HomeMy WebLinkAbout08/20/1996, 9 - WATER SYSTEM ACCESS CHARGES council
August zo, 199
j ac En as REpoRt
CITY OF SAN LUIS OBISPO
FROM: John Moss, Utilities Directo /L_1Prepared By: Gary W. Henderson, Water ivision Manager
SUBJECT: Water System Access Charges
CAO RECOMMENDATION
1. Approve the "Fixed Fee" method for establishing water system access charges; and
2. Adopt a resolution establishing water system access charges, effective November 1,
1996, of $22.40 per month, to be adjusted according to future percentage changes in
water rates.
DISCUSSION
As part of the 1996-97 annual review of enterprise funds, staff recommended establishing water
system access charges for commercial properties which use a private well for their domestic
needs but are connected to the City water system to supply their on-site fire protection. In these
cases, the customer receives the benefit of the City's water system for pressure and flow, while
the City assumes some liability should the City's system fail to deliver water in the event of a
fire. The customer pays nothing towards the operation and maintenance of the City's system
since there is no actual consumption of water unless there is a fire emergency. Council directed
staff to return with an analysis and alternatives on how to equitably charge the customer for the
benefit they receive.
Staff has discussed various alternatives for developing appropriate charges for providing this
service to the customer. It should be noted that this policy would only impact two properties
at this time. However, an increasing number of properties may fall into this category in the
future, especially in new annexation areas.
Properties that would be affected by water system access charges could avoid the charges by
paying the associated water impact fees, developing a water allocation, and installing a water
service connection. The property would then be charged only for the amount of City water
used.
The following five alternatives are presented for Council's consideration. Alternatives A, B,
and C are based on the assumption that the customers are benefiting from that part of the water
system that is directly related to distribution, and should not be charged for any source of supply
or treatment costs. The equitable share of the costs of operation and maintenance for the
distribution system should be recovered through appropriate charges to the properties receiving
the benefit of fire protection.
Council Agenda Report - Water System Access Charges
Page 2
ALTERNATIVES
A. Fixed Fee: This alternative would establish a flat rate to charge customers for access
to the water system for fire protection. This is the method previously presented to
Council for consideration and is still the staff recommended option. The derivation of
the proposed charges are shown in Attachment B. This methodology would result in a
recommended 1996-97 monthly charge of$22.40 per property.
Pros: This option would be the easiest to implement and require the least staff time to
administer. It would be fairly straightforward and easy to explain to customers.
Cons: The option would not differentiate between the size of building that is being
served. It could be argued that a very large structure receives a greater benefit
than a small building from a fire protection standpoint.
B. Fee Based on Estimated Meter Size: Table 1: Fee Based on Estimated Meter Size
This option would require staff to
determine the size of water meter that
would be necessary to serve the Meter Size Monthly Charge
property if they were to connect to the
water system. Based on this 5/8" & 3/4" $15.55
determination, the monthly charges 1" $31.10
for the various sizes of meters would
be as shown in Table 1. The 1.5" $62.20
derivation of these charges is shown 211 $99.50
in Attachment B.
3" $217.70
Pros: This method would differentiate
between the size of the building being 4" $342.10
served by the water system for fire 6" $699.75
protection.
Cons: These charges may be less
than Alternative A for businesses
which would only require a 5/8" or 3/4" meter. On the other hand, businesses which
would require larger meters would have significantly higher monthly bills. These bills
could exceed monthly bills for similar businesses that are actually connected to the water
system and receive water for consumptive use.
C. Fee Based on Square Footage of Building: This option would base the monthly charge
on the square footage of the building served by the fire protection system. The rationale
for determining the charge per square foot is shown in Attachment B and based on the
assumptions would result in a monthly charge of 1.3c per square foot. While the cost
per square foot may seem small, Table 2 shows examples of monthly charges for random
9�
Council Agenda Report - Water System Access Charges
Page 3
businesses if they were being served by a private well and connected to the City's system
for fire protection.
Table 2: Fee Based on Square Footage (examples)
Business Square Footage Monthly Charge
Rocky Mountain Chocolates 1,200 $15.60
Amtrak Station 4,600 $59.80
San Luis Obispo City Hall 12,000 $156.00
Scolaris Market 25,000 $325.00
Sears 75,400 $980.20
Pros: Same as Alternative B above.
Cons: The monthly bills for large commercial buildings would be significant and would
likely be more than a similar businesses that actually consumes water and is also
provided fire protection. The process would also be more complicated and there is no
guarantee that the size of a building is directly related fire protection needs.
