erv

ice


20


4 Proposed Rate Adjustments The initial consideration in the derivation of rate schedules for water service is the

establishment of equitable charges to the customers commensurate with the cost of providing that

service. While the cost of service allocations to customer classes should not be construed as literal

or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments.

Practical considerations sometimes modify rate adjustments by taking into account additional

factors such as the extent of bill impacts, and local policies and practices.

4.1 EXISTING RATES The water utility’s existing rates consists of a readiness to serve charge and a commodity

charge which is a uniform commodity rate for all customer classes. In addition, there is a fire line

charge for fire service connections based on meter size. A summary of existing water rates was

presented earlier in this report in Table 2-3.

4.2 PROPOSED RATES The costs of service analysis described in preceding sections of this report provide a basis for

the design of water rates. As observed in Table 3-6, the cost of providing service compared to the

revenues received from different customer classes is not uniform. That is, for some customer

classes the cost of providing service is greater than the revenues received. The 5-year rate schedule

is shown in Table 4-1 which takes into consideration water utility objectives.

The water rates for all customer classes will keep the current rate structure which consists of

a readiness to serve charge plus a commodity rate. The readiness to serve charge will be based on

meter size. The commodity rates incorporate the amount of water consumed. A unit represents 100

cubic feet of water. Under the uniform rate structure, users pay the same commodity rate

regardless of usage amounts.

Table 4-1 Proposed Water Rates

Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year

Description 2017 2018 2019 2020 2021

($/month) ($/month) ($/month) ($/month) ($/month)

Readiness To Serve Charge

3/4" 15.35 17.66 20.31 23.36 26.87

1" 20.93 24.07 27.69 31.85 36.63

1.5" 34.76 39.98 45.98 52.88 60.82

2" 51.42 59.14 68.02 78.23 89.97

3" 95.90 110.29 126.84 145.87 167.76

4" 145.88 167.77 192.94 221.89 255.18

6" 284.67 327.38 376.49 432.97 497.92

8" 506.84 582.87 670.31 770.86 886.49

Commodity Charge ($/HCF) ($/HCF) ($/HCF) ($/HCF) ($/HCF)

All Customers 3.53 4.06 4.67 5.38 6.19


BLACK & VEATCH CORPORATION | Proposed Rate Adjustments

21

4.2.1 Readiness-to-Serve Charge

The readiness to serve charge includes a portion of the cost of meter maintenance, reading

customer meters, issuing bills, general fire protection costs, and accounting/financial

administrative costs associated with customer account. As noted previously, the meter service

charge increases with increasing meter size. The meter ratio used follows those recommended by

AWWA and recognizes that as meter size increases, so does the capacity. For example, customers

with a 4” meter have an expectation of being able to use more water (at a higher flow capacity) than

customers are with a 3/4” meter. Consequently, the City’s water system must be prepared to

provide each customer the level of service expected from his or her meter connection when the tap

is turned on. Table 4-2 demonstrates the development of readiness-to-serve charges.

Table 4-2 Readiness-to-Serve Development

4.2.2 Fire Service

As part of the services provided by the water utility, 92 accounts that have a private water

line connection as well as 1,100 fire hydrants that are tied to the water system for fire protection.

To meet fire protection demands, the City must design, operate and maintain a water system that

can meet peak fire demand requirements. Public hydrants are of beneficial use for all customers

therefore costs are allocated to each customer class. Private fire services are charged based on the

diameter of the line that connects to the water system. The results of the cost-of-service analysis

conducted herein indicate that an increase from current fire service charges is necessary in order to

achieve full cost recovery as shown in Table 4-3. Table 4-4 demonstrates the development of fire

line charges.

