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Home My WebLink About06/06/2006, PH 1B - 2006 SEWER FUND REVIEW council MwieDM June 6,2006 j acEnba Report 1�N.I". t � CITY OF SAN LUIS OBISPO FROM: John Moss, Utilities Directo Prepared By: Kathe Bisho enior Administrative Analyst SUBJECT: 2006 SEWER FUND REVIEW CAO RECOMMENDATION 1. Review and accept the 2006 annual sewer fund financial review; and 2. Conceptually approve the proposed operating program change requests ($179,700) and capital improvement plan requests ($360,000), pending the June 20, 2006 budget review and adoption. DISCUSSION This report presents the annual review of the sewer fund, with no changes recommended to the currently adopted sewer rate resolution (Attachment 1). Last year, Council approved increasing sewer rates by 10%, effective July 1, 2006. The analysis demonstrates that the currently adopted rate increase will provide sewer revenues adequate to fund proposed expenditures, including recommended changes of$539,700, to the currently approved 2006-07 Budget. In addition, this analysis points to an eventual leveling off of projected rate increases in 2009-10, as some current major initiatives are completed and the fund looks forward to the retirement of some debt obligations. A summary of requested changes is as follows: Significant Operating Program Change Requests Program Description 2006-07 Sewer Fund contribution to Customer service staff and operating materials to 138,000 Water Customer Service— support monthly utility billing: two Water Customer Monthly billing and volume Service Personnel and one Accounting Assistant— based sewer billing proportionate share 50% Water Reclamation Facility Chemical cost increase to ensure successful 20,000 wastewater treatment Water Reclamation Facility Laboratory Analyst to support increased water and 21,700 wastewater demands including water reuse - proportionate share 25% Total $1799700 2006 Sewer Fund Review Page 2 Capital Improvement Plan Requests Program Description. 2006-07 Wastewater Collection Tank Farm Gravity Sewer,Lift Station and Force 340,000 Main: for easement land acquisition and additional design work Sewer Fund contribution to Fleet addition two light pickups to support monthly 20,000 Water Customer Service— meter reading—proportionate share 50% - Monthly billing and volume based sewer billing Total $360,000 The 2006-07 budget requests and the approved 2005-07 Financial Plan provide the community with infrastructure and process improvements to meet capacity requirements, and to reduce energy consumption at the Water Reclamation Facility, while maintaining infrastructure replacements to improve system reliability. Additional customer service staff and operating resources will enhance the delivery of customer services with the implementation of volume based residential sewer billing, and one additional laboratory analyst to continue to meet the increasing demands in maintaining program, regulatory, environmental and health standards. 2006 Sewer Fund Analysis Attached to this report is the 2006 Sewer Fund Analysis that includes a forecast of the significant programs and requirements on the horizon and the financial implications through 2011-12. In addition, detailed information on the Sewer Fund 2006-07 significant operating program change requests and capital improvement plan requests are included in Attachment 2. Sewer Rate Structure The 2006-07 sewer rate structure has a fixed charge for residential customers, and a fixed minimum charge plus variable charge based on water use for non-residential customers. As previously directed by Council, staff is working with HDR Engineering, Inc. on the final rate structure modeling and testing to move to a volume based sewer structure to include a small fixed charge plus variable sewer rate based on the individual customer's water usage as measured in the winter months of December, January, and February when water usage for landscape purposes is at a minimum. Staff will return to Council this fall with the final recommended sewer rate structure and implementation schedule, to allow adequate time for community information and outreach prior to winter, in preparation for the proposed 2007 implementation of the volume based sewer rate structure. Sewer Lateral Replacement Program At the 2005-06 mid-year budget review in February 2006, the Council requested that we return with a re-consideration of an incentive/subsidy program to financially assist property owners in replacing sewer laterals, which was deleted as a budget-balancing action in the 2005-07 Financial 2006 Sewer Fund Review Page 3 Plan. An analysis of the cost of processing encroachments (including required inspections).is included in the comprehensive cost of services study, which is currently underway. The results of the cost of services study is planned to be presented to the Council at the August 18th meeting. Since the cost of processing encroachment permits is likely to be an important part of the Council's re-consideration of the sewer lateral replacement program, this re-consideration will be scheduled for later in 2006 (after completion of the cost of services study), and not as part of the 2006-07 Financial Plan Supplement process. FISCAL IlVIPACT Previously adopted in July 2005, the 10% sewer rate increase establishes 2006 monthly sewer service charges of $35.56 for single family dwellings. This is an increase of $3.23 per month over the 2005 single family charges. New funding requests in 2006-07 do not result in an additional rate increase for three primary reasons: (1) The timing of construction for Tank Farm Lift Station is reprogrammed from 2004- 05 to 2005-06, with resulting debt service payment previously projected to begin in 2005-06 now projected with first debt payment in 2007-08; (2) Increased revenues from sales to Cal Poly in 2004-05 (actual) and the 2005-06 (revised projection), and; (3) Resulting end of year working capital balance for 2004-05 (actual) and the 2005-06 (revised projection) are greater than previously estimated. With the previously adopted 10% sewer rate increase the City will be able to ensure the solvency of the Sewer Fund and meet capital, operating and regulatory requirements contained in the attached financial analysis. ATTACHIVIENTS 1. 2005 Resolution No. 9688 Establishing Sewer Service Rates 2. 