Loading...
HomeMy WebLinkAboutREDlichtigmattinglyb5RED FILE MEETING AGENDA DATE OMITEM #'Be counci l j mp v memoianc~um ~r~ 'COUNCIL C?r'CDD DI RCr=ErtrOctrlfm CT-FIN DI RMay 27, 2010 Et–A fl errin6 FIRE CHIE FQ'ATTORNEY 215 W DI R TO : City Council 21tLERK/ORIG Er POLICE CH F7DEPTHEADSE-REC DI R CTUTIL D1 RFROM: Katie Lichtig, City Manager -n2c Q'I Carrie Mattingly, Utilities Dire for new "65 e tai +'Kf ~L. RESIDENTIAL TO COMMERCIALG CONVERSION S In July 2009, a local business property owner addressed Council, in person and in writing , requesting his property, a residential to commercial conversion, be eligible for the residentia l sewer cap . The owner stated the present sewer rate structure is inequitable for the older home s that had been converted into offices and that "sewer rates are not volume based, as all wate r usage, even for landscaping, is being double-charged as if it were being used for sewage ." H e indicated it would be cost-prohibitive for him to install an irrigation meter . Council requeste d staff to look into this issue and report back during the 2010 Sewer Fund review . To provide long-term improvements to sewer customer service, the City performed a multi-yea r study and comprehensive analysis which recommended a volume based sewer rate structure . City Council adopted the new rate structure which became effective July 1, 2007 . As a result of the community process that preceded this decision, Council had priority ranked water and sewe r rate structure goals and objectives as follows : 1.Comply with legal requirements RECEIVE D2.Encourage conservatio n 3. Ensure revenue adequacy to fully meet system operating and capital needs MAY 2 7 201 0 4.Provide equity and fairness between customer s 5.Be easy to understand and administer SLO CITY CLER K 6.Facilitate ongoing review to maintain rate stabilit y Acknowledging no rate structure is perfect, with the Council's priorities in mind the consultan t created a volume based sewer rate structure that is easy to understand and administer while stil l allocating costs as equitably as possible . Because the volume-based sewer rate was to be based on the amount of water used, there wa s concern over equity for residential properties that, at times, can use a significant amount of wate r for outside uses . Unlike commercial properties, residential properties, due to cross contaminatio n concerns with the potable water system, may not install separate irrigation water meters . In order to compensate for this, a residential sewer cap was established based on the average volume o f water used during a three-month period during the winter months . Staff has analyzed the concerned property owner's sewer use charges using both the prior flat rate and the new volume-based sewer rate structures . For the 11 months between July 2008 an d June 2009 he would have been charged $645 .15 with the flat rate structure instead of the $326 .02 SUBJECT : SEWER RATE STRUCTURE Council Memorandum - Sewer Rate Structure — Residential to Commercial Conversions Page 2 that the property was billed using the commercial volume-based rate . The volume-based sewer rate structure has effectively reduced his sewer use charges by about 50 percent . Additionally, the Council has authorized the Utility Billing Adjustment Committee to resolv e disputes over utility billing issues . The owner was scheduled to meet with the Committee, but had to cancel his meeting and has been unable to reschedule as of this date . Staff has concern with and does not recommend creating a special category of commercial user in the rate structure . This new category conflicts with many of the adopted sewer rate structur e goals and objectives . Below is a list of staff's concerns with a new rate category and its conflic t with the City's current rate structure policies : 1.Council rate structure priority number two is to encourage conservation . If existing commercial properties choose not to install irrigation meters, planting a drought toleran t landscape is a viable alternative to reduce and potentially eliminate outdoor water use . 2.Creating a rate structure with special categories or exceptions is more complicated tha n the current design. There are multiple reasons why certain categories of commercia l sewer users could be charged differently — no rate structure perfectly addresses al l situations . Council rate structure priority number three is rates are easy to understand and administer . The current rate structure was designed with this priority in mind . 3.Current City databases do not track residential units that have been converted t o commercial uses either through utility billing, business licensing, or other . Once the property changes to commercial, with currently available technology, the information tha t the property is a residential conversion to commercial is not available electronically . While our databases are about to go through an upgrade, a significant investment of staff resources to create this database would be required either by canvassing neighborhood s or going through individual property files . 4.Sewer caps "reset" each time a residential account turns over . How changes in tenants o r intensification of uses in the commercial properties would be addressed is an issue o f equity. For example : if a converted commercial property were vacant during the winte r water use period setting the sewer cap and subsequently leased in the spring, but stil l under the same property owner or management company that pays the water bills, th e potential for under collection of sewer rates is high . The risk of this happening with a residential unit is low in comparison . 5.There would be an unknown fiscal impact on the overall sewer rates in the community a s the number of these converted properties is not known . Should Council choose to create a special category for commercial properties converted from residential, extensive wor k would be required to analyze the impacts, run rate scenarios, and incorporate the ne w category into the rate model . This work would require the assistance of a consultant . Staff will be presenting the 2010 Sewer Fund review on June 1, 2010 as Business Item 5 and wil l be prepared to discuss this issue further should Council desire .