Table 4-3 Proposed Fire Service Rates

Meter Billing Public Fire Service Total

Unit Meter Adjusted Adjusted Adjusted Service

Description Cost Ratio Unit Cost Unit Cost Bill Ratio Unit Cost Unit Cost

Meter

Ratio Unit Cost Charge

per EM $ per Bill $ per EM $ $/Monthly

3/4" $2.80 1.00 $2.80 $7.01 1.00 $7.01 $5.53 1.00 $5.53 $15.35

1" 2.80 1.67 4.67 7.01 1.00 7.01 5.53 1.67 9.24 20.93

1 1/2" 2.80 3.33 9.31 7.01 1.00 7.01 5.53 3.33 18.43 34.76

2" 2.80 5.33 14.90 7.01 1.00 7.01 5.53 5.33 29.50 51.42

3" 2.80 10.67 29.83 7.01 1.00 7.01 5.53 10.67 59.06 95.90

4" 2.80 16.67 46.60 7.01 1.00 7.01 5.53 16.67 92.27 145.88

6" 2.80 33.33 93.17 7.01 1.00 7.01 5.53 33.33 184.48 284.67

8" 2.80 60.00 167.73 7.01 1.00 7.01 5.53 60.00 332.10 506.84


Description 2017 2018 2019 2020 2021


Fire Line Charge

1" 10.35 11.91 13.70 15.76 18.13

1.5" 13.66 15.71 18.07 20.79 23.91

2" 17.65 20.30 23.35 26.86 30.89

3" 28.31 32.56 37.45 43.07 49.54

4" 40.29 46.34 53.30 61.30 70.50

6" 73.53 84.56 97.25 111.84 128.62

8" 126.76 145.78 167.65 192.80 221.72

10" 199.94 229.94 264.44 304.11 349.73


22


Table 4-4 Readiness-to-Serve Development

4.3 REVENUE RECOVERY UNDER PROPOSED RATES As previously discussed, the proposed rate schedule shown in Table 2-9 would increase rate

revenues by the average system-wide cumulative increase of 101.1 percent over the study period

and maintain current cost recovery by customer class, as indicated in Tables 4-5.

Table 4-5 Comparison of Water Cost of Service to Proposed Revenue

4.4 NEIGHBORING WATER UTILITIES Presented in Table 4-6 are the proposed rates compared to rates of neighboring

cities/agencies, for a single family residential customer with a 5/8” or 3/4” meter consuming 12

hundred cubic feet monthly. Based on the comparison, the City is currently in the bottom of water

providers in the area, but with the proposed rate increases, the City moves to the middle of water

providers. All surveyed community rates are current as of September 2016. The City existing bill for

12 units is $49.77 and is anticipated to increase to $57.71.

Billing Public Fire Service Total

Adjusted Adjusted Service

Description Unit Cost Bill Ratio Unit Cost Unit Cost

Meter

Ratio Unit Cost Charge

per Bill $ per EM $ $/Monthly

3/4" $7.01 1.00 $7.01 $2.00 1.67 $3.33 $10.35

1" 7.01 1.00 7.01 2.00 3.33 6.65 13.66

1 1/2" 7.01 1.00 7.01 2.00 5.33 10.64 17.65

2" 7.01 1.00 7.01 2.00 10.67 21.29 28.31

3" 7.01 1.00 7.01 2.00 16.67 33.27 40.29

4" 7.01 1.00 7.01 2.00 33.33 66.52 73.53

6" 7.01 1.00 7.01 2.00 60.00 119.74 126.76

8" 7.01 1.00 7.01 2.00 96.67 192.92 199.94

Line Adjusted Rev under Percent

No. Description COS Proposed Rates Recovery

($) ($) (%)

Customer Class

1 All Customers 9,197,300 9,197,300 100.0%

2 Private Fire 64,100 64,100 100.0%

3 Total 9,261,400$ 9,261,400$ 100.0%



23

Table 4-6 Comparison of Water Fees to Neighboring Agencies

Typical

Water Purveyor Bill

($/month)

Downey 29.95

Paramount 32.36

Huntington Park 34.80

Lynwood (Existing) 49.77

Lynwood (Proposed) 57.71

Average of Neighbors [a] 58.98

Golden State Water [b] 62.98

South Gate 72.82

Compton 83.75

Liberty Utilities [c] 96.08

[a] Represents the average of all Neighboring utilities.

[b] Golden State Water provides services for the portions of the following cities: Bell Gardens,

Bell, Norwalk, Paramount, Lakewood, Santa Fe Springs, and South Gate.

[c] Liberty Utilities provides services for the portions of the following cities: Norwalk,

Downey, Bellflower, Santa Fe Springs, and Lynwood.


