HomeMy WebLinkAboutTransmittal - 11/12/2024SALT LAKE CITY TRANSMITTAL
To:
Salt Lake City Council Chair
Start Date:
11/08/2024
Date Sent to Council:
11/12/2024
From:
Employee Name:
Briefer, Laura
E-mail
Laura.Briefer@slc.gov
Department
Public Utilities
Department Director Signature Chief Administrator Officer's Signature*
Director Signed Date
11/08/2024
Chief Administrator Officer's Signed Date
11/12/2024
Subject:
2024 Comprehensive Water, Wastewater, and Stormwater Rate Study
Additional Staff Contact:
Lisa Tarufelli; lisa.tarufelli@slc.govJacob Jorgensen: jacob.jorgensen@slc.gov
Presenters/Staff Table
Laura Briefer; laura.briefer@slc.govLisa Tarufelli; lisa.tarufelli@slc.govJason Mumm, FCS Group; jasonm@fcsgroup.com
Document Type*
Information Item
Budget Impact*
Yes
No
Budget Impact:
Recommendation:*
That the City Council receive information and provide feedback regarding the recommendations of the Salt Lake City Department of Public Utilities (SLCDPU) 2024 Water, Wastewater, and Stormwater Rate Study. The recommended rates and rate design are integral to future City decisions regarding the SLCDPU Fiscal Year 2026 budget and the Consolidated Fee Schedule. In addition, recommended rate design changes will result in needing corresponding amendments to certain Salt Lake City ordinances before they are implemented.
Background/Discussion (?)
SLCDPU operates four separate utility enterprises that are financially separate from each other and operate separately from Salt Lake City’s general fund. These include the water, wastewater (sewer), stormwater, and streetlighting utilities that serve Salt Lake City residents. In addition, the water utility serves residents in nearby communities outside of Salt Lake City, including in portions of Millcreek, Holladay, Cottonwood Heights, Murray, Midvale, and South Salt Lake. Each utility enterprise relies upon fees and rates as the sources of revenue to support their necessary operational and capital requirements.
Salt Lake City’s three water-related utilities are comprised of substantial critical operational functions and infrastructure assets that must respond to local, state, and federal regulatory requirements, aging infrastructure, changing population dynamics, resiliency priorities, and environmental pressures. The key means to ensure the ability to provide drinking water, wastewater, and stormwater services is maintaining a sound financial strategy. The implementation of rates and a deliberate rate design serve as structural support for SLCDPU’s sound financial strategy for the utilities. Rates and rate design are not meant to be static and should be periodically evaluated for effectiveness to reflect changing conditions. As such, SLCDPU conducts water, wastewater and stormwater rate studies about every five years to ensure rates and the rate design continue to support sound financial management for each of the utilities.
SLCDPU contracted with FCS Group ( https://fcsgroup.com/), a consulting firm with expertise in public sector utility rate and fee consulting, among other types of financial and management work. The resulting 2024 rate study establishes rates and charges for services for Fiscal Year 2026, including projected rate adjustments through Fiscal Year 2029. The executive summary and comprehensive rate study report are attached to this transmittal. The rate study addresses several important rate components for each of the water-related utilities:
y p p1)Determination of revenue requirements. This is the total amount of money each utility needs to cover operating costs, maintenance expenses, and investments in infrastructure.
2)Allocation of costs to customer classes. This is the amount needed to cover the cost of service among different customer groups, such as residential, commercial, and industrial customers based on how much each group uses each of the utility’s services.
3)Rate design. This is the rate setting process that allows each utility to recover its costs from each customer class. Rate design can take various forms such as fixed/flat fees, tiered rates, or demand-based rates. The rate design objective is to reach the practical financial requirements for the rates while achieving as many community preferences as possible.
The 2024 rate study determines increased revenue requirements over the next several years are due to operations and maintenance needs and significant investments into infrastructure, primarily repair and replacement of aging infrastructure. The 2024 rate study updates the cost allocation from the previous 2018 rate study to better reflect the cost of service to each customer class. Finally, the rate study evaluates and recommends a rate design to meet multiple technical and subjective objectives. These include revenue sufficiency, interclass equity, cost allocation, economic efficiency (water conservation), clarity, predictability, and affordability.
The selected rate design alternatives presented in the rate study also corrects specific performance issues in the existing rate design and is a result of substantial feedback from an ad-hoc Rate Advisory Committee (RAC) convened specifically for the rate study process. The attached draft Water, Wastewater, and Stormwater Rate Study includes an Executive Summary and detailed appendices that provide detail regarding the process and rationale for the selected alternative. Of particular interest, Appendix E includes examples of impacts the proposed rates would have on different customer classes, including residential, commercial, institutional, and industrial customers, as compared to existing Fiscal Year 2025 rates.
Will the City Council need to hold a public hearing for this item?*
Yes
No
Public Process (?)
SLCDPU’s rate study process included the convening of a RateAdvisory Committee to provide feedback about rate design objectives. The RACconsisted of volunteer community members representing diverse perspectives, including residential, business,industrial, institutional, affordability, environmental, and other interests.SLCDPU hosted seven workshops with the RAC during the months of May – September 2024. A summary of the role and representation of the RAC isprovided in Section IV of the attached report. Throughout the rate study report specific feedback from the RAC is discussed in the context of selecting the recommended rate design alternative. The role of the individuals participating in the RAC proved to be very valuable in weighing alternatives and their tradeoffs. We cannot thank members of the RAC enough for their time and thoughtfulness.
Public Utility rates are included in the City's budget deliberation and adoption process. Public Utility rates are also part of the City's Consolidated Fee Schedule, and are considered during the budget process. The public hearing requirement is due to role of Public Utility rates in the annual budget process.
Changes in certain City ordinances in Title 17 concerning utility rates will be required in order to implement the selected rate design alternative. These ordinance changes will also require a public hearing.
Chief Administrator Officer's Comments
APPENDIX A
Salt Lake City
Utility Rate Study: Water Utility (FY 7/1 - 6/30)
Assumptions
Economic & Financial Factors FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Escalation Rates
Personnel Costs - 7.80% 5.00% 5.00% 5.00% 5.00%
Operating Expenses - 4.00% 4.00% 4.00% 4.00% 4.00%
Utilities - 8.00% 8.00% 8.00% 8.00% 8.00%
METRO WATER PURCHASE Rate Increases - 3.00% 3.00% 3.00% 3.00% 3.00%
General Administrative - 10.00% 10.00% 10.00% 10.00% 10.00%
Investment Interest 5.48%4.00%1.00%1.00%1.00%1.00%
Adjustments to Operating or Capital Spending FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Budget Realization Factor (100% is default)100%100%100%100%100%100%
CIP Completion Factor (100% is default)70% 10% 10% 45% 45% 55%
Fund Balance & Financial Policy Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Beginning Enterprise Fund Balances
Operating Reserve 26,868,567$
Capital Reserve 90,033,223
Total Beginning Enterprise Fund Balance 116,901,790$
Total Operating and Capital Cash Test: Days of O&M 180 days 180 days 180 days 180 days 180 days 180 days
Operating Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 120 days 120 days 120 days 120 days 120 days 120 days
Min. Fund Balance Target ($) 30,798,656$ 33,113,638$ 35,615,351$ 37,652,269$ 38,957,071$ 40,534,287$
Capital Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 60 days 60 days 60 days 60 days 60 days 60 days
Min. Fund Balance Target ($) 15,399,328$ 16,556,819$ 17,807,676$ 18,826,135$ 19,478,536$ 20,267,143$
Capital Financing Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Impact Fees
Proj. Actual Prop. Budget Calculated
Annual Impact Fee Revenue 2,000,000$ 2,000,000$ $3,920,582 $4,112,008 $4,271,312 $4,436,788
Proposed Charge 2,561$ 2,689$ 5,226$ $5,435 $5,598 $5,766
Incremental Customer Base 781 744 750 757 763 769
Other Funding Sources (Uses)
Capital Resources
FEMA BRIC for City Creek WTP Upgrades 10,850,000$ 31,500,000$ 5,180,000$ -$ -$ -$
Additional Outside Funding - Scenario Specific - 3,283,000 3,920,000 4,557,000 4,018,000 3,675,000
10,850,000$ 34,783,000$ 9,100,000$ 4,557,000$ 4,018,000$ 3,675,000$
Other Capital Resources Proj. Actual Prop. Budget
Annual Capital Contribution Amount 500,000 500,000 500,000 500,000 500,000 500,000
500,000$ 500,000$ 500,000$ 500,000$ 500,000$ 500,000$
Total Other Funding Sources (Uses) 11,350,000$ 35,283,000$ 9,600,000$ 5,057,000$ 4,518,000$ 4,175,000$
Revenue Bonds Level total payments
Term (years) 30 years 30 years 30 years 30 years 30 years 30 years
Interest Only Payments (years) 3 years 3 years 3 years 3 years 3 years 3 years
Interest Cost 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
Issuance Cost 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Debt Service Coverage Minimum (Legal or Policy)1.50
Include / Exclude Impact Fees in Coverage? Exclude
State Revolving Fund Loan Program Level total payments
Term (years) 20 years 20 years 20 years 20 years 20 years 20 years
Interest Only Payments (years) 0 years 5 years 4 years 3 years 2 years 1 years
Interest Cost 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Issuance Cost 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802
SLC - Water Revenue Requirement 2024
Salt Lake City
Utility Rate Study: Sewer Utility (FY 7/1 - 6/30)
Assumptions
Economic & Financial Factors FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Escalation Rates
Personnel Costs - 8.20% 5.00% 5.00% 5.00% 5.00%
Operating Expenses - 4.00% 4.00% 4.00% 4.00% 4.00%
Utilities - 8.00% 8.00% 8.00% 8.00% 8.00%
General Administrative - 10.00% 10.00% 10.00% 10.00% 10.00%
Investment Interest 5.48%4.00%1.00%1.00%1.00%1.00%
Adjustments to Operating or Capital Spending FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Budget Realization Factor (100% is default)100%100%100%100%100%100%
CIP Completion Factor (100% is default)70% 70% 70% 45% 40% 55%
Fund Balance & Financial Policy Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Beginning Enterprise Fund Balances
Operating Reserve 58,379,179$
Capital Reserve 181,173,055
Total Beginning Enterprise Fund Balance 239,552,234$
Total Operating and Capital Cash Test: Days of O&M 180 days 180 days 180 days 180 days 180 days 180 days
Operating Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 120 days 120 days 120 days 120 days 120 days 120 days
Min. Fund Balance Target ($) 10,390,270$ 11,223,259$ 12,804,013$ 17,067,597$ 15,486,589$ 16,101,613$
Capital Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 60 days 60 days 60 days 60 days 60 days 60 days
2 Min. Fund Balance Target ($) 5,195,135$ 5,611,629$ 6,402,006$ 8,533,798$ 7,743,295$ 8,050,806$
Capital Financing Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Impact Fees
Proj. Actual Prop. Budget Calculated
2 Annual Impact Fee Revenue 1,650,000$ 1,650,000$ 6,626,677$ 6,639,930$ 6,653,210$ 6,666,516$
Other Funding Sources (Uses)
Capital Resources
Additional Outside Funding - Scenario Specific 178,517,000$ 140,456,000$ 16,549,801$ -$ -$ -$
178,517,000$ 140,456,000$ 16,549,801$ -$ -$ -$
Other Capital Resources Proj. Actual Prop. Budget
Annual Contribution Amount 400,000 400,000 400,000 400,000 400,000 400,000
400,000$ 400,000$ 400,000$ 400,000$ 400,000$ 400,000$
Total Other Funding Sources (Uses) 178,917,000$ 140,856,000$ 16,949,801$ 400,000$ 400,000$ 400,000$
Revenue Bonds Level total payments
Term (years) 30 years 30 years 30 years 30 years 30 years 30 years
Interest Only Payments (years) 3 years 3 years 3 years 3 years 3 years 3 years
Interest Cost 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
Issuance Cost 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Debt Service Coverage Minimum (Legal or Policy)1.50
Include / Exclude Impact Fees in Coverage? Exclude
WIFIA Loans Level total payments
Term (years) 30 years 30 years 30 years 30 years 30 years 30 years
Interest Only Payments (years) 5 years 5 years 5 years 5 years 5 years 5 years
Interest Cost 1.34% 1.34% 1.34% 1.34% 1.34% 1.34%
Issuance Cost 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802
SLC - Sewer Revenue Requirement 2024
Salt Lake City
Utility Rate Study: Stormwater Utility (FY 7/1 - 6/30)
Assumptions
Economic & Financial Factors FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Escalation Rates
Personnel Costs - 8.20% 5.00% 5.00% 5.00% 5.00%
Operating Expenses - 5.00% 5.00% 5.00% 5.00% 5.00%
Utilities - 8.00% 8.00% 8.00% 8.00% 8.00%
CITY DATA PROCESSING SERVICES - 10.00% 10.00% 10.00% 10.00% 10.00%
Investment Interest 5.48%4.00%1.00%1.00%1.00%1.00%
Adjustments to Operating or Capital Spending FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Budget Realization Factor (100% is default)100%100%100%100%100%100%
CIP Completion Factor (100% is default)70% 70% 55% 35% 35% 40%
Fund Balance & Financial Policy Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Beginning Enterprise Fund Balances
Operating Reserve 17,017,902$
Capital Reserve 9,851,097
Total Beginning Enterprise Fund Balance 26,868,999$
Total Operating and Capital Cash Test: Days of O&M 180 days 180 days 180 days 180 days 180 days 180 days
Operating Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 120 days 120 days 120 days 120 days 120 days 120 days
Min. Fund Balance Target ($) 3,711,196$ 4,097,015$ 4,403,977$ 4,671,084$ 4,954,105$ 5,248,752$
Capital Balance: Minimum Target
Min. Fund Balance Target (days of O&M expense) 60 days 60 days 60 days 60 days 60 days 60 days
2 Min. Fund Balance Target ($) 1,855,598$ 2,048,508$ 2,201,988$ 2,335,542$ 2,477,052$ 2,624,376$
Capital Financing Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Impact Fees
Proj. Actual Prop. Budget Calculated
2 Annual Impact Fee Revenue 750,000$ 750,000$ 2,945,779$ 2,945,779$ 2,945,779$ 2,945,779$
Other Funding Sources (Uses)
Other Capital Resources Proj. Actual Prop. Budget
Annual Contribution Amount 400,000$ 400,000$ 400,000$ 400,000$ 400,000$ 400,000$
400,000$ 400,000$ 400,000$ 400,000$ 400,000$ 400,000$
Total Other Funding Sources (Uses) 400,000$ 400,000$ 400,000$ 400,000$ 400,000$ 400,000$
Revenue Bonds Level total payments
Term (years) 30 years 30 years 30 years 30 years 30 years 30 years
Interest Only Payments (years) 3 years 3 years 3 years 3 years 3 years 3 years
Interest Cost 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
Issuance Cost 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Debt Service Coverage Minimum (Legal or Policy)1.50
Include / Exclude Impact Fees in Coverage? Exclude
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Stormwater Revenue Requirement 2024
APPENDIX B
Salt Lake City
Utility Rate Study: Water Utility (FY 7/1 - 6/30)
Summary
Revenue Requirement FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Revenues
Rate Revenues Under Existing Rates 98,046,300$ 121,851,453$ 133,815,105$ 134,991,308$ 136,181,673$ 137,337,391$
Non-Rate Revenues 8,211,295 8,342,987 7,610,793 7,811,171 8,013,915 8,216,633
Total Revenues 106,257,595$ 130,194,440$ 141,425,898$ 142,802,478$ 144,195,588$ 145,554,024$
Expenses
Cash Operating Expenses 93,679,246$ 100,720,648$ 108,330,027$ 114,525,652$ 118,494,425$ 123,291,789$
Existing Debt Service 6,955,101 8,230,091 8,230,284 8,230,385 8,230,090 8,230,091
New Debt Service - 4,368,139 4,429,339 4,500,484 16,344,180 16,401,555
Total Expenses 100,634,347$ 113,318,878$ 120,989,649$ 127,256,521$ 143,068,695$ 147,923,434$
Annual Rate Increase 0.00%7.00%7.00%5.50%5.50%
Cumulative Rate Increase 0.00%7.00%14.49%20.79%27.43%
Rate Revenues After Increases 98,046,300$ 121,851,453$ 143,182,162$ 154,551,548$ 164,489,689$ 175,009,356$
Non-Rate Revenues 8,211,295 8,342,987 7,610,793 7,811,171 8,013,915 8,216,633
Total Operating Revenues After Rate Increases 106,257,595$ 130,194,440$ 150,792,955$ 162,362,719$ 172,503,604$ 183,225,989$
Net Cash Flow After Rate Increase 5,623,248$ 16,875,562$ 29,803,306$ 35,106,198$ 29,434,909$ 35,302,555$
Fund Balance FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Reserve
Beginning Balance 26,868,567$ 30,798,656$ 33,113,638$ 35,615,351$ 37,652,269$ 38,957,071$
Net Cash Flow After Rate Increase 5,623,248 16,875,562 29,803,306 35,106,198 29,434,909 35,302,555
less: Transfer of Surplus to Capital Fund (1,693,159) (14,560,581) (27,301,592) (33,069,279) (28,130,107) (33,725,339)
Ending Balance 30,798,656$ 33,113,638$ 35,615,351$ 37,652,269$ 38,957,071$ 40,534,287$
Actual Days of O&M 120 days 120 days 120 days 120 days 120 days 120 days
Minimum Target Balance 30,798,656$ 33,113,638$ 35,615,351$ 37,652,269$ 38,957,071$ 40,534,287$
Capital Reserve
Beginning Balance 90,033,223$ 10,593,742$ 86,105,168$ 63,289,799$ 19,013,069$ 175,012,282$
plus: Transfers from Operating Fund 1,693,159 14,560,581 27,301,592 33,069,279 28,130,107 33,725,339
plus: Capital Resources 10,850,000 34,783,000 9,100,000 4,557,000 4,018,000 3,675,000
plus: Other Capital Resources 500,000 500,000 500,000 500,000 500,000 500,000
plus: Impact Fee Revenue 2,000,000 2,000,000 3,920,582 4,112,008 4,271,312 4,436,788
plus: Revenue Bond Proceeds - 100,558,000 - - 226,000,000 -
plus: State Revolving Fund Loan Program Proceeds - 3,417,000 4,080,000 4,743,000 4,182,000 3,825,000
plus: Interest Earnings 4,935,330 423,750 861,052 632,898 190,131 1,750,123
Total Funding Sources 110,011,712$ 166,836,073$ 131,868,393$ 110,903,985$ 286,304,619$ 222,924,532$
less: Capital Expenditures (99,417,969) (80,730,904) (68,578,594) (91,890,915) (111,292,336) (121,996,805)
Ending Capital Fund Balance 10,593,743$ 86,105,169$ 63,289,800$ 19,013,069$ 175,012,283$ 100,927,727$
Minimum Target Balance 15,399,328$ 16,556,818$ 17,807,675$ 18,826,134$ 19,478,535$ 20,267,143$
Combined Beginning Balance (Op., Cap.)116,901,790$ 41,392,398$ 119,218,806$ 98,905,150$ 56,665,338$ 213,969,353$
Combined Ending Balance (Op., Cap.)41,392,399$ 119,218,807$ 98,905,151$ 56,665,339$ 213,969,354$ 141,462,013$
Ending Total Days of Operating Expenditures (Op., Cap.)161 days 432 days 333 days 181 days 659 days 419 days
Combined Minimum Target Balance (Op., Cap.)$46,197,984 $49,670,456 $53,423,026 $56,478,403 $58,435,606 $60,801,430
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Water Revenue Requirement 2024
Salt Lake City
Utility Rate Study: Sewer Utility (FY 7/1 - 6/30)
Summary
Revenue Requirement FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Revenues
Rate Revenues Under Existing Rates 76,303,000$ 89,716,383$ 104,858,420$ 105,327,786$ 105,806,779$ 106,018,392$
Non-Rate Revenues 4,562,698 1,815,113 1,550,175 1,605,960 1,690,173 1,717,602
Total Revenues 80,865,698$ 91,531,496$ 106,408,595$ 106,933,746$ 107,496,951$ 107,735,994$
Expenses
Cash Operating Expenses 31,603,738$ 34,137,412$ 38,945,539$ 51,913,940$ 47,105,042$ 48,975,738$
Existing Debt Service 24,626,927 29,467,437 29,446,217 29,428,442 28,910,322 44,259,292
New Debt Service - 4,273,740 5,733,336 5,733,336 7,791,504 8,494,423
Total Expenses 56,230,665$ 67,878,589$ 74,125,092$ 87,075,718$ 83,806,868$ 101,729,453$
Annual Rate Increase 0.00%5.50%5.50%5.50%4.00%
Cumulative Rate Increase 0.00%5.50%11.30%17.42%22.12%
Rate Revenues After Increases 76,303,000$ 89,716,383$ 110,625,633$ 117,232,459$ 124,242,697$ 129,470,830$
Non-Rate Revenues 4,562,698 1,815,113 1,550,175 1,605,960 1,690,173 1,717,602
Total Operating Revenues After Rate Increases 80,865,698$ 91,531,496$ 112,175,808$ 118,838,419$ 125,932,870$ 131,188,432$
Net Cash Flow After Rate Increase 24,635,033$ 23,652,907$ 38,050,716$ 31,762,701$ 42,126,002$ 29,458,979$
Fund Balance FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Reserve
Beginning Balance 58,379,179$ 10,390,270$ 11,223,259$ 12,804,013$ 17,067,597$ 15,486,589$
Net Cash Flow After Rate Increase 24,635,033 23,652,907 38,050,716 31,762,701 42,126,002 29,458,979
less: Transfer of Surplus to Capital Fund (72,623,942) (22,819,918) (36,469,962) (27,499,117) (43,707,010) (28,843,955)
Ending Balance 10,390,270$ 11,223,259$ 12,804,013$ 17,067,597$ 15,486,589$ 16,101,613$
Actual Days of O&M 120 days 120 days 120 days 120 days 120 days 120 days
Minimum Target Balance 10,390,270$ 11,223,259$ 12,804,013$ 17,067,597$ 15,486,589$ 16,101,613$
Capital Reserve
Beginning Balance 181,173,055$ 2,197,192$ 8,808,061$ 6,950,114$ 12,650,430$ 36,836,976$
plus: Transfers from Operating Fund 72,623,942 22,819,918 36,469,962 27,499,117 43,707,010 28,843,955
plus: Capital Resources 178,517,000 140,456,000 16,549,801 - - -
plus: Other Capital Resources 400,000 400,000 400,000 400,000 400,000 400,000
plus: Impact Fee Revenue 1,650,000 1,650,000 6,626,677 6,639,930 6,653,210 6,666,516
plus: Revenue Bond Proceeds - 99,553,000 34,000,000 - - -
plus: Interest Earnings 9,931,321 87,888 88,081 69,501 126,504 368,370
Total Funding Sources 444,295,318$ 267,163,998$ 102,942,582$ 41,558,662$ 63,537,154$ 73,115,818$
less: Capital Expenditures (442,098,125) (258,355,937) (95,992,467) (28,908,232) (26,700,178) (46,504,984)
Ending Capital Fund Balance 2,197,192$ 8,808,061$ 6,950,114$ 12,650,430$ 36,836,976$ 26,610,834$
