HomeMy WebLinkAboutCC AG PKT 2003-08-11 #M AGENDA REPORT 01?
DATE: August 11, 2003 O / n42,
1 Qo
TO: Honorable Mayor and City Council ° 9
THRU: John B. Bahorski, City Manager
FROM: Douglas A. Danes, P.E. Director of Public Works /City Engineer
SUBJECT: WATER RATE ADJUSTMENT
SUMMARY OF REQUEST:
City Council to conduct a public hearing on water rates and upon closing of the public
hearing adopt Resolution No.
BACKGROUND:
The City of Seal Beach provides water service to most areas within its boundaries
through approximately 5,200 meters. The sources of supply consist of groundwater from
the Orange County Groundwater Basin and treated imported water from the Metropolitan
Water District of Southern California. Service is provided with the use of three active
wells, two booster pump stations, two forebay reservoirs, one imported water connection,
and 67.5 miles of pipe ranging in size from 6 inch to 18 inch in diameter. Some of the
pipes date back to the 1920's. The replacement value of the system is estimated at $100
million.
The water system is operated as an "enterprise" system. This means the City's water
utility must be self - supporting from charges made by the City for water furnished to
customers and all services rendered in connection with its operation. It also means that
money collected from the sale of water can only be used for water related purposes and
can not be used for other city programs such as public safety or parks.
An update to the City of Seal Beach's Water Master Plan was completed in March 2003.
The Master Plan update recommended a 10 -year capital improvement plan with a total
cost of over $13.5 million identified on page 6 of the 2003 Water Rate Study.
The last update to the City's water rates was approved in 1997 per Resolution 4538 dated
June 9, 1997 and prior to that in 1992 per Resolution 4185 dated October 26, 1992. The
existing rate structure has two components. The operation and maintenance of the system
is intended to be funded through water sales. This component of the rate structure has a
tiered commodity rate based upon water use. The resolution adopting the rates allowed
annual adjustments in the commodity rates based upon actual cost of producing and
purchasing water. However, the revenues generated from the existing commodity rates
S7296 0001.2003 -08 -11 CM DD Water Rate Adjustment Agenda Item Ai
have fallen short of the operational and maintenance expenses of the system for four of
the past five years.
The capital improvements to the system are intended to be funded through the capital
fund charge component of the- rates. These rates are charged based upon meter size.
Given that users of larger meters are typically consumers of more water, these rates are
also roughly proportional to water use. The existing capital charges were established to
support a much smaller capital improvement program based upon the previous Water
Master Plan. They are insufficient to support the currently recommended capital
improvement program.
The two funds of the City's Water Enterprise were evaluated with various funding
alternatives. These evaluations were conducted based upon developing sufficient
balances (reserves) in the two funds, and generating the necessary operation and
maintenance and capital improvement revenues. The City's Fiscal and Budget Policy
should include a requirement for developing reserves of 50 to 100 of the annual
Maintenance and Operation budget, and a minimum of 100 percent of the Capital
Improvement Budget over a 10 -year period. The recommended funding alternative
increases both the commodity rates and the capital charges. The impact on an average
City of Seal Beach water customer for the next six years is as follows:
Fiscal Year 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09
Average Bill 29.9% 20.0% 15.8% 5.9% 4.3% 3.6%
Increase
By way of comparison, neighboring cities Cypress and Los Alamitos, served by Southern
California Water, are also experiencing a rate increase. A comparison table is provided
below based on an average residential bill. For further information refer to page 17 of the
