HomeMy WebLinkAbout01/26/1982M I N U T E S
ADJOURNED MEETING OF THE CITY COUNCIL
CITY OF SAN LUIS OBISPO
TUESDAY, JANUARY 26, 1982 - 7:00 P.M.
COUNCIL HEARING ROOM, CITY HALL, 990 PALM STREET
SAN LUIS OBISPO, CALIFORNIA
STUDY SESSION
ROLL CALL
Councilmembers
Present: GlennaDeane Dovey, Ron Dunin, Robert Griffin, Allen
Settle and Mayor Melanie C. Billig
Absent: None
City staff
Present: Paul Lanspery, Administrative Officer; Pamela Voges,
City Clerk; Rudy MuYavez, Finance Director; Dave Romero,
Public Services Director; Gerald Peasley, Water & Sewer
Consultant
1. WATER AND SEWER RATES (continued from 12 /15/81)
The City Council considered the following:
A. Continued public hearing to take public comment concerning
revision of water service charges,
B. Review of previously adopted sewer acreage charges, and
C. Consideration of-the development of a City Water Management
and Conservation Plan.
Paul Lanspery, Administrative Officer, briefly summarized the issues and
recommended steps of action concerning utility rate increases. He
explained that he did not expect the Council to take any definitive
action this evening but allow staff to come back within 60 to 120 days
with additional recommendations. He then briefly reviewed the three
most important issues he felt needed to be addressed:
1. Water Acreage Fee - In recognition of a capital "Buy -in" Fee he felt
some level was essential to the proper financing of the water utility.
He would recommend that any changes to the.current acreage fee of $1,160
be a part of the Council's review and approval of the 1982/1983 Water
Capital Program.
2. Capital Replacements and Improvements - He explained that implemen-
4. Waste Water - At this time it would appear that the sewer rate
increases adopted in November were still valid with the exception of the
tation of the reserve policy
recommended in
the Peasley report would
result in a significant rate
increase. -He
felt that reserved policies
needed to be developed in the
context of an
overall water fund expendi-
ture plan.
3. Operation and Maintenance
Rate Increase
- He recommended Council
approve the rate adjustments
to the readiness
-to -serve charge proposing
an increase from 65 cents per
cubic hundred
feet to 70 cents per 100
cubic feet.
4. Waste Water - At this time it would appear that the sewer rate
increases adopted in November were still valid with the exception of the
City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 2
acreage fees and, again, he felt this needed further review and be
considered as a part of the five -year capital budget recommendation for
the wastewater utility.
5. Water Management and Conservation Plan - He felt the development of
a plan to serve as a principle policy position of the City and managing
the water utility was necessary and.felt that much of this material
already existed in a report prepared by Engineering Science, Inc.,in
April of 1977. The first-area of the plan to be developed being the
financial management policies.
Rudy Muravez, Finance Director, then reviewed background information on
the policies establishing the current water rates first introduced in
the Engineering- Science Report of April 1977 which established the
"commodity- demand" method of cost allocation and developing water rates.
The demand portion of the rate was reflected in a "readiness -to- serve"
charge and a second "commodity" charge made for all water actually used
by a customer. The rates were designed to recover the full cost of
operation of the system, including scheduled capital replacements and
improvements. This rate philosophy used the enterprise approach, the
system being perceived as a private enterprise and subjected to the same
conditions of operation as a private company. He felt using this
approach was paramount to any review of the water operations. He then
outlined for the Council eight basic policy decisions the Council should
make with regard to the proposed water rates. He explained the issue of
current policy, the recommendation',from the Peasley study, and staff
recommendation and input if different from the Peasley study. Those
eight items involved: 1) Enterprise method of operations; 2) rates to
be on the basis of "readiness -to- serve" charge, plus all consumptions
billed at a level "commodity" rate; 3) charge city departments for
regular rates for water service; 4) charge Fire Department for mainten-
ance of up blic fire hydrants; 5) charge private customers for providing
fire protection service on private property; 6) charge Fire Department
for revenue loss by providing free service to private monitored fireline;
7) pay the general fund an ' in -lieu amount for franchise tax and lost
property tax; and 8) charge new customers an "acreage fee" as a buy -in to
the existing capital facilities.