2006 Sewer Fund Analysis Exhibit A— Updated Financial Schedules A.1 Changes in Financial Position A.2 Assumptions for Fund Projections A.3 Significant Operating Program Change Requests A.4 Capital Improvement Plan Requests GA2005-07 Financial P1an\2006-07 Budget\2006 Fund Analysis\Sewer\2006 Sewer Fund CAR.doc ( a Attachment 1 Page 1 RESOLUTION NO.9688 (2005 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING SEWER SERVICE RATES WHEREAS,it is the policy of the City of San Luis Obispo to.review enterprise fund fees and rates on an ongoing basis and to adjust them as required to ensure that they remain equitable and adequate to fully cover the cost of providing services;and WHEREAS,a comprehensive analysis of sewer fund operating,capital and debt service needs has been perfonmed for fiscal years 2004-05 through 2009-10;and WHEREAS,this comprehensive analysis has been revised based on updated revenue and expenditure information;and WHEREAS,the Council has reviewed the sewer service rates necessary to meet.system operating, capital and debt service requirements. NOW,THEREFORE,BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION I. Resolution No.9569(2004 Series)is hereby rescinded,effective July 1,2005. SECTION 2. The rates set forth in Exhibit"A"are hereby adopted,establishing rates effective July 1,2005 and July 1,2006. Upon motion of Council Member Settle seconded by Vice Mayor Ewan,and on the following roll call vote: AYES: Council Members Brown,Mulholland and Settle,Vice Mayor Ewan and Mayor Romero NOES: None ABSENT. None The foregoing resolution was adopted this Vd day of June 2005. Mayor David-F.Romero ATTEST: Audrey Hoo e City Clerk R 9688 I � Attachment 1 Resolution No. 9688(2005 Series) Page 2 Page 2 APPROVED AS TO FORM: JonMaw well City Attorney r 1 Resolution No. 9688 (2005 Series) Attachment I P Page 3 age 3 MONTHLY SEWER SERVICE RATES Type of Account July 1,20.05 July 1, 2006 Single family dwelling, includng single meter 32.33 $35.56 condominiums and townhouses Mufti-family dwelling in any duplex,apartment house or 25.46 28.01 rooming house, per each dwelling unit Mobile home or trailer park, 1922 21.14 per each dwelling unit Public,private,or parochial 3.65 4.02 school,average daily attendance at the school. All other accounts Minimum charge 32.33 35.56 Additional charge for every 3.90 429 100 cubic feet in excess of 500 cubic feet of metered water consum tion Each vehicle discharging sewer into City system Minimum charge 106.51 117.16 Additional charge per 100 6.41 7.05 gallons in excess of 1500 gallons discharged ATTACHMENT 2 2006 Sewer Fund Analysis June 6, 2006 Prepared by the Utilities Department city of San WIS OBISPO Attachment 2 Page 2 City of San Luis Obispo 2006 Sewer Fund TABLE OF CONTENTS I. OVERVIEW II. 2006-07 BUDGET A. Summary of Operating Programs B. Significant Operating Program Change Requests C. Capital Improvement Plan Requests III. RATE SETTING A. Methodology B. Structure C. History IV. ASSUMPTIONS A. Revenues B. Expenses C. Debt Service Payments V. 2005-06 UPDATE VI. LOOKING TO THE FUTURE A. New Regulatory Requirements B. Master Plan Upgrades and Improvements C. Infrastructure Maintenance EXHIBIT A—UPDATED FINANCIAL SCHEDULES A.1 Changes in Financial Position A.2 Assumptions for Fund Projections A.3 Significant Operating Program Change Requests A.4 Capital Improvement Plan Requests Attachment 2 Page 3 city of san LUIS OBISp0 2006 Sewer Fund Analysis I. OVERVIEW This report presents the financial condition of the Sewer Fund, based on the 2005-07 Financial Plan: 2006-07 operating program budgets, and recommended program and capital requests to address the identified needs in the Master ,Plan, regulatory requirements, and adopted City financial and infrastructure maintenance policies. Based on the Fiscal Year 2006-07 Fund Analysis, no change to the previously adopted 10% rate increase effective July 1, 2006 is recommended. H. 2006-07 BUDGET A.Summary of Operating Programs Including requests shown in section B. 2006-07 BUDGET Wastewater Collection 859,200 Pretreatment 234,200 Water Reclamation Facility 3,031,200 Administration/Engineering 366,900 Municipal Stormwater• 63,000 Wastewater Taxes and Fees 382,300 Total Wastewater Services 4,936,800 B.Significant Operating Program Change Requests 2006-07 BUDGET Wastewater Collection Customer Service Staff—proportionate share 50% 138,000 Water Reclamation Facility Increased Chemical Costs 20,000 Lab Analyst-proportionate share 25% 21,700 Total Wastewater Services-SOPCs 179,700 Attachment 2 Page 4 C. Capital Improvement Plan Requests 2006-07 2007-08 2008-09 2009-10 2010-11 REQUESTS PROPOSED PROPOSED PROPOSED PROPOSED Wastewater Collection Collection system improvements 1,209,900 1,321,000 1,000,000 1,010,000 Tank Farm Lift Station 340,000 Howard Johnson Lift Station 2,000,000 Fleet replacement: 1/2 ton pickup 20,900 Fleet addition:2 pickups-share 50% 20,000 Reclamation Facility Master plan implementation Design 1 600,000 1,500,000 Construction 5,500,000 15,000,000 Water reclamation facility maintenance 430,000 555,000 475,000 775,000 Fleet replacement Pickup 17,200 2 electric utility carts 18,800 Pretreatment Fleet replacement: Pickup 22,100 Administration and Engineering Fleet replacement: Sedan 17,000 Total Wastewater Services New Requests' 360,000 7,796,200 3,915,700 2,975,000 16,785,000 Wastewater 2005-07 Financial Plan CIP 2,330,700 Shared City Information Technology CIP 51,000 5,100 Total Sewer Fund CIP 2,690,700 7,847,200 3,920,800 2,975,000 16,785,000 'Design in the amount of$600,000 reprogrammed from 2006-07 to 2007-08 when study phase will be complete. III. RATE SETTING A. Methodology In determining sewer revenue requirements and setting recommended rates, the following general methodology is used: Step 1: Determine Sewer Fund revenue requirements for: a. Operations and maintenance b. Capital improvements and replacements C. Debt service obligations(existing and projected) Step 2: Subtract from this amount"non-rate revenues"such as: a. Interest earnings b. Connection fees and meter sales C. Revenues from other agencies(Cal Poly) d. Other service charges(service start-up fees,late charges,etc.) Step 3: Identify sewer rate requirements: a. Revenue needed to be generated from sewer rates is the difference between sewer revenue requirements(Step 1)and"non-rate"revenues(Step 2). Step 4: Determine new rates: a. Model the rate base(consumption and customer account assumptions)against the existing rate structure and rate requirements identified in Step 3. O I. I Attachment 2 Page 5 Because this analysis is performed over a multi-year period, other factors are considered, such as working capital available to support capital projects, debt service requirements, and minimum working capital policy. B. Adopted Sewer Rates The