24


5 Sewer Rate Study

5.1 REVENUE AND REVENUE REQUIREMENTS The sewer utility provides sewer collection services to its residential, commercial and

industrial customers. Sewer treatment services are provided by the Sanitation Districts of Los

Angeles County and are billed directly on property tax rolls. To meet the costs associated with

providing sewer collection services to its customers, the sewer utility derives revenue from sewer

charges, miscellaneous revenue, and interest earned from the investment of available funds. The

level of future revenue generated in the study is projected through a combination of an analysis of

historical and future system growth in terms of number of accounts.

With revenue derived from the various sources, the sewer utility meets the cash

requirements of operation and maintenance (O&M); debt service and reserve payments on bond

indebtedness; and recurring annual capital expenditures for replacements, system betterments,

and extensions not debt financed. O&M expenses are those expenditures necessary to maintain the

system in good working order. Routine annual capital expenditures, which include equipment

replacements, consist of recurring annual replacements, minor extensions, and betterments which

are normally revenue financed. Other capital costs include principal and interest payments, bond

covenant-required payments, and the costs of major capital improvements paid directly from

annual operating revenues.

5.2 CUSTOMER ACCOUNT PROJECTIONS The sewer utility has two major customer classes. These customer classes are: 1) Residential

which consists of all single family accounts and multi-family accounts with less than four dwelling

units; and 2) Commercial which consists of multi-family accounts with four or more dwelling units

and all other non-residential classes. These non-residential classes are commercial, industrial,

hospitals, schools and municipal.

Based on a detailed review of historical growth patterns and similarly to water, the number

of customer accounts is projected to increase by an average of 0.25 percent for the study period.

The City is fairly built-out with most of the growth coming from high density expansion and

commercial growth. Shown in Table 5-1 are the projected customer accounts.

Table 5-1 Number of Sewer Customer Accounts

5.3 REVENUE UNDER EXISTING RATES The primary source of revenue for the sewer utility is derived from sewer rates. The level of

future revenue is projected based on an analysis of historical and projected system growth in terms


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

(accts) (accts) (accts) (accts) (accts)

Customer Class

1 Residential 8,703 8,725 8,747 8,769 8,791

2 Commercial 1,339 1,342 1,345 1,348 1,351

3 Total 10,042 10,067 10,092 10,117 10,142

Line

No. Description


BLACK & VEATCH CORPORATION | Sewer Rate Study

25

of number of accounts conducted in section 5.2. Using the accounts, the applicable rates shown in

Table 5-2 are applied to determine the total sewer revenue.

Table 5-2 Existing Sewer Rates

Table 5-3 represents a summary of projected sewer revenue under existing rates. As shown,

the revenue generated is anticipated to slowly increase over the study period in conjunction with

the increase in number of accounts. The projected sewer revenue increases from $1,439,300 in FY

2017 to $1,453,100 in FY 2021.

Table 5-3 Revenue under Existing Sewer Rates

5.4 OTHER REVENUE In addition to revenue from rates, the sewer utility obtains revenue from other operating

sources. Other revenue sources include miscellaneous revenue, and interest earned from the

investment of available funds. In total, these revenues represent roughly 2 percent of total sewer

revenues. It is anticipated that these revenues will remain relatively constant for the duration of the

study period.

5.5 OPERATING AND MAINTENANCE EXPENSES Table 5-4 summarizes the sewer utility’s projected operating and maintenance expense for

the study period. Within the four major line items, expenses are further separated by costs

categories such as salaries and benefits, contracts and professional services, services and supplies,

utilities, etc. These O&M categories are projected to increase between 1.0 and 10.0 percent per year

depending on the type of category. Table 5-5 shows the escalation factors.

FY 2016

Description Flat Rate

($/month)

Service Charge

Residential 7.79

Commercial 38.94


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Customer Class

1 Residential 813,600 815,600 817,700 819,700 821,800

2 Commercial 625,700 627,100 628,500 629,900 631,300

3 Total 1,439,300$ 1,442,700$ 1,446,200$ 1,449,600$ 1,453,100$

Line

No. Description


26


Table 5-4 Sewer Operating and Maintenance Expenses

Table 5-5 Sewer O&M Expenses Escalators

5.6 DEBT SERVICE REQUIREMENTS Table 5-6 represents the sewer utility’s debt service obligations. This table shows the

combined principal and interest payment from the sewer utility to the water utility for an inter-

fund loan. As mentioned in section 2.8, the inter-fund transfer was from the water utility to the

sewer utility to help stabilize the sewer utility in FY 2014. There is no debt service coverage ratio

required for this transfer.

