HomeMy WebLinkAbout05/31/2007, BUS 4 - 2007 WATER FUND REVIEW f
council May 31,2007
j acEnaa RepoM W.Nwba
CITY OF SAN LUIS O B I S P O
FROM: John Moss, Utilities Directo, -
Prepared By: Kathe Bishop, enior Administrative Analyst
SUBJECT: 2007 WATER FUND REVIEW
CAO RECOMMENDATION
1. Review and accept the 2007 annual water fund financial review; and
2. Conceptually approve the proposed operating program changes and capital improvement plan
requests contained in the preliminary 2007-09 Financial Plan, pending the June 19, 2007 final
budget review and adoption; and
3. Conceptually approve increasing water service charges by thirteen percent (13%), effective
July 1, 2007, and thirteen percent (13%) effective July 1, 2008, pending final budget review
and rate setting adoption on June 19, 2007.
DISCUSSION
The 2007 Water Fund analysis confirms the ongoing moderate rate increases forecast in recent
years during consideration of the Nacimiento water supply project and the Water Treatment Plant
Master Plan Improvement project. The construction phase of the Nacimiento water supply
project goes out to bid in five phases between May 22 and June 12, 2007. The Water Treatment
Plant Master Plan Improvements project is currently under construction. With the recommended
rate increases, the Water Fund will continue to be healthy and stable, capable of supporting the
continuing operations and capital programs. This report recommends conceptual approval of
water rate changes for the next two years—with water rates increased by 13% effective July 1,
2007 and water rates increased by 13% effective July 1, 2008—pending the June 19, 2007 final
budget review and rate adoption.
Within this analysis, which forecasts the water fund's financial position until 2013, the City is
able to deliver recycled water for irrigation, fund the long-term financing costs on the Master
Plan Improvement project at the Water Treatment Plant, and achieve its long-term goal of
adequate water supply through participation in the Nacimiento water supply project. This
analysis also includes an ongoing level of capital maintenance projects to maintain the City's
water infrastructure assets.
Although regular annual rate increases are forecast to position the water fund to meet its current
and future obligations, the water rates are projected to level off in fiscal year 2012-13. Last year,
in the 2006 water fund analysis, rates were forecasted to increase 12% in 2007-08 and II% in
2008-09. The recommended 13% water rate increases (1% greater than previously projected in
2007-08 and 2% greater than projected in 2008-09) are driven by a number of factors, including:
(1) increased electrical energy costs; (2) increased costs to continue to meet regulatory,
y-/
c
2007 Water Fund Review Page 2
environmental and health standards - including increased costs for operating certification
compliance and training; increased laboratory services costs for water analyses mandated by the
Department of Health Services (DHS), increased cost for annual permit fees to DHS and the Air
Pollution Control District, and annual dam inspection fees paid to the Department of Water
Resources, and; (3) revised construction estimates on the Nacimiento water supply project.
Recommended operating program changes and capital improvement plan requests contained in
the preliminary 2007-09 Financial Plan include:
Significant Operating Program Change Requests
Program Description 2007-08 2008-09
Source of Supply Water Reuse operating materials and supplies increase, 30,000 30,000
includes increased electric costs for system expansion
Source of Supply Increased Salinas Reservoir payment to County 25,000 50,000
Source of Supply Electric utility cost increase for on-peak electrical periods 156,000 0
to ensure adequate coverage and oversight of the Water
Treatment Plant upgrade project
Water Treatment Plant maintenance projects 48,000 50,000
Water Treatment Operating materials and supplies increase 32,000 41,500
Water Treatment Operating certification compliance and training 6,000 6,000
Water Treatment Electric utility cost increase for new treatment processes 30,000 31,200
Water Distribution Utility pickup broom for skid steer tractor 7,500 0
Water Admin/Eng Temporary salaries for records system improvements 4,600 5,800
Total $339,100 $214,500
Capital Improvement Plan Requests
Prouam Description 2007-08 2008-09
Source of Supply Water Reuse Master Plan implementation 250,000 250,000
Water Treatment Major facility maintenance 130,000 140,000
Water Treatment Fleet: Service body only for existing truck 15.100 0
Water Distribution Distribution Master Plan implementation 250,000 250,000
Water Distribution Distribution system improvements 1,300,000 1.325,000
Water Distribution Polybutylene water service replacements 350,000 350,000
Water Distribution Fleet replacement:flatbed with crane 98,700 0
Water Distribution Fleet replacement:mid-size pickup 23,900 0
Water Distribution Fleet replacement:four(4)Mid-size pickups 0 83,600
Water Admin/Engr Telemetry system upgrade-balance of 50%share 3,000 0
Water Admin/Engr Materials separator-50%share 12,600 0
Water Admin/Engr Fleet replacement: sedan 17,600 0
Total Water Services CIP $2,450,900 $2,398,600
Shared Technology requests: Voice Over IP,Sharepoint,Utility billing system upgrade 27,200 • 75,000
Total Water Fund CIP $2,478,100 $2,473,600
y-z
2007 Water Fund Review Page 3
Water Rate Changes for the Average Residential Customer
What does this mean to the average residential customer? For the average residential customer
using 10 units ("ccf') of water monthly, the following illustrates the changes to the monthly bill
with the recommended increases.