Minimum Target Balance 5,195,135$ 5,611,629$ 6,402,006$ 8,533,798$ 7,743,294$ 8,050,806$
Combined Beginning Balance (Op., Cap.)239,552,234$ 12,587,462$ 20,031,320$ 19,754,127$ 29,718,027$ 52,323,565$
Combined Ending Balance (Op., Cap.)12,587,462$ 20,031,319$ 19,754,127$ 29,718,027$ 52,323,565$ 42,712,446$
Ending Total Days of Operating Expenditures (Op., Cap.)145 days 214 days 185 days 209 days 405 days 318 days
Combined Minimum Target Balance (Op., Cap.)$15,585,405 $16,834,888 $19,206,019 $25,601,395 $23,229,883 $24,152,419
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802
SLC - Sewer Revenue Requirement 2024
Salt Lake City
Utility Rate Study: Stormwater Utility (FY 7/1 - 6/30)
Summary
Revenue Requirement FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Revenues
Rate Revenues Under Existing Rates 13,553,906$ 14,909,297$ 14,939,116$ 14,968,994$ 14,998,932$ 15,028,930$
Non-Rate Revenues 995,866 211,448 103,970 107,040 109,711 112,541
Total Revenues 14,549,772$ 15,120,745$ 15,043,086$ 15,076,034$ 15,108,643$ 15,141,471$
Expenses
Cash Operating Expenses 11,288,220$ 12,461,755$ 13,395,429$ 14,207,882$ 15,068,735$ 15,964,954$
Existing Debt Service 1,550,192 1,465,915 1,467,013 1,463,369 767,589 767,679
New Debt Service - 215,848 215,848 215,848 319,798 319,798
Total Expenses 12,838,412$ 14,143,518$ 15,078,291$ 15,887,099$ 16,156,122$ 17,052,430$
Annual Rate Increase 0.00%7.00%10.00%10.00%10.00%
Cumulative Rate Increase 0.00%7.00%17.70%29.47%42.42%
Rate Revenues After Increases 13,553,906$ 14,909,297$ 15,984,854$ 17,618,506$ 19,419,117$ 21,403,751$
Non-Rate Revenues 995,866 211,448 103,970 107,040 109,711 112,541
Total Operating Revenues After Rate Increases 14,549,772$ 15,120,745$ 16,088,824$ 17,725,545$ 19,528,828$ 21,516,292$
Net Cash Flow After Rate Increase 1,711,360$ 977,226$ 1,010,533$ 1,838,446$ 3,372,706$ 4,463,861$
Fund Balance FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Operating Reserve
Beginning Balance 17,017,902$ 3,711,196$ 4,097,015$ 4,403,977$ 4,671,084$ 4,954,105$
Net Cash Flow After Rate Increase 1,711,360 977,226 1,010,533 1,838,446 3,372,706 4,463,861
less: Transfer of Surplus to Capital Fund (15,018,067) (591,407) (703,572) (1,571,339) (3,089,686) (4,169,214)
Ending Balance 3,711,196$ 4,097,015$ 4,403,977$ 4,671,084$ 4,954,105$ 5,248,752$
Actual Days of O&M 120 days 120 days 120 days 120 days 120 days 120 days
Minimum Target Balance 3,711,196$ 4,097,015$ 4,403,977$ 4,671,084$ 4,954,105$ 5,248,752$
Capital Reserve
Beginning Balance 9,851,097$ 18,714,169$ 12,477,498$ 8,957,239$ 8,248,369$ 8,340,124$
plus: Transfers from Operating Fund 15,018,067 591,407 703,572 1,571,339 3,089,686 4,169,214
plus: Other Capital Resources 400,000 400,000 400,000 400,000 400,000 400,000
plus: Impact Fee Revenue 750,000 750,000 2,945,779 2,945,779 2,945,779 2,945,779
plus: Revenue Bond Proceeds - 5,028,000 - - - -
plus: Interest Earnings 540,005 748,567 124,775 89,572 82,484 83,401
Total Funding Sources 26,559,169$ 26,232,142$ 16,651,624$ 13,963,929$ 14,766,317$ 15,938,518$
less: Capital Expenditures (7,845,000) (13,754,644) (7,694,384) (5,715,560) (6,426,192) (7,555,636)
Ending Capital Fund Balance 18,714,169$ 12,477,498$ 8,957,240$ 8,248,369$ 8,340,125$ 8,382,882$
Minimum Target Balance 1,855,597$ 2,048,507$ 2,201,988$ 2,335,542$ 2,477,052$ 2,624,375$
Combined Beginning Balance (Op., Cap.)26,868,999$ 22,425,365$ 16,574,513$ 13,361,216$ 12,919,453$ 13,294,229$
Combined Ending Balance (Op., Cap.)22,425,365$ 16,574,514$ 13,361,217$ 12,919,454$ 13,294,230$ 13,631,634$
Ending Total Days of Operating Expenditures (Op., Cap.)725 days 485 days 364 days 332 days 322 days 312 days
Combined Minimum Target Balance (Op., Cap.)$5,566,793 $6,145,522 $6,605,965 $7,006,626 $7,431,157 $7,873,127
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802
SLC - Stormwater Revenue Requirement 2024
APPENDIX C
Salt Lake City
Water Cost-of-Service
Unit Cost Calculation
Distribution
Description / Class Base Max Day Peak Hour Customer Meter Fire Total
Distribution of Joint System Costs
Total Cost ($M)$71.83 $24.83 $14.98 $14.56 $14.90 $2.08
System Units 32,987,050 94,218 110,756 1,087,489 136,599 39,080,167
Unit Type CCF CCF/Day CCF/Day Bills Eq. Meters Weighed GPM
Unit Cost ($/unit)$2.18 $263.49 $135.23 $13.39 $109.11 $0.05
Class Distributions
Commercial (Outside)
Units 1,394,200 3,354 4,304 12,843 4,507 1,541,106
Distributed Costs ($M)$3.04 $0.88 $0.58 $0.17 $0.49 $0.08 $5.25
Institutional (Inside)
Units 1,195,803 3,094 3,822 6,464 2,963 775,680
Distributed Costs ($M)$2.60 $0.82 $0.52 $0.09 $0.32 $0.04 $4.39
Institutional (Outside)
Units 143,022 595 592 1,166 409 139,968
Distributed Costs ($M)$0.31 $0.16 $0.08 $0.02 $0.04 $0.01 $0.62
Industrial (Inside)
Units 1,672,833 1,708 3,774 2,659 1,661 319,080
Distributed Costs ($M)$3.64 $0.45 $0.51 $0.04 $0.18 $0.02 $4.84
Industrial (Outside)
Units 55,497 330 289 113 82 13,608
Distributed Costs ($M)$0.12 $0.09 $0.04 $0.00 $0.01 $0.00 $0.26
Irrigation (Inside)
Units 2,323,123 11,593 10,775 10,723 3,317 -
Distributed Costs ($M)$5.06 $3.05 $1.46 $0.14 $0.36 $0.00 $10.08
Irrigation (Outside)
Units 418,694 2,191 2,003 3,272 730 -
Distributed Costs ($M)$0.91 $0.58 $0.27 $0.04 $0.08 $0.00 $1.88
Private Firelines
Units - - - - - 4,965,120
Distributed Costs ($M)$0.00 $0.00 $0.00 $0.00 $0.00 $0.26 $0.26
Total Costs $71.83 $24.83 $14.98 $14.56 $14.90 $2.08 $143.18
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Water Cost-of-Service Analysis 2024
Salt Lake City
Sewer Cost-of-Service
Unit Cost Calculation
Distribution
Description / Class FLOW CUSTOMER BOD TSS NH3 TP Total
Distribution of Joint System Costs
Total Costs $75.37 $0.00 $12.26 $11.37 $6.02 $6.73
System Units 10,947,871 48,727 20,949,375 18,667,673 1,878,310 416,373
Unit Type CCF Accounts LBS LBS LBS LBS
Unit Cost ($/unit)$6.88 $0.00 $0.58 $0.61 $3.20 $16.16
Class Distributions
Residential
Units 2,252,376 41,674 3,165,560 3,487,188 291,252 64,563
Distributed Costs ($ M)$15.51 $0.00 $1.85 $2.12 $0.93 $1.04 $23.74
Multi-Family
Units 1,905,448 2,167 2,677,977 2,950,065 246,391 54,618
Distributed Costs ($ M)$13.12 $0.00 $1.57 $1.80 $0.79 $0.88 $20.88
Non-Residential
Units 6,790,047 4,886 15,105,838 12,230,421 1,340,667 297,192
Distributed Costs ($ M)$46.75 $0.00 $8.84 $7.45 $4.30 $4.80 $79.12
Total Costs $75.37 $0.00 $12.26 $11.37 $6.02 $6.73 $123.74
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Sewer Cost-of-Service Analysis 2024
APPENDIX D
Salt Lake City
Water Cost-of-Service
Customer Units by Cost Sharing Group
JOINT
Annual Use
(ccf)
Max-Day
Extra
Capacity
(ccf/day)
Max-Hour
Extra
Capacity
(ccf/day)
Bills
Equivalent
Meters &
Services
Fire (1,000
gals / min)
CUSTOMER CLASS
% to Cost
Sharing
Group
Base Max Day Peak Hour Customer Meter Fire
Single Family (Inside)100.00%7,237,991 23,215 25,827 515,372 46,919 10,307,440
Single Family (Outside)100.00%6,763,617 25,294 26,295 369,596 35,806 7,391,925
Duplex (Inside)100.00%735,297 1,887 2,341 46,895 4,281 937,900
Duplex (Outside)100.00%184,725 487 596 8,940 885 178,794
Triplex (Inside)100.00%108,911 220 311 6,061 574 121,220
Triplex (Outside)100.00%8,228 11 20 178 26 3,564
Multi-Family (Inside)100.00%2,761,221 3,748 6,788 28,194 9,036 3,383,280
Multi-Family (Outside)100.00%1,119,283 2,315 3,229 5,482 4,624 657,882
Commercial (Inside)100.00%6,864,605 14,176 19,790 69,530 20,778 8,343,600
Commercial (Outside)100.00%1,394,200 3,354 4,304 12,843 4,507 1,541,106
Institutional (Inside)100.00%1,195,803 3,094 3,822 6,464 2,963 775,680
Institutional (Outside)100.00%143,022 595 592 1,166 409 139,968
Industrial (Inside)100.00%1,672,833 1,708 3,774 2,659 1,661 319,080
Industrial (Outside)100.00%55,497 330 289 113 82 13,608
Irrigation (Inside)100.00%2,323,123 11,593 10,775 10,723 3,317 -
Irrigation (Outside)100.00%418,694 2,191 2,003 3,272 730 -
Private Firelines 100.00%- - - - - 4,965,120
Total 32,987,050 94,218 110,756 1,087,489 136,599 39,080,167
Single Family (Inside)21.94%24.64%23.32%47.39%34.35%26.38%
Single Family (Outside)20.50%26.85%23.74%33.99%26.21%18.91%
Duplex (Inside)2.23%2.00%2.11%4.31%3.13%2.40%
Duplex (Outside)0.56%0.52%0.54%0.82%0.65%0.46%
Triplex (Inside)0.33%0.23%0.28%0.56%0.42%0.31%
Triplex (Outside)0.02%0.01%0.02%0.02%0.02%0.01%
Multi-Family (Inside)8.37%3.98%6.13%2.59%6.61%8.66%
Multi-Family (Outside)3.39%2.46%2.92%0.50%3.39%1.68%
Commercial (Inside)20.81%15.05%17.87%6.39%15.21%21.35%
Commercial (Outside)4.23%3.56%3.89%1.18%3.30%3.94%
Institutional (Inside)3.63%3.28%3.45%0.59%2.17%1.98%
Institutional (Outside)0.43%0.63%0.53%0.11%0.30%0.36%
Industrial (Inside)5.07%1.81%3.41%0.24%1.22%0.82%
Industrial (Outside)0.17%0.35%0.26%0.01%0.06%0.03%
Irrigation (Inside)7.04%12.30%9.73%0.99%2.43%0.00%
Irrigation (Outside)1.27%2.33%1.81%0.30%0.53%0.00%
Private Firelines 0.00%0.00%0.00%0.00%0.00%12.70%
Total 100.00%100.00%100.00%100.00%100.00%100.00%
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Water Cost-of-Service Analysis 2024
Salt Lake City
Sewer Cost-of-Service
Customer Units by Cost Sharing Group
JOINT
CUSTOMER CLASS
% to Cost
Sharing
Group
FLOW CUSTOMER BILLS
SERVICE
UNITS BOD TSS NH3 TP
Residential 100.00% 2,252,376 41,674 500,088 46,235 3,165,560 3,487,188 291,252 64,563
Multi-Family 100.00% 1,905,448 2,167 26,004 55,281 2,677,977 2,950,065 246,391 54,618
Non-Residential 100.00% 6,790,047 4,886 58,632 141,459 15,105,838 12,230,421 1,340,667 297,192
Total 10,947,871 48,727 584,724 242,975 20,949,375 18,667,673 1,878,310 416,373
Residential 20.57% 85.53% 85.53% 19.03% 15.11% 18.68% 15.51% 15.51%
Multi-Family 17.40% 4.45% 4.45% 22.75% 12.78% 15.80% 13.12% 13.12%
Non-Residential 62.02% 10.03% 10.03% 58.22% 72.11% 65.52% 71.38% 71.38%
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
PREPARED BY FCS, A BOWMAN COMPANY
425-867-1802 SLC - Sewer Cost-of-Service Analysis 2024
APPENDIX E
Residential Inside City Water Rate Bill Impacts (2026 Only)
ccf usage ccf usage ccf usage
Single Family 1 4 11 27 59 Duplex 1 2 5 11 20 Triplex 1 2 4 8 17
Current Bills Mtr.Current Bills Mtr.Current Bills Mtr.
Current Monthly Charge 5/8"$25.65 $25.65 $25.65 $25.65 $25.65 Current Monthly Charge 1"$60.79 $60.79 $60.79 $60.79 $60.79 Current Monthly Charge 1"$60.79 $60.79 $60.79 $60.79 $60.79Block 1 $2.24 $8.96 $22.40 $22.40 $22.40 Block 1 $2.24 $4.48 $11.20 $22.40 $22.40 Block 1 DU $2.24 $4.48 $8.96 $17.92 $22.40
Block 2 $0.00 $0.00 $3.05 $51.85 $61.00 Block 2 $0.00 $0.00 $0.00 $3.05 $30.50 Block 2 3 $0.00 $0.00 $0.00 $0.00 $21.35
Block 3 $0.00 $0.00 $0.00 $0.00 $122.67 Block 3 $0.00 $0.00 $0.00 $0.00 $0.00 Block 3 $0.00 $0.00 $0.00 $0.00 $0.00
Block 4 $0.00 $0.00 $0.00 $0.00 $0.00 Block 4 $0.00 $0.00 $0.00 $0.00 $0.00 Block 4 $0.00 $0.00 $0.00 $0.00 $0.00Total Existing Bill $27.89 $34.61 $51.10 $99.90 $231.72 Total Existing Bill $63.03 $65.27 $71.99 $86.24 $113.69 Total Existing Bill $63.03 $65.27 $69.75 $78.71 $104.54
Proposed Bills Mtr.Proposed Bills Mtr.Proposed Bills Mtr.
Monthly Charges 5/8"$22.48 $22.48 $22.48 $22.48 $22.48 Monthly Charges 1"$28.57 $28.57 $28.57 $28.57 $28.57 Monthly Charges 1"$28.57 $28.57 $28.57 $28.57 $28.57Block 1 $2.84 $11.37 $14.21 $14.21 $14.21 Block 1 DU $2.84 $5.68 $14.21 $28.42 $28.42 Block 1 DU $2.84 $5.68 $11.37 $22.73 $42.63
Block 2 $0.00 $0.00 $17.45 $17.45 $17.45 Block 2 2 $0.00 $0.00 $0.00 $3.49 $34.90 Block 2 3 $0.00 $0.00 $0.00 $0.00 $6.98
Block 3 $0.00 $0.00 $4.46 $75.75 $133.68 Block 3 $0.00 $0.00 $0.00 $0.00 $0.00 Block 3 $0.00 $0.00 $0.00 $0.00 $0.00
Block 4 $0.00 $0.00 $0.00 $0.00 $93.52 Block 4 $0.00 $0.00 $0.00 $0.00 $0.00 Block 4 $0.00 $0.00 $0.00 $0.00 $0.00Total Proposed Bill $25.32 $33.85 $58.59 $129.89 $281.34 Total Proposed Bill $31.41 $34.25 $42.78 $60.48 $91.89 Total Proposed Bill $31.41 $34.25 $39.94 $51.30 $78.18
Increase (Decrease)-$2.57 -$0.76 $7.49 $29.99 $49.62 Increase (Decrease)-$31.62 -$31.02 -$29.21 -$25.76 -$21.80 Increase (Decrease)-$31.62 -$31.02 -$29.81 -$27.41 -$26.36
% Increase (Decrease)-9%-2%15%30%21%% Increase (Decrease)-50%-48%-41%-30%-19%% Increase (Decrease)-50%-48%-43%-35%-25%
Non-Residential Inside City Water Rate Bill Impacts (2026 Only)
ccf usage ccf usage ccf usageCommercial251977284Industrial310543321,625 Institutional 2 7 33 139 404
Current Bills Mtr.Current Bills Mtr.Current Bills Mtr.
Current Monthly Charge 1"$60.79 $60.79 $60.79 $60.79 $60.79 Current Monthly Charge 1"$60.79 $60.79 $60.79 $60.79 $60.79 Current Monthly Charge 1"$60.79 $60.79 $60.79 $60.79 $60.79
Winter Usage $4.86 $12.15 $46.17 $187.11 $690.12 Winter Usage $7.29 $24.30 $131.22 $806.76 $3,947.54 Winter Usage $4.86 $17.01 $80.19 $337.77 $980.99
Total Existing Bill $65.65 $72.94 $106.96 $247.90 $750.91 Total Existing Bill $68.08 $85.09 $192.01 $867.55 $4,008.33 Total Existing Bill $65.65 $77.80 $140.98 $398.56 $1,041.78
Proposed Bills Mtr.Proposed Bills Mtr.Proposed Bills Mtr.
Monthly Charges 1"$28.57 $28.57 $28.57 $28.57 $28.57 Monthly Charges 1"$28.57 $28.57 $28.57 $28.57 $28.57 Monthly Charges 1"$28.57 $28.57 $28.57 $28.57 $28.57
Winter Usage $4.36 $10.90 $41.42 $167.86 $619.12 Winter Usage $6.54 $21.80 $117.72 $723.76 $3,541.41 Winter Usage $4.36 $15.26 $71.94 $303.02 $880.07Total Proposed Bill $32.93 $39.47 $69.99 $196.43 $647.69 Total Proposed Bill $35.11 $50.37 $146.29 $752.33 $3,569.98 Total Proposed Bill $32.93 $43.83 $100.51 $331.59 $908.64
Increase (Decrease)-$32.72 -$33.47 -$36.97 -$51.47 -$103.22 Increase (Decrease)-$32.97 -$34.72 -$45.72 -$115.22 -$438.35 Increase (Decrease)-$32.72 -$33.97 -$40.47 -$66.97 -$133.15
% Increase (Decrease)-50%-46%-35%-21%-14%% Increase (Decrease)-48%-41%-24%-13%-11%% Increase (Decrease)-50%-44%-29%-17%-13%
PREPARED BY FCS, A BOWMAN COMPANY425-867-1802 SLC - Water Rate Study 2024
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
($10.00)
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
Cu
m
u
l
a
t
i
v
e
%
B
i
l
l
s
$ C
h
a
n
g
e
i
n
M
o
n
t
h
l
y
B
i
l
l
Usage (ccf)
Change in Bill with Proposed Cost-Based Rates vs. Existing Rates (Single Family 3/4")
PREPARED BY FCS, A BOWMAN COMPANY425-867-1802 SLC - Water Rate Study 2024
Residential Inside City Sewer Rate Bill Impacts (2026 Only)
ccf usage ccf usage ccf usageSingle Family 1 2 4 6 9 Duplex 3 4 6 9 14 Triplex 4 6 8 12 18
Current Bills Mtr.Current Bills Mtr.Current Bills Mtr.
Current Monthly Charge 3/4"$17.66 $17.66 $17.66 $17.66 $17.66 Current Monthly Charge 3/4"$17.66 $17.66 $17.66 $17.66 $17.66 Current Monthly Charge 3/4"$17.66 $17.66 $17.66 $17.66 $17.66
SC SC SCFlow Charges 1 $4.63 $9.26 $18.53 $27.79 $41.68 Flow Charges 1 $13.89 $18.53 $27.79 $41.68 $64.84 Flow Charges 1 $18.53 $27.79 $37.05 $55.58 $83.37
BOD Charges 1 $1.64 $3.27 $6.54 $9.81 $14.72 BOD Charges 1 $4.91 $6.54 $9.81 $14.72 $22.89 BOD Charges 1 $6.54 $9.81 $13.08 $19.62 $29.43
TSS Charges 1 $1.18 $2.36 $4.73 $7.09 $10.63 TSS Charges 1 $3.54 $4.73 $7.09 $10.63 $16.54 TSS Charges 1 $4.73 $7.09 $9.45 $14.18 $21.27Total Existing Bill $25.11 $32.56 $47.45 $62.35 $84.69 Total Existing Bill $40.00 $47.45 $62.35 $84.69 $121.94 Total Existing Bill $47.45 $62.35 $77.25 $107.04 $151.73
Proposed Bills EDU Proposed Bills EDU Proposed Bills EDUMonthly Charges 1 $3.70 $3.70 $3.70 $3.70 $3.70 Monthly Charges 2 $7.39 $7.39 $7.39 $7.39 $7.39 Monthly Charges 3 $11.09 $11.09 $11.09 $11.09 $11.09
Flow Charges $8.56 $17.12 $34.24 $51.36 $77.04 Flow Charges $25.68 $34.24 $51.36 $77.04 $119.84 Flow Charges $34.24 $51.36 $68.48 $102.72 $154.08
Total Proposed Bill $12.26 $20.82 $37.94 $55.06 $80.74 Total Proposed Bill $33.07 $41.63 $58.75 $84.43 $127.23 Total Proposed Bill $45.33 $62.45 $79.57 $113.81 $165.17
Increase (Decrease)-$12.85 -$11.74 -$9.52 -$7.29 -$3.96 Increase (Decrease)-$6.93 -$5.82 -$3.60 -$0.26 $5.30 Increase (Decrease)-$2.12 $0.10 $2.32 $6.77 $13.44% Increase (Decrease)-51%-36%-20%-12%-5%% Increase (Decrease)-17%-12%-6%0%4%% Increase (Decrease)-4%0%3%6%9%
Multi-Family Inside City Sewer Rate Bill Impacts (2026 Only)
Multi-Family (Fourplex)Water Use ccf 9 13 20 30 40 Multi-Family (Larger)Water Use ccf 16 29 60 150 400
AMWC 6 9 13 20 27 AMWC 10 19 40 100 267
Mtr.3/4"3/4"3/4"1"2"Mtr.3/4"3/4"3/4"1"2"
Current Bills Current Bills
Current Monthly Charge $17.66 $17.66 $17.66 $51.89 $138.19 Current Monthly Charge $17.66 $17.66 $17.66 $51.89 $138.19SCSC
Flow Charges 1 $29.08 $40.86 $62.16 $91.86 $124.92 Flow Charges 1 $47.99 $90.25 $185.52 $463.76 $1,234.28
BOD Charges 2 $16.69 $23.45 $35.68 $52.73 $71.71 BOD Charges 2 $27.55 $51.81 $106.49 $266.21 $708.52TSS Charges 2 $14.97 $21.03 $32.00 $47.29 $64.31 TSS Charges 2 $24.70 $46.46 $95.50 $238.75 $635.42
Total Existing Bill $78.39 $103.01 $147.51 $243.76 $399.13 Total Existing Bill $117.90 $206.18 $405.17 $1,020.61 $2,716.40
Proposed Bills EDU Proposed Bills EDU 3 5 10 25 67
Monthly Charges 4 $14.78 $73.92 $73.92 $73.92 $73.92 Monthly Charges $9.57 $18.00 $37.01 $92.52 $246.23
Flow Charges $56.43 $79.29 $120.64 $178.27 $242.43 Flow Charges $93.13 $175.15 $360.03 $900.01 $2,395.36Total Proposed Bill $71.21 $153.21 $194.56 $252.18 $316.35 Total Proposed Bill $102.70 $193.15 $397.04 $992.53 $2,641.60
Increase (Decrease)-$7.18 $50.20 $47.05 $8.42 -$82.78 Increase (Decrease)-$15.20 -$13.03 -$8.13 -$28.07 -$74.81
% Increase (Decrease)-9%49%32%3%-21%% Increase (Decrease)-13%-6%-2%-3%-3%
Non-Residential Inside City Sewer Rate Bill Impacts (2026 Only)
Commercial Water Use ccf 2 5 19 77 284 Industrial Water Use ccf 3 10 54 332 1,625 Institutional Water Use ccf 2 7 33 139 404
AMWC 1 3 11 44 162 AMWC 2 7 39 242 1,186 AMWC 1 4 17 72 208
Current Bills Mtr.3/4"3/4"3/4"1"2"Current Bills Mtr.3/4"3/4"1"2"3"Current Bills Mtr.3/4"3/4"3/4"1"2"
Current Monthly Charge $17.66 $17.66 $17.66 $51.89 $138.19 Current Monthly Charge $17.66 $17.66 $51.89 $138.19 $704.02 Current Monthly Charge $17.66 $17.66 $17.66 $51.89 $138.19
SC SC SCFlow Charges 4 $5.29 $13.23 $50.28 $203.78 $751.62 Flow Charges 4 $10.14 $33.81 $182.55 $1,122.36 $5,491.81 Flow Charges 4 $4.77 $16.71 $78.78 $331.84 $963.77
BOD Charges 2 $3.04 $7.60 $28.86 $116.98 $431.45 BOD Charges 2 $5.82 $19.41 $104.79 $644.27 $3,152.47 BOD Charges 2 $2.74 $9.59 $45.22 $190.49 $553.23
TSS Charges 2 $2.72 $6.81 $25.89 $104.91 $386.94 TSS Charges 2 $5.22 $17.40 $93.98 $577.80 $2,827.22 TSS Charges 2 $2.46 $8.60 $40.56 $170.83 $496.16Total Existing Bill $28.72 $45.30 $122.70 $477.56 $1,708.20 Total Existing Bill $38.84 $88.28 $433.21 $2,482.63 $12,175.53 Total Existing Bill $27.63 $52.57 $182.22 $745.05 $2,151.35
EDU (1 per 4 ccf)EDU (1 per 4 ccf)EDU (1 per 4 ccf)Proposed Bills 0.5 1.25 4.75 19.25 71 Proposed Bills 0.75 2.5 13.5 83 406.125 Proposed Bills 0.5 1.75 8.25 34.75 100.925Monthly Charges $1.85 $4.62 $17.56 $71.14 $262.40 Monthly Charges $2.77 $9.24 $49.89 $306.75 $1,500.95 Monthly Charges $1.85 $6.47 $30.49 $128.43 $373.00
Flow Charges $13.36 $33.41 $126.94 $514.46 $1,897.49 Flow Charges $20.04 $95.45 $515.42 $3,168.85 $15,505.42 Flow Charges $13.36 $46.77 $220.48 $928.70 $2,697.25
Total Proposed Bill $15.21 $38.03 $144.50 $585.61 $2,159.89 Total Proposed Bill $22.82 $104.69 $565.31 $3,475.60 $17,006.38 Total Proposed Bill $15.21 $53.24 $250.97 $1,057.13 $3,070.24
Increase (Decrease)-$13.51 -$7.27 $21.80 $108.04 $451.70 Increase (Decrease)-$16.03 $16.41 $132.09 $992.97 $4,830.85 Increase (Decrease)-$12.42 $0.67 $68.75 $312.08 $918.89% Increase (Decrease)-47%-16%18%23%26%% Increase (Decrease)-41%19%30%40%40%% Increase (Decrease)-45%1%38%42%43%
PREPARED BY FCS, A BOWMAN COMPANY425-867-1802 SLC - Sewer Rate Study 2024
Single Family & Duplex Inside City Stormwater Rate Bill Impacts (2026 Only)
Lot Size (<0.25 acres)Lot Size (>0.25 acres)Single Family/Duplex ESU 1 1.4
Current Bills
Current Monthly Charge $8.33 $8.33
Total Existing Bill $8.33 $8.33
Proposed Bills
Monthly Charges $8.75 $8.75
Total Proposed Bill $8.75 $8.75
Increase (Decrease)$0.42 $0.42% Increase (Decrease)5%5%
Triplex & Fourplex Inside City Stormwater Rate Bill Impacts (2026 Only)
Triplex/Fouplex ESU 2
Current Bills
Current Monthly Charge $16.64
Total Existing Bill $16.64
Proposed Bills
Monthly Charges $17.50
Total Proposed Bill $17.50
Increase (Decrease)$0.86% Increase (Decrease)5%
All Other (per 2,500 SF Impervious Area) Inside City Stormwater Rate Bill Impacts (2026 Only)
All Other - Non-credited Impervious Area 5,461 9,198 20,841 67,721 203,906 All Other - Credited Impervious Area 5,461 9,198 20,841 67,721 203,906
ESU 2 4 8 27 82 ESU 2 4 8 27 82
Current Bills Current Bills
Current Monthly Charge $16.66 $33.32 $66.64 $224.91 $683.06 Current Monthly Charge $16.66 $33.32 $66.64 $224.91 $683.06Total Existing Bill $16.66 $33.32 $66.64 $224.91 $683.06 Credit - 70%($11.66)($23.32)($46.65)($157.44)($478.14)
Total Existing Bill $5.00 $10.00 $19.99 $67.47 $204.92
Proposed Bills
Monthly Charges $17.50 $35.00 $70.00 $236.25 $717.50 Proposed BillsTotal Proposed Bill $17.50 $35.00 $70.00 $236.25 $717.50 Monthly Charges $17.50 $35.00 $70.00 $236.25 $717.50
Credit - 55%($9.63)($19.25)($38.50)($129.94)($394.63)
Increase (Decrease)$0.84 $1.68 $3.36 $11.34 $34.44 Total Proposed Bill $7.88 $15.75 $31.50 $106.31 $322.88
% Increase (Decrease)5%5%5%5%5%
Increase (Decrease)$2.88 $5.75 $11.51 $38.84 $117.96% Increase (Decrease)58%58%58%58%58%
PREPARED BY FCS, A BOWMAN COMPANY425-867-1802 SLC - Stormwater Rate Study 2024
This page has intentionally been left blank
Salt Lake City
Department of Public Utilities
Water, Wastewater, and
Stormwater Rate Study
2024 DRAFT REPORT
Washington
7525 166th Avenue NE, Ste. D215
Redmond, WA 98052
425.867.1802
Oregon
5335 Meadows Road, Ste 330
Lake Oswego, OR 97035
503.841.6543
Colorado
2755 Canyon Blvd
Boulder, CO 80302
719.284.9168
www.fcsgroup.com
Firm Headquarters Redmond Town Center 7525 166th Ave NE, Ste. D-215
Redmond, Washington 98052
Established 1988 Washington | 425.867.1802 Oregon | 503.841.6543
Colorado | 719.284.9168
November 9, 2024
Laura Briefer
Salt Lake City Utilities
1530 S. West Temple
Salt Lake City, UT 84115
Subject: Draft 2024 Utility Rate Study Report
Dear Ms. Briefer:
On behalf of FCS GROUP and our entire project team, I am pleased to submit this DRAFT report
outlining the methods, procedures, findings, and recommendations for the Salt Lake City Department
of Public Utilities (City) water, wastewater, and stormwater rates.