Table 5-6 Existing Sewer Debt Service

5.7 CAPITAL IMPROVEMENT PROGRAM The City’s Capital Improvement Program (CIP) for FY 2017 through FY 2021 is summarized

in Table 5-7. The City developed this multi-year CIP covering its commitments identified in the

2009 Sewer System Management Plan and 2015 Needs Assessment. The 2015 Needs Assessment

reexamined the projects listed in the Sewer System Management Plan and reprioritized the


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

O&M Expenses

1 Finance & Administration

2 Water Bill ing/Collections 392,100 409,300 427,200 445,900 465,600

3 Public Works

4 Storm Water Program 221,800 225,800 229,800 233,900 238,100

5 Sewer Service 1,790,800 1,831,100 1,872,600 1,915,900 1,960,600

6 Technology & Media Support Services

7 Information Technology 46,100 48,200 50,200 52,400 54,800

8 Total 2,450,800$ 2,514,400$ 2,579,800$ 2,648,100$ 2,719,100$

Line

No. Description

Escalation

Factor

1 Salaries and Wages 3.0%

2 Fringe Benefits 7.0%

3 OPEB 10.0%

4 Materials & Supplies 1.0%

5 Contract Services 1.0%

6 Utilities 3.0%

7 Equipment 1.0%

8 Administrative 2.0%

Line

No. O&M Expense Category


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Long-Term Debt

1 Inter-Fund Loan (Water) 19,500 19,500 19,500 19,500 19,500

2 Total 19,500$ 19,500$ 19,500$ 19,500$ 19,500$

Line

No. Description



27

schedule accordingly. Based on the Sewer System Management Plan and Needs Assessment, it was

determined that the City needs to address a total of $17.8 million in capital needs.

While the City is cognizant of its total needs, the City developed the capital program in Table

5-7 which reflects planned projects that can be designed and or constructed over the study period.

The City is projecting a $2.5 million capital improvement program, which includes both capital and

replacement projects. The majority of the capital projects identified are collection system related.

Table 5-7 Sewer Capital Improvement Projects by Function

In addition, the City allocates an additional $250k for the Sewer Later Program not identified

in Table 5-7. The program is designed to help replace sewer laterals that enter the customer’s

property as needed. Should the City not use the entire amount, it can be used to fund traditional CIP

projects.

5.8 PROJECTED OPERATING RESULTS The revenue requirements of the sewer utility consist of system O&M expense, debt service

requirements, and transfer (capital contributions).

In the analysis, it was important to identify the state of the sewer utility if no revenue

increases were to occur, which is the status quo scenario. Under this scenario, the sewer utility

would not impose any revenue increases over the study period. As shown in Figure 5-1, the status

quo conditions means that the sewer utility will operate at an annual deficit position thus tapping

into its operating reserves. In addition, since the sewer utility has debt service commitments to the

water utility, the City would need to reduced capital improvements or implement some type of rate

increase.


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Capital Projects

1 Collection 0 150,000 250,000 1,100,000 1,000,000

2 Total -$ 150,000$ 250,000$ 1,100,000$ 1,000,000$

Line

No. Description


28


Figure 5-1 Status Quo

In order to avoid deficit positions, the sewer utility examined various options for revenue

increases that would meet the revenue requirements. Based on the goals and objectives, the City

arrived at the revenue adjustments shown in the operating cash flow on Table 5-8. The operating

cash flow transitions the sewer utility to positive cash flow and meets its debt coverage

requirement over the study period.3

The operating cash flow is separated into revenue and revenue requirements. In line 1 is the

revenue under existing rates while lines 2 through 7 are the additional revenue generated from the

required annual revenue increases. Lines 9 and 11 represent other revenues, which include

miscellaneous revenue and interest earned from the investment of available funds. Line 12

represents that inter-fund transfer from the water utility which none is anticipated over the study

period. In line 14, the total revenues generated from existing rates, revenue from increases and

other operating revenue are shown.