Upon question by Councilman Griffin as to the definition of capital
replacements and improvements:. and whether this included capital replace-
ments costs and service enhancement costs, Gerald Peasley.stated that it
was only replacement, although sometimes when you are replacing old
equipment, you will be replacing it with something different than what
you already had, therefore, an improvement.
Councilman Dunin stated that he was unfamiliar with any business prac-
tice that operated on a full capital replacement approach, which was
what this report was saying the City is attempting to do.
Mr. Pealsey explained that when parts are replaced, either the customer
must be charged or the money must be borrowed to pay for this replacement.
Mayor Billig declared'the, public hearing open.
Charles Long, motel owner, questioned how much the actual increase would
cost the user.
Mr. Peasley replied that the recovery cost would be $12 million; the
full replacement cost would be $36 million cost. This amounts to the
City requiring approximately $952,000 per year. to cover those costs.
Leonard Blaser, developer, agreed with staff that their recommended
change from 90 cents to 70 cents per 100 cubic feet would be more .
equitable. He was opposed to the explanation given with regard to the
requirement of $36 million as being the replacement cost figure. He
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City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 3
felt that in many situations he was being charged twice, both as a user,
and as a developer.
Gerald Peasley explained that the "buy -in" fee assessed the developer -.and
allowed new developments in the city. The "in -tract facilities" are
approximately $9 million of this $36 million he was referring to.
Stan Bell, 1036 Vista Collado and builder, explained that he had his
' accountant analyze Mr. Peasley's report and basically his accountant
states that he was not in support of using the replacement costs to
determine "acreage charges" for ten different reasons which he briefly
outlined for the Council. He would, therefore; be supportive of the
Administrative Officer's recommendation and would urge the Council to
look at other criteria i.e, water lines lasting longer than 50 years
that staff is basing the replacement costs on. He felt the City of San
Luis Obispo was taking a "Rolls Royce" approach; and he would,urge the
Council to look at an overall management policy, including water and
sewer acreage fees to determine what the.cash requirements are for a
five -year period. He would not support another study being conducted
but would urge an independent review committee analyze the present
report and would urge the Administrative Officer's recommendation.
Bob Baker, 900 Del Rio, stated that he had also engaged an accountant to
do an impartial analysis of Mr. Peasley's report. That report outlined
seven major areas of concern. He emphasized item 2 of the report, which
states, the water system seemed to have been operating in a profitable
mode for the year's contained in this study up until the budget year
1981 -82. The budget year 1981- 82,saw substantial increases over the
prior three years in almost every category of cost. The increases
outstriped inflation in most every area. Item 3,of_.Peasley's report
recommended a substantial change .-in accounting methods from those
previously used with respect to the funding of capital replacements.
Although this change is a.major.change in.accounting; it is given very
little explanation in either the work papers or the study. If the City
were to adopt this recommended method in their current stage of planning,
they would be collecting substantial funds for replacement reserves
without any overall plan for management or replacement of the water
system. The City undoubtedly will be able to find a use for the "unan-
ticipated reserves ", however, the reserves should not be accumulated
without a management plan for their use. Item 7, the accountant relied
heavily on input from the staff in their preparation and their results
are not in any way, shape or form an audit. Because the accountant is
not preparing an audit, he is not'required-to be independent and relies
primarily on information that is supplied by the staff without indepen-
dent verification. His accountant felt that the results of the study
were what the staff had anticipated since they supplied the information
and assumptions. He would also urge the Council's support of the
Administrative Officer's recommendation.
Walt Ross, 508 Higuera Street, stated that he would support the Council's
further study.- He was primarily concerned with what these rates would
do to the real estate values. He felt they would be raising all lots,
maybe up to $1,500 per lot; and this has a direct effect on the tax
base. The City will collect a very small portion of this. The second
point he made was that the new buyer would be paying in essence twice - -the
developer cost and replacement reserve. The new person is paying for
the old equipment and, therefore, a disproportionate share.
Russ Johnson stated that he was opposed to the rate increase as he also
did not feel that it was proportionate.
Don Smith, stated that he was afraid.that. the City. Government would be
in a position of wasting its money by having a large reserve. He would
support a "sensitive life -line rate recognizing the difference between
winter and summer use."