Average Residential Water Customer Monthly Bill
Assuming 10 units of water use per month
CCF 2006-07 2007-08 2008-09
1 -5 $3.28/ccf 16.40 $3.71/ccf 18.55 $4.19/ccf 20.95
6-25 $4.11/ccf 20.55 $4.64/ccf 23.20 $5.24/ccf 26.20
26+ $5.14/ccf n/a $5.81/ccf n/a $6.57/ccf n/a
$36.95 $41.75 $47.15
The 2007 Water Fund Analysis
Attached to this report is the 2007 Water Fund Analysis including the details of the process and
assumptions used to complete the analysis. An update on major activities and programs is
included in Attachment 1. Annually, staff reviews the water fund's health and recommends
appropriate rates to meet the financial and programmatic requirements. This annual rate review
recommends increases to the 2007-08 and 2008-09 water service charges and projects a series of
annual rate increases through 2012-13. As identified in recent years, the water fund is being
positioned to pay for the City's share of the Nacimiento Project and the Water Treatment Plant
Master Plan Improvements, as well as meeting operational demands, maintenance programs,
improving customer services and ensuring the water fund's fiscal health.
Proposition 218 Notification and Public Participation
Notification of a public hearing on the proposed water rate increases was mailed on April 30,
2007 to all water and sewer customers in accordance with the Proposition 218 notification
requirements. The notice (Attachment 2) includes proposed water rate increases of 13% in 2007-
08 and 13% in 2008-09, which are the final recommended water rate changes for Council
consideration. As outlined in the Prop 218 notice, the recommended rate increases will be
discussed as a public hearing item before the Council on June 19, 2007, when the public will
have an opportunity to comment on the recommendations. Additionally, on June 19`l' staff will
provide a summary of written protests and telephone responses received regarding the proposed
rates. Staff looks forward to Council and community input on these issues.
ATTACHMENTS
1. 2007 Water Fund Analysis
Exhibit A— Financial Schedules
A.1. Changes in Financial Position
A.2. Assumptions for Fund Projections
A.3. Capital Improvement Plan Schedule
2. Proposition 218 Notification
GAUTlL\Kaffie\Fiscal\FlNANCIAL PLANS\2007-09 Financial Plan\2007 ftrid Analysis\Water\2007 Water Fund CAR.doc 7 /0
�1
ATTACHMENT 1
2007 Water Fund Analysis
May 31, 2007
Prepared by the
Utilities Department
City Of san WIS OBISPO
y�
Attachment 1
Page 2
city of san Luis oBispo
2007 Water Fund
TABLE OF CONTENTS
I. OVERVIEW
II. 2007-09 FINANCIAL PLAN
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. 2006-07 UPDATE
A. Major Activities and Programs
EXHIBIT A— FINANCIAL SCHEDULES
A.1. Changes in Financial Position
A.2. Assumptions for Fund Projections
A.3. Capital Improvement Plan Schedule
r�
Attachment 1
Page 3
city of
i&I san WIS OBlspo
2007 Water Fund Report
I. OVERVIEW
This report presents the financial condition of the Water Fund, based on the 2007-09 Financial
Plan operating program budgets, and recommended program and capital requests to address the
identified needs in the Water Master Plan, regulatory requirements, and adopted City financial
and infrastructure maintenance policies.
