HomeMy WebLinkAbout01/18/1994, 1 - SEWER RATE STRUCTURE REVIEWIllry�l�l1lll�nII � II � � MEETING DATE:
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MUNCIL AGENDA REPORT ITEM NUMBER: /
FROM: William C. Statler, Director of FinanceW' ,
Prepared by: Linda Asprion, Revenue Manage
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SUBJECT: SEWER RATE STRUCTURE REVIEW
CAO RECOMMENDATION
■ Adopt a resolution establishing that sewer service charges for restaurants, bakeries
and hostelries be the same rate and based on water consumption as all other
commercial customers.
■ Adopt a resolution effective March 21, 1994, eliminating strength factors in the
calculation of non - residential sewer impact fees and increasing non - residential sewer
impact fees by 4% as a one -time adjustment to compensate for discontinuing strength
factors in the sewer impact fee calculations.
DISCUSSION
Background
In January 1993, staff performed a comprehensive review of the water rate structure - not
to raise more revenues, but to see if there was a simpler, fairer way of meeting Council
adopted water rate goals. As a result of that review, Council adopted a new rate structure
that was "revenue neutral" which is easier for customers to understand, more supportive of
conservation goals, easier to administer, and generally fairer to our customers.
Accordingly, staff has conducted a similar review of the sewer rate structure, again not to
raise more revenues, but to determine if there is a simpler, fairer way of meeting the rate
requirements of the sewer fund. This sewer rate review concludes that the sewer rate
structure is basically sound. The current structure is generally easy to communicate to our
customers and treats all customers in a similar manner with the exception of restaurants,
bakeries, and hotels /motels: restaurants and bakeries pay a higher per unit rate than other
commercial customers once the 5 allowable units per month included in the minimum
charge is exceeded; and hotels /motels are charged on a per room basis rather than
consumption. (Attachment A provides the current sewer rates.) Accordingly, staff has
identified these two rate categories where further consideration is warranted:
■ Restaurants and Bakeries
■ Hotels, Motels, Inns, and Bed & Breakfasts
Restaurants and Bakeries
As reflected in Attachment A, all non - residential customers who pay sewer fees based on
water consumption are charged the same rate except restaurants and bakeries. There is a
sound basis for this distinction: the "strength" of their discharge in terms of "biological
oxygen demand" (BOD's) and suspended solids (SS) is typically greater for the same volume
���fl� ��lllll �►� N city of san .,Ais oBispo
COUNCIL AGENDA REPORT
of discharge than other users. However, achieving this level of equity comes at a cost in
terms of administering and communicating the rate structure. The primary difficulty comes
when there are mixed uses behind the meter. For example:
■ How should a customer be charged if there is a realty office, stationers, men's
clothing store, and a restaurant being served by the same meter?
■ What if there is a "restaurant /bakery" type use within the same building, such as in
a grocery store?
Currently, it is the City's policy for sewer charges to be based upon the highest use behind
the meter, which means that in the examples cited above, consumption over 5 units per
month is charged at the higher restaurant /bakery rate of $3.70 per unit rather than the
commercial rate of $2.20 per unit. The issue of "equity" arises in circumstances such as the
following scenario:
■ A large shopping center has only one water meter and is occupied by two or three
small restaurants, a grocery store with a bakery, other retail stores, and a laundromat.
The water and sewer bills are divided among the tenants in an agreement with the
landlord. The sewer bill is charged at the restaurant /bakery rate ($3.70 per unit) as
that is the highest usage behind the meter. The retail stores and laundromat, which
consumes (by far) the largest amount of water, are required to pay the higher sewer
rate even though they would normally pay the regular commercial rate ($2.20 per
unit).
Accordingly, staff is recommending eliminating the "restaurant /bakery" category and
consolidating it with the general non - residential category. Total sewer revenues generated
by this $1.50 rate differential ($3.70 minus $2.20 = $1.50 per unit) on an annual basis is
estimated at $65,000, or about 1.4% of total anticipated sewer service charges. In balancing
the relatively small revenue effects of our current rate structure against equity and
simplicity, staff recommends charging all non - residential accounts (with the exception of
schools) at the same rate.