current sewer rate structure has a fixed charge for residential customers, and a fixed minimum charge plus variable charge based on water use for non-residential customers. As shown below,rates within the various residential customer classes vary according to a concept of "equivalent dwelling units" (EDU's) which is useful in establishing a ratio between the various types of uses. It is based on 2000 census data for population per housing unit type in single and multi-family units. Current TYPE OF ACCOUNT EDUs Monthly 2006-07 Rates Rates' Single family dwelling,including single meter condominiums 1 32.33 35.56 and townhouses Multi-family dwelling in any duplex,apartment house or I rooming house,per each dwelling unit 8 25.46 28.01 Mobile home or trailer park,per each dwelling unit 6 19.22 21.14 Public or private school,based on average daily attendance at 3.65 4.02 the school All non-residential accounts 1 32.33 35.56 Plus additional charge for every 100 cubic feet of water used 3.90 4.29 in excess of 500 cubic feet of metered water consum tion Vehicles dischar-im,into City wastelvater collection srstem i Minimum charge 106.51 117.16 Additional charge per 100 gallons in excess of 1500 gallons _E]dischazped 6.41 7.05 J 2006-07 Sewer Rates adopted in June 2005 as part of our standard multi-year rate review and Fnancial Plan adoption process. C. Sewer Rate History The table at the right shows a ten-year history of the fixed sewer charge for single family households from 1996 to 2006. Ycar Charue 2006-07 3556 2005-06 32.33 2004-05 28.36 2003-04 26.63 2002-03 25.24 2001-02 24.50 2000-01 23.79 1999-00 22.88 1998-99 21.79 1997-98 21.47 1996-97 20.95 Attachment 2 Page 6 IV. ASSUMPTIONS The following provides more detail for the key assumptions in Exhibit A.I. and A.2. to this report, the financial schedules showing the sewer fund's changes in financial position and the listing of assumptions. A. Revenues 1. Sales are calculated based on the percentage increase in rates and a one percent growth rate. 2. Sales to Cal Poly are based on historic use and the 2003 Agreement between the City and the University. This agreement, which covers the current period ending June 30, 2007, set the proportion (74%) of the non-residential rate the University pays to account for the University's difference from other customers (prepaid capital share in the collection system and the Water Reclamation Facility). 3. Development Impact Fee collection is calculated according to the base set by the impact fee study in 2004 and adjusted by the one percent growth rate and inflation. Annually, this calculation is evaluated and proportionately adjusted due to lower than one percent growth as well as development occurring under maps vested prior to impact fee establishment. Development in those areas pay only those fees in place at the time of approval. B. Expenses The operating and capital expenses are based upon projections to end of the 2005-06 fiscal year and the preliminary 2006-07 Budget. Thereafter, operations and maintenance costs are adjusted according to an inflation rate of 3%. C. Debt Service Payments The sewer fund's current annual debt service payment is $2.43 million. Staffs objective whenever possible, is to defer as much debt service as possible, so as not to compound the sewer fund's current annual debt service payment. This strategy, along with efficient operations, ongoing capital replacement and carefully deciding when to fund debt finance improvements should serve to stabilize rates. 1. Annual debt service payments of$2,135,600 are to repay the State Revolving Loan Funds received by the City for the collection system improvement ("Relief Sewer Main") and for construction of the Unit 3 and 4 improvements to the Water Reclamation Facility. The collection system improvement final debt service payment ($249,800) will be met in September 2011 and the final debt service payment ($1,885,800) for construction of Unit.3 and 4 improvements to the Water Reclamation Facility is scheduled for August 2012, when the State Revolving Loan debt obligation will be met. Attachment 2 Page 7 2. Annual debt service payments of $278,100 for the energy conservation projects began in 2003-04. Electrical energy savings at the Water Reclamation Facility are projected to equal or exceed debt service payments in 2006-07. 3. Annual debt service is increased by a pro-rated payment of $17,500 in 2006-07, with debt service payments of $52,800 beginning in 2007-08 to pay for the sewer fund's share of the police dispatch and radio upgrade project. 4. Annual debt service is increased by $520,700 in 2007-08 to pay for the $7.4 million Tank Farm Lift Station project. It is anticipated that this project will receive a California Infrastructure and Economic Development Bank revolving fund loan with a favorable interest rate (3.5%). 5. Annual debt service is increased by $387,000 in 2008-09 to pay for estimated $6.6 million in treatment and infrastructure improvements that may be required to meet the pending regulatory requirements for the removal of trihalomethanes from the Water Reclamation Facility's effluent. 6. Annual debt service is increased by $1,214.100 in 2011-12 to pay for estimated $16.5 million in infrastructure improvements to upgrade the capacity of the Water Reclamation Facility. V. 2005-06 UPDATE Key factors that changed the Sewer Fund's financial condition at the end of fiscal year 2005-06: 1. Increased revenue from sales to Cal Poly: Staff projected to receive $270,400 in revenue from sales to Cal Poly in 2005-06. We now project receiving $398,900 for that same time period based on actual revenues from sales to Cal Poly in 2004-05 and year to date in 2005-06. 2. Reduced wastewater development impact fee collections: Staff projected receiving $341,000 in impact fees in 2005-06. We now project receiving $284,200 for that same time period. Staff is working with Finance and Community Development in reviewing our projection methodology and the various factors that have influenced a lower fee collection. 3. Increased project budget to complete Tank Farm Lift Station: The Tank Farm Gravity Sewer, Lift Station and Force Main project budget was increased by $42,000 for environmental review using working capital in 2005-06. This $42,000 expense was not projected for that time period. In addition, the Tank Farm Lift Station construction cost was projected at $7.2 million and staff now projects $7.4 million for construction in 2005-06. 