H. 2007-09 FINANCIAL PLAN
A. Summary of Operating Programs
Including requests shown in section B. 2007-08 2008-09
BUDGET BUDGET
Source of Supply 1,305,100 1,198,600
Conservation 413,100 427,200
Treatment 1,757,300 1,813,700
Water Distribution 977,600 1,021,500
Customer Service 394,400 417,700
AdministrationlEngineering 617,200 645,800
Water Taxes and Fees 464,500 514,200
Total Water Services 5,929400 61038,700
Operating program descriptions are provided in the Preliminary Financial Plan,pages D-45 to 55.
B. Significant Operating Program Change Requests
2007-08 2008-09
BUDGET BUDGET
Source of Supply
Water Reuse Operating Materials and Supplies 30,000 30,000
Electric Cost Increase for Reservoir Operations 156,000
Increased Salinas Reservoir Payment to County 25,000 50,000
Water Treatment Plant
Plant Maintenance Projects 48,000 50,000
Operating Materials and Supplies Increase 32,000 41,500
Operating Certification Compliance and Training 6,000 6,000
Electric Cost Increase 30,000 31,200
Water Distribution
Utility Pickup Broom for Skid Steer Tractor 7,500
Water Administration/Engineering
. Temporary Salaries for Records System Improvements 4,600 5,800
Total Water Services 339,100 214,500
Detailed supporting documents for each request is provided in Appendix A of the Preliminary Financial
Plan,pages 34 to 51.
i
Attachment I
Page 4
C. Capital Improvement Plan Requests
2007-08 2008-09 2009-10 2010-11
BUDGET BUDGET PROPOSED PROPOSED
Source of Supply
Water Reuse Master Plan 250,000 250,000 250,000 250,000
Water Treatment Plant
Major Facility Maintenance 130,000 140,000
Fleet Replacement
Service body only for existing truck 15,100
4-wheel drive pickup 30,900
Water Distribution
Distribution Master Plan Implementation 250,000 250,000 250,000 250,000
Distribution System Improvements 1,300,000 1,325,000 1,350,000 1,375,000
Polybutylene Water Service Replacement 350,000 350,000 350,000 350,000
Fleet Replacement
Flatbed with crane 98,700
Mid-size pickup 23,900
4-Mid-size pickups 83,600
Administration and Engineering
Telemetry System Upgrade-50%share balance 3,000
Materials Separator-50%share 12,600
Exterior Painting of 879 Morro-50% share 8,500
Fleet Replacement
2-Sedans 17,600 19,200
Light pickup 20,700
Total Water Services CIP 2,450,900 2,398,600 2,227,700 2,276,600
Shared City Information Technology CIP 27,200 75,000 3,200 16,000
Total Water Fund CIP 2,478,100 2,473,600 2,230,900 2,292,600
Detailed supporting documents for each project is provided in Appendix B of the Preliminary Financial Plan,pages 3-87
to 125;and pages 3-497 to 512 for shared Information Technology projects.
M. RATE SETTING
A. Methodology
In determining water revenue requirements and setting recommended rates, the following general
methodology is used:
Step 1: Determine Water 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. Development impact fees and meter sales
c. Revenues from other agencies(Cal Poly)
d. Other service charges(service start-up fees, late charges,etc.)
y-7
Attachment 1
Page 5
Step 3: Identify water rate requirements:
a. Revenue needed to be generated from water rates is the difference between water
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.
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 coverage requirements, and
minimum working capital policy.
B. Water Rate Structure
Current policies to guide rate structure setting:
■ Comply with legal requirements
■ Encourage conservation
■ Ensure revenue adequacy to fully meet system operating and capital needs
■ Provide equity and fairness between classes of customers
■ Be easy to understand and easy to administer
■ Facilitate ongoing review to maintain rate stability
The current water rate structure is completely variable, with the charges based on the volume of
water used. The table below shows the current water rate structure.