Mayor Billig declared the public hearing closed.
City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 4
Rudy Muravez, Finance Director, then outlined five basic policy issues
he would like Council to give direction on:
1. Private Fire Line Service Rates
A. Continue to provide a preferential rate.
B. Work towards.regular rates.
Staff would recommend Option "A ".
Upon general'consensus, Council supported Option "A ". (5 -0)
2. Buy -in Fees (Acreage Fee) .
A. Should excess.capacity used by new customers be paid for by
those customers.
B. Should all rate payers bare the cost of maintaining excess
capacity.
Staff was recommending Option "A ".
Councilman Griffin stated that he was.more interested in.the methodology
used to obtain the results of "excess use ". He felt that he could be
supportive of a new customer paying for it.
Councilmembers Dovey, Settle and Dunin also would support Option "2 -A ".
Mayor Billig stated that she also could support Option "2 -A" but would
like staff to come back with various options.
Upon general consensus, Council would support Option "2 -A ". (5 -0)
2A. Design of "buy -in" Fee
A. Cost to replace (full).
B. Historical (full).
C. Partial Recovery.
Staff was recommending Options "A" and "B".
Councilman Dunin explained that he could not support the new user.paying
for all the replacement.
Councilman Griffin felt that he could support partial recovery. He
would like to see the option outlined by Don Callahan in the Analysis
Report submitted by Stan Bell looked at closely with regard to his
comment that full recovery was inappropriate. He did feel that some
kind of an allocated recovery should be used for a portion of the
replacement.
Councilwoman Dovey would like staff to look at other similar communities
and also look at charges for hillside or elevated properties..
Upon general consensus, Council agreed to go with the partial recovery
option with staff to look further at zones and a planned allocation
approach. (5 -0)
3. Capital Replacement Reserves
A. Replacement Cost of components recovered annually and their
expected useful life.
B. Pay -as- you -go (cash basis).
C. Borrow to replace.
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City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 5
Staff would recommend Option "A ". At this time (see discussion on 3A
below) City Council agreed to support Option "A ".
3A. Replacement Program
A. Immediate.
B. Phased with the Water Management and Conservation Plan.
Staff would recommend Option "B ".
Councilman Settle stated that he would look at "the replacement costs
concept ".
Councilman Dunin could not support Option "B ". He would be more suppor-
tive to be on a pay -as- you -go basis with increased funds directly
earmarked for replacement.
Councilwoman Dovey would support replacement costs although she would
not preclude borrowing if interest rates were to drop dramatically.
Councilman Griffin felt he could support staff recommendations with two
additional provisos: 1) Strict limitation of replacement for "major
structures" and 2) only support capital replacement program if there was
a concurrent strong policy that would preclude the use of those reserves
for anything except for replacement. Minor capital replacements should
be refunded from current operations.
Councilman Settle also agreed with Councilman Griffin's statement.
Upon general consensus, Council agreed with Councilman Griffin's
remarks. (5 -0)
1 4. Water Utility - Current Funding Needs
A. Approve Readiness -to -serve charges proposed and a commodity
charge reduced to 70 cents per cubic foot from the proposed 90
(life line) (effective 4 -1, billed 6/1).
B. Update other users charges to recover current costs of providing
services (implement 4/1).
C. Maintain current.rates until
Staff recommended Options "A" and "B ".
Upon question by Councilwoman Dovey as to whether or not staff had
looked into water conservation being worked into this, Mr. Peasley
stated that it was built into the rate already.
Councilman Dunin questioned if the City would break even this year or if
the City was in danger of using reserves.
Rudy Muravez, Finance Director, explained that this year the City would
break even but would start dipping into reserves by the beginning of
fiscal year 1982 -83.
Councilman:Griffin stated that with regard to the question
of the rates
being deferred until the development of a management
plan,
he would not
be opposed if the Council felt strongly to defer this
item,
although he
could support the maintenance and operation portions
of it
at this time.
However, he would suggest a more expansive life -line
rate.
He also felt
the P.U.C. approach was on the stingy side.
Councilman Settle could also go.along with the 0 & M
rates
being
established now.
City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 6
Mayor Billig.suggested that staff bring back additional alternatives and
look to other communities as to how they have approached this problem.