The revenue requirements for O&M, debt service, and capital projects have been previously

discussed. These revenue requirements are shown on lines 15 through 21 of Tables 5-8. Line 22

represents that total revenue requirement that will need to be met through revenue. The net

cumulative balance is indicated in line 25. The City will transition from a minimum 16 percent of

O&M expenses as an operating reserve balance to an industry standard of 90 days of O&M expenses

(25 percent of O&M). The recommended revenue adjustments allow the sewer utility to reach a

positive balance in FY 2022 while still incorporating capital improvement.

3 All debt service coverage calculations are subject to verification by the City’s Financial Advisor.

-$8,000,000

-$6,000,000

-$4,000,000

-$2,000,000

$0

$2,000,000

$4,000,000

$6,000,000

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021


O&M Expenses Debt Service Transfers Revenue Operating Reserves



29

Table 5-8 Sewer Operating Cash Flow


FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

($) ($) ($) ($) ($)

Revenue

Rate Revenue

1 Revenue from Existing Rates 1,439,300 1,442,700 1,446,200 1,449,600 1,453,100

Year

Months

Effective Rate Adj

2 FY 2017 2 55.0% 131,900 793,500 795,400 797,300 799,200

3 FY 2018 6 55.0% 615,000 1,232,900 1,235,800 1,238,800

4 FY 2019 6 15.0% 260,600 522,400 523,700

5 FY 2020 6 15.0% 300,400 602,200

6 FY 2021 6 15.0% 346,300

7 Increased Revenue Due to Adjustments 131,900 1,408,500 2,288,900 2,855,900 3,510,200

8 Subtotal 1,571,200$ 2,851,200$ 3,735,100$ 4,305,500$ 4,963,300$

Other Operating Revenue

9 Miscellaneous Revenue 0 0 0 0 0

10 Interest Income 3,200 2,100 8,200 15,400 36,700

11 Subtotal 3,200$ 2,100$ 8,200$ 15,400$ 36,700$

Transfers

12 From Water Util ity 0 0 0 0 0

13 Subtotal 0 0 0 0 0

14 Total Revenue 1,574,400$ 2,853,300$ 3,743,300$ 4,320,900$ 5,000,000$


Operating & Maintenance

15 O&M Expenses 2,450,800 2,514,400 2,579,800 2,648,100 2,719,100

16 Subtotal 2,450,800$ 2,514,400$ 2,579,800$ 2,648,100$ 2,719,100$

Debt Service

17 Existing Revenue Bonds 0 0 0 0 0

18 Proposed Inter Fund Loan 19,500 19,500 19,500 19,500 19,500

19 Subtotal 19,500$ 19,500$ 19,500$ 19,500$ 19,500$

Transfers

20 To Capital Projects Fund 0 150,000 250,000 1,100,000 1,000,000

21 Subtotal 0$ 150,000$ 250,000$ 1,100,000$ 1,000,000$

22 Total Revenue Requirements 2,470,300$ 2,683,900$ 2,849,300$ 3,767,600$ 3,738,600$

23 Net Annual Cash Balance (895,900) 169,400 894,000 553,300 1,261,400

24 Beginning Fund Balance 1,097,261 201,361 370,761 1,264,761 1,818,061

25 Net Cumulative Fund Balance 201,361$ 370,761$ 1,264,761$ 1,818,061$ 3,079,461$

26 Working Capital Reserves - Target (90 days of O&M) 604,300$ 620,000$ 636,100$ 653,000$ 670,500$

Line

No. Description


30


Figure 5-2 Operating Cash Flow

5.8.1 Test Year Revenue Requirements

In analyzing the sewer utility’s cost of service for allocation to its customer classes, the

annual revenue requirements for FY 2017 is selected as the Test Year (TY) requirements to

demonstrate the development of cost-of-service sewer rates. Based on achieving the sewer utility’s

principal goals within the study period, the cash flow in Tables 5-8 serves as the basis for the cost of

service analyses.

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021


O&M Expenses Debt Service Transfers Revenue Operating Reserves



31

6 Cost of Service Allocation The revenue requirements to be derived from rates for sewer service are synonymous with

the definition of the Cost of Service (COS). In developing equitable rate structures, revenue

requirements are allocable to the various customer classifications according to the service

rendered. Allocations of these requirements to customer classes should take into account the

quantity of sewage produced, sewer flow strengths, number of customer accounts, and other

relevant factors. The total costs of service recovered from sewer user rates for the TY 2017 are

summarized in Tables 6-1.