Our engagement was a comprehensive evaluation of the existing rates and charges for the City’s
utilities. It included determining the annual revenue requirements, conducting a cost-of-service
analysis, and designing proposed rates for each of the three utilities. We received significant
feedback from the Rate Advisory Committee (RAC), a group of volunteers from the community
representing residential, commercial, and stakeholder interests. The City hosted seven workshops
with the RAC, and the group’s input into the rate study was essential in arriving at the
recommendations in this DRAFT report. The findings and recommendations in this report establish
the utility rates for fiscal year 2026, starting July 1st, 2025.
I would like to thank you and the entire leadership team at Salt Lake City Utilities for our partnership
over the nearly nine-month engagement period. Your commitment to our study contributed greatly to
the high-quality outcomes I believe you will find in the pages of this report.
Sincerely,
Jason Mumm
Principal
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page i
www.fcsgroup.com
TABLE OF CONTENTS
Table of Contents ............................................................................................................................................... i
Section I. Executive Summary ....................................................................................................................... 1
Revenue Requirements ............................................................................................................................................ 1
Cost-of-Service Allocation ........................................................................................................................................ 4
Rate Design ............................................................................................................................................................. 7
Stormwater Rate Design ......................................................................................................................................... 13
Section I. Introduction .................................................................................................................................. 14
An Overview of the City’s Utility Systems ................................................................................................................ 14
Financial Operations of Salt Lake’s Utilities ............................................................................................................ 15
Overview of the Ratemaking Process ..................................................................................................................... 16
Limiting Conditions ................................................................................................................................................. 16
Section II. Revenue Requirements ................................................................................................................ 17
Water Revenue Requirement ...................................................................................................................................... 19
The Rate Stabilization Fee ..................................................................................................................................... 26
Wastewater Revenue Requirement ............................................................................................................................. 26
The Rate Stabilization Fee ..................................................................................................................................... 33
Stormwater Revenue Requirement .............................................................................................................................. 33
Section III. Cost-of-Service Study .................................................................................................................. 39
Water Cost-of-Service Study ....................................................................................................................................... 40
Functionalization of Water System Costs ................................................................................................................ 40
Allocation of Functionalized Water System Costs ................................................................................................... 42
Distribution of Water System Costs to Customer Classes ....................................................................................... 45
County Customers .................................................................................................................................................. 48
Comparing Class Cost-of-Service to Existing Revenue ........................................................................................... 48
Wastewater Cost-of-Service Study .............................................................................................................................. 50
Functionalization of the Wastewater System Costs ................................................................................................. 50
Allocation of Functionalized Wastewater System Costs .......................................................................................... 51
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page ii
www.fcsgroup.com
Customer Class Consolidation ................................................................................................................................ 53
Distribution of Wastewater System Costs to Customer Classes .............................................................................. 54
Comparing Class Cost-of-Service to Existing Revenue ........................................................................................... 55
Stormwater Cost-of-Service Study .............................................................................................................................. 56
Functionalization of the Stormwater System Costs ................................................................................................. 56
Allocation of Stormwater Costs to Customer Units .................................................................................................. 57
Section IV. Rate Advisory Committee ............................................................................................................. 59
Section V. Rate Design ................................................................................................................................. 66
Water Rate Design ...................................................................................................................................................... 67
Water Rate Design Objectives ................................................................................................................................ 68
Proposed Water Rates ........................................................................................................................................... 69
Wastewater Rate Design ............................................................................................................................................. 71
Wastewater Rate Design Objectives ....................................................................................................................... 72
Proposed Wastewater Rates .................................................................................................................................. 73
Stormwater Rate Design ............................................................................................................................................. 75
Stormwater On Parcel Mitigation Credit .................................................................................................................. 75
Stormwater Rate Design Objectives ....................................................................................................................... 76
Proposed Stormwater Rates ................................................................................................................................... 76
Section VI. Implementation ............................................................................................................................ 78
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 1
www.fcsgroup.com
Section I. EXECUTIVE SUMMARY
FCS GROUP recently completed a Water, Wastewater, and Stormwater Rate Study (Study) for Salt
Lake City’s Department of Public Utilities (City) to assist the City in establishing rates and charges
for services for fiscal year 2026, including projected rate adjustments through fiscal year 2029. The
Study involved three major phases for each of the three City utilities. Those phases included:
1. Determining Revenue Requirements: This is the total amount of money the utility needs to
cover its operating costs, maintenance expenses, and investments in infrastructure.
2. Allocating Costs to Customer Classes: The utility's costs are then divided among different
customer groups, such as residential, commercial, and industrial customers, based on how
much each group uses the utility's services.
3. Designing Rates: The final step is to set rates that allow the utility to recover its costs from
each customer group. Rates can take various forms, such as flat fees, tiered rates, or demand-
based rates. The objective of the rate design effort is to reach the practical financial
requirements for the rates while achieving as many community preferences as possible.
Revenue Requirements
We determined the annual revenue requirements for the three utilities as the sum of their annual cash
needs. Cash needs include annual expenditures on operating and maintenance expenses (O&M),
principal and interest payments on debt (Debt Service), cash expenditures for the direct funding of
capital projects, and planned increases to cash reserves. Subtracting revenues earned from sources
other than user charges – called non-rate revenues – results in the Annual User Charge Revenue
Requirement, the amount the City must earn from its rates alone to cover its total cash expenditures
for the year.
FCS GROUP prepared long-range financial forecasts for each of the utilities, resulting in a 10-year
projection of annual revenue requirements and user charge revenue requirements. However, for this
Study, we have included only the requirements from FY2025-2029 in our recommendations. Among
other details, the forecasts provide the overall direction for utility revenues through FY2029. Table
ES- 1 summarizes the necessary increases above and beyond the current (FY2025) revenues, which
include a newly implemented Rate Stabilization Fee (RSF) for the Water and Wastewater utilities.
Please note: all references to the years used in the tables of this report are shown as fiscal years
ending June 30th of the year shown. For instance, 2024 (or FY2024) indicates the twelve months
ending June 30, 2024.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 2
www.fcsgroup.com
Table ES- 1: Summary of Recommended Increases to Current Utility Revenues
Utility 2024 2025 2026 2027 2028 2029
Water Utility 0.0% 0.0% 7.0% 7.0% 5.5% 5.5%
Wastewater Utility 0.0% 0.0% 5.5% 5.5% 5.5% 4.0%
Stormwater Utility 0.0% 0.0% 7.0% 7.0% 7.0% 7.0%
The total revenue increases, when also considering the RSF, are much higher. The RSF accounts for
the difference between Table ES- 2 and Table ES- 1.
Table ES- 2: Summary of Recommended Increases to Utility Revenues Including the RSF
Utility 2024 2025 2026 2027 2028 2029
Water Utility 5.4% 20.3% 16.0% 7.0% 5.5% 5.5%
Wastewater Utility 0.0% 13.6% 22.2% 5.5% 5.5% 4.0%
Stormwater Utility 0.0% 0.0% 7.0% 7.0% 7.0% 7.0%
Water Revenue Requirement
Factors driving the increases in water revenue requirements include a projected increase of 5.6% per
year in O&M expenses. However, the largest portion of the increases come from an $800 million
capital improvements plan. The costs of funding and financing the capital plan are the expected debt
service and direct funding costs to the annual revenue requirements, reaching $50 million by 2029.
After factoring in the expected increase in existing revenue sources, including the RSF, the additional
revenue adjustments are shown in Table ES- 3.
Table ES- 3: Summary of Projected Water Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $93.68 $100.72 $108.33 $114.53 $118.49 $123.29
Debt Service $6.96 $12.60 $12.66 $12.73 $24.57 $24.63
Capital Improvements $99.42 $80.73 $68.58 $91.89 $119.42 $110.28
Capital Funding Sources ($18.29) ($141.68) ($18.46) ($14.54) ($239.16) ($14.19)
Non-Rate Related Revenue ($8.21) ($8.41) ($7.61) ($7.81) ($8.01) ($8.22)
Cash Funded CIP $1.69 $14.56 $27.30 $33.07 $28.13 $33.73
Increase (Decrease) in Cash ($77.20) $63.27 ($47.62) ($75.31) $129.17 ($106.23)
Total User Charge Requirement $98.05 $121.85 $143.18 $154.55 $164.49 $175.01
User Charges at Current Rates ($98.05) ($121.85) ($133.82) ($134.99) ($136.18) ($137.34)
Additional Revenue Needed
(cumulative value)
$0.00 $0.00 $9.37 $19.56 $28.31 $37.67
Annual Revenue Increase % 0.0% 0.0% 7.0% 7.0% 5.5% 5.5%
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 3
www.fcsgroup.com
Wastewater Revenue Requirements
The major drivers of wastewater revenue requirements include a $1 billion capital improvements plan
that will increase annual debt service more than double, from $12 million per year to over $29
million. Additionally, we project O&M costs to increase 5.5% annually on top of entirely new
expenses the City expects to incur to operate the new water reclamation facility. The new O&M costs
are expected to commence in FY2026 at $3.2 million, increasing to $14.4 million during the
facility’s start-up operations before leveling off at approximately $7.5 million per year. Table ES- 4
summarizes the individual elements of the wastewater revenue requirements. Our recommended rates
commence in FY2026.
Table ES- 4: Summary of Projected Wastewater Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $31.60 $33.96 $38.75 $51.71 $46.89 $48.75
Debt Service $24.63 $33.74 $35.42 $35.40 $36.94 $53.10
Capital Improvements $442.10 $258.36 $95.99 $28.91 $26.70 $46.50
Capital Funding Sources ($190.10) ($241.73) ($62.76) ($6.75) ($6.82) ($7.07)
Non-Rate Related Revenue ($4.56) ($1.82) ($1.55) ($1.61) ($1.69) ($1.72)
Cash Funded CIP $24.64 $23.06 $36.43 $27.47 $43.69 $28.72
Increase (Decrease) in Cash ($252.00) ($15.85) ($31.66) ($17.89) ($21.46) ($38.82)
Total User Charge Requirement $76.30 $89.72 $110.63 $117.23 $124.24 $129.47
User Charges at Current Rates ($76.30) ($89.72) ($104.86) ($105.33) ($105.81) ($106.02)
Additional Revenue Needed
(cumulative value) $0.00 $0.00 $5.77 $11.90 $18.44 $23.45
Annual Revenue Increase % 0.00% 0.00% 5.50% 5.50% 5.50% 4.00%
Stormwater Revenue Requirements
The stormwater revenue requirements are much lower than the water and wastewater needs. Yet, the
total cost of services for stormwater is increasing by 57% from 2024 to 2029, driven by a
combination of O&M and capital funding needs. We project O&M costs to increase by $4 million
annually during that time and the direct funding of capital projects by $3 million. Table ES- 5
summarizes the individual elements of the stormwater revenue requirements.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 4
www.fcsgroup.com
Table ES- 5: Summary of Projected Stormwater Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $11.29 $12.46 $13.40 $14.21 $15.07 $15.96
Debt Service $1.55 $1.68 $1.68 $1.68 $1.09 $1.09
Capital Improvements $7.85 $13.75 $12.60 $8.41 $8.28 $6.99
Capital Funding Sources ($1.69) ($6.99) ($3.51) ($3.44) ($3.42) ($3.42)
Non-Rate Related Revenue ($1.00) ($0.21) ($0.10) ($0.11) ($0.11) ($0.11)
Cash Funded CIP $3.39 $2.42 $2.67 $3.20 $4.31 $4.89
Increase (Decrease) in Cash ($6.15) ($6.37) ($8.79) ($4.70) ($4.57) ($3.27)
Total User Charge Requirement $15.23 $16.75 $17.95 $19.25 $20.64 $22.13
User Charges at Current Rates ($15.23) ($16.76) ($16.79) ($16.82) ($16.86) ($16.89)
Additional Revenue Needed
(cumulative value)
$0.00 ($0.01) $1.16 $2.43 $3.78 $5.24
Annual Revenue Increase % 0.00% 0.00% 7.00% 7.00% 7.00% 7.00%
Cost-of-Service Allocation
The cost-of-service portion of our study focuses on allocating the total revenue requirements
described above to individual classes of service, such as residential and commercial services.
The process includes functionalizing costs into the facilities and processes used to deliver services to
individual customers. For instance, the water utility collects raw water from its watersheds and other
sources, treats it in treatment facilities, and delivers it through transmission and distribution
pipelines, including storage tanks, pumps, and individual service lines. Each of these is a step in
delivering water and represents one or more system functions.
Once functionalized, we allocate the costs among different demand parameters that match
measurable customer usage in one form or another. In a water system, customers use water at average
and peak rates of use. Therefore, we allocate some functionalized costs to average rates of use and
some to peak based on each function’s design. In wastewater, we allocate costs to rates of sewer
flows and the levels of pollutants. For stormwater, we allocate all costs to the square feet of
impervious area. After allocating the costs in this fashion, we calculate unit costs for each parameter,
which we multiply by a class’s measurable demand, a process called cost distribution. If the unit cost
for average-day demand in the water system is $2.18 per CCF, we distribute that cost by multiplying
$2.18 by each class’s measured average-day demand.
The cost-of-service analysis effectively assigns a portion of the total revenue requirement to an
individual class. Comparing the class’s cost of service to its revenue at the existing rates tells us
whether that class’s rates should be adjusted and by how much.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 5
www.fcsgroup.com
Water Cost-of-Service
Table ES- 6 summarizes the findings from the water cost-of-service study and indicates the changes
necessary in the proposed rates to more closely align class revenues with their costs. Many customers
in the table have been identified as “County” classes; those customers reside outside the City’s limits
and have historically been charged a premium of 35% above the corresponding inside-city class rate.
As part of our analysis, we verified the 35% premium was cost-justified due to the levy of the
Metropolitan Water District of Salt Lake and Sandy (MWDSLS) property taxes solely to residents
inside the municipal boundaries of Salt Lake City. Residents outside the municipal boundaries by
within the City’s designated water service area are beneficiaries of the MWDSLS services but do not
pay the property tax. In addition, Salt Lake City residents bear certain inherent risks in owning and
operating the water system, and the 35% differential partially compensates residents for those risks.
A negative variance indicates the current rates (which include the RSF) are below the costs of
service; a positive variance indicates current rates are higher than the cost of service.
Table ES- 6: Recommended Water Revenue Adjustments by Class for FY2026 ($ million)
Class Revenue at
Existing Rates
Costs of
Service
Variance $ Variance %
Single Family (City) $35.92 $37.94 -$2.02 -5.3%
Single Family (County) $29.38 $34.20 -$4.82 -14.1%
Duplex (City) $3.32 $3.56 -$0.24 -6.8%
Duplex (County) $0.74 $0.84 -$0.09 -11.1%
Triplex (City) $0.59 $0.49 $0.10 20.1%
Triplex (County) $0.03 $0.03 $0.00 1.5%
Multi-Family (City) $10.68 $9.46 $1.22 12.9%
Multi-Family (County) $3.64 $4.10 -$0.46 -11.2%
Commercial (City) $29.00 $25.00 $4.00 16.0%
Commercial (County) $5.65 $5.25 $0.40 7.6%
Institutional (City) $4.58 $4.39 $0.19 4.3%
Institutional (County) $0.58 $0.62 -$0.03 -5.6%
Industrial (City) $4.44 $4.84 -$0.40 -8.2%
Industrial (County) $0.28 $0.26 $0.02 8.5%
Irrigation (City) $12.97 $10.08 $2.90 28.8%
Irrigation (County) $1.38 $1.88 -$0.50 -26.5%
Private Firelines $0.00 $0.26 -$0.26 -100.0%
Total $143.18 $143.18 $0.00
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 6
www.fcsgroup.com
Wastewater Cost-of-Service
As part of the wastewater cost-of-service study, we evaluated the City’s current customer
classifications. We recommend maintaining all single-family, duplex, and triplex classes as the
residential class with sewer flows measured on average winter water usage. Multi-family customers,
those multi-family buildings with more than three dwelling units, will remain a separate class with
sewer flows measured as 70% of total water usage for a given month. The non-residential class will
include the existing commercial, industrial, and institutional customers, with sewer flows measured
as 70% of total monthly water usage. Table ES- 7 summarizes the key findings and indicates the
changes necessary in the proposed rates to more closely align class revenues with their costs.
Our analysis of the wastewater costs focused on FY2028 rather than FY2026, which was the focus
for both the water and stormwater utilities. The difference relates to the City’s ongoing construction
of its new wastewater treatment facility and expected additional costs. Using FY2028 as the focus
allowed us to establish cost proportionality based on the costs of the new facility, which include
important changes to the number, nature, and cost of the wastewater pollutants treated. While the
recommended rates reflect the proportionality from our analysis of FY2028 costs, the actual level of
the rates only reflects the expected costs for FY2026.
Table ES- 7: Recommended Wastewater Revenue Adjustments by Class for FY2028 ($ million)
Class Revenue at
Existing Rates
Costs of
Service
Variance $ Variance %
Residential $45.55 $23.74 $21.80 91.8%
Multi-Family $18.12 $20.88 -$2.77 -13.2%
Non-Residential $60.08 $79.12 -$19.04 -24.1%
Total $123.74 $123.74 $0.00
Stormwater Cost-of-Service
The stormwater cost-of-service study follows the same general procedures as water and wastewater,
but all customers fit into a single customer classification. We allocate stormwater costs based on
impervious surface areas, and there is no rational distinction between the impervious area in a
residential neighborhood vs. any other type of property. However, like many stormwater utilities in
the US, the City offers customers partial rate credits for installing on-site stormwater mitigation
facilities such as detention ponds (the most typical on-site improvement). The credits reduce the total
revenue recovered from the stormwater rates. Table ES- 8 summarizes the revenue adjustments
necessary with and without the existing on-site credit program.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 7
www.fcsgroup.com
Table ES- 8: Recommended Stormwater Revenue Adjustments for FY2026 ($ million)
Class Revenue at
Existing Rates
Costs of
Service
Variance $ Variance %
All Impervious Area Net of Credits $16.76 $17.93 $1.17 7.0%
All Impervious Area Without Credits $19.63 $17.93 -$1.70 -8.7%
Rate Design
The purpose of a rate design is to convey the findings from the cost-of-service study to individual
customers. The cost-of-service findings help determine the total revenue the City should recover
from each class of service. When rates produce revenues equal to each class’s costs, it is said to have
achieved interclass equity, where each class pays for its share of costs without subsidizing the costs
of other classes. Rate designs should also aspire to achieve intraclass equity, where individual
members of the class pay for their proportionate share of costs without subsidizing other members
within the same class. In addition, rate designs may help achieve other objectives, a typical listing of
which is included in Table ES- 9.
Table ES- 9: Typical Rate Design Objectives
Rate Design Objective Typical Definition
Revenue Sufficiency The rate design recovers the necessary revenues.
Fairness and Equity The rate design achieves interclass and intraclass
equity.
Economic Efficiency The rate design promotes the efficient use of
resources and water conservation.
Sustainability and Predictability The rate design allows customers to budget and plan for their utility expenses.
Clarity The rate design is transparent and easily understood
by customers.
Cost Allocation The rate design allocates costs to an individual level
based on cost causation principles.
Affordability Basic utility service should be reasonably affordable
for those lacking the ability to pay.
Achieving all the objectives from the above table is an unattainable goal because they tend to conflict
with each other. For instance, attaining revenue sufficiency may necessarily come with challenges to
affordability objectives. Making the rate design simple to understand often means sacrificing some
level of fairness and equity, and so on.
Following the cost-of-service methodology described thus far helps to ensure the City has the
information necessary to address revenue sufficiency, interclass equity (fairness and equity), cost
allocation, and some aspects of the economic efficiency objectives; these are technical objectives that
the City can achieve through the proper rate setting analyses. The proposed rates described in this
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 8
www.fcsgroup.com
Report also attempt to achieve a balance between the technical objectives and the more subjective
ones: sustainability and predictability, clarity, and affordability.
Rate Advisory Committee
To assist in achieving a workable balance between the technical and other rate design objectives, the
City enlisted the assistance of a Rate Advisory Committee (RAC). The RAC consisted of community
members representing residential, business, industrial, institutional, and regional interests. The City
hosted seven workshops with the RAC, covering every aspect of the rate study, from determining the
revenue requirements to the cost-of-service analysis to every part of the rate design. The feedback
received during these workshops led to the proposed rates below.
Water Rate Design
One of the key challenges in the water rate design was the sudden decline in revenue the City
experienced during the past three years. Since 2021, the summertime water demand declined by
nearly 20 percent from previous norms. The current water rate design exacerbated the revenue losses
due to its high reliance on revenue from high summertime usage, a characteristic we define as rate
tilt. The current rate structure tilts because the effective price per unit is below the average cost per
unit at the lower levels of usage. The City, therefore had to depend on high usage levels in the
summertime to attempt to make up for the built-in subsidy (of lower usage customers). As
summertime demand declined, so too did the ability to make up for those losses.
Figure 1: City’s Residential Rate Tilt from Previous Rate Study
The proposed rates eliminate the rate tilting from the previous rate structure and, based on feedback
received from the RAC, simplify non-residential rates.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0 10 20 30 40 50 60 70 80 90 100
Av
g
.
C
o
s
t
/
R
a
t
e
p
e
r
U
n
i
t
CCF per Month
Est. 2018 Cost per Unit Est. 2018 Price per Unit
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 9
www.fcsgroup.com
Residential Water Rates
The proposed water rates retain the tiered structure of the current rate design1. However, there are a
few important changes of note. First, the proposed tiered structure would remain in effect year-round;
the uniform wintertime rate has been eliminated. Second, the volumes available in each block of
usage have been decreased. Finally, the proposal eliminates the RSF from the monthly service
charges, reducing them significantly. The proposed rates also eliminate the rate tilt from the previous
structure. Residential customers include single-family, duplex, and triplex dwelling units. For duplex,
and triplex customers, the allowances of water in each tier are multiplied by the number of dwelling
units. For example, a duplex residential customer’s monthly service charge for a 1” meter would be
$28.57, and the allowance in Block 1 would be 10 CCF (2 x 5CCF); Block 2 would include 20 CCF
(2 x 10 CCF), etc.