Upon general consensus, Council agreed to consider increasing the
operating and maintenance rates at this time with staff to come back
with additional options for the remainder.
5. Sewer Acreage Fee
A. Repeal and Reevaluate along with water acreage fee.
B. Keep $3,800 fee as approved 12/81.
Staff would recommend Alternate "A".
Councilman Griffin stated that he could approve staff recommendations.
Upon general consensus,. it was agreed to go along with staff recommended
Option "A ".
The Council then discussed those items on the policy decision chart not
yet covered:
4. Charge Fire Department for maintenance of public fire hydrants.
Rudy Muravez explained that the current policy was that the Fire Depart-
ment is charged $3.00 per month per hydrant for maintenance. The
Peasley study recommended discontinuance of this charge to be consistent
with AB1653 requiring that private companies assume this cost from
public agencies. Staff was recommending that the Council go along with
the Pealsey recommendation and not charge the-Fire Department for
hydrant maintenance. This would save $50,000 a year from the Fire
Department budget.
Councilman Dunin stated that he was opposed to this recommendation and
felt the Fire Department should continue to be charged as other city
departments.
Councilmembers Settle, Griffin and Dovey agreed with staff recommenda-
tions.
Upon general consensus, Council agreed to go with staff recommendation
to not charge the Fire Department for hydrant maintenance was accepted.
(4 -1)
7. Pay the general fund and in -lieu amount for franchise tax and
another for lost property tax.
Rudy Muravez explained that the water fund currently pays the general
fund an in -lieu franchise amount of two percent of revenue and an
in -lieu amount for property tax on water fund properties. The Peasley
study would assume to continue with this policy. Staff was recommending
to continue it based on the enterprise concept. If the water system
were privately operated, such payments would be made.
Councilman Dunin asked to have the word "in- lieu" defined.
Mr. Peasley stated that basically the system would operate as a private
utility company.
Councilman Dunin felt that this was circumventing Proposition 13 by
allowing such a large reserve to be maintained.
Councilmembers Settle, Griffin and Dovey could support staff recommen-
dation.
Upon general consensus, Council agreed to accept staff recommendation.
(4 -1)
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City Council Minutes
January 26, 1982 - 7:00 p.m.
Page 7
9:15.p.m. City Council adjourned to Closed Session to discuss Personnel
Matters. 10:40 p.m. City Council reconvened, all Councilmembers present.
There being no further business to come before the Council, Mayor,Billig
adjourned the meeting at 10:45 p.m.
Pamela Voges, C ty Clerk
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APPROVED BY COUNCIL: 2/16/82
M I N U T E S
REGULAR MEETING OF THE CITY COUNCIL
CITY OF SAN LUIS OBISPO
TUESDAY, FEBRUARY 2, 1982 - 7:00 P.M.
COUNCIL CHAMBERS, CITY HALL, 990 PALM STREET
SAN LUIS OBISPO, CALIFORNIA
PLEDGE OF ALLEGIANCE
ROLL CALL
Councilmembers
Present: GlennaDeane Dovey, Ron Dunin, Robert Griffin, Allen
Settle and Mayor Melanie C. Billig
Absent: None
City Staff
Present: Paul Lanspery, Administrative Officer; George Thacher,
City Attorney; Pamela Voges, City Clerk; Geoff Grote,
Legal Assistant; Don Englert, Police Captain; Dave
Romero, Public Services Director; Ken Bruce, Senior
Planner
CONSENT ITEMS
C -1 CLAIMS AGAINST THE CITY
On motion of Councilman Dunin, seconded by Councilman Griffin, claims
against the City for the month of February, 1982, be approved and
ordered paid subject to the approval of the CAO. Motion carried, all
ayes.
C -2 . COUNCIL MINUTES
On motion of Councilman Dunin, seconded by Councilman Griffin, the
following minutes be approved as amended: January 5, 1982 - 7:00 p.m.,
January 11, 1982 - 7:00 a.m., January 11, 1982 - 12:10 p.m., January 12,
1982 - 7:00 p.m., January 14, 1982 - 12:10 p.m., January 18, 1982 -
12:10 p.m., January 19, 1982 - 7:00 p.m. Motion carried, all ayes.
C -3 CONTRACT PAY ESTIMATES