Hotels and Motels
As reflected in Attachment A, hotels and motels are charged a fixed monthly rate based on
their number of rooms. Staff has received several comments from hotel operators that this
structure is unfair as different hotels have different vacancy rates at different times of the
year, resulting in differing ainounts of effluent being discharged to the City's system. In
essence, a hotel with a higher vacancy rate pays a disproportionate share of sewer costs than
a hotel with a lower vacancy rate. This structure. also has the same problem as the
restaurant /bakery approach: what if the same meter serves a hotel with a restaurant or
other use?
Staff is recommending that hotel charges be based on water consumption like all other
commercial- accounts. Although staff hasn't analyzed this impact on a hotel -by -hotel basis,
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COUNCIL AGENDA REPORT
we estimate that total annual sewer revenues would be reduced by approximately $45,000
or less than 1% of anticipated total sewer service charges.
What effect would the reduced revenue have on the sewer fund?
An analysis of sewer fund rate requirements is performed annually. In preparing these
sewer rate reviews, key assumptions include:
■ Expenditure requirements for operations, capital outlay, and debt service
■ Customer service growth
■ Other revenues such as capital improvement charges and interest on investments
If both the restaurant /bakery and hotel /motel sewer rates were revised to be the same as
all other commercial accounts, it is projected that annual sewer service charges would be
reduced by approximately $110,000 or 2.4 %. When the annual sewer rate review is
performed in May, 1994, these same factors will be taken into consideration along with the
projected reduction in revenue based on this rate change. If the 2.4% revenue reduction
turns out to be a major component in balancing the sewer fund, staff recommends increasing
the sewer rates only for non - residential customers to make up the short-fall, who account
for about 40% of total sewer service charge revenues. All other things being equal,
spreading this revenue loss in this manner would potentially result in an overall increase for
non - residential customers of approximately 6 %.
How would this sewer rate change affect sewer development impact fees?
If Council approves the rate structure changes noted above, staff recommends making a
similar change in sewer development impact fees. Currently, users with a "stronger"
discharge (like restaurants and bakeries) pay higher fees than other commercial users. For
consistency with our monthly rates - and to address the same "behind the meter" issues
previously discussed - staff recommends one rate structure for non - residential development
impact fees.
Adopting a one -time 4% increase in the sewer development impact fee would off -set the
loss from future revenue received from the strength factor. This one -time increase will have
no effect on current businesses.
When would any change be effective?
To provide ample time to notify the affected customers and convert the rate structure, staff
recommends implementing the sewer rate structure change for restaurants /bakeries and
hotels /motels effective March 1, 1994.
Due to the timeframe regulations under AB1600 the 4% increase to the sewer impact fees
will not be effective until March 21, 1994.
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N" COUNCIL AGENDA REPORT
COMMUNITY PARTICIPATION
In September, 1993, staff introduced the proposed sewer rate changes for
restaurants/bakeries and hotels /motels with representatives from the Chamber of
Commerce, Business Improvement Association, and the Visitors Conference Bureau. It was
agreed that the Chamber of Commerce would take the lead role in presenting these
proposed changes to the appropriate business groups along with staff presentations as
requested. On November 23, 1993, staff further discussed the proposed sewer rate changes
with members from the Monterey Street Hotel /Motel Association. Additionally, each
hotel /motel has received a letter explaining the proposed sewer rate structure change and
encouraging their attendance at the Council meeting.
Although staff has requested comments regarding these proposed changes from both the
Chamber of Commerce and the Monterey Street Hotel /Motel Association, none has been
received. Each of the groups noted above (along with the Building Industry Association of
the Central Coast) is aware of this recommendation and has been provided with a copy of
this Agenda Report.