Table 6-1 Sewer Cost of Service

Shown in line 4 is the total revenue requirement that corresponds with the Table 5-8 line 22.

In order to derive the revenue requirement that will need to be recovered by the rates, it is

necessary to deduct revenues from other sources as shown in lines 7 and 10. Line 10 represents the

net annual cash balance for the utility during the Test Year. In this case, the $236,200 indicates that

the sewer utility is projecting a negative cash balance for the year. Line 11 represents the total costs

that are to be recovered from rates.

6.1 FUNCTIONAL COST COMPONENTS The cost of providing sewer service should be analyzed by system function in order to

properly allocate the costs to the various classes of customers and subsequently design rates. As a

basis for allocating costs of service among customer classes, costs may be separated into the

following four basic functional cost components: (1) “Base”; (2) “Strength”; (3) “Customer”; and (4)

“Direct Assignment”.

Base costs represent operating and capital costs primarily associated with collection. The collection costs vary directly with the quantity of sewage produced.

Operating Capital Total

Expense Cost Cost

($) ($) ($)


1 O&M Expenses 2,450,800 0 2,450,800

2 Debt Service 0 19,500 19,500

3 Transfers 0 0 0

4 Subtotal 2,450,800$ 19,500$ 2,470,300$

Less Revenue Requirements Met from Other Sources

5 Other Operating Revenue 3,200 0 3,200

6 Transfers 0 0 0

7 Subtotal 3,200$ 0$ 3,200$

Adjustments

8 Adjustment for Annual Cash Balance 895,900 0 895,900

9 Adjustment to Annualize Rate Increase (659,700) 0 (659,700)

10 Subtotal 236,200$ 0$ 236,200$

11 Cost of Service to be Recovered from Rates 2,211,400$ 19,500$ 2,230,900$

Line

No. Description


32


Strength costs represent those operating costs primarily associated with treatment. The treatment costs are specifically related to treatment of Biochemical Oxygen Demand (BOD) and Total Suspended Solid (TSS).

Customer costs are defined as those that tend to vary in proportion to the number of customers connected to the system. These include billing, collecting and accounting.

Directly assigned costs are costs specifically identified as those incurred to serve a specific customer group(s). The separation of costs of service into these principal categories facilitates allocating such costs to the various customer classes on the basis of the respective service requirements of each class.

6.2 ALLOCATION TO COST COMPONENTS Each element of cost is allocated to functional cost components on the basis of the parameter

or parameters having the most significant influence on the magnitude of that element of cost. O&M

expense items are allocated directly to appropriate cost components, while the allocation of capital

and replacement costs is based upon a detailed allocation of related capital investment. The

separation of costs into functional components provides a means for distributing such costs to the

various classes of customers on the basis of their respective responsibilities for each particular type

of service.

6.2.1 Allocation of Operating and Maintenance Expense

In the allocation of O&M expense, costs are allocated directly to cost components to the

extent possible. Finance and Information Technology & Media are allocated on the basis of

customer while Public Works (sewer operations) is allocated on the based on a 50/25/25 split

between volume, BOD strength and TSS strength. Storm water which is part of the Public Works

was allocated to volume. Table 6-2 represents the allocation of O&M to the functional cost

components. Upon allocation to function cost components, revenues from other sources as shown

in Table 6-1 lines 7 and 10 are subtracted.

6.2.2 Allocation of Capital Investments

In the allocation of capital expenses, costs are allocated to cost components to the extent

possible. Capital expenditures represent future capital investment into the sewer system. These

costs are allocated on the basis of total existing assets. A distribution of the new sewer investment

is shown in Table 6-3.



33

Table 6-2 Allocation of Sewer O&M Expenses

Table 6-3 Allocation of Sewer Capital Costs


Base Strength Customer

Flow BOD TSS Cust/Bill.