4. Accelerated 2006-07 Capital Improvement Plan funding: Due to increased project construction costs, wastewater collections Capital Improvement Projects were reprioritized to work within budget resources. This resulted in some projects being deferred until 2006-07. However, two projects were approved to move forward in late 2005-06 with partial funding accelerated from 2006-07. A total of$186,400 in funding was accelerated from the 2006-07 wastewater collection systems Ib - I3 Attachment 2 Page 8 improvement account, as follows: Grand/Mill/Palm Sewer Replacement ($171,000) and the raising and resetting of sewer manholes and cleanouts for 2006 Arterial Street Repair($15,400). VI. LOOKING TO THE FUTURE A. New Regulatory Requirements Pending regulatory requirements may require the costly removal of nitrates and Trihalomethanes (THMs) from the Water Reclamation Facility's effluent. The driver for the stringent regulation of these constituents is the State's beneficial use designation of San Luis Obispo Creek as a Municipal and Domestic Water Supply (MUN). This designation requires the application of discharge requirements that meet or exceed drinking water requirements for the WRF's. effluent. The City began working with consultants in May of 2005 to perform a feasibility analysis-of regulatory options for the WRF because it had become apparent that the City needed to explore and exhaust all likely regulatory options for the WRF's National Pollutant Discharge Elimination System (NPDES) permit. The preliminary study determined that a Use Attainability Analysis (UAA)to study the reasonable beneficial uses of San Luis Obispo Creek was the most likely and favorable regulatory option the City should pursue. If approved by the State and EPA, this study may remove or change the MUN beneficial use designation for San Luis Obispo Creek. The State mandates a compliance date of 2010 for the proposed THM limit. Funding of $500,000 was previously approved for study in 2006-07. Staff has reprogrammed the previously approved $600,000 for design from 2006-07 to 2007-08 when the feasibility analysis will be complete. If staff is not successful with removing the MUN beneficial use designation from San Luis Obispo Creek, construction and construction management services to comply with the current THM limit is projected at $5,500,000 in 2007-08. While this represents an aggressive schedule for completion of design and construction, if necessary, the City will need to proceed in an aggressive manner to comply with the State's 2010 compliance deadline. B. Master PlanUpgrades and Improvements A capacity,"treatment and facility upgrade of the Water Reclamation Facility is required to meet the needed capacity for the City's build out per the General Plan and possibly proposed regulatory requirements as discussed earlier in this report. The upgrade project is projected to begin in 2009-10 to meet the demand of the City's new annexation areas, and possibly new discharge requirements. Staff has identified $1,500,000 in the budget for design in 2009-10 and $15,000,000 for construction and construction management services in 2010-11. C. Infrastructure Maintenance Industry standard would set annual infrastructure replacements at two percent of system value (based on a fifty year replacement cycle) for the wastewater collection system. This equates to annual expenditures of$1,000,000. Repair and upgrade,at major facilities such as the Water Reclamation Facility and lift stations is based on maintenance and repair history as well as depreciated value and overall efficiency. 1 Attachment 2 Page 9 EXHIBIT A 2006 SEWER FUND FINANCIAL SCHEDULES Attachment 2 / \ Exhibit A.I O 0 0 0 0 0 0 0 0 0 0 0 0 O O C O 0 0 0 0 0 0 0 0 0.0 O O 8 0 8 8 0 O .0 O 00 r O M M — — a O O ,n ,n 00 O o0 00 — a;, 0o ri O , vi M M vi o Vi z 7 00 orn ,nMN � o � rna n r o r M r o w - C O O o 0 0 0 o0 0 0 0 0 0 O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 8 0 0 O O O O CS V — O V) V) V1 r- M N M O ol — �D of \D Vi .w 0 _ u 06 O to O Vn V,1 crf ,D Vj r al O e'n 0 %O 0 M Q 'p ,n ,n ,n O ',n ,n 00 r — O r O N N v1 r N —1W- 00 v1 C — O' I. ,n T r M O `-' t: N 7 N e-: v1 M a-e _ N . v O O O O o 0 0 0 0 O O 0 0 0 0 O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 O O o O O O •7 0 N0 as ON ,G fei a) M h r �D O 00 V' en N .p V1 N N ,n ON - ,a V O V) r r O r O r 00 ,O Vi 1F• ID to M ,D N V'1 r O, M N to V1 — b N M M c 0 0 000000 000o880 0 0 0 0 0 00 % O O V) P V) N C O 00 00 �O 7 t 00 00 O O ri en 00 O) en 00 r —: V7 r O Vi M O Vi N r. en 00 V' 't en — O �. V�j aa, M 0010 b 0000^ rl b N M V1 — �D fe1 M e+i v. 8 0 8 0 8 0 0 8 8 8 8 8 8 O O O O 8 O r V 00 N r- C �O O M 00 N O N ,n t' o '7 ,a N �o qe 8 'O, N Vi b a` e` 00 C, N M %6 r o0 0 r N O O O cl O `D T Ln O - M qT N �o -IT 00 O O ,O M r r R M V M 00 O, N v N V) 00 N -+ ND r N roc p u O 0 0 0 0 0 0 0 0 0 0 0 0 O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 O O O O �o 00 V1 �O V1 O. 00 I'� V) r N � � '7 00 �O 8 V'1 — �D 00 Vj l+ h 00 0 O — N V1 h N ee'� O N r W N Q ON — O+ 00 eb a M O �o N (71 t, O qT N O, r M — b 7 M. `-� `-� T h O O et - z N N - Q - Z LL p p 00 0 0 0 0 0 0 o 0 0 o o O O O O O O 8 O O 0 0 0 0 0 0 0 0 0 0 0 0 O O O O O- O O O M O O W) Ol O N. O �O 00 It _N N r - Vf O M O Nm e- It UJ N a o O. 06 m N 4 r P M _M r N_ v O 06 N06 V o0 M O+ t 00 - b0 \0O, r O N — V1 b V1 O) — — M O\ N N <f ^ -e N V `-' M as N N as O� % — N O r r v d'cq W U) Ztn08 88888800808 0 08 0 0 0 u qtr e: — ,00C o0 N ,o — mO m as N V? n 0 'Q 00 M M M r r — en N 6 — r- H) N N R r O� Qi 00 N T d' ,O a 00 M r O O — h b M Vi N N in M N O` \O — 'r 7 M V) — O V) r 00 00 4 — tr7 N a\ — M Q N 0 IL Q auN vLfQ.i aL� aOZ 00 N I }O m O m 'u u a y O y a0 u LL a U :L 6 m ti E 'o c u v u > > ? c W Z u 0. U 7 v J C .. 0 0 0 [/07 v O 'o v m y c u a 0`D O. d > C {N cm C'n o E c a -m O a u K .0 .� .� E A u u 0 •� .