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Castro Valley Sanitary District
Castro Valley Sanitary District (District) retained HF&H to conduct a cost of service analysis for their wastewater rates, as the District was facing increased capital costs. The District’s existing rate structure charges all residential customers, both single-family and multi-family dwellings, a flat rate per dwelling unit per year. Non-residential, commercial, and institutional customers are categorized in 35 customer classes. All customer classes are charged according to each class’ respective discharge volume and strength, per prior characteristic studies. The District tasked HF&H with developing sewer service charges for FY 2019/20 through FY 2024/25.
HF&H developed a cost of service rate model which indicated 5% annual increases in revenue were necessary to fund the District’s needed capital improvements. The need to increase annual revenues by 5.0% applied differently to each of the District’s customer classes’ sewer service charges because of adjustments in the cost of service analysis. Some high-strength customers would require a rate increase exceeding 30% the first year, while other customer classes required something less than the 5.0%. The higher than average rate increases for non-residential customers with higher strength wastewater (i.e., customers with on-site food preparation, such as restaurants, bakeries, grocery markets, etc.) indicated that their rates had not kept pace with the increasing costs of treating high strength wastewater. This is not an uncommon issue as regulations for treating wastewater for BOD (Biochemical Oxygen Demand) and TSS (Total Suspended Solids) continue to become more stringent over the years.
To reduce rate shock, we developed an approach to phase-in the significant rate increases over time. The phase-in of the sewer service charges for high-strength customers was accomplished by increasing their respective charges a maximum of 10% per year until their respective charge, for the given fiscal year, equals the cost-of-service charge for that same fiscal year. All other customer classes experiencing sewer service charges would be phased-in over a two-year period.
New rates were successfully adopted by the Board on May 7, 2019 and put into effect on July 1, 2019.