2003 Water Rate Study.
Agency Existing 2003 2004 2005
Cypress $29.32 $38.51 $43.62 $46.82
Los Alamitos
Seal Beach $20.60 $26.75 $32.11 $37.43
The City of Seal Beach's recommended funding scenario utilizes a pay -as- you -go
method. If the City utilized bonded indebtedness, the increases in the average monthly
bill would be approximately 3 percent lower for the first three years. The rates for the
various meters for both the Capital Fund and Commodity Charge are as follows:
S7296.0001.2003 -08-11 CM DD Water Rate Adjustment Agenda Item
Recommended Monthly Capital Fund Charges
Meter Meter Type Existing Proposed
Size 2003 -2004 2004 -2005 2005 -2006 12006 -2007 2007 -2008 12008 -2009
5/8" & Residential $7.00 $8.40 $10.08 $12.10 $14.52 $15.97 $17.56
3/4"
5/8" & Non- $7.50 $9.00 $10.80 $12.96 t $15.55 $17.11 $18.82
3/4" Residential
1" All $12.46 $14.95 $17.94 $21.53 $25.84 $28.42 $31.26
1 -1/2" All $15.75 $18.90 $22.68 $27.22 $32.66 $35.93 $39.52
2" All $28.00 $33.60 $40.32 $48.38 $58.06 $63.87 $70.25
3" All $63.00 $75.60 $90.72 $108.86 $130.64 $143.70 $158.07
4" All $112.03 $134.44 $161.32 $193.59 $232.31 $255.54 $281.09
6" All $251.96 $302.35 $362.82 $435.39 $522.46 $574.71 $632.18
8" All $448.04 $537.65 $645.18 $774.21 $929.06 $1,021.96 $1,124.16
10" All $700.00 $840.00 $1,008.00 $1,209.60 $1,451.52 $1,596.67 $1,756.34
12" All $1,007.93 $1,209.52 $1,451.42 $1,741.70 $2,090.04 $2,299.05 $2,528.95
Increase 20.0% 20.0% 20.0% 20.0% 10.0% 10.0%
Recommended Commodity Rates
Meters Existing Proposed
2003 -2004 1 2004 -2005 1 2005 -2006 1 2006 -2007 1 2007 -2008 1 2008 -2009
Meter Sizes 5/8" through 1 -1/2" (rates are per 100 Cubic Feet Units (HCF)
0.0 to 12.0 HCF $0.673 $0.91 $1.09 $1.25 $1.29 $1.33 $1.36
> 12.0 to 22.5 HCF $0.983 $1.33 $1.59 $1.83 $1.89 $1.94 $1.98
> 22.5 to 27.5 HCF $1.133 $1.53 $1.84 $2.11 $2.17 $2.24 $2.28
> 27.5 HCF $1.363 $1.84 $2.21 $2.54 $2.62 $2.69 $2.75
Meter Sizes 2" through 12" (rates are water usage as a percentage of immediate prior year's usage)
< 90% of prior year $1.243 $1.68 $2.01 $2.32 $2.39 $2.46 $2.51
90% to 110% of prior year $1.363 $1.84 $2.21 $2.54 $2.62 $2.69 $2.75
> 110% of prior year $1.423 $1.92 $2.31 $2.65 $2.73 $2.81 $2.87
Increase 35.0% 20.0% 15.0% 3.0% 3.0% 2.0%
The rates will ensure continued safe and reliable water service by funding increased costs
of operations, maintenance, and rehabilitation of the water system, as well as improved
facilities to treat and deliver water to customers, to improve water supply quality and
reliability, and to protect the City's groundwater resources.
The rates were calculated by determining groundwater and imported water costs and
estimating the cost of future needs. Such costs were then apportioned among water users
based on cost of service and usage. The commodity rates and capital fund charges are
charged only to those using the City - provided water and are proportionate to usage.
AKM Consulting Engineer's presented the information contained in the 2003 Water Rate
Study to the City Council in a workshop on April 28, 2003. During the session, Council
had some questions regarding expanding the "pass- through" for energy increases and
emergencies. There is an existing adjustment mechanism for addressing increases in the
cost of the City's water purchases adopted by Council in previous resolutions. It was
decided, since rates are proposed to be adjusted over a six -year period that an adjustment
mechanism for energy and emergencies is not necessary at this time. In addition, state
law gives the City the authority to address escalating energy costs and emergencies when
S7296.0001.2003 -08 -11 CM DD Water Rate Adjustment Agenda Item
and if they occur. Accordingly, the original language of the previous resolution
concerning administrative adjustments will be left unchanged.