`9 c o r °� rJ m .0 a yr Gz7 v c O m d C 'c vs w 'c 'n.. Z U o a3i w d u C i c a o E y c c c Q a G O m y E u U ti H y O a F O •iv �. V F p o L% u. a 00 t? � '� w � U U Q ato > > as=i U 5 D t c `�'. v F H v v > Etnen O a0 UD `u0aim LI uCD U a w 0 am 3 3 -% Attachment 2 Exhibit A.2 O G O O O O t00 m C o O o r o W M ? N O p„ p p O CS M o O �' pOo o e o ^ N O L I M M m N N M Ol T w 0 L 5 O OI O pp O pO m C a L6 M 8 Gn M NO I� C O M N T M M mi a N N N l`m') M v O N Nci f9 f9 f9 W C W t m p $ 8 0 Ci o RO m M rn Cn $ c �W M n c N ai N K M M_ N O W (9 N W V 8 m Y \ a g u e o Co E n o O M C N �N O N M N fel C O C N N �y W M m ,p en w w n v O g m n o p m o o $ 8 p 9 m O O O \ o m N O O � Lq N O m Cq CoC N o \ 8 5 1� A N M M CoCoO :0 m m L W m N N N N m Z 8 � � O Q $ o o p a m m m \ o C N L r o Ol i0 N O N m Z m N N M N Co Cl) r M m m C S n K N > W 0 w Co w V c E E 0 4 0 E n CD a o $ m m a V m a 3 E m muni c m `o o m m = c " m $ n ae i0 IL Fyi uJ ¢ 9 a § E m CD a m o c o ¢ •E W � 9 > m > - O W w m Jo ° �° Nccc 0 oW Z4 ° o magoWmm mW c pu9S c Mo d O m p c0L N + W—N YO tU 0LIU O �C Z. ' O 6m WYLLLL fA 0 m ¢ C LEnmEm Cocc W ¢ c o-o > IL m nA 0 Y2i B c E 2 E EE o E ¢ m CDNaa) N Q Co g Cl) CA o G c N $m�SCm> mT U y m M m m N d d >m m G a m m O a 2 w - N Q O O O D D D to O c :3: O cnj to N Attachment 2 Exhibit A.3 OPERATING PRoOAAMs SIGNIFICANT OPERATING PROGRAM CHANGES CUSTOMER SERVICE STAFF FOR MONTHLY UTILITY BILLING E77 77, 77=777 Request Summary Adding two Water Customer Service Personnel positions, one Accounting Assistant position, and associated operating materials and supplies to provide the necessary resources to implement monthly utility billing will cost .$276,100 in 2006-07. Key Objectives 1. Provide billing frequency that is easier for customers to budget for. 2. Provide timely consumption information to customers wishing to conserve water and control their costs.. 3. Provide monthly billing consistent with other utilities and service providers. Factors Driving the Request for Change City Council direction on April 18,2006 to implement monthly water and sewer billing.. ■ Provide timely information to customers to improve water conservation. C Make it easier for customers with.tight financial budgets and who have difficulty budgeting for a bill on a bimonthly basis. Provide information needed to implement volume based sewer billing. Alternatives 1. Continue the status quo. Achieving monthly utility billing and associated goals can not be accomplished with current staffing levels. 2. Implement it in a different way..An evaluation was prepared for utilizing"automated meter reading"(AMR) systems as an alternative approach to reduce the number of staff needed to read water meters. The analysis revealed that the costs would be higher for an AMR system than hiring additional staff to compliment our existing customer service staff. Therefore,this alternative is not recommended. Implementation Begin recruitment for the three positions 7/06 Fillpositions- Operating Programs Water Customer Service Revenue Management Attachment 2 J Exhibit A.3 OPERATING . . SIGNIFICANT OPERATING PROGRAM CHANGES Cost Summary Lim ItemDescrlption Amunt%I 2000.07 Staffi 2131300 Water Customer Service Stai tg Salaries-Regular 500-55170-7010 94,000 Retirement Contributions 500-55170-7040 25,2(10 Fl alth&Disabiliry Insurance 500-55170-7042 13,700 Medicare 500-55170-7044 1,400 Urteutployment Insurance 500-55170-7046 400 workers Comp Insurance 500.55170-7048 14,100 Fiitaacv e&IT Customer Services Staj tg Salaries-Regular 100-25120-7010 43,600 Retirement Contributions 100-251247040 11,700 Health&Disability Insurance 100-25120-7042 6,800 Medicare 100-25120-7044 600 unemployment Insurance 100.25120-7046 200 workm.Comp Insurance 100-25120-7048 1,600 ContractSetvloes__ .__. _. _ --_____ _ _ ----------- _ _ Contract Services 500-55170-7227 1,000 Laundry&I-men Service Contract 1 500-55170.725911000 _60, 00_ water Customer Services Supplies Office Equipment Maintenance 500-55170-7275 2400 Education&Training 500-55170-7459 1,700 Operating Material&Supplies 500.55170-7843 5,800 Protective Clothing 500-55170-7861 700 Safety Supplies 500-55170-7875 100 Small Tools 500-55170-7885 600 FZru use&IT Customer Services Supplies Computer Supplies 100.25300.7413 2;500 Postage 100-25120.7423 39,300 Printing&Repro Supplies 100-25120-7425 7,500 1 Operating Material&Supplies 1 100.251247843 200 Total Qperating Costs 276,100 Funding Sources Requested Funding by Source Account No. _ _ 2006-07 Water Fund(50%) 500 138,100 Sewer Fund(50%) 520- 138,000 Total 276,100 �� - 19 ' Attachment 2 Exhibit A.3 OPERATING PROGRAMS SIGNIFICANT OPERATING PROGRAM CHANGES CHEMICAL COST INCREASES FOR WATER AND WASTEWATER TREATMENT Request Summary Increasing chemical costs for the Water Treatment Plant and the Water Reclamation Facility will require an additional$20,300 for Water Treatment and$20,000 for Wastewater Treatment respectively; a total chemical cost increase of$40,300 in 2006-07. Key Objectives 1. Ensure compliance with the Department of Heath Services(DHS) and Regional Water Quality Control Board (RWQCB) standards,for water quality. 2. Protect the citizens and the environment of San Luis Obispo. Factors Driving the Request for Change In December 2005, proposals received from chemical vendors as part of the City's Invitation for Bid (IFB) process for chemicals for water and wastewater treatment showed marked increases in chemical costs. The Utilities Department routinely bids out chemicals prior to financial plan development to ensure adequate budget for the purchase of these chemicals during the ensuing fiscal period. Chemical addition at both of these facilities is mandated by state regulatory agencies responsible for overseeing the safe treatment of the City's drinking water supply and the successful treatment of the City's wastewater. Chemical addition in the treatment of drinking water and wastewater is an ongoing and crucial part of plant process management. Contracts with vendors to provide chemicals for water and for wastewater treatment were signed in January 2006. Alternatives There are no reasonable alternatives. Invitation for Bids for Chemicals for Water and Wastewater treatment are offered regularly. This current structure offers the City the best opportunity to secure competitive prices. Operating Program Water Treatment Water Reclamation Facility Cost Summary Total cost increases for chemicals for Water and Wastewater Treatment will be $40,300 in 2006-07. The Water Treatment Plant chemical costs will increase by $20,300 per year and the chemical cost increases for the Water Reclamation Facility will be$20,000 per year. Attachment 2 Exhibit A.3 OPERATING PROGRAMS SIGNIFICANT OPERATING PROGRAM CHANGES Line Item Description Account No. 2006-07 Other O . raNn'. nditures. .. _.. ._:.. .u ..