FISCAL IMPACT
As previously discussed, it is projected that adopting these changes in the sewer rate
structure would reduce revenues by 2.4 %, or approximately $110,000. For the balance of
1993 -94, staff would not recommend any changes in rates for commercial users due to the
relatively small revenue impact, especially on a partial year basis. However, this could be
a factor when the annual sewer rate analysis is performed in May, 1994. If, at that time
staff determines that a rate increase is necessary because of these lost revenues, staff would
propose that the balance be made -up from non - residential customers only, who account for
about 40% of total sewer revenues.
SUMMARY
In reviewing the sewer rate structure, we are not attempting to generate additional revenues,
but to simply consider changes that would make the rates easier to understand by our
customers, be fairer, and easier to administer.
ATTACHMENTS
■ Resolution adopting sewer service charges for restaurants /bakeries and hotels /motels
to be the same as other commercial customers
■ Resolution eliminating strength factors in the calculation of non - residential sewer
impact fees and increasing non - residential sewer impact fees by 4% as a one -time
adjustment
■ Current monthly sewer service - charges (Attachment A)
RESOLUTION NO.
(1994 SERIES)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
AMENDING SEWER SERVICE RATES
WHEREAS, a comprehensive review of sewer rates has been performed and
reviewed by the Council; and
WHEREAS, based on this review the Council has determined that all commercial
facilities should be charged the same rate which is to be based on the water consumed; and
WHEREAS, it is the City's policy that sewer rates and charges fully recover the
operating, debt service, and capital costs of the sewer system;
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Resolution No. 8022 (1992 Series) is hereby rescinded.
SECTION 2. Fees for sewer service are hereby established as follows:
A. Every person or business entity whose premises in the City are served by a
connection with the City's sewer system shall pay monthly service charges per Schedule 1
attached hereto.
B. Any non - residential customer using substantial amounts of water consumed
for landscaping or other purposes not requiring sewer treatment or collection facilities may
appeal to the Utilities Director to determine an equitable ratio of sewer use for billing
purposes or the user may, at the user's own expense, install private measuring devices in
accordance with the specifications approved by the Utilities Director.
On motion of
seconded by
AYES:
NOES:
ABSENT:
and on the following roll call vote:
the foregoing resolution was passed and adopted this
1994.
ATTEST:
City Clerk Diane Gladwell
APPROVED AS TO FORM:
tC Qmat n b14 c -1 c(e.lrupw
City Attorney J frey Jorgensen
Mari Peg Pinard
day of
1'S
Schedule 1
MONTHLY SEWER SERVICE CHARGES
Effective Dates
Type of Account 3/1/94 7/1/94
Single family dwelling, including $1850 $19.50
single meter condominiums and townhouses
Multi - family dwelling unit in any duplex, $14.75 $1550
apartment house or roominghouse, per each dwelling unit
Mobile home or trailer park, per each dwelling unit $11.10 $11.70
Public, private, or parochial school, average daily $ 2.10 $ 2.20
attendance at the school
All other accounts
Minimum charge $18.50 $19.50
Additional charge for every 100 cubic feet $ 2.20 $ 2.30
in excess of 500 cubic feet of metered water
consumption
Each vehicle discharging sewer into City system
Minimum charge $62.00 $65.00
Additional charge per 100 gallons in excess $ 3.70 $ 3.90
of 1500 gallons discharged
/ -6
RESOLUTION NO. (1994 SERIES)
RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ELIMINATING STRENGTH FACTORS IN THE CALCULATION OF
NON - RESIDENTIAL SEWER IMPACT FEES
WHEREAS, a comprehensive review of the sewer rate structure has been performed
and reviewed by the Council; and
WHEREAS, based on this review the Council has determined that all non - residential
facilities should be charged a development review fee based only on meter size and that a
one -time adjustment should be made to the fees to compensate for eliminating the strength
factor in the calculation;
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Strength factors are hereby eliminated from the calculation of non-
residential sewer development impact fees.
SECTION 2. Non- residential sewer development impact fees shall be increased one-
time by 4% to compensate for eliminating strength factors as per Schedule 1 attached
hereto.