2006-07 Monthiv Water Charaes
Customer Type Single Family
Residential Customers t All Other Customers
Inside the City Rates 1 -5 CCF $3.28/CCF I -5 CCF $3.28/CCF
6-25 CCF $4.11/CCF 6+ CCF $4.11/CCF
26+ CCF $5.14/CCF
Outside the City Rates' 1 -5 CCF $6.56/CCF 1 -5 CCF $6.56/CCF
6-25 CCF $8.22/CCF 6+ CCF $8.22/CCF
26+ CCF $10.28/CCF
Per Council adopted rate structure,the third der charges for more than 25 units are applicable for
Single Family Residential(SFR)customers only.
Z For service to customers outside the City,the water rates are two times the'tin-City"rate.
Attachment 1
Page 6
C. Water Rate History
The table below shows proposed water charges for 2007-08 and 2008-09, as well as a ten-year
history of water charges.
Year N/lonthiv Charge
Proposed 1-5 ccf 4.19
2008-09 6-25 ccf 5.24
more than 25 ccf 6.57
Proposed 1-5 ccf 3.71
2007-08 6-25 ccf 4.64
more than 25 ccf 5.81
1-5 ccf 3.28
2006-07 5-25 ccf 4.11
more than 25 ccf 5.14
2005-06 1-5 ccf 2.93
more than 5 ccf 3.67
2004-05 1-5 ccf 2.71
more than 5 ccf 3.40
2003-04 1-5 ccf 2.51
more than 5 ccf 3.15
2002-03 1-5 ccf 2.51
more than 5 ccf 3.15
2001-02 1-5 ccf 2.51
more than 5 ccf 3.15
2000-01 1-5 ccf 2.51
more than 5 ccf 3.15
--..-.._.............................._._._.—._._..._..._..._._._......_......._......._.__..._._.........................._........
1999-00 1-5 ccf 2.51
more than 5 ccf 3.15
1998-99 1-5 ccf 2.79
_ more than 5 ccf 3.50
1997-98 1-5 ccf 2.79
more than 5 ccf 3.50
IV. ASSUMPTIONS
The following provides more detail for the key assumptions in Exhibit A.1. and A.2. to this
report, the financial schedules showing the water 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 2007 Agreement between the
City and the University. This agreement, covering the period beginning July 1,
y-9
Attachment 1
Page 7
2007 and extending through June 30, 2012, set the proportion (66%) of the non-
residential rate the University pays to account for the University's difference from
other customers (the University owns its own water supply and capacity interest at
the Water Treatment Plant).
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 current impact fee establishment. Developments in those areas pay only those
fees in place at the time of approval plus an annual adjustment based on the
consumer price index.
B. Expenses
The operating expenses are based upon projections to the end of the 2006-07 fiscal year
and the preliminary 2007-09 Financial Plan. Thereafter, operations and maintenance
costs are adjusted assuming an inflation rate of 3% annually. With the Nacimiento water
supply project debt financing facilitated through the County, the City's share of the
project debt service costs are accounted for as an operating expense. The City's share of
the Nacimiento project annual costs are reflected in Exhibit A on the listing of
assumptions and included with the Public Utilities operating expenses listed in the
Change in Financial Position worksheet.
Capital expenses are based upon projections to the end of the 2006-07 fiscal year and the
preliminary 2007-09 Financial Plan, including four years through 2010-11. Thereafter,
capital expenses are forecast based on infrastructure maintenance and repair history, and
regulatory requirements.
C. Debt Service Payments
1. Debt service for the 1994 upgrade of the Water Treatment Plant and the refinancing
of earlier bonds for system upgrades — the 2001 and 2002 Refunding Water
Revenue Bonds—is $1,075,600 in 2007-08 and $1,072,500 in 2008-09. The 2001
lease revenue bonds (about$385,000 annually) will retire in December 2008.
2. Debt service to pay for the energy conservation projects is $28,900 annually in
2007-09.
3. Debt service for the repayment of the State Revolving Loan Fund for the
construction of the Water Reuse system is $525,500 annually in 2007-09.