On June 25, 2003, the City mailed notice of the proposed rate adjustment to each water
user, explaining the total amount of the proposed rate adjustment, the amount each water
user would pay, the duration of the payments, the reason for the adjustment in rates, the
basis upon which the rate adjustment was calculated, and instructions on providing
written comments to the City on the proposed rate adjustment, together with the date,
time, and location of a public hearing on the proposed rate adjustment. This information
was also posted on the City's web site along with the presentation that was given to
Council.
The legal authority for adjusting water rates can be found in Section 26 -8 of the Code of
the City of Seal Beach. That section provides for the establishment of water rates by
resolution of the City Council. Although the City must obtain voter approval of some
other fees and charges, the California Constitution expressly exempts adjustments of
water rates. Cal. Const. art. XIII D, § 6(c).
In addition, these proposed rates are applicable to water users, rather than property
owners. The rates are imposed only as a condition of initiating or extending service upon
the request of a customer, and not upon real property or as an incident of property
ownership. As a result, the constitutional notice requirements for assessments are
inapplicable. Cal. Const. art. XIII D § 4(c),(d). Nevertheless, although not legally
required, the City mailed notice to all affected water users at least 45 days prior to this
hearing to provide users with ample notice of an opportunity to be heard on the proposed
increases.
FISCAL IMPACT:
The City's Water Enterprise currently has an operating deficit over $275,000 per year.
Over $13.5 million of capital improvements have been recommended to ensure system
reliability. By adopting the attached resolution, Council will correct the deficit and
program the identified improvements over a ten -year period.
If the rates are not adopted the system will continue to operate in a deficit. If only the
commodity rates are raised and not the capital fund charges, reliability of the system can
not be guaranteed, creating unknown potential emergency repair costs and potential
public health and fire fighting concerns due to possible water system failures.
RECOMMENDATION:
City Council adopt Resolution No. adjusting water user rates previously
established in 1997 and 1992.
S7296.0001.2003 -08 -11 CM DD Water Rate Adjustment Agenda Item
.
s
Pr- .,. -
Douglas A. Danes, Director o . "" orks /City Engineer
NOT ' P g APPRO ED
NOT
B..z . orski, City Manager .
Att..4 ' ents
1. Resolution No. Adjusting Water Rates
g
2. Correspondence Received and Responses
3. 2003 Water Rate Study
•
57296.0001.2003 -08-11 CM DD Water Rate Adjustment Agenda Item
• From: Gary/Betty Rousselo ,
Sent: Friday, June 27, 2003 12:48 PM
To: rates @sb- publicworks.com
Subject: Rate increases
Dear Sir.
Thank you for the welcome to the City of Seal Beach. We have just purchased a home and were looking
forward to joining your community.
Surprise! I just recieved your notice that you propose to increase the Capital Fund Charges over 100% over
the next five years. What have you been doing to improve the infrastructure with the money you have been
collecting over the past five years. This increase is absolutely rediculous and just another example of the
government misspending money and always coming to the community demanding more money. I think an
audit by an outside agency should be performed to see exactly what you have been doing with the money
you have been receiving. I am coming from Long Beach and the Water commission decreased drastically
the increase they were asking from the rate payers.
You are also increasing the water rates. While an increase is certainly necessary to reflect the many factors
in acquiring a supply of water for the city, I wonder, based on my above comments, whether this amount of
increase is necessary or just another commissions dream come true.
6/30/2003
From:
Sent: Saturday, June 28, 2003 7:44 PM
To: rates @sb- publicworks.com
Subject: Rate Increases
TO: Department of Publiuc Works:
RE: Rate Increases
From: Bob and Yvonne Troutman
Date: June 28th, 2003 •
If rate increases are a necessary component of safe and reliable water service, then we are in favor. The Department is
to be commended for having been able to hold the line since 1997. But now is the time for change.
We realize that there is much needed repair, upgrading and renovation needed and the longer these improvements are
postponed, the more expensive they will be. You have our support for these much needed rate increases, and for them
to be spread out over the next six years.