Table ES- 10: Proposed Inside-City Residential Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $25.65 $22.48 Block 1 (0-10CCF) $2.24 Block 1 (0-5CCF) $2.84
1” $60.79 $28.57 Block 2 (11-30CCF) $3.05 Block 2 (6-10CCF) $3.49
1 ½” $200.77 $43.66 Block 3 (31-60CCF) $4.23 Block 3 (11-40CCF) $4.46
2” $214.78 $61.85 Block 4 (> 60CCF) $4.52 Block 4 (> 40CCF) $4.92
Winter (All CCF) $2.24 Winter (All CCF) n/a
1 In comparing rates in this Report, we have estimated the current rates for FY2026 starting July 1, 2025, which encompasses the City’s
proposed Rate Stabilization Fee.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 10
www.fcsgroup.com
Table ES- 11: Proposed Outside-City Residential Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $34.63 $30.35 Block 1 (0-10CCF) $3.02 Block 1 (0-5CCF) $3.83
1” $82.07 $38.57 Block 2 (11-30CCF) $4.12 Block 2 (6-10CCF) $4.71
1 ½” $271.04 $58.94 Block 3 (31-60CCF) $5.71 Block 3 (11-40CCF) $6.02
2” $289.95 $83.50 Block 4 (> 60CCF) $6.10 Block 4 (> 40CCF) $6.64
Winter (All CCF) $3.02 Winter (All CCF) n/a
Non-Residential and Multi-Family Water Rates
The proposed non-residential rates aim to simplify the rate structure from its current tiered structure
based on each customer’s average winter consumption (AWC) levels to a uniform seasonal rate. The
current structure, similar to the residential rate structure, includes the same challenge of rate tilting;
the proposed structure eliminates it. Non-residential customers include commercial, industrial, and
institutional customers. Larger multi-family properties that were once included in the non-residential
class are now classified separately as a new Multi-Family class due to their unique usage
characteristics and have a slightly different volumetric rate.
Table ES- 12: Proposed Inside-City Non-Residential and Multi-Family Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers
(as % of AWC)
Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $25.65 $22.48 Block 1 (0-100%) $2.43 Non-Residential
1” $60.79 $28.57 Block 2 (100-300%) $3.34 Summer (All CCF) $3.53
1 ½” $200.77 $43.66 Block 3 (300-600%) $4.64 Winter (All CCF) $2.18
2” $214.78 $61.85 Block 4 (> 600%) $4.93 Multi-Family
3” $604.67 $110.40 Winter (All CCF) $2.43 Summer (All CCF) $3.35
4” $646.62 $164.95 Winter (All CCF) $2.18
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 11
www.fcsgroup.com
Table ES- 13: Proposed Outside-City Non-Residential and Multi-Family Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers
(as % of AWC) Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $34.63 $30.35 Block 1 (0-100%) $3.28 Non-Residential
1” $82.07 $38.57 Block 2 (100-300%) $4.51 Summer (All CCF) $4.77
1 ½” $271.04 $58.94 Block 3 (300-600%) $6.26 Winter (All CCF) $2.94
2” $289.95 $83.50 Block 4 (> 600%) $6.66 Multi-Family $0.00
3” $816.30 $149.04 Winter (All CCF) $3.28 Summer (All CCF) $4.52
4” $872.94 $222.68 Winter (All CCF) $2.94
Wastewater Rate Design
The proposed wastewater rates simplify the current rate structure, eliminating the current seven
sewer classifications and establishing a single monthly service charge common to all wastewater
customers, and a class-specific volumetric charge. Under the proposed structure, most customers
would simply pay the applicable rates for their class, as shown in below.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 12
www.fcsgroup.com
Table ES- 14: Proposed Wastewater Rates for FY2026
Monthly Service Charges Volumetric Rates
Current Charges Current Volumetric Rates ($/CCF)
Meter Sz. Monthly Charge Classes Flow BOD TSS
5/8” $17.66 SC 1 $4.63 $1.64 $1.18
1” $51.89 SC 2 $4.63 $2.66 $2.38
2” $138.19 SC 3 $4.63 $4.37 $4.06
3” $704.02 SC 4 $4.63 $6.26 $5.53
4” $704.02 SC 5 $4.63 $7.84 $7.20
6” $704.02 SC 6 $4.63 $9.66 $8.71
Proposed Charges Proposed Volumetric Rates ($/CCF)
Class Monthly Charge* Residential
Per CCF Avg. Winter Consumption
$8.56
Residential $3.70 Multi-Family
per CCF 70% of Metered Water Use $8.56
Commercial $3.70 Non-Residential
per CCF 70% of Metered Water Use $9.54
* per equivalent dwelling unit
In addition to the standard rates presented in, a high-strength surcharge will apply to those customers
discharging much higher concentrations of waste into the wastewater system. The City will identify
and monitor such customers in order to assess the correct charges. The proposed rates feature new
charges for ammonia (NH3) and phosphorus (TP) discharges in addition to biochemical oxygen
demand (BOD) and total suspended solids (TSS). Treatment of the NH3 and TP discharges is a new
regulatory requirement; the surcharges have been proposed to match the new requirements.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 13
www.fcsgroup.com
Table ES- 15: Proposed Wastewater Surcharges for FY2026
Current Surcharges Proposed Surcharges
Pollutant $ / LB. Pollutant $ / LB.
BOD $1.05 BOD $0.53
TSS $0.63 TSS $0.55
NH3 $2.88
TP $14.52
Stormwater Rate Design
The proposed stormwater rates maintain much of the existing rate structure but reduce the amount of
credit customers can receive for on-site stormwater mitigation improvements over a three-year phase-
in period. Currently, the City offers lower stormwater rates for customers who install on-site
improvements ranging from zero to 75 percent of the applicable rate. The proposed rates reduce the
maximum amount of credit to 25 percent for on-site mitigation with an additional 10 percent for the
airport and customers with an NPDES stormwater permit. The reduced credit amount is phased in
over three years, with each credited parcel moving toward the new maximum credit by one-third per
year. For example, if a parcel currently receives a 55 percent credit, it will receive a 45 percent credit
in FY2026, a 35 percent credit in FY2027, and a 25 percent credit in FY2028.
With this phase-in of the lower maximum credit, the rate per property remains relatively consistent
over the phase-in period:
Table ES- 16: Proposed Stormwater Rates
Class Current
FY2025
Monthly Fee
Proposed
FY2026
Monthly Fee
Proposed
FY2027
Monthly Fee
Proposed
FY2028
Monthly Fee
Single-Family & Duplex (< 0.25 acres) $8.33 $8.75 $8.75 $8.85
Single Family & Duplex (>0.25 acres) $11.63 $12.25 $12.25 $12.39
Triplex & Fourplex $16.64 $17.50 $17.50 $17.70
All Other (per 2,500 SF Impervious Area) $8.33 $8.75 $8.75 $8.85
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 14
www.fcsgroup.com
Section I. INTRODUCTION
The Salt Lake City Department of Public Utilities (City) ensures the delivery of vital water,
wastewater, and stormwater utilities to Salt Lake City, Utah’s capital city, with a growing population
of more than 200,000 residents. The City is also the water provider to a large portion of Salt Lake
County outside of its municipal boundaries, serving approximately 365,000 residents across a
sprawling 141-square-mile service area. The City’s water service area is designated by City code and
includes portions of the municipalities of Mill Creek, Holladay, Cottonwood Heights, Murray,
Midvale, and South Salt Lake. Established in 1872, the City is one of the oldest retail water providers
in the West.
Municipal utilities like the City’s operate under a framework of federal and state regulations
designed to safeguard public health and the environment. The federal Safe Drinking Water Act, the
federal Clean Water Act, and state water quality statutes form the foundation for this framework,
ensuring the City consistently delivers clean water and minimizes its environmental impact. Beyond
these core regulations, the City adheres to additional statutes concerning water resources and flood
control, promoting responsible water management and mitigating flood risks. The City takes an
active role in water resource sustainability through its local ordinances. Salt Lake City’s ordinances
pertaining to water, wastewater, and stormwater are codified in Title 17, outlining clear requirements
for water, sewer, and stormwater management, while various sections of the City’s zoning ordinances
in Title 21 establishes the Riparian Corridor Overlay Zone, groundwater source protection, and
lowland areas protecting vital waterways and ecosystems.
An Overview of the City’s Utility Systems
A Legacy of Service: The City’s Water System
The City boasts one of the oldest water systems in the West, a testament to its long history of
providing vital water resources. Encompassing over 1,300 miles of pipelines, groundwater wells, and
pump stations, this intricate network distributes clean water throughout the City’s Designated Water
Service Area. The system incorporates both smaller distribution lines and larger transmission lines,
ensuring water reaches even the farthest pressure zones. To meet the demands of its residents, the
City utilizes a two-pronged approach. It relies on surface water and groundwater sources where it
directly holds water rights that are some of the oldest and highest priority water rights in the state. It
also purchases high-quality water from the Metropolitan Water District of Salt Lake and Sandy
(Metro District) to supplement these native supplies, ensuring a reliable and sustainable source of
clean water. The cornerstone of this system is a trio of water treatment facilities constructed back in
the 1950s. These facilities have undergone regular maintenance and upgrades over the years,
ensuring they continue to deliver safe, potable water to every household and business. The City has a
capital asset plan to steward its critical infrastructure and is prioritizing substantial investment into
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 15
www.fcsgroup.com
its aging infrastructure. This includes major water treatment facility rehabilitation projects, among
others, with projected costs exceeding $900 million through the year 2029.
Modernizing Wastewater Treatment: The City’s Wastewater System
Salt Lake City's existing water reclamation facility (WRF), built in 1965, has served the community
well. However, stricter nutrient removal regulations implemented by the US Environmental
Protection Agency and the Utah Department of Environmental Quality in 2015 necessitate a modern
upgrade. To address these regulations and ensure continued environmental protection, the City is
constructing a new WRF at a projected cost of over $800 million. This state-of-the-art facility will
not only meet the latest environmental standards but will also boast a significantly expanded
capability for treatment of nutrients like ammonia and phosphorus. The new WRF will be equipped
to handle wastewater from over 654 miles of collection pipelines, including multiple lift stations that
pump wastewater from lower elevations.
Safeguarding Our Waterways: The City’s Stormwater System
Salt Lake City safeguards its waterways through a sophisticated network encompassing 350 miles of
collection lines, 76 miles of canals and drainage ditches, and 32 miles of open channels, with each
piece playing a vital role in preventing flooding and protecting water quality. The system also
incorporates 27 lift stations, ensuring efficient stormwater flow throughout the City. Additionally, 63
strategically placed detention basins help regulate stormwater runoff, further mitigating flood risks.
Through this comprehensive program, the City demonstrates its commitment to responsible
stormwater management and environmental well-being while maintaining compliance with its
Municipal Separate Storm Sewer System permit (MS4).
Financial Operations of Salt Lake’s Utilities
The City operates its utilities under a streamlined structure. A single administrative and management
team oversees three distinct enterprise funds, each dedicated to a specific utility: water, wastewater,
and stormwater. These enterprise funds function as independent financial entities within the City's
overall financial system. Each fund meticulously tracks its assets, liabilities, revenues, and expenses,
ensuring transparency and accountability. The City publishes audited financial results for each
enterprise fund in its Annual Comprehensive Financial Report. Unlike other municipal funds fueled
by tax dollars, enterprise funds rely solely on service-generated revenue. Fees and rates charged for
water, wastewater, and stormwater services constitute the lifeblood of these funds. This self-
sufficient model ensures that utility operations are financially sustainable and independent of general
tax revenue.
Setting appropriate rates and fees is critical for the financial health of Salt Lake City's water,
wastewater, and stormwater utilities. These fees directly sustain the vital services these utilities
provide. Recognizing this, the City commissioned FCS GROUP in January 2024 to conduct a
comprehensive rate study. This follows a previous evaluation in 2018. Several factors necessitate this
timely review. Since the last study, the City has experienced significant cost increases. Inflation and
stricter regulations have played a role, as have the expenses associated with financing the new water
treatment facilities and the WRF. Additionally, water demand has decreased compared to earlier
projections, resulting in lower revenue than initially anticipated.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 16
www.fcsgroup.com
Overview of the Ratemaking Process
Utility ratemaking is the process of determining how much customers pay for the services they
receive. It involves three main steps:
1. Determining Revenue Requirements: This is the total amount of money the utility needs to cover
its operating costs, maintenance expenses, and investments in new infrastructure.
2. Allocating Costs to Customer Classes: The utility's costs are then divided among different
customer groups, such as residential, commercial, institutional, and industrial customers, based on
how much each group uses the utility's services.
3. Designing Rates: The final step is to set rates that allow the utility to recover its costs from each
customer group. Rates can take various forms, such as flat fees, tiered rates, or demand-based rates.
The objective of the rate design effort is to achieve the practical financial requirements for the rates
while achieving as many community preferences as possible.
This Report is organized into sections that follow the key processes outlined above. In each section,
we present the outcomes of our study for each of the three utility systems.
Limiting Conditions
We’ve written this Report as a public document for the City’s general use. It describes the findings
and recommendations of our rate study within the scope of work defined in our consulting agreement
with the City. It is subject to the following additional limiting conditions:
• Forward-looking statements. A large part of our analysis includes projected values, which is
crucial for setting rates that will come into effect in the year after our study. While we take
great care in making these forecasts, we cannot guarantee that the City's actual results in the
future will closely align with the values we predict in this Report.
• Working assumptions. Our analysis relies on working assumptions to project future values.
We carefully reviewed these assumptions with the City, ensuring they reflect conservative yet
realistic values. However, alterations in assumptions could result in varied outcomes,
including some that may be material.
• Quality of inputs. We utilized data supplied by the City for our analyses, reviewing it with
them and deeming it accurate to their knowledge. However, we have not independently
verified the accuracy of the received data and information.
• Subsequent events. Our findings and recommendations are based on our analysis of the City's
utility systems up to the publication date of this Report. Events or information that emerged
after this date have not been incorporated into our analysis or findings.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 17
www.fcsgroup.com
Section II. REVENUE REQUIREMENTS
A utility's annual revenue requirement represents the total amount of money it needs to cover its
operating costs and maintain its capital investments over a given year. In simpler terms, it's the total
income the utility must generate annually from all sources to remain financially healthy. This
revenue requirement can be further divided into two parts:
• Total Revenue Requirement: This encompasses all revenue streams, including those not
directly derived from user charges (e.g., government grants, interest income).
• Annual User Charge Revenue Requirement: This represents the portion of the total
revenue requirement that must be collected directly from users through rates and fees.
This rate study focuses on the user charge revenue requirement, which directly impacts the rates
customers pay. There are two primary approaches employed in the utility industry for determining
revenue requirements: the cash-needs approach and the utility approach. In the following sections,
we'll delve into the specifics of each method and explore their key differences.
Cash Needs Approach Utility Approach
• Focuses on the actual cash flow
requirements of the utility.
• Calculates revenue requirement based on
the utility's expected cash outlays for a
given period.
• Includes operating and maintenance
expenses, debt service payments, and
capital expenditures.
• Recognizes the full cost of capital projects
in the year they are incurred.
• Revenue requirements can fluctuate
significantly from year to year due to the
timing of capital projects
• Focuses on accounting-based measures of
revenue and expenses.
• Calculates revenue requirement based on
the utility's rate base (the value of its assets)
and an allowed rate of return.
• Includes operating expenses, depreciation,
taxes, and a return on investment.
• Spreads the cost of capital assets over their
useful life through depreciation.
• Provides a more stable and predictable
revenue requirement over time.
The main difference lies in how they treat capital expenditures. The utility approach spreads the cost
over time through depreciation, while the cash-needs approach includes the full costs upfront, along
with the implied task of matching those costs to internal funding sources or external financing. The
need to meet potentially “bumpy” capital requirements can lead to more volatile revenue
requirements under the cash-needs approach, but it ensures the utility has sufficient cash to cover its
capital needs.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 18
www.fcsgroup.com
Choosing the Right Approach
Ultimately, the choice between the cash-needs and utility approaches depends on the utility's specific
circumstances, regulatory environment, and capital investment needs. However, in a municipal
setting, the cash-needs approach is often recommended for a few key reasons:
Transparent Cash Flow Tracking
The cash-needs approach more transparently reflects the cash expenditures necessary to meet the
utility's needs from year to year. This level of transparency is crucial for municipal utilities, as it
allows for better tracking and management of cash flow.
Aligns with Municipal Budgeting
Municipal budgeting practices are typically presented on a cash-needs basis, which tends to align
seamlessly with the municipality's overall budgeting process.
Adapts to Fluctuating Capital Needs
Municipal utilities often face fluctuating capital investment needs due to infrastructure projects or
large expenditures. The cash-needs approach can better accommodate these fluctuations, ensuring
that the utility has the necessary funds when they are needed.
While the utility approach may provide a more stable and predictable revenue requirement over time,
the cash-needs approach is generally better suited for municipal utilities due to its transparency,
alignment with budgeting practices, and ability to adapt to changing capital needs.
Applying the Cash-Needs Approach to the City’s Utilities
We adopted the cash-needs approach to calculate the City’s recommended rates. The key components
of a utility revenue requirement under the cash-needs approach include:
1. Operating and Maintenance (O&M) Expenses: These are the day-to-day costs incurred
by the utility to operate and maintain its infrastructure, such as labor, materials, supplies,
and contracted services.
2. Debt Service: This includes the principal and interest payments on any outstanding debt
obligations, such as bonds or loans, used to finance capital projects.
3. Capital Expenditures: These are the costs associated with acquiring, constructing, or
improving the utility's infrastructure, such as treatment plants, pipelines, or other facilities.
The cash-needs approach typically includes the portion of capital projects the utility expects
to fund directly from its operating revenue in the year they are incurred rather than
depreciating them over time.
4. Working Capital and Reserves: The cash-needs approach may include provisions for
maintaining adequate working capital and funding various reserve accounts, such as
reserves for emergencies, rate stabilization, or future capital projects. The net change in
cash reserves can either increase or decrease the revenue requirement; increases to the
reserves represent an increase in the revenue requirement, while the use of reserves
represents a decrease.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 19
www.fcsgroup.com
5. Other Revenue Requirements: Depending on the specific utility, there may be additional
revenue requirements, such as payments in lieu of taxes, franchise fees, or other regulatory
obligations.
To determine the total revenue requirement using the cash-needs approach, the utility would sum up
all these cash flow components for a given period, typically a fiscal year. The resulting revenue
requirement would then be used to set rates or charges for the utility's customers, ensuring sufficient
revenue is generated to meet the utility's cash needs.
WATER REVENUE REQUIREMENT
The water utility is navigating a complex financial landscape. Significant investments in capital
improvement projects, totaling $800 million between Fiscal Years 2024 and 2029, are crucial for
maintaining reliable water infrastructure. However, these necessary upgrades come alongside rising
operational costs. The Water Fund anticipates additional expenses for maintenance, partly due to the
capital improvement projects themselves and partly due to external factors like inflation driving up
the cost of labor, materials, and supplies.
These cost pressures are further amplified by a declining water demand compared to previous years.
It should be noted that the decline in water demand is not associated with negative growth, to the
contrary, growth in the City’s water service area is very high. Rather, the decrease in demand shows
that the City’s water conservation efforts have been working. With revenue potentially shrinking
while expenses rise, the challenge becomes ensuring long-term financial stability without putting an
undue burden on ratepayers through increased water rates.
Revenue
Until Fiscal Year 2021, Salt Lake City's water demand exhibited a predictable pattern. Off-peak
months (November to March) saw minimal year-to-year fluctuations, while peak season (April to
October) experienced modest variations. However, this trend shifted dramatically in FY2022, with
average monthly peak-season demand falling by 18%.
The decline in peak season water use presents a challenge, as the City's tiered rate structure,
implemented in the 2018 rate study, relies to some extent on revenue generated from upper tiers -
primarily driven by peak-season irrigation. Consequently, revenue has fallen short of budgetary
expectations in the past three fiscal years.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 20
www.fcsgroup.com
Figure 2: Historical Avg. Monthly Peak and Off-Peak Water Demand (FY2016-24)2
Due to decreasing demand, the City implemented a fixed Rate Stabilization Fee (RSF) in FY2025 to
help augment revenues to compensate for losses. The RSF is a temporary measure pending the
outcome of this rate study. However, the projected values help explain the shortfalls the City has
recently experienced under the current rate structure.
The water utility collects revenue not only through its existing rate structure and recent RSFs but also
from various non-rate sources. Interest earnings contribute a portion, but the most significant source
is reimbursements – around $4 million annually – received from the City's other utilities for
administrative services provided by the water utility. Additional revenue comes from various fees,
including hydrant rentals, flat-rate sales, and ground rentals.
2 FY2024 includes three estimated months of water demand (Apr.-Jun.)
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2016 2017 2018 2019 2020 2021 2022 2023 2024
Av
g
.
M
o
n
t
h
l
y
C
C
F
Fiscal Year
Seasonal Water Demand by Fiscal Year
Nov. - Mar.Apr. - Oct.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 21
www.fcsgroup.com
Figure 3: Composition of Existing Water Revenues Before Recommended Increases ($ million)
Operating & Maintenance Expenses
The City’s O&M expenses include personnel, operational materials and supplies, utilities, contractual
services, fleet maintenance, purchased water, and miscellaneous expenses.
Personnel Costs. The personnel costs include all salaries and wages, overtime compensation, payroll
taxes, and employee benefits for all full and part-time employees.
O&M Materials and Supplies. Operating supplies include everything from office supplies to
chemicals used for water treatment.
Utilities. The City pays utility bills for electricity, gas, and telecommunications.
Services. The City retains the services of various professionals to support its management and
operations. Examples of the City's contractual services include auditing and legal fees, public
relations, computer maintenance contracts, consulting services, and others.
Fleet. Salt Lake City’s general fund manages a fleet maintenance department with costs allocated
across all departments, including the City’s utilities. Fleet maintenance expenses include repairs,
fuel, preventive maintenance, and related incidental expenses.
Purchased Water. The City purchases water from the Metro District. The annual charge is a fixed
assessment and may include a volumetric portion if the City exceeds its annual water allocation..
Other (Misc.). Miscellaneous expenses, not categorized as any of the above categories, include
janitorial services, rent/lease expenses, risk management and insurance costs, data processing, travel,
several categories of incidental expenses, and aggregated additional budget adjustments.
2024 2025 2026 2027 2028 2029
Misc. Revenue $8.21 $8.34 $7.61 $7.81 $8.01 $8.22
RSF Revenue $5.00 $25.08 $36.23 $36.57 $36.93 $37.24
Rate Revenue $93.05 $96.77 $97.59 $98.42 $99.25 $100.10
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$
m
i
l
l
i
o
n
Composition of Existing Water Revenue
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 22
www.fcsgroup.com
We projected the City’s costs, recognizing real and inflationary cost increases. A listing of our
operating assumptions for inflationary increases is provided in APPENDIX A. Among the more
important real cost increases for the City are the following notable expenditures:
• Technical Service Contracts – the City expects to increase its annual spending on contracted
technical services for engineering and related services to assist in executing the capital
improvement plan and management of the City’s Lead and Copper program. The annual
expenses are expected to increase from $8 million to $15 million in FY2025.
• Increased Operating Expenses Related to CIP Completion – As the City completes major
facilities from its CIP, it expects to incur additional O&M expenses. Additional expenses
include increased staffing levels, materials and supplies, and other operational costs. The
exact costs are currently unknown. However, our forecast includes an allowance for such
expenses equal to 1% of the cumulative CIP expenditures. The City is not expecting
additional O&M expenses until FY2026, at which point our forecast allows for $2.1 million
in additional expenses, growing to $3.1 million by FY2029.
Our projections show the City’s O&M expenses increasing from approximately $94 million in
FY2024 to over $123 million by FY2029, an average annual increase of 5.6% and a total increase of
32% over the five years.
Figure 4: Projected Water O&M Expenses ($ million)
2024 2025 2026 2027 2028 2029
Other $8.90 $6.68 $7.07 $7.69 $8.17 $8.89
Purchased Water $25.87 $26.41 $26.96 $27.54 $28.13 $28.74
Fleet $1.67 $1.85 $1.92 $2.00 $2.08 $2.16
Services $12.22 $19.48 $21.56 $23.73 $23.58 $23.82
Utilities $3.03 $3.11 $3.36 $3.63 $3.92 $4.23
O&M Supplies $8.84 $7.45 $9.93 $10.54 $11.26 $12.01
Personnel $33.15 $35.74 $37.52 $39.40 $41.37 $43.44
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$
m
i
l
l
i
o
n
Projected O&M Expenses -Water
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 23
www.fcsgroup.com
Capital Expenditures
As of the end of FY2023, the City managed over $515 million in water utility infrastructure, land,
and water rights. Between FY2024 and FY2029, the City’s plans call for significant investments in
its water infrastructure. Major investments include the City Creek WTP, Parley’s WTP, Big
Cottonwood WTP, and multiple smaller programs to repair, replace, and maintain water transmission
and distribution infrastructure throughout the City’s service area.
To adhere to its planned forecasts, the City must allocate approximately $800 million in current value
($932 million adjusted for inflation), effectively doubling its FY2023 capital assets. To mitigate the
impact on ratepayers, the City and FCS GROUP explored alternative scenarios, deferring spending
between 10% and 55% while prioritizing essential projects. Figure 5 summarizes the original and
revised plan for the City’s capital improvement spending.
