HomeMy WebLinkAbout01. Proposed Sewer Rates
AGENDA MEMO
DATE:
March 23, 2010
TO:
Mayor and Members of the City Council
FROM:
Office of the City Manager
By: Brian A. Ragland, Director of Public Works
SUBJECT:PROPOSED SANITARYSEWER RATE INCREASE
RECOMMENDATION
That the City Council adopt:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY
ESTABLISHING SANITARY SEWER RATES FOR THE CITY OF DOWNEY
AND REPEALING SECTION 4 OF RESOLUTION NO. 05-6861.
BACKGROUND
The City’s Sanitary Sewer Master Plan (Master Plan) and subparts thereof including the
City’s Sewer System Management Plan (SSMP) were approved and adopted by City
Council via Public Hearing on January 12, 2010 in response to State Water Resources
Control Board (SWRCB) Order No. 2006-0003 (Sanitary Sewer Order) which was
enacted to reduce Sanitary Sewer Overflows (SSOs) throughout the state.
The City’s Master Plan includes an SSMP satisfying the requirements of the SWRCB
Sanitary Sewer Order along with recommendations for improvements to the City’s
operation and maintenance procedures, staffing levels, capital improvement program
(CIP), and a financial plan and sewer rate structure to provide the funding necessary to
implement the improvements. The assessment provided in the Master Plan
characterized a sanitary sewer system consisting of approximately 200 miles of sewer
pipe and associated facilities that is aging and in need of increased maintenance,
rehabilitation, and replacement to ensure reliable sanitary sewer service into the future.
Implementation of the recommendations identified in the Master Plan is necessary in
order to minimize the risk of SSOs, mitigate impacts of SSOs, minimize City liability to
potential fines and regulatory actions for non-compliance, improve maintenance
efficiency, and shift to a more proactive mode of operation.
Some of the recommendations provided in the Master Plan include:
System-wide cleaning and video inspection program
Increased frequency in cleaning of problem sewers
Expanded chemical root control program
Continual video inspection of problem areas
Replacement and rehabilitation of lift stations and pipes
Purchase of computerized infrastructure management system
Purchase of video inspection, spill response, and jetting/cleaning equipment
Increased management, technical, and safety training
Increased staffing
CITY OF DOWNEY, CALIFORNIA
Mayor and Members of the City Council
Proposed Sanitary Sewer Rate Increase
March 23, 2010
Page 2
DISCUSSION
CURRENT RATES
The City’s sewer rate was last increased in January of 1997 and only twice in the last 25
years. Operation and maintenance (O&M) costs have risen significantly since 1997 and
sewer rates currently in place do not provide adequate funding to pay for the current cost
of services provided to maintain and replace the system. The City has been operating
the system at a deficit for some time, relying on annual transfers from the City’s General
Fund and Water Fund to make up the shortfall between current O&M and CIP expenses
of approximately $600,000 per year and revenues of $300,000 generated from existing
sewer rates.
To implement activities identified in the Master Plan, annual revenues of approximately
$1.6 million must be generated. As revenues generated from current rates are below the
current cost of providing sanitary sewer service, a sewer rate increase is needed to meet
new mandatory SSMP requirements, including maintenance and replacement of this
critical and aging infrastructure.
FINANCIAL PLAN AND PROPOSED SEWER RATE
The City’s current Sewer and Storm Drain Fund (which also includes street sweeping,
enforcement, and storm water engineering in addition to sewer system expenses) is not
self-sufficient. The goal of the City’s Sanitary Sewer Financial Plan and proposed sewer
rate increase is to create a new self-supporting Sanitary Sewer Fund that includes only
sanitary sewer-related revenue and expenses.
The proposed sewer rate is included under Section 2 in the attached resolution. Section
4 of Resolution No. 05-6861, containing current rates for sewer, would be repealed
should the attached resolution be approved by City Council. All remaining provisions of
Resolution No. 05-6861, including provisions setting rates for water and AB 939 shall
remain in full force and effect.