•
6/30/2003
"!c',.�,�, �'i�, g;K"-: �; � ,w. h 7 ` �� ` .t. ��'�9 �.� .:.A'�"m 1'4- • .e q :: m , .��d'..r.�
-wa. i'�°•m.... __ » and 'x= no:= u;2«L.�:cw:.....•...aS'. •s =�'•. n'f :.•b.. ^-
From: John Guest '
Sent: Sunday, June 29, 2003 8:44 PM
To: rates @sb- publicworks.com
Subject: Proposed new water rates
Gentlemen:
Thank you for the privilege of responding to your proposed increase to the water rates.
I have found that the average politician's simplistic solution to any problem is to raise
taxes /rates, without consideration as to reducing the ever - present "pork" in the budget. I
submit that this is quite likely the identical solution to the problem we're experiencing here
in Seal Beach, where you consider it necessary to drastically increase the water rates. I
respectfully remind you that we already experience astronomical city taxes on all our
utilities, thus stretching the budgets of persons such as myself, who live on a fixed
monthly income. It is difficult to see why even more money is needed.
You're asking the public to approve an increase in taxes /rates, but have provided
absolutely NO information to prove such an increase is necessary. Why do you not make
public a budget — present and proposed —so the poor, strapped taxpayer can identify (at
least some of) the "pork" that has unquestionably been built in?
Since I disagree with the proposal to raise taxes /rates, I am sure you prefer not to hear
from me again, except to pay my exhorbitant taxes regularly. With this notice however, I
respectfully volunteer to act on a committee consisting of my Seal Beach neighbors, to
examine your budget in order to assist in the promotion of harmony among the
concerned and unconvinced taxpayers who will argue against this frivilous raise. Then
after all unnecessary and superfluous expenses are eliminated or satisfactorily explained,
a more reasonable increase in water rates can be determined.
Thank you.
John H. Guest
•
•
From: Susan Philips
Sent: Monday, June 30, 2003 8:15 AM
To: rates @sb- publicworks.com
Subject: New monthly water rates
I have reviewed the proposed new monthly water rates. I support the increase. We need to improve our infrastructure
and the increase seems reasonable.
Sincerely,
James R. Watson
Watson & Associates
101 Main St, Suite A
Seal Beach, CA 90740
(562) 430 -0503 Fax (562) 493 -5860 -
sphilips@jrwatson com
.
6/30/2003
-
.�.. ".w i "'3'• r � .. . . _. .. 9lA:YY . �. kx.�.• „4—:,'
.. .'# '� { -+�d s
� aN �zA+�, .s..13 '°'$' re .s. ,Sp�£•; ". .:# :• ". ".Y�' R : y . . �• e' "iY`.� K. ° :. W
From: Judith Todd
Sent: Thursday, July 10, 2003 8:45 AM
To: 'rates @sb- publicworks.com'
Subject: water rate hike ,
Probably the only people who will write about the proposed water rate hike are those who are
always opposed to fee increases, tax increases, etc. But here is one resident
who is in favor of the water rate hike. I think most people are willing to pay for clean water. I do
hope that a new well will not deplete the ground water. Seal Beach needs to encourage greater
water conservation, and perhaps a rate hike will do that. .
Judy Todd
_
. I
i
From: DAVID PRIVETT
Sent: Thursday, July 03, 2003 5:03 PM •
To: rates @sb- publicworks.com
Subject: WATER SERVICE CHARGES
Attention City Clerk, City Of Seal Beach:
No sooner than we get a proposed 100% raise in our sewer taxes, now you put your other hand in the water
service tax pocket. I am not opposed to normal annual adjustments for all city and county services, but your
raises are based on a six year worst case scenario and are automatic without review.
After reviewing your notice, I find it deceptive and somewhat inaccurate:
1. I am a very careful user of water and I have never been able to meet the so called 14 units of water per month,
which you base your increase figures on.