Figure 5: Planned Capital Spending on Water Projects ($ million)
The City has multiple funding sources for its capital projects, including grants, contributions from
impact fees, cash reserves, and debt. An important source of the City’s funding plan includes the cash
flows generated from user charges and other operating revenues. The City deposits operating cash
flows into its cash reserve accounts and uses the funds to pay for capital projects.
Table 1 summarizes the various sources and uses of capital for the City’s water utility. The City’s
funding plan includes revenue bond proceeds of $100.6 million in FY2025 and $226.0 million in
2028. As shown in Table 1, the bond proceeds are not always expended in the year of issuance,
leading to an increase in cash deposits. The City uses those deposits in subsequent years as a source
of CIP funding. Additionally, the City expects to finance a smaller portion of its capital projects with
proceeds from State Revolving Fund (SRF) loans. These debts and existing obligations will increase
the annual debt service paid from the City’s operating revenues. The City is also anticipating funding
from federal and state grants related to specific capital projects.
2024 2025 2026 2027 2028 2029
CIP $110.60 $113.31 $141.58 $176.36 $200.70 $189.77
CIP with Deferrals $99.42 $80.73 $68.58 $91.89 $111.29 $122.00
Cumulative CIP $110.60 $223.91 $365.49 $541.86 $742.56 $932.32
Cumulative CIP w/ Deferrals $99.42 $180.15 $248.73 $340.62 $451.91 $573.91
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
$900.00
$1,000.00
$
m
i
l
l
i
o
n
Planned Capital Spending -Water
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 24
www.fcsgroup.com
Table 1: Sources and Uses of Water Utility Capital ($ million)
Funding Source (Use) 2024 2025 2026 2027 2028 2029
External and Grant Funding $10.85 $34.78 $9.10 $4.56 $4.02 $3.68
Impact Fees and CIAC $2.50 $2.50 $4.42 $4.61 $4.77 $4.94
Revenue Bond Proceeds $0.00 $100.56 $0.00 $0.00 $226.00 $0.00
SRF Proceeds $0.00 $3.42 $4.08 $4.74 $4.18 $3.83
Interest Earned $4.94 $0.42 $0.86 $0.64 $0.20 $1.75
Cash from Operations $1.69 $14.56 $27.30 $33.07 $28.13 $33.73
Use of Cash Reserves $79.44 $0.00 $22.82 $44.28 $0.00 $74.08
CIP Project Costs ($99.42) ($80.73) ($68.58) ($91.89) ($111.29) ($122.00)
Deposits to Cash Reserves $0.00 ($75.51) $0.00 $0.00 ($156.00) $0.00
Sum of Sources and Uses $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Debt Service
Debt service includes principal and interest payments on the City’s existing and projected debts.
Additionally, debt obligations often come with real-time coverage requirements such that the utility’s
net revenue (gross revenue less operating expenses) must exceed annual debt service obligations by a
certain percentage (typically 125% or higher). For planning purposes, we assumed a coverage factor
of 150%.
The forecast prepared for the City includes two main revenue bond issues, summarized as:
• Series 2025 - $100.6 million in construction proceeds with anticipated issuance costs of $1.0
million for a total issue size of $101.6 million. We assumed a term of 30 years and an
average coupon rate of 4.25% with interest-only payments through FY2027.
• Series 2028 - $226.0 million in construction proceeds with anticipated issuance costs of $2.3
million for a total issue size of $228.3 million. The bond terms are assumed to be the same as
the proposed Series 2025, with interest-only payments through FY2030.
Figure 6 summarizes the annual debt service for the existing and proposed bonds and the projected
debt service coverage on all debts (1.5x is the minimum value for debt coverage).
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 25
www.fcsgroup.com
Figure 6: Annual Debt Service Payments - Water ($ million)
Water Revenue Requirements
The City’s current user charge revenue at its existing schedule of rates and charges, including the
newly imposed RSF, is too low to provide for the Water Fund’s ongoing operations and capital
financing requirements. Although it represents an increase to existing user charges, the City’s newly
implemented RSF, intended to offset the loss of revenues from unprecedented decreases in water
demand, is included as an existing revenue in our analysis. We included the RSF because it had
already been implemented before we began our study. While the City implemented the RSF as a
fixed monthly charge on customers’ bills starting in FY2024, this rate study examines potentially
different ways to structure the rates to recover the same total revenue in the future.
Table 2 summarizes the major elements of the City’s water revenue requirements based on the cash-
needs approach described earlier. The table demonstrates the user charge revenue requirement each
year and compares it to the expected revenue at the current rates. The additional revenue needs begin
in FY2026 and grow through FY2029; the value shown is cumulative and assumes no rate increases.
The final line of Table 2 shows the annual increase in revenue needed to eliminate the shortfalls.
The total revenue requirement for FY2026 is the basis for the recommended rates for this Report.
2024 2025 2026 2027 2028 2029
Proposed Debt $0.00 $4.37 $4.43 $4.50 $16.34 $16.40
Existing Debt $6.96 $8.23 $8.23 $8.23 $8.23 $8.23
Projected DSC 2.5 2.4 3.4 3.8 2.2 2.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
De
b
t
C
o
v
e
r
a
g
e
R
a
t
i
o
De
b
t
S
e
r
v
i
c
e
P
m
t
s
.
(
$
m
i
l
l
i
o
n
)
Annual Debt Service Payments
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 26
www.fcsgroup.com
Table 2: Summary of Projected Water Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $93.68 $100.72 $108.33 $114.53 $118.49 $123.29
Debt Service $6.96 $12.60 $12.66 $12.73 $24.57 $24.63
Capital Improvements $99.42 $80.73 $68.58 $91.89 $111.29 $122.00
Capital Funding Sources ($18.29) ($141.68) ($18.46) ($14.54) ($239.16) ($14.19)
Non-Rate Related Revenue ($8.21) ($8.34) ($7.61) ($7.81) ($8.01) ($8.22)
Cash Funded CIP $1.69 $14.56 $27.30 $33.07 $28.13 $33.73
Increase (Decrease) in Cash ($77.20) $63.27 ($47.62) ($75.31) $129.17 ($106.23)
Total User Charge Requirement $98.05 $121.85 $143.18 $154.55 $164.49 $175.01
User Charges at Current Rates ($98.05) ($121.85) ($133.82) ($134.99) ($136.18) ($137.34)
Additional Revenue Needed
(cumulative value)
$0.00 $0.00 $9.37 $19.56 $28.31 $37.67
Annual Revenue Increase % 0.0% 0.0% 7.0% 7.0% 5.5% 5.5%
While this study focuses on FY2024-2029, FCS GROUP prepared a longer-range forecast for the
City that extends for ten years. In the longer term, we estimate the City would require annual
increases in the range of 5% per year to sustain its water utility operations.
The Rate Stabilization Fee
Starting in FY2024, the City imposed a temporary Rate Stabilization Fee (RSF) to address a
significant and unexpected decline in revenue experienced in FY2022 and FY2023. This rate study
will help determine a more permanent solution to the recent losses. Throughout this Report, we
accounted for the RSF as an existing revenue source; the adjustments shown in Table 2 and
elsewhere represent the increases necessary after already accounting for the RSF. However, the total
increase customers will experience includes the RSF and additional adjustments outlined in this
Report. Table 3 is a summary of the total increases customers can expect. Even though the RSF may
not be continued in its current form, the total revenue required for the water utility reflects the total
percentage changes shown in Table 3.
Table 3: Summary of Total Expected Water Revenue Increases by Source
Revenue Source 2024 2025 2026 2027 2028 2029
Increases to Base Rates 0.0% 0.0% 7.0% 7.0% 5.5% 5.5%
Rate Stabilization Fees 5.4% 20.3% 9.0% 0.0% 0.0% 0.0%
Total Customer Increases 5.4% 20.3% 16.0% 7.0% 5.5% 5.5%
WASTEWATER REVENUE REQUIREMENT
Like the Water Fund, the City’s Wastewater Fund is poised to invest over a billion dollars in capital
improvement projects between FY2024 and 2029. The investments are crucial for meeting the
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 27
www.fcsgroup.com
requirements of the Clean Water Act and include a new wastewater reclamation facility (WRF)
currently under construction. The financing for the reclamation facility and other capital projects has
already presented a challenge for ratepayers; the City’s Series 2022 revenue bonds, plus loans from
the US EPA’s Water Infrastructure Finance and Innovation Act (WIFIA), used in financing the WRF,
increased annual debt service more than double, from approximately $12 million per year to over $29
million. Debt service may increase to as high as $44 million by 2029. As the new facilities come
online, the City expects additional operating costs, too.
Revenue
The water demand patterns we identified as a challenge for the Water Fund revenues were less of a
driver for the wastewater utility, yet still very relevant. Wastewater billing depends, for the most
part, on average wintertime water usage as an estimate of wastewater flows contributed to the City’s
sewers. However, in FY2022, billed sewer flows did experience a decrease, according to data
provided by the City, but recovered to FY2021 levels by FY2023. Despite the dip in billed flows, the
City’s billed revenue increased 15% in FY2022 and another 22% in FY2023.
Figure 7: Historical Billed Flows and Average Revenue per CCF
The City implemented a new RSF on the wastewater rates for FY2025. As with the water utility, the
RSFs are a temporary measure pending the outcome of this rate study. However, we have included
the expected revenue from the RSFs as part of the existing rate-related revenue.
The wastewater utility recovers additional sums of revenue from miscellaneous and non-rate-related
sources. The most significant of these additional sources are rental income from ground leases and
income from sewer inspections.
2021 2022 2023
Billed Flow (CCF)8,093,119 7,778,864 8,129,808
Revenue per CCF $6.13 $7.35 $8.56
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
$/
C
C
F
CC
F
Billed Flows & Revenue per CCF
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 28
www.fcsgroup.com
Figure 8: Composition of Existing Wastewater Revenues Before Recommended Increases ($ million)
Operating & Maintenance Expenses
The City’s O&M expenses include costs for personnel, operational materials and supplies, utilities,
contractual services, fleet maintenance, and miscellaneous expenses.
Personnel Costs. The personnel costs include all salaries and wages, overtime compensation, payroll
taxes, and employee benefits for all full and part-time employees.
O&M Materials and Supplies. Operating supplies include everything from office supplies to
chemicals used for treatment. Chemical costs alone make up over 40% of the materials and supplies
category.
Utilities. The City pays utility bills for electricity, gas, and telecommunications. Electrical costs
make up over 70% of the total.
Services. The City retains the services of various professionals to support its management and
operations. Examples of the City's contractual services include auditing and legal fees, public
relations, computer maintenance contracts, consulting services, and others.
Fleet. Salt Lake City, via the general fund, manages a fleet maintenance department with costs
allocated across all city departments, including the City’s utilities. Fleet maintenance expenses
include repairs, fuel, preventive maintenance, and related incidental expenses.
Other (Misc.). Miscellaneous expenses, not categorized as any of the above categories, include
janitorial services, rent/lease expenses, risk management and insurance costs, data processing, travel,
and several categories of incidental expenses.
2024 2025 2026 2027 2028 2029
Misc. Revenue $4.56 $1.82 $1.55 $1.61 $1.69 $1.72
RSF Revenue $0.00 $10.36 $25.34 $25.65 $25.97 $26.03
Rate Revenue $76.30 $79.36 $79.51 $79.67 $79.83 $79.99
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$
m
i
l
l
i
o
n
Composition of Existing Wastewater Revenue
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 29
www.fcsgroup.com
Our forecast indicates an average escalation of O&M costs between FY2024 and FY2029 of around
5.5% before factoring in the anticipated costs of operating the new WRF. The City provided an
estimate of its additional O&M costs related to the WRF, which will start in FY2026 at $3.2 million,
rising to $14.4 million3 in FY2027 before leveling out around $7.5 million. Figure 9 summarizes our
projected O&M expenses by major category.
Figure 9: Projected Wastewater O&M Expenses ($ million)
Capital Expenditures
As of FY2023, the City managed over $623 million in wastewater assets, including land, treatment
facilities, pumping and pipeline infrastructure, buildings, and machinery. Between FY2024 and
FY2029, the City’s plans include the addition of over $1 billion (Approximately $1.1 billion after
adjusting for future inflation) in capital improvements, $475 million of which relates to the new
WRF.
3 The City anticipates additional, one-time expenses, related to the startup of its new WRF.
2024 2025 2026 2027 2028 2029
Other $4.10 $4.29 $4.39 $4.64 $5.10 $5.26
Fleet $0.64 $0.67 $0.69 $0.72 $0.75 $0.78
Services $5.75 $6.41 $6.67 $6.93 $7.21 $7.50
Utilities $1.69 $1.99 $2.15 $2.32 $2.50 $2.71
O&M Supplies $4.05 $4.14 $7.57 $18.95 $12.27 $12.51
Personnel $15.38 $16.64 $17.47 $18.35 $19.26 $20.23
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$
m
i
l
l
i
o
n
Projected O&M Expenses -Wastewater
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 30
www.fcsgroup.com
As with the Water Fund, recognizing that the pace of capital investment may be too much for
ratepayers to bear immediately, the City and FCS GROUP explored alternative scenarios for
deferring portions of the CIP. Unlike the Water Fund, however, because many of the City’s
wastewater projects are necessary to meet regulatory requirements, the deferrals had less effect.
Figure 10: Planned Capital Spending on Wastewater Projects ($ million)
The City plans to fund its capital improvements through a combination of contributions from grants,
impact fees, cash reserves, and debt. An important component of the City’s funding plan includes
regular transfers of operating cash flows generated from user charges. Operating cash flows are
available as capital funding sources after the City pays its operating expenses and debt service and
after retaining sufficient working capital.
Table 4 summarizes the various sources and uses of capital for the City’s wastewater utility. The
City’s funding plan includes proceeds from a Water Infrastructure Finance & Innovation Act
(WIFIA) loan totaling over $335 million. Additionally, our forecast indicates the City would require
revenue bond proceeds of $99.5 million in FY2025 and $34 million in FY2026. Table 4 summarizes
our projection of the sources and uses of capital funding in the Wastewater Fund.
2024 2025 2026 2027 2028 2029
CIP $492.10 $267.99 $112.42 $57.53 $65.20 $83.68
CIP with Deferrals $442.10 $258.36 $95.99 $28.91 $26.70 $46.50
Cumulative CIP $492.10 $760.09 $872.51 $930.04 $995.24 $1,078.92
Cumulative CIP w/ Deferrals $442.10 $700.45 $796.45 $825.35 $852.05 $898.56
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$
m
i
l
l
i
o
n
Planned Capital Spending -Wastewater
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 31
www.fcsgroup.com
Table 4: Sources and Uses of Wastewater Utility Capital ($ million)
Funding Source (Use) 2024 2025 2026 2027 2028 2029
External and Grant Funding $178.52 $140.46 $16.55 $0.00 $0.00 $0.00
Impact Fees and CIAC $2.05 $2.05 $7.03 $7.04 $7.05 $7.07
Revenue Bond Proceeds $0.00 $99.55 $34.00 $0.00 $0.00 $0.00
SRF Proceeds $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Interest Earned $9.93 $0.09 $0.09 $0.07 $0.13 $0.37
Cash from Operations $24.64 $22.82 $36.47 $27.50 $43.71 $28.84
Use of Cash Reserves $226.96 $0.00 $1.86 $0.00 $0.00 $10.23
CIP Project Costs ($442.10) ($258.36) ($95.99) ($28.91) ($26.70) ($46.50)
Deposits to Cash Reserves $0.00 ($6.61) $0.00 ($5.70) ($24.19) $0.00
Sum of Sources and Uses $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Debt Service
Debt service includes principal and interest payments on the City’s existing and projected debts.
Additionally, debt obligations often come with real-time coverage requirements such that the utility’s
net revenue (gross revenue less operating expenses) must exceed annual debt service obligations by a
certain percentage (typically 125% or higher). For planning purposes, we assumed a coverage factor
of 150%.
The Wastewater Fund holds several existing debt obligations in the form of revenue bonds plus a
WIFIA loan.
• Revenue bonds. The City has long-term revenue bond obligations from its Series 2009, 2010,
2012, 2017, 2020, and 2022 revenue bonds. The total combined annual debt service for all
revenue bonds is approximately $29.5 million annually.
• WIFIA loan. The US Environmental Protection Agency awarded the City a WIFIA loan in
2020. The loan initially disburses proceeds to offset capital project costs. Repayment does
not start until five years after completion of the project(s) financed by the loan. The expected
annual debt service for the 2020 WIFIA loan is approximately $15.0 million per year starting
in FY2029.
In addition to the existing loans and revenue bond obligations, our forecast includes additional
financing from revenue bonds that will increase the annual debt service obligations:
• Series 2025 - $99.6 million in construction proceeds with anticipated issuance sots of $1
million for a total issue of $100.6 million. We assumed a term of 30 years and an average
coupon rate of 4.25% with interest-only payments through FY2027.
• Series 2026 - $34.0 million in construction proceeds with anticipated issuance costs of $0.3
million for a total issue size of $34.3 million. We assumed a term of 30 years and an average
coupon rate of 4.25% with interest-only payments through FY2028.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 32
www.fcsgroup.com
Figure 11 summarizes the annual debt service for the existing and proposed bonds and loans and the
projected debt service coverage on all debts (1.5x is the minimum value for debt coverage).
Figure 11: Annual Debt Service Payments – Wastewater ($ million)
Wastewater Revenue Requirements
The City’s current user charge revenue at its existing schedule of rates and charges, including the
newly imposed RSF, is too low to provide for the Wastewater Fund’s ongoing operations and capital
financing requirements. Although it represents an increase in user charges, the City’s newly
implemented RSF is included as an existing revenue in our analysis. We included the RSF because it
had already been implemented before we began our study. This rate study examines potentially
different ways to structure the rates to capture the same total revenue.
Table 5 summarizes the major elements of the City’s wastewater revenue requirements based on the
cash-needs approach described earlier. The table demonstrates the user charge revenue requirement
each year and compares it to the expected revenue at the current rates. The additional revenue needs
begin in FY2026 continuing through FY2029; the value shown is cumulative and assumes no rate
increases. The final line of Table 5 shows the annual increase in revenue needed to eliminate the
shortfalls.
The total revenue requirement for FY2026 is the basis for the recommended rates for this Report.
2024 2025 2026 2027 2028 2029
Proposed Debt $0.00 $4.27 $5.73 $5.73 $7.79 $8.49
Existing Debt $24.63 $29.47 $29.45 $29.43 $28.91 $44.26
Projected DSC 2.4 1.7 2.1 1.9 2.2 1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
De
b
t
C
o
v
e
r
a
g
e
R
a
t
i
o
$
m
i
l
l
i
o
n
Annual Debt Service Payments
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 33
www.fcsgroup.com
Table 5: Summary of Projected Wastewater Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $31.60 $34.14 $38.95 $51.91 $47.11 $48.98
Debt Service $24.63 $33.74 $35.18 $35.16 $36.70 $52.75
Capital Improvements $442.10 $258.36 $95.99 $28.91 $26.70 $46.50
Capital Funding Sources ($190.50) ($242.15) ($57.66) ($7.11) ($7.18) ($7.43)
Non-Rate Related Revenue ($4.56) ($1.82) ($1.55) ($1.61) ($1.69) ($1.72)
Cash Funded CIP $24.64 $22.82 $36.47 $27.50 $43.71 $28.84
Increase (Decrease) in Cash ($251.60) ($15.38) ($36.75) ($17.54) ($21.10) ($38.46)
Total User Charge Requirement $76.30 $89.72 $110.63 $117.23 $124.24 $129.47
User Charges at Current Rates ($76.30) ($89.72) ($104.86) ($105.33) ($105.81) ($106.02)
Additional Revenue Needed
(cumulative value)
$0.00 $0.00 $5.77 $11.90 $18.44 $23.45
Annual Revenue Increase % 0.00% 0.00% 5.50% 5.50% 5.50% 4.00%
While this study focuses on FY2024-2029, FCS GROUP prepared a longer-range forecast for the
City that extends for ten years. In the longer term, we estimate the City would require annual
increases in the range of 4% per year to sustain its wastewater operations.
The Rate Stabilization Fee
Starting in FY2025, the City imposed a temporary Rate Stabilization Fee (RSF) to address a
significant and unexpected decline in revenue experienced in FY2022 and FY2023. This rate study
will help determine a more permanent solution to the recent losses. Throughout this Report, we
accounted for the RSF as an existing revenue source; the adjustments shown in Table 5 and
elsewhere represent the increases necessary after already accounting for the RSF. However, the total
increase customers will experience includes the RSF and additional adjustments outlined in this
Report. Table 6 is a summary of the total increases customers can expect. Although the RSF may not
be implemented as planned, the total revenue required for the wastewater utility will still need to
reflect the increases shown in Table 6.
Table 6: Summary of Total Expected Wastewater Revenue Increases by Source
Revenue Source 2024 2025 2026 2027 2028 2029
Increases to Base Rates 0.0% 0.0% 5.5% 5.5% 5.5% 4.0%
Rate Stabilization Fees 0.0% 13.6% 16.7% 0.0% 0.0% 0.0%
Total Customer Increases 0.0% 13.6% 22.2% 5.5% 5.5% 4.0%
STORMWATER REVENUE REQUIREMENT
Of the three utilities included in this rate study, the Stormwater Fund has historically operated at the
lowest cost with the least need for capital improvements. However, future operating and maintenance
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 34
www.fcsgroup.com
costs will increase faster for the Stormwater Fund than the other utilities as the City increases its
activities to comply with its MS4 Permit. Capital improvements are also increasing even if to a lesser
extent than with the water and wastewater utilities. The City plans call for approximately $58.9
million in new stormwater infrastructure investments between FY2024 and FY2029.
Revenue
Revenue for the Stormwater Fund tends to be relatively stable compared to revenues in the Water and
Wastewater Funds. Unlike the other utilities the City’s stormwater charges are flat monthly fees not
subject to changes in water demand or other variable factors. As a result, stormwater revenue is
relatively reliable from year to year; there was no need for the kind of RSFs seen with the Water and
Wastewater Fund. Nearly all revenue in the Stormwater Fund comes from user charges;
miscellaneous revenue from fines, repairs, and inspection fees is minimal.
Figure 12: Composition of Existing Stormwater Revenues Before Recommended Increases ($ million)
Operating & Maintenance Expenses
The City’s O&M expenses include costs for personnel, operational materials and supplies, utilities,
contractual services, fleet maintenance, and miscellaneous expenses.
Personnel Costs. The personnel costs include all salaries and wages, overtime compensation, payroll
taxes, and employee benefits for all full and part-time employees.
O&M Materials and Supplies. Operating materials and supplies include everything needed to
maintain the City’s storm sewer infrastructure, including supplies to maintain the grounds where the
infrastructure is located, an important aspect of stormwater management.
Utilities. The City pays utility bills for electricity, gas, and telecommunications. Electrical costs
make up over 80% of the total.
2024 2025 2026 2027 2028 2029
Misc. Revenue $1.00 $0.21 $0.10 $0.11 $0.11 $0.11
Rate Revenue $15.23 $16.76 $16.79 $16.82 $16.86 $16.89
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$
m
i
l
l
i
o
n
Composition of Existing Stormwater Revenue
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 35
www.fcsgroup.com
Services. The City retains the services of various professionals to support its management and
operations. Examples of the City's contractual services include auditing and legal fees, public
relations, computer maintenance contracts, consulting services, and others.
Fleet. Salt Lake City, via the general fund, manages a fleet maintenance department with costs
allocated across all city departments, including the City’s utilities. Fleet maintenance expenses
include repairs, fuel, preventive maintenance, and related incidental expenses.
Other (Misc.). Miscellaneous expenses, not categorized as any of the above categories, include
janitorial services, rent/lease expenses, risk management and insurance costs, data processing, travel,
and several categories of incidental expenses.
Our forecast indicates an average escalation of O&M costs between FY2024 and FY2029 of around
7.2%, led by increases in O&M supplies and materials. Figure 13 summarizes our projected O&M
expenses by major category.
Figure 13: Projected Stormwater O&M Expenses ($ million)
Capital Expenditures
The City managed approximately $121.0 million in stormwater infrastructure as of the end of
FY2023. The capital improvements plan includes adding $58.9 million ($63.3 million after adjusting
for future inflation). However, along with increases to the O&M expenses, the City elected to defer
2024 2025 2026 2027 2028 2029
Other $2.39 $2.55 $2.74 $2.96 $3.19 $3.44
Fleet $0.32 $0.37 $0.39 $0.41 $0.43 $0.45
Services $2.61 $2.86 $3.00 $3.15 $3.31 $3.47
Utilities $0.29 $0.29 $0.31 $0.33 $0.36 $0.39
O&M Supplies $0.39 $0.66 $0.93 $1.04 $1.14 $1.24
Personnel $5.30 $5.73 $6.02 $6.32 $6.64 $6.97
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$
m
i
l
l
i
o
n
Projected O&M Expenses -Stormwater
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 36
www.fcsgroup.com
several planned capital projects to ease the short-term financial burdens on its ratepayers. The
deferrals reduced the total capital expenditures to $57.9 million between FY2024 and FY2029.
Figure 14 summarizes the planned and revised capital spending plan.
Figure 14: Planned Capital Spending on Stormwater Projects ($ million)
The Stormwater Fund receives most of its capital funding from impact fees and developer
contributions. However, the cash flow generated from user charges is also a crucial funding source,
as is the use of the fund’s existing cash reserves. Table 7 summarizes the sources and uses of capital
for the Stormwater Fund for FY2024 through FY2029.