The Sanitary Sewer Financial Plan and proposed sewer rates are structured to provide
annual revenues of $1.6 million per year to meet annual O&M and CIP expenses for a
period of ten years. These projections were based on initial inspection of 50,000 feet of
sewer pipe of all ages, size, and location. The results of the inspections were
extrapolated to characterize the overall condition of the system to allow for a reasonable
initial projection of O&M and CIP needs over the next ten years.
The City has adopted a pay-as-you go approach in lieu of debt financing (i.e., selling of
municipal bonds) in order to save rate payers money. Bond financing can be very costly
due to charges associated with interest payments and fees required for financial
Mayor and Members of the City Council
Proposed Sanitary Sewer Rate Increase
March 23, 2010
Page 3
advisors, bond counsel, and investment bankers. In addition, bond financing is typically
used for large fast-track projects that are in need of immediate capital. In the City’s case,
the bulk of the funds needed for capital projects would span out over the next 10 years.
Therefore, the most prudent approach is pay-as-you go financing.
The proposed sewer rate has two components: 1) a fixed bi-monthly charge component
based on the number of dwelling units, water meter size, or customer class, and 2) a
variable bi-monthly charge component based on units of water usage, determined as bi-
monthly metered water use.
The following tables include a comparison of bi-monthly sewer bills for Single Family
Residential (SFR), Multi-family Residential (MFR), and Commercial customers under
the existing and proposed City of Downey sewer rate structures vs. bi-monthly bills for
neighboring communities. Meter size and water usage assumptions used in
calculating the bi-monthly sewer bills are provided in the notes at the foot of each
table. The City’s current sewer rate structure has only a fixed component based on
the size of the customer’s water meter while the proposed sewer rate structure would
have both fixed and variable components as provided above. The proposed
fixed/variable rate structure will establish stable revenue while still providing an
incentive for water conservation. New sewer rates are assumed to begin no later than
July 1, 2010.
FY 2010/11 - COMPARISON OF BI-MONTHLY SEWER BILLS
FOR SFR CUSTOMERS
1,2
AB-M S B
GENCYIONTHLYEWERILL
City of Cerritos $0.58
City of Downey (existing) $1.90
3
City of Huntington Park$5.25
City of Downey (proposed) $8.98
3
City of Whittier$11.62
City of South Gate $11.90
City of Lynwood $15.58
City of Long Beach $23.69
City of Compton $28.71
NOTES:
1. Bills assume 5/8-inch water meter and bi-monthly water use of 35 hcf
2. Bills only account for sewer collection service; wastewater treatment service is not
included, as this service is handled through the County Sanitation Districts of Los Angeles
and is exclusive of service provided by City agencies
3. Cities of Huntington Park and Whittier are currently planning rate increases for FY 10/11;
Such rate increases are not accounted for in the sample sewer bills provided as these
increases have not yet been finalized
Mayor and Members of the City Council
Proposed Sanitary Sewer Rate Increase
March 23, 2010
Page 4
FY 2010/11 - COMPARISON OF BI-MONTHLY SEWER BILLS
FOR MFR CUSTOMERS
1,2
A
B-M S B
GENCY
IONTHLYEWERILL
City of Downey (existing) $1.90
City of Cerritos $2.15
City of Lynwood $15.58
3
City of Huntington Park$19.50
City of Downey (proposed) $26.12
3
City of Whittier$43.16
City of South Gate $44.20
City of Long Beach $52.47
City of Compton $82.19
NOTES:
1. Bills assume 3/4-inch water meter, 4 units, and bi-monthly water use of 130 hcf
2. Bills only account for sewer collection service; wastewater treatment service is not
included, as this service is handled through the County Sanitation Districts of Los Angeles
and is exclusive of service provided by City agencies
3. Cities of Huntington Park and Whittier are currently planning rate increases for FY 10/11;
Such rate increases are not accounted for in the sample sewer bills provided as these
increases have not yet been finalized
FY 2010/11 - COMPARISON OF BI-MONTHLY SEWER BILLS
FOR COMMERCIAL CUSTOMERS
1,2
AB-M S B
GENCYIONTHLYEWERILL
City of Cerritos $2.48
City of Downey (existing) $3.65
3
City of Huntington Park$22.50
City of Downey (proposed) $27.94
City of South Gate$51.00
3
City of Whittier $65.85
City of Lynwood $77.88
City of Long Beach $83.25
City of Compton $93.45
NOTES:
1. Bills assume 1-1/2-inch water meter and bi-monthly water use of 150 hcf
2. Bills only account for sewer collection service; wastewater treatment service is not
included, as this service is handled through the County Sanitation Districts of Los Angeles
and is exclusive of service provided by City agencies
3. Cities of Huntington Park and Whittier are currently planning rate increases for FY 10/11;
Such rate increases are not accounted for in the sample sewer bills provided as these
increases have not yet been finalized
PROPOSITION 218
Imposition of sewer rate increases is governed by Proposition 218 which requires a
majority of property owners/ratepayers of affected City parcels to submit written protests
against the sewer rate increase to prevent its passage.