($) ($) ($) ($) ($)

Operating Expenses

1 Finance & Administration 392,100 0 0 0 392,100

2 Public Works 2,012,600 1,117,200 447,700 447,700 0

3 Technology & Media Support Services 46,100 0 0 0 46,100

4 Transfers 0 0 0 0 0

5 Subtotal 2,450,800$ 1,117,200$ 447,700$ 447,700$ 438,200$

Less Other Revenue

6 Miscellaneous Revenues 3,200 1,600 800 800 0

7 Other Adjustments 236,200 118,000 59,100 59,100 0

8 Net Operating Expenses 2,211,400$ 997,600$ 387,800$ 387,800$ 438,200$

Line





($) ($) ($) ($) ($)

Plant Assets

1 Collection 17,900 17,900 0 0 0

2 General Plant 1,600 1,600 0 0 0

3 Net Capital Expenses 19,500$ 19,500$ 0$ 0$ 0$

Total Costs

Line

No. Description


34


6.3 UNITS OF SERVICE The total cost responsibility for each customer class may be established by developing unit

costs of service for each cost function and subsequently assigning those costs to the customer

classes based on the respective service requirements of each. To properly recognize the cost of

service, each customer class is allocated its share of base, strength, and customer costs. The number

of units of service required by each customer class provides a means for the proportionate

distribution of costs previously allocated to respective cost categories. Table 6-4 is a summary of

the estimated units of service for the various customer classes.

Base costs vary with the volume of sewage produced and are distributed to customer classes

on that basis. Strength costs are those associated with pollutant characteristics and is distributed to

customer classes on the basis of loadings. Customer costs, which consist of billing, collection and

accounting costs, are allocated to the various classes on the basis of the number of bills. The sewage

produced is estimated based water consumption. The pollutant loadings are derived from

monitored data and recommendations of the State Water Resources Control Board., Revenue

Program Guidelines, Appendix G and the WEF MoP No. 27, Table 7.3. The City’s commercial and

industrial class encompasses a broad range of type of business such as retail, offices, restaurants,

and hospitals. Since sampling wasn’t an possibility, based on similar utilities and City staff

experience it was recommended that this class would reflect a high medium strength.

Table 6-4 Sewer Units of Service

6.4 COST OF SERVICE ALLOCATIONS The costs of service are distributed to the various customer classes by applying the unit costs

of service to respective service requirements. The total unit costs of service applied to the

respective requirements for each customer class results in the total cost of service for each

customer class.

6.4.1 Units Costs of Service

The Test Year unit cost of service for each functional cost component is based on the total

cost divided by the applicable units of service as shown in Tables 6-5. In lines 1 and 2, the total

costs represent the cost to be recovered from rates shown in Table 6-1 line 11. Line 5 represents

the unit costs that are used in allocating the costs to the specific customer classes.

6.4.2 Distribution of Costs of Service to Customer Classes

The customer class responsibility for service is obtained by applying the unit costs of service

to the number of units for which the customer class is responsible. This process is illustrated in

Tables 6-6 in which the unit costs of service are applied to the customer class units of service.

Contributed BOD Loadings TSS Loadings

Volume Factor Loading Factor Loading Customer

Units of Measure (HCF) (mg/L) (lbs) (mg/L) (lbs) (bills)

Customer Class

1 Residential 1,264,738 200 1,578,073 200 1,578,073 104,436

2 Commercial 921,342 800 4,598,408 800 4,598,408 16,068

3 Total 2,186,080 6,176,481 6,176,481 120,504

Line

No. Description



35

Table 6-5 Sewer Unit Costs of Service

Table 6-6 Distribution of Sewer Cost to Customer Classes




($) ($) ($) ($) ($)

Unit Cost of Service

1 Net Operating Expense 2,211,400 997,600 387,800 387,800 438,200

2 Capital Costs 19,500 19,500 0 0 0

3 Total Cost of Service 2,230,900$ 1,017,100$ 387,800$ 387,800$ 438,200$

4 Units of Service (Total) 2,186,080 6,176,481 6,176,481 120,504

5 Cost per Unit 0.47$ 0.06$ 0.06$ 3.64$

per Unit per HCF per lbs/Day per lbs/Day per bill

Line





($) ($) ($) ($) ($)

per HCF per lbs/Day per lbs/Day per bill

1 Cost per Unit 0.47$ 0.06$ 0.06$ 3.64$

Customer Class

Residential

2 Units 1,264,738 1,578,073 1,578,073 104,436

3 Allocation of costs of service 1,166,400 588,400 99,100 99,100 379,800

Commercial

4 Units 921,342 4,598,408 4,598,408 16,068

5 Allocation of costs of service 1,064,500 428,700 288,700 288,700 58,400

6 Total 2,230,900$ 1,017,100$ 387,800$ 387,800$ 438,200$

Description Total Costs

Line

No.