D. Negotiate Each Situation: This option would require each situation to be negotiated on
a case-by-case basis.
Pros: The City may be able through negotiations to maximize the monthly charge to the
business. It would also allow staff to weigh the benefits received versus the service
provided.
Cons: This option would be very time consuming and would likely lead to appeals to
the Council relative to appropriate charges. This option may not provide for equitable
and fair charges being assessed to all effected properties.
E. No Fee: This option would not establish a monthly charge for access to the water system
for fire protection.
Pros: This would require no additional staff time and since there are currently only two
properties which would be covered by such charges, this would not have any significant
fiscal impacts.
Council Agenda Report - Water System Access Charges
Page 4
Cons: This option would not equitably recover costs associated for providing water
system access for fire protection. In the future, there may be additional businesses that
would fall under these provisions and proposed modifications at that time may be more
heavily contested.
SUMMARY
Staff believes that an equitable system should be adopted to recover the costs associated with
providing fire protection to businesses that utilize a private well for their domestic needs. Since
these properties do not actually consume water, it seems reasonable that the monthly charges
should be less than a similar business that consumes water and also has fire protection.
Alternative A provides a reasonable rational for establishing monthly charges that will equitable
recover the costs necessary to provide this service. Alternative A will require less staff time and
associated costs than the other alternatives (with the exception of Alternate E).
Should the Council approve this proposal, staff can implement the charge by requesting that the
County include the charge in the property taxes for those specific properties that do not have a
water meter but are attached to the City system for fire protection. Future increases would be
linked to any percentage change in the water service rates.
FISCAL EUPACT
Adoption of the recommended water system access charges will generate an estimated revenue
of$550. The annual revenue assumes two affected properties.
Attachment: A. Resolution adopting Water Access Charges
B. Water System Access Charge fee derivation for alternatives
gAcar\w=hM.car
9-y
RESOLUTION NO. (1996 SERIFS)
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SAN LUIS OBISPO
IMPLEMENTING WATER SYSTEM ACCESS CHARGES
WHEREAS, the City Council of the City of San Luis Obispo has determined that
water access charges are necessary to pay for the costs associated with providing water
system access and should be applied to any property owner within the City who does not
have a water meter but is attached to the City's water system for emergency purposes, such
as fire protection; and
WHEREAS, after an analysis of the costs associated with providing distribution
facilities necessary to serve City customers, divided by the number of the total number of
water meters, it has been determined that the monthly access charge will be $22.40;
WHEREAS, this fee will be modified annually according to any percentage change in
future water service rate adjustments; and
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San
Luis Obispo hereby establishes a monthly water system access charge payable by the
property owners in the amount of$22.40, to become effective November 1, 1996.
BE IT FURTHER RESOLVED that the City Council of the City of San Luis Obispo
hereby authorizes the San Luis Obispo County Assessor to access the amounts due as liens
against the developed properties.
On motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted on this day of , 1996.
ATTEST: Mayor Allen Settle
City Clerk, Bonnie Gawf
APPROVED AS TO FORM:
9A&�5��
AtfornVJePky J42ensen
q�s
Water System Access Charges
1996 Water Fund Budget Information
Source of Supply = $2,354,737
Treatment = $2,308,088
Distribution System = $3.527.675
TOTAL $8,190,500
Alternative A: Fixed Fee
Total Number of Water Meters = 13,138
Monthly Charge per Meter = $3,527,675 _ 13,138 - 12
= $22.40 per month
Alternative B: Fee Based on Estimated Meter Size
Number of meter equivalents:
Meter Size Number Service Unit Equiv. Total Svc Units
5/8" 7,229 1.0 7,229
3/4" 3,589 1.0 3,589
1' 1,682 2.0 3,364
1.5" 290 4.0 1,160
2" 280 6.4 17792
3" 16 14.0 224
4" 1 34 1 22.0 1 748
6" 18 45.0 810
TOTAL 13,138 18,916
y-�
Water System Access Charges
Page 2
Cost per Month per Meter Equivalent = $3,527,675 _ 18,916 _ 12
= $15.55 per month for 5/8" &3/4" meters
Fee Based on Estimated Meter Size
Meter Size Monthly Charge
5/8" & 3/4" $15.55
1" $31.10
1.5" $62.20
2" $99. 50
3" $2.17.70
4" $342. 10
6" $699.75
Alternative C: Fee Based on Square Footage
Estimated existing commercial space = 8,000,000 ft2
Approximately 35% of water use is for commercial uses
Monthly charge per square foot = .35 x $3,527,675 - 8,000,000 fe _ 12
= $0.013 per square foot of building served
y-7