__ ._ _.._ - 40;3K. Aluminum Sulfate 500-55150-7755 8,400 Chlorine(Water) 500-55150-7777 8,700 Filter Aids 500-55150-7801 2,000 Sodium Silicofluoride 500-55150-7887 1,200 Chemicals(General) 520-55330-7775 20,000 Total Operating Costs 40,300 Net Operating Costs 40,300 Attachment 2 Exhibit A.3 IOPERATING PROGRAMS SIGNIFICANT OPERATING PROGRAM CHANGES LAB ANALYST FOR WATER AND WASTEWATER PROGRAM REQUIREMENTS Request Summary Meeting the laboratory demands created by the continued workload for both water and wastewater analysis and sampling, and the water reuse program has created a workload that cannot be met by the existing Water Reclamation Facility Laboratory staff and will require one additional laboratory analyst at a cost of$84,200 in 2006-07. This request was identified as part of the 2005-07 Financial Plan as a necessary step in meeting the increasing laboratory workload created by water reuse, special studies and regulatory requirements, but was deferred because of fiscal constraints. Part-time temporary staffing approved in the 2005-07 Financial Plan for fiscal year 2005-06 has helped offset some of this increasing demand during the past year. However, one regular lab analyst is necessary to meet the current demands and the significant workload associated with ensuring water quality standards are being met for water reuse. History of the Water Reclamation Facility Laboratory The Water Reclamation Facility(WRF)laboratory section was created in 1993 with the completion of the WRF's $20,000,000 upgrade in 1993. At that time,it was recognized that dedicated and specialized laboratory staff were necessary to comply with the WRFs stringent NPDES permit and perform the numerous process control analyses needed to operate a tertiary treatment facility. Staff were added in 2001 and 2005 to help alleviate the tremendous growth in analytical workload created by continuingly more stringent NPDES permits and related sampling requirements, required special studies and creek sampling, pilot testing, taking on water treatment and distribution system analysis, and increased laboratory certification requirements. These factors have also required the Chief Laboratory analyst to spend more time managing the section's growing duties, data management and reporting, and ensure the overall quality of the laboratory services. The Laboratory now serves the entire Utilities Department and has become an important component of the Department's overall success in providing technical analysis,compliance monitoring and customer service. Key Objectives 1. Meet all program/permit requirements for the Water Reuse Program, special studies and water and wastewater operating programs. 2. Ensure high quality water and wastewater through laboratory and process control analysis. 3. Complete all laboratory analysis within required time frame. 4. Ensure consumer and public confidence in recycled water,drinking water and wastewater effluent. 5. Meet all regulatory demands effectively and efficiently. 6. Maintain clear concise certifiable records of all sampling events and analysis,. 7. Meet increased sampling and analyses demands to ensure compliance and avoid mandatory penalties. 8. Protect environmental resources and human health. Attachment 2 �. Exhibit A.3 OPERATING ■ ■ ■ ■ . ■ SIGNIFICANT OPERATING PROGRAM CHANGES Factors Driving the Request for Change 1. Change in Laboratory Certification Standards. Since 1995 the WRF's laboratory was required to comply with significantly more stringent Quality Assurance/Quality Control (QA/QC) standards to perform laboratory analyses. QA/QC is a State requirement of certification for laboratories to assure that analyses are performed in a determined manner to guarantee accurate and reliable results. All of the analyses found in the City's NPDES permit and those required for all of its special studies must be performed by a certified lab. This more stringent certification continues to add staff hours to perform the QA/QC procedures. The certification of our laboratory is critical to allowing the laboratory to perform a variety of analysis that would otherwise have to be performed by a contract lab at a significantly higher cost. All certified labs in California must perform QA/QC to be certified. 2. Regulatory sampling and analysis for the Water Reuse Project. The Water Reuse Project will be operational in summer 2006. The Master Reclamation Permit issued for the project by the State Water Resources Control Board requires daily coliform, turbidity, and chlorine residual sampling and analysis. The coliform sampling is extremely time consuming and can best be done in house to control costs and provide results as quickly as possible. Many in-house analyses have very short holding times and timely results are crucial to allow operational changes that will guarantee protection of public health and recycled water quality. Timely process analysis will also be critical to water reuse to ensure that treatment processes are being operated efficiently and compliantly to assist staff in reporting to regulatory agencies. The Laboratory will also be responsible for making the additional calibration standards for a variety of the new process equipment to ensure proper process control. These requirements will require a significant amount of one analyst's time. The beginning stage of the water reuse project is a critical period to ensure consumer confidence in recycled water and adequate and competent laboratory staffing will be an essential component of a successful City water reuse program. 3. Operational and regulatory needs at the Water Reclamation Facility Laboratory. Laboratory staff continue to struggle to meet the ongoing amount of regulatory and operational laboratory analysis. Added sampling requirements from last year's NPDES permit, time sensitive process analysis, meeting the demands of QA/QC analysis, performing analysis for a variety of the City Departments and handling customer service requests strain the laboratory's available staffing. Hiring a full time laboratory analyst to cover a portion of these demands will help alleviate the majority of these issues. 4. Meeting trihalomethane limits and other requirements. Options for meeting Trihalomethane (THM) Limits as outlined in our discharge permit issued by the Regional Water Quality Control Board will continue to require study which consumes laboratory time. Researching new ways of achieving disinfection without the use of chlorine, which causes the formation of THM's, must be completed in 2006 and will include some pilot studies. These pilot studies will consume laboratory time for sampling and analysis. Additional analysis and studies will be required for the upcoming renewal of the WRF's NPDES permit, improvement design and special projects. 