Table 7: Sources and Uses of Stormwater Utility Capital ($ million)
Funding Source (Use) 2024 2025 2026 2027 2028 2029
External and Grant Funding $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Impact Fees and CIAC $1.15 $1.15 $3.35 $3.35 $3.35 $3.35
Revenue Bond Proceeds $0.00 $5.03 $0.00 $0.00 $0.00 $0.00
SRF Proceeds $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Interest Earned $0.54 $0.82 $0.16 $0.10 $0.08 $0.07
Cash from Operations $3.39 $2.42 $2.67 $3.20 $4.31 $4.89
Use of Cash Reserves $13.31 $4.34 $6.42 $1.77 $0.54 $0.00
CIP Project Costs ($7.85) ($13.75) ($12.60) ($8.41) ($8.28) ($6.99)
Deposits to Cash Reserves ($10.54) $0.00 $0.00 $0.00 $0.00 ($1.33)
Sum of Sources and Uses $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
2024 2025 2026 2027 2028 2029
CIP $9.92 $17.08 $12.60 $8.41 $8.28 $6.99
CIP with Deferrals $7.85 $13.75 $12.60 $8.41 $8.28 $6.99
Cumulative CIP $9.92 $27.00 $39.60 $48.01 $56.29 $63.27
Cumulative CIP w/ Deferrals $7.85 $21.60 $34.20 $42.61 $50.89 $57.87
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$
m
i
l
l
i
o
n
Planned Capital Spending -Stormwater
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 37
www.fcsgroup.com
Debt Service
The Stormwater Fund’s current debt obligations include Series 2011, 2012, and 2020 revenue bonds
with an annual debt service of approximately $1.5 million. The Series 2011 and 2012 bonds will be
retired in FY2027, freeing up approximately $0.7 million in cash flow the City may use to issue new
bonds or as a funding source for ongoing capital projects.
The forecast prepared for the City includes one additional revenue bond:
• Series 2025 - $5.03 million in construction proceeds with anticipated issuance costs of $0.05
million for a total issue size of $5.08 million. We assumed a term of 30 years and an average
coupon rate of 4.25% with interest-only payments through FY2027.
Figure 15 summarizes the annual debt service for the existing and proposed bonds and the projected
debt service coverage on all debts (1.5x is the minimum value for debt coverage).
Figure 15: Annual Debt Service Payments - Stormwater ($ million)
Stormwater Revenue Requirements
The City’s current stormwater user charges at its existing schedule of approved rates and charges are
too low to provide for the Stormwater Fund’s ongoing operations and capital financing requirements.
Table 8 summarizes the major elements of the City’s stormwater revenue requirements based on the
cash-needs approach described earlier. The table demonstrates the user charge revenue requirement
each year and compares it to the expected revenue at the current rates. The additional revenue needs
begin in FY2026 and grow through FY2029; the value shown is cumulative and assumes no rate
increases. The final line of Table 8 shows the annual increase in revenue needed to eliminate the
shortfalls.
The total revenue requirement for FY2026 is the basis for the recommended rates for this Report.
2024 2025 2026 2027 2028 2029
Proposed Debt $0.00 $0.22 $0.22 $0.22 $0.32 $0.32
Existing Debt $1.55 $1.47 $1.47 $1.46 $0.77 $0.77
Projected DSC 3.5 3.2 2.9 3.1 5.3 5.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
De
b
t
C
o
v
e
r
a
g
e
R
a
t
i
o
$
m
i
l
l
i
o
n
Annual Debt Service Payments
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 38
www.fcsgroup.com
Table 8: Summary of Projected Stormwater Revenue Requirements ($ million)
Component of Revenue Req. 2024 2025 2026 2027 2028 2029
Operating Expenses $11.29 $12.47 $13.41 $14.22 $15.08 $15.98
Debt Service $1.55 $1.68 $1.68 $1.68 $1.09 $1.09
Capital Improvements $7.85 $13.75 $12.60 $8.41 $8.28 $6.99
Capital Funding Sources ($1.69) ($6.99) ($3.51) ($3.44) ($3.42) ($3.42)
Non-Rate Related Revenue ($1.00) ($0.21) ($0.10) ($0.11) ($0.11) ($0.11)
Cash Funded CIP $3.39 $2.42 $2.67 $3.20 $4.31 $4.89
Increase (Decrease) in Cash ($6.15) ($6.37) ($8.79) ($4.70) ($4.57) ($3.27)
Total User Charge Requirement $15.23 $16.76 $17.97 $19.26 $20.65 $22.14
User Charges at Current Rates ($15.23) ($16.76) ($16.79) ($16.82) ($16.86) ($16.89)
Additional Revenue Needed
(cumulative value)
$0.00 $0.00 $1.18 $2.44 $3.79 $5.25
Annual Revenue Increase % 0.00% 0.00% 7.00% 7.00% 7.00% 7.00%
While this study focuses on FY2024-2029, FCS GROUP prepared a longer-range forecast for the
City that extends for ten years. In the longer term, we estimate the City would require an additional
7.0% annual increases in the longer term.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 39
www.fcsgroup.com
Section III. COST-OF-SERVICE STUDY
Where the revenue requirements define the total amount of money the utilities need to recover from
all user charges, the cost-of-service study defines how to share those requirements among the City’s
various service classes; if the revenue requirement were a pie, the cost-of-service would determine
the size of each slice.
The process for determining the cost of serving a given service class includes:
• Functionalization – individual cost components within the revenue requirements are either
assigned or allocated to key functions performed by the utility system in providing services
to customers. Functions are steps in a process. For instance, a water utility collects untreated
water from lakes, streams, reservoirs, and wells. It transports the water to treatment facilities
before delivering it to customers through large transmission mains and, eventually, to smaller
distribution lines to individual customers. Therefore, the steps in the water delivery process
include the operating and capital costs incurred for providing the source of supply, treatment,
transmission, distribution, and individual service lines and meters.
• Allocation – System functions perform crucial steps in the process of delivering service to
customers, and engineers design the infrastructure within a function to meet different demand
criteria. For example, engineers design water treatment plants to meet peak-day demand.
Therefore, within a cost-of-service study, one would allocate the functionalized treatment
costs based on the system’s peak-day demands. Other system functions meet different types
of demand criteria. Importantly, the criteria are directly related to customer demands placed
on the utility system, providing a direct link between functionalized costs and customer
demand.
• Distribution – Once the utility allocates the functionalized costs to demand components, it
can determine an average unit cost for each. The unit cost is the total cost for a given
demand component divided by the total system demand. For example, the treatment function
with a total cost of $10 million and a peak-day system demand of 10 MGD would yield a unit
cost of $1 per GPD (=$10 million / 10 million gallons per day). To distribute the treatment
costs to individual service classes, multiply the unit cost by each class’s demand. For
example, if the Residential class has a peak-day demand of 2 MGD, the distributed treatment
function cost would be $1 x 2 million gallons per day, or $2 million. The unit cost is the
same for all classes.
Although the examples discussed above are related to water utilities, the cost-of-service process is
identical regardless of the type of utility system. The following sections will delve further into the
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 40
www.fcsgroup.com
differences involved, but all cost-of-service studies result in a direct relationship between the utility’s
costs and customer demand. It is an essential building block for proper rate design because it
objectively measures the utility’s cost of serving its various service classes. Moreover, the cost-of-
service findings allow the utility to establish rates that meet the objectives for interclass equity,
which exists when the revenue for the service classes closely matches their measurable service costs.
When a class’s revenue falls well short of costs, other classes must ultimately absorb the shortfall,
resulting in interclass subsidization. Adhering to cost-of-service findings avoids such subsidization,
ensuring each class’s rates recover costs without substantial over or under-recovery.
Unlike the revenue requirements which involved projecting revenue needs for multiple years, the
cost-of-service study focuses on a single year, called a “test year.” The test year for this study is the
City’s fiscal year 2026, which will commence on July 1, 2025.
WATER COST-OF-SERVICE STUDY
The water cost-of-service study involved functionalizing, allocating, and distributing the projected
FY2026 water system costs to 16 customer classes.
Functionalization of Water System Costs
We classified the SLC water system into ten functional components. The process included reviewing
the City’s O&M costs and assigning or allocating them to one or more functions. Additionally, we
assigned or allocated the City’s water system assets to the same functions to determine the correct
allocation of capital costs, as described later in this section.
• Source of Supply. The costs related to the collection of raw, untreated water, including the
costs of transporting and storing it before treatment. Source of supply includes purchased
water.
• Treatment. The costs related to treating raw water to the required drinking water quality.
Mostly, the treatment function consists of costs for the City’s water treatment facilities.
• Transmission. The costs of transporting water from the treatment facilities to storage and
smaller distribution pipelines. It includes the cost of pipelines 16 inches or larger.
• Storage. The costs of storing treated water to meet peak demand conditions and fire
suppression requirements throughout the City.
• Distribution. The costs of transporting water from transmission and storage to customer
service line connections. It includes the cost of pipelines smaller than 16 inches.
• Pumping. The cost of pumping water from lower elevations to higher ones within the water
system.
• Meters. The cost of maintaining customers’ meters and service lines.
• Customer. Costs related to the City’s customer service activities, billing and financial
systems, and much of the system's administration.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 41
www.fcsgroup.com
• General. Overhead-type costs that cannot be easily classified into a single function or group
of functions.
• Public Fire Protection. The direct costs of providing fire hydrants and related components
for public firefighting. It does not include the indirect costs of oversizing other system
elements to provide the firefighting capacity; we allocate those costs separately later in the
cost-of-service study.
• Peak Supply. A portion of the City’s source of supply includes wells used solely to meet
peak-day demands. We separated these facilities and their related costs into a separate
function called peak supply so we could easily allocate them later to the system’s peak day
requirements.
Figure 16: Functionalized Water System Costs ($ million)
Note: the O&M costs reported in this section of the Report are shown net of related non-rate revenue.
Total O&M costs for the water system are $108.33 million vs. $12.39 million of non-rate revenue for
a net O&M cost of $95.94 million.
SourceofSupply Storage Trans.Distrib.Meters Tmt.Custome
r General Pumping Public
Fire
Peak
Supply
Capital Costs $5.53 $1.73 $2.72 $18.33 $7.93 $4.88 $0.11 $4.64 $1.31 $0.07 $0.00
O&M Costs $36.06 $0.27 $3.27 $17.64 $6.98 $11.89 $15.23 $2.41 $1.96 ($0.85)$1.09
($5.00)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$ million
Distribution of Functionalized Water System Costs
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 42
www.fcsgroup.com
Allocation of Functionalized Water System Costs
We allocated the water system costs using the Base Extra-Capacity (BEC) approach described by the
American Water Works Association Manual M14. The BEC approach prescribes the allocation of
functionalized costs incrementally to peak demand components. A functional component designed
for peak days, for example, meets both average and peak-day demand; the BEC approach allocates a
portion of costs to both average and peak demand5.
Example.
The water treatment function costs are $10 million. The treatment function meets peak-day demands
of 10 MGD. Meanwhile, the system’s average-day demand is 6 MGD. The BEC approach would
result in an allocation of the functional treatment costs as follows:
Average Day
6 MGD / 10 MGD = 60%
$6,000,000
Peak-Day
(10 MGD – 6 MGD) / 10 MGD = 40%
$4,000,000
From the above example, the utility uses 60% of the treatment function to meet average-day demand
and 40% to meet peak-day demand.
The allocation process involves reviewing each system function and selecting an allocation procedure
based on how the function meets system demands. We developed eight allocation factors for the
SLC water system, as outlined below in Table 9.
4 American Water Works. M1, Water Rates, Fees, and Charges. 2017.
5 Note that in the BEC approach, the term “Base” refers to the average daily demand.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 43
www.fcsgroup.com
Table 9: Water System Allocation Factors – Base Extra-Capacity Approach
Allocation
Factor
Base
(Avg. Day)
Max-Day Max-Hour Customer Meter Fire
Base 100% - - - - -
Max Day 49% 51% - - - -
Max Hour 31% 32% 37% - - -
Customer - - - 100% - -
Meter - - - - 100% -
Fire Prot. - - - - - 100%
Storage 23% 24% 51% - - 2%
Distribution 30% 40% 35% - - 6%
Max Day Only - 100% - - - -
We allocated the system functions to the appropriate factors based on the typical design requirements
for each. For example, the source of supply deals with acquiring and transporting raw water
typically purchased to provide a given quantity per year without respect to daily or hourly peaks.
Accordingly, the source of supply function is best allocated to the Base allocation factor, which
results in 100% of the costs allocated to average-day, or “base,” demands.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 44
www.fcsgroup.com
Table 10: Allocation Factors Applied to Water System Functions
System Function Allocation Factor
Source of Supply Base
Storage Storage
Transmission Max-Day
Distribution Distribution
Meters Meter
Treatment Max-Day
Customer Customer
General Base
Pumping Max-Hour
Peak Supply Max Day Only
Progressing through each function, we allocated all O&M (net of non-rate revenues) and capital costs
to the BEC demand components. Figure 17 is a summary of the results from the allocation process.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 45
www.fcsgroup.com
Figure 17: Summary Allocation of Water System Costs to BEC Demand Components
Distribution of Water System Costs to Customer Classes
Distributing costs to a service class involves multiplying the average unit cost for each BEC demand
component by the class’s demand units. The average unit cost is the total cost for the categories
listed above in Figure 17, divided by the systemwide demand applicable to that category. For
example, the total base cost above is $71.83 million; the unit cost is the total cost divided by the
annual water demand for the entire system, 32.99 million CCF, or $2.18 per CCF. Each unit cost
relates to a different type of system demand:
• Base – base demands include the total water delivered in the water system up to the average-
day capacity level. The unit costs developed for base demand involve dividing total base
costs by the total system water deliveries. The system’s average daily demand is 90,375.5
CCF per day, or 32.99 million CCF in total water deliveries per year.
• Max Day—The max-day demand includes water delivered above the average daily demand to
meet the max-day demand requirements. We estimated the max-day demand for individual
classes based on billing records. The system max day, according to the City’s master plan
criteria, is 2x the average. The peaking factors for individual classes vary.
O&M Costs Capital Costs Total Costs
Fire $1.00 $1.08 $2.08
Meter $6.98 $7.93 $14.90
Customer $14.37 $0.19 $14.56
Max Hr $7.11 $7.86 $14.98
Max Day $14.72 $10.11 $24.83
Base $51.76 $20.08 $71.83
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$
m
i
l
l
i
o
n
Allocation of Water System Costs
Base Max Day Max Hr Customer Meter Fire
$95.9
$47.2
$143.1
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 46
www.fcsgroup.com
• Max Hour—The max-hour demand includes water delivered above the max-day level. We
estimated the max-hour demand requirements for each class based on their max-day demand
and applied a peaking factor determined by system design requirements. The City’s max-
hour, according to the master plan criteria, is 3.2x the average-day demand. The peaking
factors for individual classes vary.
• Customer – costs that tend to vary based solely on the number of customers rather than any
measurement of water usage fall into the customer demand component. The class demand
value for the customer component is the number of customer accounts served. However,
because we expect to recover customer costs from fixed monthly service charges, we
multiplied the customer accounts by twelve to arrive at a monthly rather than annual number
of customer units. The City provides 1.08 million water bills per year.
• Meter – the meter component includes the costs of reading, servicing, and caring for
customers’ water meters and services. Larger meters tend to cost more to care for than
smaller ones, so the typical demand units used for determining meter-related unit costs is a
size-weighted meter count or an equivalent meter count. The equivalent meter count for the
City is the number of meters by size multiplied by the meter’s capacity value relative to the
capacity of a ¾-inch meter. All meter capacities come from AWWA standards (Manual
M22). The City’s equivalent meter count is 136,599.
• Fire – The fire demand component consists of the direct fire protection costs incurred by the
City solely to provide firefighting capabilities. The City also incurs indirect fire protection
costs related to oversizing various components (i.e., functions) to meet system design
requirements for firefighting capacity. Still, the indirect costs are not part of the fire
component in this case (we account for them indirectly in the functionalization process). Fire
protection requirements differ for different properties but are typically expressed as some
gallons per minute (GPM) for a set duration. For this study, we developed a demand unit
value based on each class’s GPM requirement and duration times the number of accounts in
the class. For example, the single-family (inside city) class’s fire protection requirement is
2,000 GPM for two hours with 42,948 total accounts, for a total count of 10.3 million
weighted fire protection units. There are 34.1 million such units systemwide.
Table 11 below summarizes the distribution of system costs to individual classes. The top rows in the
table illustrate the systemwide unit cost calculations. The class totals show the total units for each
cost component, and the distributed costs are the system unit costs multiplied by the class’s demand
units.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 47
www.fcsgroup.com
Table 11: Distribution of Water System Costs to Classes
Cont. on Next Page
Description / Class Base Max Day Peak Hour Customer Meter Fire Total
Total Cost ($M)$71.83 $24.83 $14.98 $14.56 $14.90 $2.08
System Units 32,987,050 94,218 110,756 1,087,489 136,599 39,080,167
Unit Type CCF CCF/Day CCF/Day Bills Eq. MetersWeighed GPM
Unit Cost ($/unit)$2.18 $263.49 $135.23 $13.39 $109.11 $0.05
Class Distributions:
Single Family (Inside)
Units 7,237,991 23,215 25,827 515,372 46,919 10,307,440
Distributed Costs ($M)$15.76 $6.12 $3.49 $6.90 $5.12 $0.55 $37.94
Single Family (Outside)
Units 6,763,617 25,294 26,295 369,596 35,806 7,391,925
Distributed Costs ($M)$14.73 $6.66 $3.56 $4.95 $3.91 $0.39 $34.20
Duplex (Inside)
Units 735,297 1,887 2,341 46,895 4,281 937,900
Distributed Costs ($M)$1.60 $0.50 $0.32 $0.63 $0.47 $0.05 $3.56
Duplex (Outside)
Units 184,725 487 596 8,940 885 178,794
Distributed Costs ($M)$0.40 $0.13 $0.08 $0.12 $0.10 $0.01 $0.84
Triplex (Inside)
Units 108,911 220 311 6,061 574 121,220
Distributed Costs ($M)$0.24 $0.06 $0.04 $0.08 $0.06 $0.01 $0.49
Triplex (Outside)
Units 8,228 11 20 178 26 3,564
Distributed Costs ($M)$0.02 $0.00 $0.00 $0.00 $0.00 $0.00 $0.03
Multi-Family (Inside)
Units 2,761,221 3,748 6,788 28,194 9,036 3,383,280
Distributed Costs ($M)$6.01 $0.99 $0.92 $0.38 $0.99 $0.18 $9.46
Multi-Family (Outside)
Units 1,119,283 2,315 3,229 5,482 4,624 657,882
Distributed Costs ($M)$2.44 $0.61 $0.44 $0.07 $0.50 $0.04 $4.10
Commercial (Inside)
Units 6,864,605 14,176 19,790 69,530 20,778 8,343,600
Distributed Costs ($M)$14.95 $3.74 $2.68 $0.93 $2.27 $0.44 $25.00
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 48
www.fcsgroup.com
County Customers
The City serves customers located in the County, which we designated as “outside” customers per
Table 11The City charges County customers 35% more than the comparable rates for inside-city
customers, partly to compensate for the property tax assessment that inside-city customers bear to
offset a portion of costs incurred from water purchased from the Metropolitan District of Salt Lake
and Sandy. We prepared a separate analysis that confirmed the 35% cost differential.
Comparing Class Cost-of-Service to Existing Revenue
One key finding from a cost-of-service study is the adjustments required of the existing rates to
match each class’s service costs. A class’s service cost changes over time due to its use, or demand,
on the system relative to other classes. Thus, the cost-of-service findings from previous rate studies
may not coincide with updated studies.
Description / Class Base Max Day Peak Hour Customer Meter Fire Total
Total Cost ($M)$71.83 $24.83 $14.98 $14.56 $14.90 $2.08
System Units 32,987,050 94,218 110,756 1,087,489 136,599 39,080,167
Unit Type CCF CCF/Day CCF/Day Bills Eq. MetersWeighed GPM
Unit Cost ($/unit)$2.18 $263.49 $135.23 $13.39 $109.11 $0.05
Class Distributions:
Commercial (Outside)
Units 1,394,200 3,354 4,304 12,843 4,507 1,541,106
Distributed Costs ($M)$3.04 $0.88 $0.58 $0.17 $0.49 $0.08 $5.25
Institutional (Inside)
Units 1,195,803 3,094 3,822 6,464 2,963 775,680
Distributed Costs ($M)$2.60 $0.82 $0.52 $0.09 $0.32 $0.04 $4.39
Institutional (Outside)
Units 143,022 595 592 1,166 409 139,968
Distributed Costs ($M)$0.31 $0.16 $0.08 $0.02 $0.04 $0.01 $0.62
Industrial (Inside)
Units 1,672,833 1,708 3,774 2,659 1,661 319,080
Distributed Costs ($M)$3.64 $0.45 $0.51 $0.04 $0.18 $0.02 $4.84
Industrial (Outside)
Units 55,497 330 289 113 82 13,608
Distributed Costs ($M)$0.12 $0.09 $0.04 $0.00 $0.01 $0.00 $0.26
Irrigation (Inside)
Units 2,323,123 11,593 10,775 10,723 3,317 -
Distributed Costs ($M)$5.06 $3.05 $1.46 $0.14 $0.36 $0.00 $10.08
Irrigation (Outside)
Units 418,694 2,191 2,003 3,272 730 -
Distributed Costs ($M)$0.91 $0.58 $0.27 $0.04 $0.08 $0.00 $1.88
Private Firelines
Units - - - - - 4,965,120
Distributed Costs ($M)$0.00 $0.00 $0.00 $0.00 $0.00 $0.26 $0.26
Total Costs $71.83 $24.83 $14.98 $14.56 $14.90 $2.08 $143.18
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 49
www.fcsgroup.com
Table 12 summarizes the expected revenue for each class at the currently approved rates6 compared
to each class’s distributed costs of service. A positive variance indicates the rates for the class are
currently too high relative to costs; a negative variance indicates the rates are too low. The rate study
adjusts for such variances during the rate design process, which will be discussed in subsequent
sections of the Report.
Table 12: Comparison of Existing Water Rate Revenues with Cost-of-Service Findings by Class ($ million)
Class Revenue at
Existing Rates
Costs of
Service
Variance $ Variance %
Single Family (Inside) $35.92 $37.94 -$2.02 -5.3%
Single Family (Outside) $29.38 $34.20 -$4.82 -14.1%
Duplex (Inside) $3.32 $3.56 -$0.24 -6.8%
Duplex (Outside) $0.74 $0.84 -$0.09 -11.1%
Triplex (Inside) $0.59 $0.49 $0.10 20.1%
Triplex (Outside) $0.03 $0.03 $0.00 1.5%
Multi-Family (Inside) $10.68 $9.46 $1.22 12.9%
Multi-Family (Outside) $3.64 $4.10 -$0.46 -11.2%
Commercial (Inside) $29.00 $25.00 $4.00 16.0%
Commercial (Outside) $5.65 $5.25 $0.40 7.6%
Institutional (Inside) $4.58 $4.39 $0.19 4.3%
Institutional (Outside) $0.58 $0.62 -$0.03 -5.6%
Industrial (Inside) $4.44 $4.84 -$0.40 -8.2%
Industrial (Outside) $0.28 $0.26 $0.02 8.5%
Irrigation (Inside) $12.97 $10.08 $2.90 28.8%
Irrigation (Outside) $1.38 $1.88 -$0.50 -26.5%
Private Firelines $0.00 $0.26 -$0.26 -100.0%
Total $143.18 $143.18 $0.00
6 The currently approved rates as projected for fiscal year 2026 include City-approved increases to the base rates, plus a Rate
Stabilization Fee.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 50
www.fcsgroup.com
WASTEWATER COST-OF-SERVICE STUDY
The wastewater cost-of-service study follows all the same procedures described above regarding the
water cost-of-service study. However, the names of system functions and cost components are
different in wastewater. Additionally, there are only seven customer classifications because, unlike
water service, the City does not provide outside-city sewer services.
Functionalization of the Wastewater System Costs
We classified the SLC wastewater system into eight functional components. The process included
reviewing operating activities to assign O&M costs to one or more functions and evaluating the
City’s total asset investments to assign capital costs. Six functions relate to different aspects of the
wastewater treatment process.
• Treatment – General. Costs that are broadly applicable to the entire treatment process and
cannot be reasonably allocated to other treatment functions.
• Treatment – BOD. Costs applicable to the removal of organic pollutants from the
wastewater. BOD is a measure of organic concentration.
• Treatment – TSS. Costs applicable to the removal of suspended solids from the wastewater.
TSS is a measure of suspended solid matter in the wastewater.
• Treatment – Ammonia (NH3). Costs applicable to the removal of ammonia from the
wastewater. Ammonia is a new system function for the City related to new USEPA
requirements for treating nutrient pollutants (also referred to in the Report by its chemical
structure, NH3).
• Treatment – Phosphorus (TP). Costs applicable to the removal of phosphorus from the
wastewater. Like ammonia, phosphorus is a new system function related to newer USEPA
nutrient regulations (also referred to as TP for total phosphorus).
• Treatment – Flow. Costs related to the handling of hydraulic flows through the wastewater
treatment process.
• Collection System. Costs related to the trunks, mains, lift stations, and collection lines that
transport wastewater flows from customers to the wastewater treatment facility.
• Customer. Costs related to providing customer service, account maintenance, billing and
financial systems, and much of the system’s administration.