Mayor and Members of the City Council
Proposed Sanitary Sewer Rate Increase
March 23, 2010
Page 5
The following provides a timeline of the tasks previously completed and scheduled for
completion in compliance with Proposition 218 for the City to successfully increase its
sewer rates:
Jan 12, 2010 City Council approved and adopted Master Plan and SSMP via
Public Hearing
Jan 12, 2010 City Council adopted resolution establishing date and location of
public hearing and authorized staff to notify property
owners/ratepayers
Feb 4, 2010 Proposition 218 notice in both English and Spanish mailed to
property owners/ratepayers informing them of proposed rate
increase, date/time/location of public hearing, and instructing them
how they can protest against the proposed rate increase
Mar 5 & 12, 2010 Legal advertisement for public hearing on proposed sewer rate
increase posted in Press Telegram (English) and La Opinion
(Spanish)
Mar 23, 2010 Hold Public Hearing on proposed rate increase
Mar 23, 2010 City Clerk finalizes tabulation of the protests filed during the more
than 45 days between Proposition 218 notices being mailed and
close of public hearing at City Council meeting
Mar 23, 2010 City Council votes on passage of new rates assuming number of
written protests received is less than 50% of property
owners/ratepayers of affected parcels
FINANCIAL IMPACT
Existing sanitary sewer rates generate $300,000 per year while current annual O&M and
CIP expenses average approximately $600,000. To implement SSMP activities over the
next ten years, revenues of approximately $1.6 million per year must be generated.
Failure to implement the SSMP according to the SWRCB Sanitary Sewer Order, could
lead to fines by the SWRCB and third party lawsuits for failure to comply. Establishment
of a self-supporting Sanitary Sewer Fund will eliminate the annual transfer of
approximately $300,000 from the City’s General and Water Funds.
Attachment:
Resolution – Proposed Sanitary Sewer Rate Increase
Affidavit of Noticing
S:\AgendaMemosCC2010\3-23-10\Sewer Rate
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY ESTABLISHING
SANITARY SEWER RATES FOR THE CITY OF DOWNEY AND REPEALING SECTION
4 OF RESOLUTION NO. 05-6861.
WHEREAS
, A sewer rate increase is necessary to meet mandatory Sewer System
Management Plan (SSMP) requirements, to maintain and replace critical/aging infrastructure, and
to ensure that the future Sewer Fund is self supporting; and
WHEREAS
, Increases in property-related fees and charges, including sanitary sewer, are
subject to the requirements of Article XIII D, Section 6 of the California Constitution (Proposition
218); and
WHEREAS
, A special notice proceeding on the proposition of increasing rates for sanitary
sewer purposes was called by City Council on January 12, 2010 setting the time and place for a
public hearing on establishing rates for sanitary sewer service and authorizing staff to notify
property owners and ratepayers of affected parcels; and
WHEREAS
, Pursuant to Proposition 218 requirements, a public notice in both English and
Spanish consisting of the proposed sanitary sewer rate, the basis upon which the proposed rate
was calculated, the reason for the proposed rate increase, the date, time, and location of the
public hearing, instructions on how to calculate the proposed sewer charges, and instructions on
how to protest against the proposed rate increase was mailed on February 4, 2010 to property
owners and ratepayers of record within the City as of the latest available City database; and
WHEREAS
, The City has given notice of the date, time, and location of the public hearing
on the proposed sewer rate increase by publishing such notice in both English and Spanish in
local newspapers on March 5 and March 12, 2010, and by posting copies of the public notice at
the City Library, Barbara J. Riley Center, and City Hall; and
WHEREAS
, A duly noticed public hearing on the proposed sewer rate increase was held
at 7:30 p.m., or as soon thereafter as could be heard, on Tuesday March 23, 2010 in the City
Council Chamber at Downey City Hall, 11111 Brookshire Avenue, Downey CA 90241; and
WHEREAS
, A majority protest, as contemplated by Article XIII D, Section 6 of the
California Constitution (Proposition 218), was not received from property owners and ratepayers
of affected City parcels by the conclusion of the public hearing.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES HEREBY
RESOLVE AS FOLLOWS:
SECTION 1.
Pursuant to Title 14, Division 6, Chapter 3, Article 18, Section 15273 of the
California Code of Regulations, the California Environmental Quality Act (CEQA) is not applicable
to the approval of the sanitary sewer rates and charges set forth herein because such rates and
charges are for the purpose of:
(1) Meeting operating expenses including employee wage rates and fringe benefits;
(2) Purchasing or leasing of supplies, equipment, or materials;
(3) Meeting financial reserve needs and requirements;
(4) Obtaining funds for capital projects necessary to maintain a service within existing service
areas.
RESOLUTION NO.
PAGE TWO
SECTION 2.
Pursuant to the provisions of Article XIII D, Section 6 of the California
Constitution (Proposition 218), the City Council hereby establishes the following sanitary sewer
rate schedule, the fees of which shall appear on the bi-monthly water bill as follows:
(1) Fixed Bi-monthly Sanitary Sewer Charge
Single Family Residential Accounts: $5.48
Multi-Family Residential Accounts: $3.28 per number of units
Non-Residential Accounts – Billed by water meter size per the following:
Size of Meter Charge
5/8” $ 5.48
3/4“ 6.88
1” 8.38
1-1/2” 12.94
2” 20.02
3” 30.04
4” 42.16
6” 60.10
8” 80.10
10” 100.12
Accounts with compound water meters shall be billed for sanitary sewer service according
to the larger side of the meter.
(2) Variable Bi-Monthly Sanitary Sewer Charge
In addition to the fixed bi-monthly sanitary sewer charge, each sanitary sewer customer shall pay
a bi-monthly variable sanitary sewer charge based on units of water flow, determined as bi-
monthly metered water use.
Per 100 cu. ft.: $0.10
(3) Customer Classifications
Customers deemed by the City to qualify under more than one type of customer classification will
be charged the higher of the associated rates.
RESOLUTION NO.
PAGE THREE
SECTION 3. Section 4 of
Resolution No. 05-6861 adopted June 28, 2005, containing
current rates for sanitary sewer, is hereby repealed. All remaining provisions of Resolution No.
05-6861, including provisions setting rates for water and AB 939, shall remain in full force and
effect.
SECTION 4.
The City Clerk shall certify to the adoption of this Resolution and provide
for appropriate distribution thereof.
APPROVED AND ADOPTED
this day of , 2010.
ANNE M. BAYER, Mayor
ATTEST:
KATHLEEN L. MIDSTOKKE, City Clerk
I HEREBY CERTIFY
that the foregoing Resolution was adopted by the City Council of the
City of Downey at a regular meeting held on the day of , 2010, by the
following vote, to wit:
AYES: Council Members:
NOES: Council Members:
ABSENT: Council Members:
ABSTAIN: Council Members:
KATHLEEN L. MIDSTOKKE, City Clerk