Upon motion of
and on the following roll call vote:
AYES:
NOES:
ABSENT:
seconded by
the foregoing resolution was adopted this day of , 1994 and effective
60 days thereafter.
ATTEST:
City Clerk Diane Gladwell
"9• ; •
'CA§ Attorne ldfrey Jorgensen
May Peg Pinard
/' 7
WATER AND WASTEWATER IMPACT FEE SCHEDULE
EFFECTIVE MARCH 1, 1994
RESIDENTIAL IMPACT FEE SCHEDULE
Unit
Service
Twe
Units
Water
Wastewater
Single Family Dwelling
1.00
$2,704.00
$2,282.00
Duplex, Townhouse,
2.00
$ 5,408.00
$ 4,746.00
Condo, Apartment
0.80
$2,163.00
$1,826.00
Mobile Home
0.60
$1,622.00
$1,369.00
NON - RESIDENTIAL IMPACT FEE SCHEDULE
Unit
Service
Tune
Units
Water
Wastewater
5/811- 3/4"
1.00
$ 2,704.00
$ 2,373.00
1"
2.00
$ 5,408.00
$ 4,746.00
11/211
4.00
$ 10,816.00
$ 9,492.00
2"
6.40
$ 17,306.00
$ 15,187.00
3"
14.00
$ 37,856.00
.$ 33,222.00
4"
22.00
$ 59,488.00
$ 52,206.00
6"
45.00
$121,680.00
$106,785.00
C
SCHEDULE 1
/4
Attachment.
MONTHLY SEWER SERVICE CHARGES
Effective Dates
Type of Account 7/1/92 7/1/93 7/1/94
---------------------------------------------------------- - - - - --
Single family dwelling, $15.00 $18.50 $19.50
including single meter
condominiums and townhouses
Multi- family dwelling unit $12.00 $14.75 $15.50
in any duplex, apartment house
or roominghouse, per each
dwelling unit
Mobile Home or trailer park, $ 9.00 $11.10 $11.70
per each dwelling unit
Hotel, motel, or auto court, $12.00 $14.75 $15.50
per each unit
Public, private or parochial $ 1.70 $ 2.10 $ 2.20
school, average daily attendance
at the school
Each restaurant or bakery ,
Minimum charge $15.00 $18.50 $19.50
Additional charge for every $ 3.00 $ 3.70 $ 3.90
100 cubic feet in excess of
500 cubic feet of metered
water consumption
All other accounts
Minimum charge $15.00 $18.50 $19.50
Additional charge for every $ 1.80 $ 2.20 $ 2.30
100 cubic feet in excess of
500 cubic feet of metered
water consumption
Each vehicle discharging sewage
into City system
Minimum charge $50.30 $62.00 $65.00
Additional charge per $ 3.00 $ 3.70 $ 3.90
100 gallons in excess of
1500 gallons discharged
�- 9
January 18, 1994
Mayor Peg Pinard
P.O. Box 8100
San Luis Obispo,
Quality Suites
CA 93403 -8100
AEETING AGENDA
DATE ITEM #
RECEIVED
JAN 18 1994
aen Ili use I&
RE: Proposed Sewer Rate Structure Changes for Hotels and Motels
Dear Mayor Pinard,
I wanted to take this opportunity to let you and the City Council
know that I am in favor of the above referenced changes to the
sewer rates. I am in favor of the changes because I think it is a
more fair way to allocate the costs in that everyone would be
paying for what they use. From a business /cashflow standpoint, the
changes would also help because our higher sewer expenses would be
incurred when we would be generating the most income.
Please call feel free to contact me if you have any questions.
Very truly yours,
QUALITY SUITES HOTEL
Ge96 Newland
Giffier/General Manager
Resident of San Luis Obispo
cc. City Council Members 1 "CAO
ATTORNEY
D418 W MG
O MWTEAM
O CwADFRE
1631 MONTEREY STREET
SAN LUIS OBISPO, CALIFORNIA 93401
(805) 541 -500 1
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