• Industrial Pretreatment. Costs specifically related to managing the City’s industrial
pretreatment program (IPP).
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 51
www.fcsgroup.com
Figure 18: Functionalized Water System Costs ($ million)
Note: the O&M costs reported in this section of the Report are shown net of related non-rate revenue.
Total O&M costs for the wastewater system are $47.11 million vs. $2.32 million of non-rate revenue
for a net O&M cost of $44.79 million.
Allocation of Functionalized Wastewater System Costs
We allocated the wastewater system costs using approaches described by the Water Environment
Federation (WEF) Manual of Practice 27. The approach calls for allocating costs between flow-
related costs, constituent costs related to pollutant removal, and customer costs. Unlike the allocation
approach for the water system, the wastewater approach is more straightforward. Costs related to
flow, for example, are allocated directly to the flow cost component; costs related to the removal of
BOD are allocated directly to the BOD component. In many ways, the allocation matches closely to
the functionalization. In a few cases, we developed indirect allocations for certain costs outlined in
the table below.
Table 13: Indirect Allocations Used for the Treatment-General Function
Allocation Usage Flow BOD TSS NH3 TP Cust.
Treatment Indirect Allocating Treatment-General function for assets, O&M expenses, and non-
rate revenue.
54.4% 15.4% 14.3% 7.5% 8.4% 0.0%
Treatment Depreciation Allocating Treatment-General function for depreciation only. 0.0% 50.0% 45.0% 1.0% 4.0% 0.0%
Based on system design and operations, we allocated the system functions to the appropriate factors.
For example, the Treatment-BOD function deals exclusively with removing BOD from the
Treatment -General Treatment -BOD Treatment -TSS Treatment -Ammonia Treatment -Phosphorus Treatment -Flow CollectionSystem Customer
Industrial
Pre-
Treatment
Capital Costs $0.52 $8.71 $8.09 $4.28 $4.78 $30.86 $21.72 $0.00 $0.00
O&M Costs $11.10 $1.76 $1.63 $0.86 $0.97 $6.23 $10.24 $10.50 $1.49
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$
m
i
l
l
i
o
n
Distribution of Functionalized Wastewater System Costs
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 52
www.fcsgroup.com
wastewater, and we allocated those costs directly to the BOD cost component. Except for the indirect
allocations described above, all allocations were direct assignments, with 100 percent of the costs
allocated to the cost component indicated in the table below.
Table 14: Allocation Factors Applied to Wastewater System Functions
System Function Allocation Factor
Treatment-General See Table 13
Treatment – BOD BOD
Treatment – TSS TSS
Treatment – Ammonia NH3
Treatment – Phosphorus TP
Treatment – Flow Flow
Collection System Flow
Customer Customer
Industrial Pretreatment Flow
After allocating each system function according to the above table, we allocated all O&M (net of
non-rate revenues) and capital costs to the correct factors, resulting in a total cost for each cost
component as summarized in Figure 19.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 53
www.fcsgroup.com
Figure 19: Summary Allocation of Wastewater System Costs
Customer Class Consolidation
The City’s current customer classification system includes six sub-classifications based on a
customer’s BOD and TSS concentrations, leading to a potential for 36 unique combinations, each
with its own service class. Each service class has its own rate. With this rate study, the City needs to
add NH3 and TP as additional pollutant categories, potentially increasing the number of unique
classes to 1,296. The current structure also includes a seventh classification reserved for customers
the City monitors regularly for their flows and pollutant loadings.
For this rate study, FCS GROUP examined ways to simplify the classification system. We
characterized sewer flows into three major classifications. A summary of the major characteristics of
these classes is provided in Table 15:
• Residential – Residential sewer classes include all single-family, duplex, and triplex
properties. Wastewater flows for these customers are of normal strength, meaning the
concentration of waste is low relative to commercial and industrial use. We recommend
measuring residential sewer flow as the average winter consumption (AWC) and the average
water usage for December- February.
O&M Costs Capital Costs Total Costs
TP $1.90 $4.83 $6.73
NH3 $1.70 $4.32 $6.02
TSS $3.21 $8.16 $11.37
BOD $3.46 $8.79 $12.26
Customer $11.99 $0.00 $11.99
Flow $22.51 $52.86 $75.37
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$
m
i
l
l
i
o
n
Allocation of Wastewater System Costs
Flow Customer BOD TSS NH3 TP
$44.8
$78.9
$123.7
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 54
www.fcsgroup.com
• Multi-Family – We propose a separate multi-family class for properties with more than three
dwelling units. The multi-family class has similar wastewater strength characteristics as the
residential class. However, sewer flows for this class are not as closely related to AWC.
Instead, we recommend measuring multi-family sewer flows as 70% of the monthly water
usage.
• Non-residential— Customers not in the residential or non-residential classes would be
classified as non-residential. That includes all commercial, industrial, and institutional users
in the system. These customers combine for a higher average wastewater strength than the
residential or multi-family classes, and we recommend measuring the class sewer flow as
70% of the monthly water usage.
Table 15: Characteristics of Recommended Sewer Classes (based on FY2023 records)
Billing Determinant Residential Class Multi-Family Class Non-Residential Class
Flow Measurement Avg. Winter Consumption 70% of Monthly Water Use 70% of Monthly Water Use
BOD mg/l 225 225 356
TSS mg/l 248 248 289
NH3 mg/l 21 21 32
TP mg/l 5 5 7
Non-residential customers who discharge unusually high concentrations of waste into the wastewater
system will be identified as Surcharge Customers. The City will identify and monitor such customers
who will pay charges in addition to the standard non-residential rates.
Distribution of Wastewater System Costs to Customer Classes
We developed unit costs for each of the above-cost components by dividing the total cost of each
component by the total service units. The average unit cost is then multiplied by each class’s service
units to determine the proportion of total costs to allocate to the class. We distributed costs for each
of the following components:
• Flow—Flow demand values are estimated contributions to the wastewater system by class.
For residential customers, flows are estimated based on their average monthly water usage
during the winter. For non-residential customers, we estimated the flow at 70% of their total
monthly water usage. The total estimated customer flows were 10.95 million CCF.
• BOD – BOD demand is an estimate based on the customer’s contributed flows and the
observed or estimated concentration of BOD in the customer’s wastewater effluent, measured
in milligrams per liter (mg/l). Converting the flow and concentration values results in a unit
of mass – measurable in pounds (or tons). The concentration levels vary based on the
customer’s assigned sewer classification (SC). The City assigns customers to varying SCs
based on typical concentrations for similar, mostly non-residential (i.e., business) activities.
In most cases, residential customers are assigned to SC1; other classes may be assigned to
higher classes based on observed measurements or similarity to other customers in the same
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 55
www.fcsgroup.com
SC. Based on the concentrations from Table 15, we determined that 20.95 million pounds of
BOD were removed from wastewater flows systemwide.
• TSS – TSS demand is the mass from converting the concentrations of TSS and the
customers’ contributed flows. Based on the concentrations in Table 15, plus our estimate of
contributed systemwide flows, we concluded there were 18.67 million pounds of TSS for the
FY2026 test year systemwide.
• Ammonia (NH3) – Ammonia is a new addition to the SC table for this rate study. The
current estimate for NH3 concentration is approximately 9 percent of the BOD concentration
for each SC. Based on Table 15, we estimated that 1.88 million pounds of NH3 will be
removed from wastewater flows in FY2026.
• Phosphorus (TP) – Phosphorus is another new addition, estimated with concentration levels
at two percent of the BOD concentration levels. Based on Table 15, we estimated
that 416,400 pounds of TP will be removed from wastewater flows in FY2026.
• Customer – Costs that vary solely on the number of customers served rather than their
wastewater flow or pollutant levels fall into the customer demand component. For this rate
study, we measured customer values as the equivalent number of accounts served, 242,975.
Table 16: Distribution of Wastewater System Costs to Classes
Comparing Class Cost-of-Service to Existing Revenue
As with the water cost-of-service study, a key finding for wastewater is the adjustment required of
the existing rates to match each class’s service costs more closely. Table 17 compares expected
revenue in the FY2026 test year to the findings from the cost-of-service study. A positive variance
indicates the rates for the class are currently too high relative to costs; a negative variance indicates
Description / Class FLOW SVC. Units BOD TSS NH3 TP Total
Distribution of Joint System Costs
Total Costs $75.37 $11.99 $12.26 $11.37 $6.02 $6.73
System Units 10,947,871 242,975 20,949,375 18,667,673 1,878,310 416,373
Unit Type CCF Service Units LBS LBS LBS LBS
Unit Cost ($/unit)$6.88 $49.36 $0.58 $0.61 $3.20 $16.16
Residential
Units 2,252,376 46,235 3,165,560 3,487,188 291,252 64,563
Distributed Costs ($ M)$15.51 $2.28 $1.85 $2.12 $0.93 $1.04 $23.74
Multi-Family
Units 1,905,448 55,281 2,677,977 2,950,065 246,391 54,618
Distributed Costs ($ M)$13.12 $2.73 $1.57 $1.80 $0.79 $0.88 $20.88
Non-Residential
Units 6,790,047 141,459 15,105,838 12,230,421 1,340,667 297,192
Distributed Costs ($ M)$46.75 $6.98 $8.84 $7.45 $4.30 $4.80 $79.12
Total Costs $75.37 $11.99 $12.26 $11.37 $6.02 $6.73 $123.74
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 56
www.fcsgroup.com
the rates are too low. The rate study adjusts for such variances during the rate design process, which
will be discussed in subsequent sections of the Report.
Table 17: Comparison of Existing Wastewater Revenue with Cost-of-Service Findings by Class ($ million)
Class Revenue at Existing Rates Costs of Service Variance $M Variance %
Residential $45.55 $23.74 $21.80 91.8%
Multi-Family $18.12 $20.88 -$2.77 -13.2%
Non-Residential $60.08 $79.12 -$19.04 -24.1%
Total $123.74 $123.74 $0.00
STORMWATER COST-OF-SERVICE STUDY
Although the stormwater cost-of-service follows the same functionalization process as water and
wastewater, the allocation and distribution steps are not necessary. The key determining factor for
stormwater costs is the impervious area attributable to individual customer classes. Impervious area
is developed or paved surfaces that alter the natural flow of runoff from precipitation. The runoff
from impervious areas becomes the stormwater flows the City must manage under its Municipal
Separate Storm Sewer System Permit (MS4 Permit). Because of the MS4 Permit requirements, the
City owns and operates an intricate storm drain system necessary for conveying stormwater flows to
natural waterways at appropriate water quality levels.
Functionalization of the Stormwater System Costs
The reason for functionalizing system costs, as described already for the water and wastewater
systems, is because doing so makes it easier to determine which cost components (e.g., base, use)
apply to which costs. For the stormwater system, we functionalized costs into three functional
components.7
• Base - All. Costs that are applicable to all customers, regardless of any onsite improvements.
This includes all administrative or overhead costs, engineering project management, and
operating and maintenance related to the public portion of the system.
• Base – Inspection/Monitoring. Costs related to inspections and monitoring stormwater
quality.
7 During the RAC process, only two functions were considered: Base and Use. The Base function was split into two separate functions
after the RAC process to determine an additional credit amount for properties with NPDES permits.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 57
www.fcsgroup.com
• Use. Costs associated with stormwater flow management on private parcels throughout the
City.
To do this, we developed an allocation factor from the proportionality of private impervious areas
(sourced from the customer billing data) to the impervious area related to streets, sidewalks and other
public paved areas. The public paved surfaces, while they contribute to stormwater flow, would not
be impacted by any individual facilities on private parcels and are therefore considered a part of the
utility Base costs. Table 18 summarizes the breakdown of O&M and capital costs between the three
functions.
Table 18: Summary Functionalization of the Stormwater System Costs
Revenue Requirement Base - All Base –
Inspection/Monitoring
Use Total
Net O&M Costs $8.71 $1.33 $3.10 $13.14
Capital Costs $3.20 $0.49 $1.14 $4.82
Total $11.91 $1.82 $4.24 $17.97
Percent of Total 66% 10% 24%
As all stormwater parcels are billed on the same impervious square foot basis, the primary goal of a
stormwater cost-of-service is to determine the maximum cost savings the utility would experience if
all private parcels had full on-site stormwater mitigation.
Allocation of Stormwater Costs to Customer Units
The total impervious area is the only allocation factor that applies to stormwater costs. We
characterized the impervious area into equivalent service units (ESUs) of 2,500 SF per ESU. We used
the customer billing data to determine the number of ESUs billed per customer type. We adjusted the
non-residential ESUs to reflect the City’s current stormwater credit program – essentially a program
that provides customers with a reduced ESU in exchange for installing and maintaining certain on-
site stormwater facilities. The credit values vary, but the City’s current stormwater credit policy
reduces the total non-residential ESUs by 38 percent.
In the case of stormwater, the allocation process is simple. All costs are allocated to the ESU values.
Based on Table 19 and the total cost of $17.97 million, the annual cost per ESU is $112.72 with the
existing rate credit structure in place.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 58
www.fcsgroup.com
Table 19: Summary Service Units and Unit Cost per ESU - Stormwater
Rate Class ESUs
Residential ESUs 45,601
Non-Residential 175,603
(Less) Credits (61,826)
Net Non-Residential ESUs 113,777
Total ESUs
Total Costs
$ / ESU (per yr.)
159,379
$17.97M
$112.72
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 59
www.fcsgroup.com
Section IV. RATE ADVISORY COMMITTEE
Salt Lake City periodically updates the structure of the water, sewer, and stormwater utility rate
system to ensure they are current and reflect community values. The rate study aims to make
improvements that will have a positive impact on the community for decades to come. This study
comes amidst a time where there is potential to make real, meaningful change, particularly
considering the changing climate, increasing periods of drought, lower water levels in the Great Salt
Lake, and more. The Salt Lake City Department of Public Utilities Rate Advisory Committee (RAC)
was formed to help develop this rate study. The RAC was assembled of a diversity of perspectives
that represent the community to evaluate and advise on the water, sewer, and stormwater rate
structures. The RAC was provided with information from the City regarding the utilities’ financial
responsibilities, necessary revenue to support their commitments, customer usage characteristics, and
the nature of the costs of service and service structures. The RAC had two overarching purposes
within the study:
• To provide input and recommendations regarding the rate structure to the Public Utilities
Advisory Committee, Salt Lake City Mayor, and Council
• To represent and communicate the views of the community
Selection of RAC members
In planning and convening the RAC, the team put together a list of customer types as well as other
interest groups that helped to round out a broad cross-section of perspectives from whom the study
could glean strong input and feedback on rate design. The following were the groups that were
invited to participate. Table 20 is a list of the individual members and their affiliated organization(s):
• One resident from each Council District in SLC
• SLC Mayor’s Office
• Industrial customers
• Commercial customers
• SLC School District
• Low-income Advocacy Groups
• Senior Citizen Advocacy Groups
• Mayor’s Office for Access and Belonging
• Public Utilities Advisory Board
• Metropolitan Water District of Salt Lake & Sandy
• Utah Rivers Council
• Western Resource Advocates
• Utah League of Women Voters
• SLC Chamber
• The Cities of Millcreek, Cottonwood Heights,
and Holladay
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 60
www.fcsgroup.com
Table 20: Organization and Business Participation in the RAC
Name Affiliation Name Affiliation
Lindsey Nikola SLC Mayor’s Office Lissa Larsen University of Utah
Damian Choi Mayor’s Office of Equity Brad Shafer Marathon
Jorge Chamorro SLC Public Services Baron Gajkowski SLC Global Logistics – Real Estate Developer
Kathryn Floor SLC Public Utilities Advisory Committee Geoffrey Dzuida Sweets Candy
Kathryn Torres City Council District 1 Matt Tomczyk Horizon Organic Dairy
Jeri Fowles City Council District 4 Trevor Haskell Uinta Brewery
Tom Godfrey City Council District 5 - SLC Public Utilities
Advisory Committee
Joseph Erickson Utah Community Action
Landon Clark City Council District 6 Gina Chamness Holladay
Ricky Martinez SLC School District Matthew Shipp Cottonwood Heights
Todd Reeder CDC Utah Jeff Silvestrini Millcreek City
Yousef Abouzelof City Creek Annalee Munsey Metropolitan Water District of Salt Lake and
Sandy
Norma Wills Utah League of Women Voters Nick Halberg Utah Rivers Council
Derek Miller SLC Chamber Nick Schou Western Resource Advocates
RAC Meetings and Events
The City hosted seven workshops and two facility tours for RAC members. The workshop meetings
were two hours each, covering all aspects of the rate study. During each workshop, FCS GROUP
presented the findings from various stages of the study, and RAC members were encouraged to ask
questions and provide feedback. Comments from RAC members factored into the direction of the
rate study and influenced the final recommendations as outlined in this report. In addition to the
seven workshops, the City also hosted two tours so RAC members could learn more about the water
and wastewater treatment facilities. A summary of the workshop dates and tour events is included in
Table 21.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 61
www.fcsgroup.com
Table 21: Schedule of RAC Meetings and Tours
Meeting #1
Date: Wednesday, May 29, 2024
Time: 12:00 pm to 2:00 pm
Location: Marmalade Library and Microsoft Teams
Topics: Committee Purpose, Introduction to Rates
Meeting #2
Date: Wednesday, June 12, 2024
Time: 12:00 pm to 2:00 pm
Location: Marmalade Library and Microsoft Teams
Topics: Financial Forecasts, Trade-Offs to Consider, Principles and Values
Meeting #3
Date: Wednesday, June 25, 2024
Time: 12:00 pm to 2:00 pm
Location: Marmalade Library and Microsoft Teams
Topics: Existing Rate Structures, Key Elements for New Rate Structure,
Equity in the Salt Lake Area
Meeting #4
Date: Wednesday, July 10, 2024
Time: 12:00 pm to 2:00 pm
Location: Microsoft Teams
Topics: Review of Current Rate Structures, Other Types of Rate
Structures
Meeting #5
Date: Wednesday, August 7, 2024
Time: 12:00 pm to 2:00 pm
Location: Marmalade Library and Microsoft Teams
Topics: Water Cost-of-Service Study Results, Preliminary Rate
Structure Suggestions
Meeting #6
Date: Wednesday, August 21, 2024
Time: 12:00 pm to 2:00 pm
Location: Marmalade Library and Microsoft Teams
Topics: Wastewater and Stormwater Cost-of-Service Study Results,
Wastewater Rate Structure Alternatives, Evaluating Outcomes,
Affordability Metrics
Meeting #7
Date: Wednesday, September 18, 2024
Time: 12:00 pm to 2:00 pm
Location: Microsoft Teams
Topics: Recommended Rate Designs, Affordability Metrics, Regional Bill Comparisons
Tour: New Water Reclamation Facility
Date: Friday, August 2, 2024
Time: 8:00 am to 11:00 am
Location: Water Reclamation Facility, 1365 West 1300 North, Salt Lake
City
Tour: Parley’s Water Treatment Plant
Date: Wednesday, August 14, 2024
Time: 9:00 am to 11:00 am
Location: Parley’s Water Treatment Plant
Feedback from RAC Members
From the first workshop, the RAC members provided their input on those things in the utility rates
they hoped would be addressed in the rate study. That discussion included the following
considerations:
• What will an increase in rates do to small businesses?
• What will an increase in rates do to retired/elderly individuals or others who live on fixed
incomes?
• Unexpected costs versus costs that can’t be anticipated.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 62
www.fcsgroup.com
• Overall equity assuming normal use.
• Volumetric and lower quintile fees.
• Subsidize lower-tier indoor cost with higher-volume outdoor costs.
• Increasing rates has a greater effect on lower income households than it does on higher
income households.
• How you message the rates, and the costs are extremely important for people’s behaviors.
• Has income determined rates?
• Having fees on each separate line item adds up and can have a greater impact than we may
realize.
Feedback regarding the current rate structures for Stormwater, Wastewater, and Water are listed
below.
Stormwater Rate Structure
Likes Dislikes
• The idea of incentivizing developers to reduce their
impact to the system is great, but we should consider
how it is structured.
• There are some residential customers that don’t have
curb and gutter – we should match level of service to
their charge – can we better balance impervious area
with outdoor water use? This is an equity
consideration.
Additional Thoughts
• What can we do to link this with conservation efforts
to help educate what people can be doing to better
conserve
• Consider including more developed alternatives on
the credit system
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 63
www.fcsgroup.com
Wastewater Rate Structure
Likes Dislikes
• Based on good rationale and industry standards.
• Defensible.
• Generally easily understood by the public .
• Seems more equitable – in terms of who is paying
and who benefits than a structured and monitored
approach would be.
• We can design it to meet affordability goals, because
there isn’t a base rate.
• Current BOD classes and limits can make it difficult
to conserve water for highest sewer classes. Water
conservation is disincentivized to get down to a lower
class (encourages using a lot of water to dilute
byproduct to get to a lower BOD per CCF).
• Consider if a base rate would be more equitable.
Would this help with maintenance and help
customers when they experience leaks?
• Lack of information about why sewer class may have
been changed and of testing results – data and
calculations for what sewer class a customer is in is
not shared with the customer.
• Doesn’t capture flows well.
• Average winter consumption doesn’t infrastructure
leaks.
Additional Concerns, Considerations, Ideas
• Are there equity considerations between the quantity-
quality approach and the surcharge application?
• Misapplication can be helped/decreased through
factors outside of the actual rate established, such as
better coordination between different city
departments.
• How close are we to cost of service currently?
• Charging for phosphorous and ammonia.
• Cost will go up as regulations tighten.
• Is average winter consumption the right estimate?
• Potential for less reliable revenue.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 64
www.fcsgroup.com
Water Rate Structure
Likes Dislikes
• Like the inclining block structure.
• The fourth tier is charged for excessive use.
• Considers beneficial uses.
• Supports Conservation.
• Makes sense for county users to pay more if they are
not paying with their property tax.
• Like that non-discretionary uses dictate the first block
– helps to make sure that the water necessary for life
is affordable.
• Current structure is defensible – it is derived from
cost-of-service analysis and data and it is not
arbitrary.
• Outdoor irrigation structure considers beneficial uses
– specifically common/city owned green spaces and
urban agriculture.
• Outdoor water use is subsidized (residential and
commercial).
• Doesn’t serve the utilities purpose of revenue
reliability, especially considering how much debt
service public utilities has and how much is being
deferred.
• This structure is working and encouraging businesses
(or other customers in the higher blocks) to use less
water, which is good, but that is further contributing to
the revenue problem.
• Can it be made easier for urban farmers to
understand and participate?
Additional Concerns, Considerations, Ideas
• State requirements (HB 121) will decrease water use,
which will decrease revenue. How do we balance
conservation need with revenue needs?
• The current rate structure may force lower tires to
start needing to par more, which may raise issues or
concerns with affordability.
• Outdoor water use is not solely irrigation water, this is
also places like splash pads or other cooling centers.
Areas such as these will become more and more
needed as summers get hotter, and these may be
some of the only places that kids can safely recreate
outdoors during the hotter times of the year.
• Are there tiers that can be created or considered for
indoor water use?
• Can we look at winter use tiering?
• Consider what behavior you’d like to see from
accounts like University of Utah as they grow and
change.
• Can we look at having below cost outdoor water use?
How do we review/clean up service classes? How
does SLCDPU want new development metered?
RAC members were encouraged to reach out anytime to ask questions or provide feedback – when
that happened, we published all questions and answers for the benefit of all members on a shared
document. These questions and the answers that the team prepared are shown at the end of this
section.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 65
www.fcsgroup.com
Public Engagement
RAC members were asked to not just represent their own personal interests and opinions on the
Committee. They were also asked to reach out to others in the group they represented (i.e. residents,
commercial users, developers, low-income groups, etc.) and ask what concerns, questions or issues
they have and then bring those to the broader committee in our meetings.
Additionally, information about the RAC was posted on the SLCDPU website – where members of
the public could reach out and connect with the person representing them in the process and offer
their feedback directly.
Figure 20: RAC Information from SLCDPU Website
RAC members were encouraged to continue to participate with the Rate Study process even after the
conclusion of the above-mentioned meetings. RAC members were encouraged to continue to follow
the process through the approval and public notification process, which includes a draft report of the
rate study prepared submitted to the Mayor and City Council, hosting a work session with the City
Council, and will henge on the budget process and fee schedule for the city.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 66
www.fcsgroup.com
Section V. RATE DESIGN
The purpose of a rate design is to convey the findings from the cost-of-service study to individual
customers. The cost-of-service findings help determine the total revenue the City should recover
from each class of service. When rates produce revenues equal to each class’s costs, it is said to have
achieved interclass equity, where each class pays for its share of costs without subsidizing the costs
of other classes. Rate designs should also aspire to achieve intraclass equity, where individual class
members pay for their proportionate share of costs without subsidizing other members within the
same class. In addition, rate designs may help achieve other objectives, a typical listing of which is
included in Table 22.
Achieving all objectives outlined below to their fullest extent is mostly unattainable. The objectives
tend to conflict with one another. For instance, attaining revenue sufficiency may necessarily come
with challenges to ideals around affordability; making the rate design simple to understand often
means sacrificing some level of fairness and equity, and so on. Still, adhering to the analytical
findings as outlined in Sections 2 and 3 of this Report serves to meet several of the objectives in
Table 22 because doing so will address objectives such as revenue sufficiency, interclass equity, cost
allocation, and certain aspects of economic efficiency. Moreover, those findings help provide a basis
for judging the tradeoffs involved in prioritizing one set of objectives over others.
Table 22: Typical Rate Design Objectives
Rate Design Objective Typical Definition
Revenue Sufficiency The rate design recovers the necessary revenues.
Fairness and Equity The rate design achieves interclass and intraclass
equity.