5. Performing all required analyses. Currently the lab is not performing a variety of analyses that should be completed routinely. The analyses have been prioritized to ensure that operations at the WU will not be adversely affected by deleting some of the recommended testing, but this forces the facility staff to make operational decisions without all of the proper information. This additional information would enhance the facility's operations. Some analyses are critical and will be needed to comply with upcoming permit requirements next year and to ensure proper control of new processes. � 3-a3 Attachment 2 Exhibit A.3 OPLRATING PROGRAMS SIGNIFICANT OPERATING PROGRAM CHANGES Alternatives 1. Continue the status quo. This is not recommended. Although current workload is being met by temporary staffing, this does not include the workload generated from the water reuse project. This additional analysis will requite approximately 75% of one analyst's time and will best be performed by full-time staff. The coliform pathogen analysis requires extensive daily preparation and setup on top of the sampling, analysis and management of analytical results. The temporary staffing for this position in 2005-06 was meant to be a short term solution and conflicts with the City policy on use of temporary staffing. 2. Defer or re phase the request. The Water Reuse project is just finishing construction and will be delivering recycled water this summer. Additional requirements will continue to increase the lab's workload. Re- phasing of the water reuse program is not possible and adequate laboratory staff is vital to its operation and consumer confidence. This request was previously deferred as identified in the 2005-07, Financial Plan, Appendix A,pages 14-16,and is currently being partially covered by temporary staffing. 3. Implement it in a different way. Using a contract laboratory is neither practical nor cost efficient. Water Reuse sampling will be required seven days per week and each sample requires a complicated and time consuming set-up and analysis that requires close monitoring for signs of bacterial growth. Immediate response by WRF operations staff to any sign of bacterial growth will keep the delivered recycled water safe. Additionally, the hold time on samples taken, such as coliform presence and chlorine residual, is very short requiring daily sample pick-up. Process analysis is a critical function that is best accomplished by on-site staff. Immediate response to the variety of requests and urgent unscheduled sampling event could not be achieved with contract lab services. Generally, most required and process sampling and analysis, and subsequent data management, can be done more efficiently by in-house staff than by a contract laboratory services. Below is a table that shows the estimated costs of analysis that may be practical to send to a contract laboratory. These numbers are estimates and do not reflect the additional costs that would be incurred for additional pick-up service from the lab. These costs would be significant given it would require sample pick- up seven days a week instead of the two days during the week per our current contract with the lab. It is also important to note that these analysis costs do not reflect the approximate 20% of a lab analyst's time performing sample collection and performing sample preparation for shipping. Estimated Cost for Contract Laborator Services ICosisfcl;contract Laboratii +erac l` �(10d 7' Bacteriological Sampling for Water Reuse(8 months) $73,000 NPDES Permit Analysis $48,400 Process Control Analysis $27,000 Total $1487000 Implementation . Task Date Hire lab anal st _77 2006 f -0.4 Attachment 2 Exhibit A.3 OPERATING . .O SIGNIFICANT OPERATING PROGRAM CHANGES Operating Program Water Reclamation Facility Cost Summary Hiring one laboratory analyst will cost$84,200 in 2006-07. Line Item Description Account No. 2006-07 Staring 83,400... Regular Salaries 7010 53,600 Retirement 7040 14,400 Health and Disability 7042 6,400 Medicare 7044 800 Unemployment Insurance 7046 200 Workers Comp Insurance 70481 8,000 Oih& Laundry and linen 1 520-55330-72591 800 Total Operating Costs 1 84,200 Net Operating Costs 1 84,200 The workload and staffing expenses for one additional laboratory analyst to meet the demand of the Water Reuse Project, regulatory sampling and operational requirements and studies will be charged 75% to the Water Fund for water reuse and 25%to the Sewer Fund for wastewater process analysis and study activities. Requested Funding by Source Account No. 2006-07 Water Fund Water Reuse(75%) 500.55150 62,500 Sewer Fund 520.55330 21,700 Wastewater Process Analysis and Studies(25% Total 84 00 i Attachment 2 Exhibit AA CAPITAL IMPROVEMENT PLAN PROJECT DESCRIPTIONS EASEMENT AQUISTION,ENVIRONMENTAL AND DESIGN SERVICES FOR TANK FARM GRAVITY SEWER LIFT STATION AND FORCE MAIN CIP Project Summary Acquisition of easements and contracting with a consultant for additional design work for the Tank Farm Lift Station Gravity Sewer and Force Main in order to provide easements and fund additional design services will cost $340,000 in 2006-07. Background. The Tank Farm project has completed 50% design submittals and the City's consultant is currently working on draft plans, specifications and bidding documents. This project has been delayed because the proposed alignment of the gravity sewer in Tank Farm Road could not adequately mitigate traffic impacts and required redesign to the adjacent Chevron property. This redesign triggered revised gravity sewer drawings, much more thorough environmental review and requires.acquisition of significantly more easements. The revised schedule for this project calls for completion of bid documents in fall of 2006. Project Objectives 1. Replace aging and deteriorated infrastructure. 2. Address existing deficiencies in the wastewater collection system 3. Provide infrastructure needed to serve new development planned within the Urban Reserve Line. 4. Acquire needed easements for pipelines and facilities. Existing Situation Currently public wastewater collection facilities do not exist to serve the Airport, Margarita and Orcutt areas. This project is being designed to accommodate existing and new development as identified in the City's General Plan and replace existing aging overcapacity lift stations and infrastructure. Plan and Specifications are 50% complete, but several changes have occurred in the last year that have delayed this project. The project is expected to be constructed by early 2008. Goal and Policy Links 1. Approved 2003-05 Financial Plan,Appendix B pgs 94,95 &96. 2. Wastewater Element of the General Plan. 3. Wastewater Master Plan, Chapter 6. 4.. Airport Area Specific Plan, Section 8.4. Project Work Completed 1. Wastewater Master Plan. 2. Contract with Consultant. 3. 50% Drawings and Specifications. 4. Contract with Right of Way Agent for easement acquisition. 