36


6.5 ADEQUACY OF EXISTING RATES TO MEET COSTS OF SERVICE Presented in Tables 6-7 is a comparison of the allocated cost of service and revenue under

existing rates by individual customer class and for the system in total. The indicated revenue

increase required over existing rates for each user class indicates where the emphasis should be

directed in the subsequent rate design of sewer service user rates.

The 55.0 percent, overall increase is considered necessary to meet the projected revenue

requirements for the FY 2017 Test Year. This overall level of revenue needs to be produced by the

proposed rates developed and presented in subsequent sections of this report.

Table 6-7 Comparison of Sewer Cost of Service to Existing Revenue

Line Adjusted Rev under Indicated

No. Description COS Exst Rates Rev Increase

($) ($) (%)

Customer Class

1 Residential 1,166,400 813,600 43.4%

2 Commercial 1,064,500 625,700 70.1%

3 Total 2,230,900$ 1,439,300$ 55.0%

Ta

ble

3-4

. Un

it o

f S

erv

ice



37

7 Proposed Rate Adjustments The initial consideration in the derivation of rate schedules for sewer service is the

establishment of equitable charges to the customers commensurate with the cost of providing that

service. While the cost of service allocations to customer classes should not be construed as literal

or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments.

Practical considerations sometimes modify rate adjustments by taking into account additional

factors such as the extent of bill impacts, and local policies and practices.

7.1 EXISTING RATES The sewer utility’s existing rates consists of a flat rate per account which vary by either

residential or commercial. A summary of existing sewer rates was presented earlier in this report in

Table 5-2.

7.2 PROPOSED RATES The costs of service analysis described in preceding sections of this report provide a basis for

the design of sewer rates. As observed in Table 6-7, the cost of providing service compared to the

revenues received from different customer classes is not uniform. That is, for some customer

classes the cost of providing service is greater than the revenues received. The rate schedules for FY

2016 shown in Table 7-1 take into consideration the City’s objectives and are designed to address

the revenue recovery imbalance in different customer classes.

Table 7-1 Proposed Sewer Rates

7.3 REVENUE RECOVERY UNDER PROPOSED RATES As previously discussed, the proposed rate schedule shown in Table 7-1 would increase rate

revenues by the average system-wide cumulative increase of 265.4 percent over the study period

and maintain current cost recovery by customer class, as indicated in Tables 7-2.

Table 7-2 Comparison of Sewer Cost of Service to Proposed Revenue

7.4 NEIGHBORING UTILITIES Presented in Table 7-3 are the proposed rates compared to rates of neighboring cities and

agencies, for a single family residential customer. With the proposed rate increases, the City


Description 2017 2018 2019 2020 2021


Sewer Charge

Residential 11.17 17.32 19.92 22.91 26.35

Commercial 66.25 102.69 118.10 135.82 156.20

Line Adjusted Rev under Percent

No. Description COS Proposed Rates Recovery

($) ($) (%)

Customer Class

1 Residential 1,166,400 1,166,400 100.0%

2 Commercial 1,064,500 1,064,500 100.0%

3 Total 2,230,900$ 2,230,900$ 100.0%


38


continues to be the highest sewer providers of the surveyed communities. All surveyed community

rates are current as of September 2016. The City proposed single family residential bill is

anticipated to be $11.17. Sewer treatment services are provided by Sanitation Districts of Los

Angeles County, therefore these costs only represent the collection component.

Table 7-3 Comparison of Sewer Fees to Neighboring Agencies

Typical

Sewer Purveyor Bill

($/month)

Huntington Park [a] 1.50

South Gate 3.50

Downey 3.74

Los Angeles County

Sewer Maintenance District [c] 4.21

Average of Neighbors [b] 4.43

Compton 6.30

Norwalk 7.31

Lynwood (Existing) 7.79

Lynwood (Proposed) 11.17

[a] Huntington Park performed a rate study and determined that rates should be higher, but

the City never moved forward on inplementing the proposed rates.

[b] Represents the average of all Neighboring utilities.

[c] Los Angeles County provides services for the portions of the following

cities: Pico Rivera, Paramount, Sante Fee Springs, Bell Gardens, and Cudahy.

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