Economic Efficiency The rate design promotes the efficient use of
resources and water conservation.
Sustainability and Predictability The rate design allows customers to budget and plan for their utility expenses.
Clarity The rate design is transparent and easily understood
by customers.
Cost Allocation The rate design allocates costs to an individual level
based on cost causation principles.
Affordability Basic utility service should be reasonably affordable for those lacking the ability to pay.
As we will see later in this Section, the recommended rates do not satisfy every objective. However,
the recommendations do make important improvements in key areas and minimize tradeoffs with
other objectives to the extent possible.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 67
www.fcsgroup.com
WATER RATE DESIGN
The City’s current water rate structure is an inclining block design for residential and non-residential
customers during summer periods, where the volumetric rate increases with the customer’s water
usage. The two summertime rates differ in that the residential rates increase at the same usage
thresholds for all customers in the class, whereas the non-residential rates increase proportionally to
each customer’s AWC. The rates become uniform in winter, with a single volumetric rate applicable
to all water usage. All customers are also charged a fixed monthly charge based on the meter size.
Inclining block rates are ubiquitous in western water utilities. Like others, the City chose the current
rate structures in part to promote water conservation. The working concept with inclining block
designs is that they increase the customer’s marginal cost of water. In doing so, the structure works
on the principle of price elasticity of demand, where expected demand decreases as the price (i.e., the
rate) increases. Whether customers purchasing water services react to marginal price signals is a
topic debated among economists. In a 1985 paper published in The Review of Economics and
Statistics, Dr. Jeong-Shik Shin concluded that utility service customers could not reasonably react to
marginal prices for lack of necessary information about their instantaneous usage and that their
elasticity responses were, therefore, based more on the average cost of their bill rather than the
marginal price signals.8 Marginal cost pricing is further complicated with water providers because the
short-run marginal cost roughly equals the (relatively small) variable production costs. Water utilities
are natural monopolies that, by definition, operate at very high fixed costs, making multiple
providers within the same market economically infeasible. Marginal cost pricing for a water utility
would mean pricing below average cost, ultimately leading to insolvency. This is why utility
regulatory commissions regulate rates based on average-cost pricing.
One of the key challenges in the current water rate design was the sudden decline in revenue the City
experienced during the past three years. Since 2021, the summertime water demand declined by
nearly 20 percent from previous norms. The current water rate design exacerbated the revenue losses
due to its high reliance on revenue from high summertime usage, a characteristic we define as rate
tilt. The current rate structure tilts because the effective price per unit is below the average cost per
unit at the lower usage levels. Therefore, the City had to depend on high usage levels in the
summertime to compensate for the built-in subsidy (of lower usage customers) and recover sufficient
revenue to meet its annual costs. As summertime demand declined, so did the ability to make up for
those losses.
Figure 21 illustrates the rate tilt calculated from the 2018 rate study. The cost-of-service analysis
defines the average cost per unit, shown in the figure as the dashed gold line. The adopted rate
structure defines the price paid per unit, shown in the solid blue line. The City’s recent revenue
losses from the decline in summertime demand can be traced to the tilt. The figure shows that all
8 Shin, J.-S. (1985). Perception of Price When Price Information is Costly: Evidence from Residential Electricity Demand. The Review of
Economics and Statistics, 67(4), 591–598.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 68
www.fcsgroup.com
usage below nearly 45 CCF per month (approximately 33,600 gallons) was priced below cost. The
structure is only sustainable assuming a sizeable number of customers with usage above 45 CCF
where prices exceed cost. Since 2021, the amount of water sold in the summertime has declined
substantially, meaning fewer high-volume customers supported the subsidies.
Figure 21: City’s Residential Rate Tilt from the Previous Rate Study
In the years following the 2018 rate study, the City made progress in minimizing the degree of tilt in
the rate structure, but it still exists today. Reducing tilt to ensure more reliable revenue recovery was
a major consideration for the proposed water rates.
Water Rate Design Objectives
Eliminating rate tilt was a major consideration for the water rate design, but not the only one.
Members of the RAC and the City’s water utility leadership shared the concern for revenue
sufficiency and the challenges from known rate tilt but were also wary of reducing what they viewed
as conservation incentives. Many of the commercial customers on the RAC were in favor of
simplifying the non-residential rate because the current design was perceived as unfair in cases where
the customer was using water not for discretionary reasons for which conservation efforts had been
targeted, such as outdoor irrigation, but rather for legitimate business needs. Finally, there was strong
consensus from both the RAC and the City that the rate structure should do more to promote
affordability for basic services.
Based on the inputs received from the RAC and City leadership, together with our understanding of
the current difficulties with the rate structure and the cost-of-service findings, we developed separate
rate structures for the residential and non-residential classes. For the residential class, we
recommended a structure that would retain the inclining block design while correcting for rate tilt. To
promote affordability, we restructured the existing rate blocks, creating a 0-5 CCF on the front end of
the structure for basic indoor usage (e.g., cooking, bathing, etc.) and reducing the top tier threshold
from 60 CCF to 40 CCF.
We recommended a simplified rate structure for the non-residential rates that eliminates the inclining
block based on AWC and replaces it with a seasonal uniform rate. The new rates feature a single
volumetric rate that will apply in the winter and another higher rate that will apply in the summer.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0 10 20 30 40 50 60 70 80 90 100
Av
g
.
C
o
s
t
/
R
a
t
e
p
e
r
U
n
i
t
CCF per Month
Est. 2018 Cost per Unit Est. 2018 Price per Unit
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 69
www.fcsgroup.com
The non-residential design addresses concerns about fairness and simplicity while preserving and
enhancing revenue sufficiency. At the same time, the seasonal rates retain a measure of conservation
incentives; the higher rates in the summer send a consistent price signal to non-residential customers
to curb demand while the water system is operating at peak production for the year. The price signal
applies to discretionary and nondiscretionary demand without preference, encouraging water
efficiency in both cases without having the appearance of penalizing one over the other.
Proposed Water Rates
Residential Water Rates
The proposed water rates retain the tiered structure of the current rate design9. However, there are a
few important changes of note. First, the proposed tiered structure would remain in effect year-round;
the uniform wintertime rate has been eliminated. Second, the volumes available in each block of
usage have been decreased. Finally, the proposal eliminates the RSF from the monthly service
charges. The proposed rates also eliminate the rate tilt from the previous structure. Residential
customers include single-family, duplex, and triplex dwelling units. For duplex, and triplex
customers, the allowances of water in each tier are multiplied by the number of dwelling units. For
example, a duplex residential customer’s monthly service charge for a 1” meter would be $28.57, and
the allowance in Block 1 would be 10 CCF (2 x 5CCF); Block 2 would include 20 CCF (2 x 10
CCF), etc.
The proposed rates also feature a different block structure. Whereas the old structure had a 0-10 CCF
volume block in Block 1, the proposed structure splits the volumes into two blocks; Block 1 is now
0-5 CCF, and Block 2 is 6-10 CCF. Block 3 will include a volume allotment of 11 – 40 CCF. Block
4 is reserved for all usage above 40 CCF. The main result is to shift block thresholds down so the
City can offer low-volume users the lowest rates without requiring subsidization from higher-volume
users. The proposed residential rates should improve affordability outcomes for low-volume users.
We estimate that all customers using 5 CCF or less, which accounts for nearly half of all residential
water bills, will see a decrease in their bills compared to the current rate structure. Table 23
summarizes the proposed residential rates compared to the current ones.
9 In comparing rates in this Report, we have estimated the current rates for FY2026 starting July 1, 2025, which encompasses the City’s
proposed Rate Stabilization Fee.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 70
www.fcsgroup.com
Table 23: Proposed Inside-City Residential Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $25.65 $22.48 Block 1 (0-10CCF) $2.24 Block 1 (0-5CCF) $2.84
1” $60.79 $28.57 Block 2 (11-30CCF) $3.05 Block 2 (6-10CCF) $3.49
1 ½” $200.77 $43.66 Block 3 (31-60CCF) $4.23 Block 3 (11-40CCF) $4.46
2” $214.78 $61.85 Block 4 (> 60CCF) $4.52 Block 4 (> 40CCF) $4.92
Winter (All CCF) $2.24 Winter (All CCF) n/a
Non-Residential and Multi-Family Water Rates
The proposed non-residential rates aim to simplify the rate structure from its current tiered structure
based on each customer’s AWC levels to a uniform seasonal rate. The current structure, similar to the
residential rate structure, includes the same challenge of rate tilting; the proposed structure eliminates
it. Non-residential customers include commercial, industrial, and institutional customers. Larger
multi-family properties are now classified separately as a new Multi-Family class due to their unique
usage characteristics and slightly different volumetric rates.
Table ES- 17: Proposed Inside-City Non-Residential and Multi-Family Water Rates for FY2026
Monthly Service Charges Volumetric Rates
Meter Current Proposed Current Tiers
(as % of AWC) Current
$/CCF
Proposed Tiers Proposed
$/CCF
3/4” $25.65 $22.48 Block 1 (0-100%) $2.43 Non-Residential
1” $60.79 $28.57 Block 2 (100-300%) $3.34 Summer (All CCF) $3.53
1 ½” $200.77 $43.66 Block 3 (300-600%) $4.64 Winter (All CCF) $2.18
2” $214.78 $61.85 Block 4 (> 600%) $4.93 Multi-Family
3” $604.67 $110.40 Winter (All CCF) $2.43 Summer (All CCF) $3.35
4” $646.62 $164.95 Winter (All CCF) $2.18
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 71
www.fcsgroup.com
WASTEWATER RATE DESIGN
The current wastewater rates are of a variety often referred to as a quantity-quality approach. Under
that approach, the City assigns each customer a quantity of wastewater flow based on their average
wintertime water usage. The City bills customers monthly for the flows at a common rate per
hundred cubic feet (CCF). In addition, each customer is assigned to various levels of water quality.
The City has six predefined water quality levels based on organic and solids concentrations in the
wastewater flows.1011 Customers discharging more highly concentrated wastes are placed in higher
classifications and pay a higher rate to account for the cost of treating the additional pollutants. In the
City’s case, customers may have a different classification for organic and solids based on their
expected effluent strength. In addition to the six predefined classifications (see Table 24), the City
has a seventh class where customers’ flows are routinely monitored; they are billed based on their
actual flows and waste discharges rather than the estimated levels inherent in classes 1-612.
Table 24: 2024 Sewer Rates for Class 1-6 Customers
Sewer Classification Concentration
Levels (mg/l)
Flow Rate per CCF BOD Rate per CCF TSS Rate per CCF
Class 1 < 300 $4.22 $1.49 $1.08
Class 2 300-600 $4.22 $2.42 $2.17
Class 3 600-900 $4.22 $3.98 $3.70
Class 4 900-1200 $4.22 $5.70 $5.04
Class 5 1200-1500 $4.22 $7.14 $6.56
Class 6 1500-1800 $4.22 $8.81 $7.94
The City’s charge components are additive, meaning customers pay the flow rate, BOD rate, and TSS
rate in determining the total bill. For example, a customer in Sewer Class 3 with 10 CCF of average
wintertime flow would pay:
[Flow:10 CCF x $4.22] + [BOD: 10 CCF x $3.98] + [TSS: 10 CCF x $3.70] = $119.00
The quantity-quality method offers certain advantages from a rate design perspective. Notably, it
offers the perception of a high level of fairness and equitability where those customers with more
challenging waste streams pay proportionately more to account for increased use of treatment inputs.
10 Organic concentrations are measured in milligrams per liter (mg/l) for biochemical oxygen demand, or BOD for short. Higher
concentrations indicate greater levels of pollutants.
11 Solids concentrations are measured in milligrams per liter (mg/l) for total suspended solids, or TSS for short. Higher concentrations
indicate great levels of pollutants.
12 The existing structure also includes a 7th classification for monitored customers charged per LB of TSS and BOD; the current rates are
shown later in this section at Table 26.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 72
www.fcsgroup.com
In reality, the approach can be difficult to administer in the manner intended. The approach depends
on having a reasonably accurate understanding of each customer’s waste concentrations, which
implies a regular sampling and testing process. Such tests are most often labor and time-intensive, so
many utilities who use such an approach tend to depend on published resources, many of which are
now much outdated, or rules of thumb to characterize concentration levels. Often, the intended
fairness and equity with such a rate structure can become difficult to maintain.
The other typical approach used in the wastewater industry is a surcharge approach, which the City
uses for its Class 7 customers. Under the surcharge approach, select customers are routinely
monitored for flows and waste concentrations and are billed based on the results of such monitoring.
Because of the costs involved, many wastewater providers limit the program to customers whose
wastewater is likely to have a material impact on the treatment system. Customers with very high
waste concentrations coupled with relatively large flow rates fall into a typical category of surcharge
customers – those whom wastewater providers would monitor routinely.
The City has additional requirements for certain other customers posing higher risks to the
wastewater system. Like other wastewater utility providers, the City must manage and monitor
certain industrial or commercial customers through an industrial pretreatment program (IPP). Other
customers, such as some restaurants, contribute substantial food, oils, and grease (FOG) into the
wastewater system and receive additional monitoring in addition to requirements for on-site
mitigation or removal facilities.
Wastewater Rate Design Objectives
Although we examined maintaining the current wastewater rate structure, the challenges in doing so
proved very difficult. Under the current structure, unmonitored customers may have as many as 36
combinations of applicable rates, plus a rate for their wastewater flow, for a total of 37 potential
configurations. The new rate structure must account for two new pollutant levels in the customers’
wastewater flows: ammonia (NH3) and phosphorus (TP). With the addition of NH3 and TP, the
possible combinations of user rates would jump to 1,297. To the extent that the City may have found
it challenging to assign customers to the correct sewer classifications consistent with their individual
waste concentrations, a system with over a thousand new classifications would introduce orders of
magnitude greater difficulty.
During our meetings with the RAC, it also became clear that non-residential customers preferred a
simpler rate structure. Some said the structure's complexity had made it difficult for them to budget
their wastewater costs reasonably. Others felt they had not been assigned to the correct classification
and were, therefore, charged higher rates.
The City’s wastewater utility leadership also expressed interest in simplifying the rate structure while
retaining as much of the fairness and equitability promoted by the current structure as possible. One
of the key challenges for the City over the previous few years had been a decline in wastewater
revenue. Reduced complexity, they reasoned, may help restore revenue streams, especially if coupled
with a reset in the cost basis for the rates.
Given the input from the RAC and City leadership, together with the understanding of the balance of
objectives as shown above in Table 22, we recommended that the City move from a largely quantity-
quality approach to rate design to a surcharge approach. Under the surcharge approach, we would
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 73
www.fcsgroup.com
propose a single class-based rate for most customers in a given class but would retain the high-
strength surcharges for customers discharging unusually high concentrations of pollutants into the
wastewater system. The design would also introduce a fixed monthly charge for all customers. The
simplified rate structure would reduce the possible rate combinations from over a thousand to just
one fixed monthly charge and one volumetric charge for all but a relative few. However, by retaining
the high-strength surcharges, the City would be able to maintain a measure of fairness and equity by
identifying and monitoring those customers whose high-strength discharges pose a higher burden or
higher cost within the wastewater conveyance and treatment system.
Proposed Wastewater Rates
The proposed wastewater rates are shown below in Table 25. Apart from simplifying the sewer
classes, the proposed rates include additional features worthy of note. First, the monthly fixed
charges of $3.70 will be assessed per equivalent dwelling unit (EDU). For single-family, duplex, and
triplex properties in the proposed residential class, the dwelling unit matches the type of property:
one for single-family, two for duplex, and three for triplex. Multi-family accounts would pay $3.70
for each dwelling unit as well. For non-residential customers, one dwelling unit equals four CCF of
wastewater flow; a commercial customer with 12 CCF of flow would be charged for three EDUs. The
City’s current and future RSF charges are eliminated.
Second, we recommend measuring billed sewer flows differently among the different classes. AWC
is an acceptable and reasonably accurate way to measure sewer flow in the residential class.
However, we recommend decreasing the months used to determine average winter water usage from
six months to three, using only the months of December – February. For multi-family and non-
residential classes, we recommend using 70% of the total monthly water usage; the 70% coefficient
is a standardized allowance for water not returned to the City’s sewers (e.g., consumptive water
usage related to such things as irrigation, cooking, manufacturing processes, etc.).
Lastly, the volumetric rate for residential and multi-family sewer flows reflects the same typical
domestic wastewater strength levels, resulting in identical rates. Non-residential volumetric rates are
higher to account for elevated wastewater strength typical in the class, which includes all
commercial, industrial, and institutional customers.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 74
www.fcsgroup.com
Table 25: Proposed Wastewater Rates for FY2026
Monthly Service Charges Volumetric Rates
Current Charges Current Volumetric Rates ($/CCF)
Meter Sz. Monthly Charge Classes Flow BOD TSS
5/8” $17.66 SC 1 $4.63 $1.64 $1.18
1” $51.89 SC 2 $4.63 $2.66 $2.38
2” $138.19 SC 3 $4.63 $4.37 $4.06
3” $704.02 SC 4 $4.63 $6.26 $5.53
4” $704.02 SC 5 $4.63 $7.84 $7.20
6” $704.02 SC 6 $4.63 $9.66 $8.71
Proposed Charges Proposed Volumetric Rates ($/CCF)
Class Monthly Charge* Residential
Per CCF Avg. Winter Consumption $8.56
Residential $3.70 Multi-Family
per CCF 70% of Metered Water Use $8.56
Commercial $3.70 Non-Residential
per CCF 70% of Metered Water Use $9.54
* per equivalent dwelling unit
Non-residential customers discharging unusually high concentrations of waste will be identified and
routinely monitored by the City for their actual wastewater flows and waste contributions. These so-
called “surcharge customers” will pay the normal non-residential rate from Table 25, plus additional
charges for waste concentrations exceeding the non-residential class's average level. Table 26
summarizes the proposed surcharge rates.
Table 26: Proposed High-Strength Surcharges
Current Surcharges Proposed Surcharges
Pollutant $ / LB. Pollutant $ / LB.
BOD $1.05 BOD (>360 mg/l) $0.53
TSS $0.63 TSS (> 290 mg/l) $0.55
NH3 (> 32 mg/l) $2.88
TP (> 7 mg/l) $14.52
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 75
www.fcsgroup.com
STORMWATER RATE DESIGN
The City’s current stormwater rate structure is charged based on impervious surface area, resulting in
a rate expressed as a dollar amount per equivalent service unit (ESU). An ESU represents the average
impervious area for a single-family residential parcel within the service area. The City has defined
one ESU to be equal to 2,500 impervious square feet (ISF). Impervious surface area is widely
accepted as an appropriate measure of a property’s contribution of runoff, providing a rational nexus
to service received from a stormwater program.
The City’s existing 2024 stormwater rate per ESU is $8.33.
The City has a slightly weighted ESU application for residential properties with four or fewer units.
• Single-family and Duplex (up to 0.25-acre lot): 1 ESU per month
• Single-family and Duplex (greater than 0.25 acres): 1.4 ESUs per month
• Triplex and Fourplex: 2 ESUs per month
Other developed properties are billed based on the total impervious area converted to ESUs. The
monthly bill for these properties is calculated as ESUs x Rate per ESU. For example, a commercial
property with 25,000 impervious square feet or 10 ESUs would pay:
25,000 ISF / 2,500 ISF = 10 ESUs x $8.33 = $83.30 per month
Stormwater On Parcel Mitigation Credit
The City currently offers a stormwater credit program – essentially a program that provides
customers with a reduced rate per ESU in exchange for installing and maintaining on-site stormwater
mitigation facilities. The credit values vary by parcel, as determined by City staff at the time of
connection, with a maximum credit value of 75 percent reduction to the rate per ESU. The average
existing credit per parcel is a 61 percent reduction to the rate per ESU. Currently, over half of the
non-residential impervious area in the City is receiving a credit, reducing the overall billable ESUs in
the system by 28 percent.
The credit is applied directly to the monthly rate for each individual credited parcel. For example, a
commercial property with 25,000 impervious square feet and a 60 percent credit would pay:
25,000 ISF / 2,500 ISF = 10 ESUs x $8.33 x (1 - 60% credit) = $33.32 per month
However, the stormwater cost-of-service functionalization results show that only 24 percent of
system costs would be eliminated if all parcels had comprehensive on-site facilities to mitigate
stormwater. Therefore, we recommend a maximum credit for on-site mitigation of a 25 percent
reduction in the rate.
There are a small number of properties in the City that have their own NPDES permit, and therefore,
the City does not perform any inspections or monitoring of these properties or facilities. The parcels,
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 76
www.fcsgroup.com
as determined by the City, are eligible for the additional 10 percent credit reflecting the Base -
Inspection/Monitoring function.
Stormwater Rate Design Objectives
Several rate structures were discussed with City staff, but ultimately it was determined that the most
appropriate structure for the City is an ESU-based rate similar to the existing rates. The key
recommended structure change is the above adjustment to rate credits for onsite mitigation.
As with water and wastewater, City staff expressed a desire for a structure that focused on revenue
predictability and cost-of-service-based equity. Additionally, the City’s stormwater utility leadership
expressed interest in increasing affordability for residential customers while retaining as much equity
and fairness as possible. Recognizing that the overall revenue requirement need is increasing faster
than inflation for the stormwater utility, we are able to mitigate that impact on typical residential
customers through rate design.
One concern raised by City leadership was the potentially large rate impact on non-residential parcels
currently receiving credits larger than 25 percent. The RAC also raised the concern that perhaps these
properties made investments in onsite facilities because of this rate credit offering. To mitigate the
impact of the change in policy and give property owners time to adjust, the proposed rates include a
three-year phase-in to the new maximum credit amount. Each credited parcel would move toward the
new maximum credit by one-third per year. For example, if a parcel currently receives a 55 percent
credit, it will receive a 45 percent credit in FY2026, a 35 percent credit in FY2027, and a 25 percent
credit in FY2028. Table 27 below shows the adjusted system total ESUs with the three-year phase-in
of the new maximum credit amount.
Table 27: Billable ESUs with Three-Year Phase-In
Rate Class 2026 Existing ESUs 2026 Adj. ESUs 2027 Adj. ESUs 2028 Adj. ESUs
Residential ESUs 45,601 45,601 45,692 45,784
Non-Residential 175,603 175,603 175,603 175,603
(Less) Credits (61,826) (49,986) (38,146) (26,306)
Net Non-Residential ESUs 113,777 125,618 137,458 149,298
Total ESUs
Total Costs
$ / ESU (per yr.)
159,379
$17.97M
$112.72
171,219
$17.97M
$104.93
183,150
$19.23M
$105.17
195,082
$20.65M
$105.86
Proposed Stormwater Rates
The proposed stormwater rates are in Table 28. With the three-year phase-in, the reduction in credits
offered each year roughly balances out the seven percent per year user rate revenue requirement
need. Therefore, the resulting rates increase in fiscal year 2026 but remain relatively consistent
throughout the forecast.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 77
www.fcsgroup.com
Table 28: Proposed Stormwater Rates
Class Current
FY2025
Monthly
Fee
Proposed
FY2026
Monthly
Fee
Proposed
FY2027
Monthly
Fee
Proposed
FY2028
Monthly
Fee
Single-Family & Duplex (< 0.25 acres) $8.33 $8.75 $8.75 $8.85
Single Family & Duplex (>0.25 acres) $11.63 $12.25 $12.25 $12.39
Triplex & Fourplex $16.64 $17.50 $17.50 $17.70
All Other (per 2,500 SF Impervious Area) $8.33 $8.75 $8.75 $8.85
Max Credit for On-site Mitigation 70% 55% 40% 25%
Add. Credit for NPDES Permit 5% 7% 8% 10%
By phasing down the existing rate credits, the rate for non-credited customers (including all
residential) remains more affordable throughout the forecast period. This is the result of decreasing
the credit offered to the cost-of-service-based discount, reducing the rate burden on all other
customers.
For implementation of the proposed rates above, it is essential that the City billing system can
effectively adjust each parcel’s credit on an annual basis. If the rate credits are not adjusted toward
the new maximum each year, the utility will not collect enough revenue to meet the annual
requirement as outlined in Section II of this report.
Salt Lake City 2024
Water, Wastewater, and Stormwater Rate Study page 78
www.fcsgroup.com
Section VI. IMPLEMENTATION
We calculated the rates in this report for implementation in FY2026, starting July 1st, 2025. FCS
GROUP is not responsible for the implementation itself, but the City should remain mindful of the
following factors during the process.
• The rates herein must be billed to customers precisely as indicated in the recommended rate
schedules, with no exceptions. We can confirm that the City will not receive the expected
revenue from the recommended rates in any other way.
• Billing adjustments should be held to a minimum. Any such adjustments should be
documented in the billing records and auditable. Billing records should always show the full
bill at the prevailing rates and charges; any adjustments should be shown separately as
adjustments to the full bill.
• Delaying the implementation of the recommended rates past July 1st, 2025, will reduce the
City’s expected revenue and should be avoided.
• We have assumed the City will amend its ordinances to implement the recommended rates.
• Based on the information provided to us during this study, we have assumed that the City is
able to assign the correct billing determinants to each customer account. Such determinants
include but are not limited to meter sizes, water usage, AWC, 70% of water usage, equivalent
dwelling units, and surcharge factors where applicable (i.e., lbs. of TSS, BOD, NH3, and TP).
• We have assumed that the City’s billing system is capable of implementing the recommended
rates as outlined in this report with no exceptions.
• Our analysis contains assumptions about the future. Changes in assumptions, including but
not limited to changes in the City’s budgets, may result in material differences between the
outcomes discussed in this report and actual outcomes achieved.
This page has intentionally been left blank