5. Contract with environmental consultant to meet CEQA requirements. f{� Attachment 2 Exhibit A.4 CAPITAL IMPROVEMENT PLAN PROJECT DESCRIPTIONS Environmental Review This project has received some initial environmental review with the AASP environmental review. Additional projects specific review will also be required. The project will require the services of an environmental services consultant. During redesign it was determined that a consultant would be needed to address the complicated environmental aspect of this project and prepare the required documents as the project alignment has shifted from the Tank Farm Road right of way to adjacent open space. Staff will be contracting with a consultant very shortly and working closely with the Community Development Department and the City's Natural Resources Manager to complete the required CEQA documents. Other Special Review Considerations 1. This project will require the coordination with San Luis Obispo County and Cal Trans. 2. Construction of this project must occur in such a way as to prevent interference with the City's ability to provide wastewater collection service to its customers. Project Phasing and Funding Sources Design services for this project have cost $615,000 and environmental review $42,000, for a total cost to date of $657,000. This request is for$340,000 for additional design services and land acquisition. Construction costs are based on the latest estimate from the City's consultant and will be debt financed. Construction is anticipated to begin in the winter or early spring of 2007. Pro'ect Budget by Phase Phase To-Date 2006-07 2007-08 2008-09 Total Environmental Review 42,000 42,000 Land Acquistion 250,000 250,000 Design 615,000 90,000 705,000 Construction 7,400,000 7,400,000 Total 8,057,000 1 340,000 1 1 8,397,000 Pro"ect Budget by Funding Source Funding Source To-Date 2006-07 2007-08 2008-09 Total Sewer Fund 657,000 340,000 997,000 Debt Financing 7,400,000 7,400,000 Total 8,057,000 340,000 8,397,000 Department Coordinator and Project Review/Support Department Coordinator David Hix, Wastewater Division Manager Project Review and Support The Community Development Department will work with the consultant and review the environmental document for compliance with CEQA. Public Works engineering will provide review of the project plans, specifications, bidding and contract management. Public Works may also be involved in construction management and/or oversight of the project construction. —� Attachment 2 Exhibit A.4 CAPITAL • • • • PROJECT DESCRIPTIONS Alternatives 1. Defer or Re phase the Request. Deferral of this project is not recommended, as it could affect the timing of the Airport and Orcutt areas and possibly result in the halting of any new development within this project's service area. Deferral would also require the need to keep the existing Tank and Rockview lift stations in service that are the end of their operating life and have no capacity. Operating Program Wastewater Collection Project Effect on the Operating Budget 1. Utilities staff will work with the consultant to ensure facilities are properly designed. Public Works staff will bid the project and provide contract management oversight. Requesting Department. Wastewater Division Manager and Utilities Engineer, 160 hours for project approvals,consultant coordination,design and financing assistance and plan review. Project Support. Public Works Engineering, 40 hours for plan review and bidding, 20 hours for contract administration. Community Development Department,40 hours for environmental and architectural review. 2. It is anticipated that this facility will require less operations and maintenance activities than the existing aging and overcapacity lift stations. 3. Some cost saving are anticipated from more efficient pumping. Greater capacity and emergency power will eliminate overflows that have led to penalties and fines in the past. 1 � - d0 Attachment 2 Exhibit A.4 �CAPITAL IMPROVEMENTPLAN PROJECT DESCRIPTIONS Location Map o Sewer Fe.Mf. New Grnhy Sewer Ner 1'eu4 Ferm W Sn O . i d NOW t >° r � N Attachment 2 Exhibit A.4 IMPROVEMENT PROJECT DESCRIPTIONS FLEET ADDITION-WATER CUSTOMER SERVICE „a." d^i, CIP Project Summary Adding two light pick-up service trucks to provide monthly water meter reading will cost$40,000 in 2006-07. Project Objectives 1. .Provide enhanced customer service with monthly billing. 2. Improve employee safety and productivity. Existing Situation The City of San Luis Obispo has historical billed customers for water and sewer service on a bimonthly basis. With over 14,400 water meters,this has required that approximately 7,700 meters be read on a monthly basis. On April 18, 2006, the City Council considered changes to the City's water and sewer rate structures as well as providing monthly billing to our customers. The Council conceptually approved moving forward with monthly billing. Monthly billing will require two additional customer service staff to provide for the reading of all meters on a monthly basis. The staff will need a small service vehicle for the meter reading and other water service repair work. Goal and Policy Links Fleet Management Policy(Section 405 of the Finance Management Manual) Project Work Completed 1. Public Works has met with the Deputy Director of Utilities/Water and the Water Distribution Supervisor to ensure that the replacement units have been correctly specified. Environmental Review No environmental review required. Project Phasing and Funding Sources Project Cost Phase To-Date 2006-07 2007-08 2008-09 Total Equipment Acquisition-Service Trucks(2) 40,000 40,000 Total 40,000 40,000 Project Funding Source: Water Fund-50% Sewer Fund -50% Attachment 2 J Exhibit A.4 CAPITAL IMPROVEMENT PROJECT DESCRIPTIONS Department Coordinator and Project Review/Support Department Coordinator: Gary Henderson Project Review and Support: Ron Holstine,Fleet Supervisor Alternatives There are no reasonable alternatives to the recommended addition of the service trucks. Operating Program Water Distribution Project Effect on the Operating Budget Requesting Department: Hours of staff time needed for project coordination: 2 Project Support: Fleet Maintenance staff time needed for project coordination: 4 Description of Additional Units: Model Year: 2007 2007 Make: Dodge* Dodge* Model: Dakota Dakota Description: V2-ton Sri-ton pickup pickup w/extended w/extended cab cab Original Acquisition Price**: $16,326 $16,326 Estimated Replacement Price $20,000 $20,000 W/Accessories: *or equal **current CMAS list i � _ I Dodge Dakota Extended Cab � � �cDA