2. Your notice claims, "inflation, energy, maintenance and regulations" as reasons for the increase. The 11% City
utility tax should off set most of these additional costs since all of our utility costs have gone up and probably
will continue to go up at a higher rate. (Our electric bills alone has allowed the city coup many additional dollars)
3. The chart shown in the notice depicts a 100% increase over six years for Capital Fund Charges. However,
when you compound the year over year increases the actual amount is 150 %. ($7.001$17.56 = 150%)
4. The chart for Commodity Rates indicates a 78% raise over six years. However, this increase will be 102%
compounded. ($0.6731$1.36 =102 %)
5. If these raises are necessary for normal water costs and infrastructure, what have you been doing with the
Capital Fund monies that have been accruing over these many years?
I am opposed to your proposal and I am not convinced that it was thought out with the idea of the least increase
and impact to our citizens being the goal.
Sincerely,
David Privett
.
717/2003 • ,
City of Seal Beach
211 8 Street
Seal Beach, Ca 90740
Dept of Public works
Attn:
I am not in favor of your recommended increases for the monthly capital fund charge and
the new commodity rates.
I base my objection on the basis that you do not inform us how the money will be used
during the next six years. You do not even tell us the total funds in the account as of this
date, how much was added during the past 5 years and how much was spent during this
5 -year period.
You do not explain why you will need more money for repairs and maintenance over 3%
per year. Their has been no inflation during the past three years and if the Dept of Public
works keeps its costs in line by holding the line on wages and benefits during the next
few years I see not reason for such a large increase.
You state that the cost of city groundwater from OCWD will increase over 20 %. But an
increase of $127 to $149 is only an increase of 12 %. The Balance of water used is from
our city groundwater, which should not increase more then 3 %. Yet you want to increase
our rates by 35 %, 20 %, 20 %, 15 %, 3 %, 3 %, and 2 %. You do not explain why OCWD
would require more increases in the future after the current increase.
Seems to me that you are over estimating the costs of future needs to our water system.
Best regards,
Saul Zenk
Correspondence Received
Rcvd via E -mail June 27, 2003 Garry/Betty Rousello
Response: The Capital Charge is necessary to keep the system in operation. Refer to page
6 for a summary of the proposed Capital Improvement Program and pages 2 -5 for a
description of the infrastructure in the 2003 Water Rate Study.
Rcvd via E -mail June 28, 2003 Bob/Yvonne Troutman
Response: Resident supports the rate adjustment.
Mentions the need for upgrade of the system and is in favor of spreading out the
adjustment over 6 years.
Rcvd via Email June 29, 2003 John Guest
Response: Correspondence claims that no information was available to support the rate
increase. The 2003 Water Rate Study detailing the reasons and recommended
improvements was presented to City Council on April 28, 2003. A copy of the
presentation was posted on the City's website in addition to the frequently asked
questions provided in the notice. The notice sent to the public informed interested parties
that the 2003 Water Rate Study was available for review.
Rcvd via Email June 30, 2003 Jim Watson
Response: Resident supports the rate adjustment.
Rcvd via Email July 3, 2003 David Privett
Response:
1. The industry standard for water usage for a resident household is 12 -14 units per
month. For further information on water conservation, please refer to information
provided on the city's website or www.ocwd.com or www.mwdoc.com
2. Utility User tax is not used to fund the water system.
3. Rates in the chart only show percentage increase from year to year.
4. Rates in the chart only show percentage increase from year to year.
5. As mentioned on page 1 of the 2003 Water Rate Study, the existing capital fund
charges are insufficient to meet the necessary recommended capital improvements
and was based on a much smaller and now inadequate plan.
Rcvd via Email July 10, 2003 Judith Todd
Response: Resident supports the rate adjustment.
A
Mentions the need to encourage water conservation and proposed rate adjustment may
promote further conservation.
Rcvd via Email Saul Zenk
Response: Discussions how funding will be spent for the next 6 years on Capital
Improvements is summarized on page 6 of the 2003 Water Rate Study. Discussion on the
cost of water supply can be found on page 12 of the 2003 Water Rate Study.
r
3. 2003 Water Rate Study
S7296.0001.2003 -08 -11 CM DD Water Rate Adjustment Agenda Item