Section 1 - Introduction

1.1. Purpose of this Report 
The purpose of this rate study is to evaluate the self-financing capacity of the Groveland Community 
Services District (GCSD) water utility fund and to determine revenue increases that are required in that 
utility fund to maintain adequate service and meet future financial obligations.  
The new rates developed herein are intended to fund GCSD’s operation and maintenance expenses, 
debt service requirements, and capital improvement reserves (CIR). Any significant deviation from the 
cost estimates and funding requirements, major operating changes, or other financial policy changes 
that were not foreseen, may result in the need for lower or higher revenue than anticipated. It is 
suggested that GCSD conduct an update to the rate study at least every three years for prudent rate 
planning. 

1.2. Why an Increase is Needed 
GCSD water rates have not been increased to meet rising expenses, inflation, and regulatory changes. 
Significant segments of GCSD’s water infrastructure are in need of repair or replacement. 
GCSD’s water rate structure contains a fixed rate and a variable rate based on actual metered 
consumption. Except for a rate increase implemented in 2013 to mitigate the drought impacts on 
revenues, GCSD has not had a rate increase since FY 2010-11 which was a modest 0.8% to the fixed rate 
and a 1.06% to the variable rate. The last significant rate increase the District had was in fiscal year 
2007/2008which was based on a rate study that did not address the need to budget for repair and 
replacement of the water system infrastructure. This rate analysis calculates the estimated revenue 
requirements and the rate increases that are necessary to sustain revenues in the water utility fund.  

1.2.1. Water Sources 
GCSD’s water supply comes from the watershed within Yosemite National Park. The water is collected 
behind O’Shaughnessy Dam (Hetch Hetchy Reservoir) that is owned by the City of San Francisco. While 
the watershed is provided with excellent protection being within a National Park, it is still continuously 
monitored to keep it safe from possible pollution or contamination. 
Water leaves O’Shaughnessy Dam through the Canyon Power tunnel where it is used to generate 
electrical power at the Kirkwood Powerhouse. The water then enters the Mountain tunnel on its way to 
GCSD and ultimately to San Francisco. 
The Mountain tunnel was constructed in the early 1920’s through solid rock several hundreds of feet 
below the surface. Eleven airshafts were constructed during the tunneling, which also provided for 
debris and rock removal. GCSD draws water from two of the airshafts known as Big Creek Shaft and 
Second Garrotte Shaft.  
Big Creek Shaft is upstream of Second Garrotte Shaft. A 300 horsepower pump is used at Big Creek to 
draw water from a depth of 570 feet below ground, at a rate of 1,650 gallons per minute or 2,376,000 
gallons per day. A 200 horsepower pump is used at Second Garrotte to draw water from a depth of 720 
feet below ground, at a rate of 680 gallons per minute or 892,800 gallons per day. 

1.3. Goals and Objectives 
Basic objectives of this analysis include: 

• Determine revenue requirements to meet the O&M and capital expenditures of GCSD’s water utility; 
• Recommend water rate increase needed to recover the cost of providing service and maintain the water fund’s long-term financial health;
• Maintain good financial ratings by providing for a stable and reliable financial position so that debt issuance can be achieved at the lowest cost and that GCSD maintains eligibility for grants and loans; 
• Provide an introduction to the Proposition 218 rate-increase process and rate implementation. 

1.4. Methodology 
The methodology used in this study follows the cost causative allocation practice endorsed by American 
Water Works Association (AWWA) and the Water Environment Federation (WEF). This allocation 
methodology produces cost of service allocations recognizing the projected customer service 
requirements. The basic methodology consists of three major components: Revenue Requirements, Cost 
of Service, and Rate Design. 
The following is a brief description of the three components: 

• Revenue Requirements: Revenue requirements are determined by developing a multi-year financial plan for the enterprises. The financial plan projects revenue and expenditures based on anticipated changes in the systems. Revenue incorporates revenue under the existing rate structure, anticipated growth in customer classes, and unique customer characteristics. Expenditures incorporate operation & maintenance, debt service, and capital expenditures. 
• Cost of Service: Cost of service is the process of allocating the revenue requirements to functional cost components which are then assigned to specific customer classes. The cost of service is designed to assign costs associated with each customer class based on the demands they put on the system, in compliance with Proposition 218 
• Rate Design: Rate design consists of developing a rate structure that adequately recovers the revenue requirements through fixed and variable components yet remains equitable among the specific customer classes. 

 

Learn more about GCSD’s Demographic Information, Revenue Requirements, Cost of Service and more when you review the full analysis below:

Water Rate Analysis