4. Debt service interest only for the design of the Nacimiento project is $295,000 in
2007-08 and the final interest only payment for design is $147,800 in 2008-09.
5. Debt Service for the 2006 upgrade of the Water Treatment Plant—the 2006 Water
Revenue Bonds—is $1,033,900 in 2007-08 and$1,032,300 in 2008-09.
6. Debt service for the water fund's share of the new dispatch center is projected at
y-16
Attachment 1
Page 8
$31,000 annually beginning in 2008-09.
7. Debt service for the water fund's share of the radio system upgrades is projected at
$36,000 annually beginning in 2008-09.
V. 2006-07 UPDATE
A. Major Activities and Programs
I. Water Reuse Project
The Water Reuse project was approved by Council in 1997 and construction of the
backbone distribution system was completed in August of 2004. The Water
Reclamation Facilities' construction improvements required for the Recycled Water
System were completed in spring 2005-06. Recycled water deliveries began in
spring 2006 and are currently serving four sites: (1) Damon-Garcia Sport Fields;
(2) Los Osos Valley Road medians; (3) Calle Joaquin Parkway along the new
alignment, and; (4) Gerhardt Auto Park at the end of Calle Joaquin. System
expansion plans in various stages of use approval and training include: Courtyard
by Marriott, Laguna Village Shopping Center, Cal Trans, Costco, Irish Hills Plaza,
Laguna Middle School, and City parks including Laguna Lake Park, Laguna Hills
Park, French Park and Islay Park. This is the first significant new water supply
added for the City since the completion of the Whale Rock Reservoir and
transmission facilities in 1961. The Water Reuse project is funded through a
combination of State Grant ($2.6 million) and State Revolving Loan funds ($8.1
million)with annual debt service payments for Water Reuse at$525,500.
2. Nacimiento Pipeline Water Supply Project
Participation in the Nacimiento Pipeline Water Supply Project is the most
significant water supply achievement in terms of both cost and benefit. The project,
as identified, will provide the City with an additional 3,380 acre-feet per year of
water,providing adequate supplies to meet our current General Plan build-out needs
and provide greatly improved system and service reliability. The total project cost
for the Nacimiento Project is estimated at $186.5 million for design and
construction. The City's share of that cost is estimated at $80.4 million. An
operating and maintenance payment to the County for the City's share of project
costs is estimated at$6.75 million annually beginning in 2010-11.
3. Utilities Conservation
The conservation office oversaw the successful completion of the energy generation
projects in 2007. With the initial investment in the projects of $3.1 million, the
various components will save the City well over $300,000 per year in energy costs
on an ongoing basis. Additionally, the conservation office continued to implement
water conservation programs that have effectively saved approximately 120 acre
feet of water year during the 2006-07 fiscal year.
4. Water Treatment Plant Master Plan Implementation
The construction contract for the Water Master Plan Improvements to the Water
Treatment Plant was awarded on May 16, 2006. Construction began in July 2006
and is currently 70% complete, with project completion estimated in December
V-//
Attachment 1
Page 9
2007. Capital project costs are included in this analysis, reflected in the 2006-07
budget. The total project budget is $16.8 million. Annual debt service payments
for $15.5 million of the Water Treatment Plant Master Plan Improvement project
cost is $1,033,900 in 2007-08 and$1,032,300 in 2008-09.
5. Infrastructure Replacements
Industry standard would set annual infrastructure replacements at two percent of
system value (based on a fifty year replacement cycle) for the water distribution
system. This equates to expenditures of $1,300,000 in 2007-08 and $1,325,000 in
2008-09. Repair and upgrade at major facilities such as the Water Treatment Plant
and pump stations is based on maintenance and repair history..
6. Dispatch Center and Radio Systems Upgrade Improvements
Utilities relies heavily on the radio system for dispatch of field crews and
communication between crews on routine and emergency operations. The
Enterprise funds will be expected to participate financially in the Dispatch Center
and Radio Systems Upgrade Project. The projects will be debt financed and annual
debt service costs to the water fund are estimated at $31,000 annually beginning in
2008-09 for the dispatch center, and $36,000 annually beginning in 2008-09 for the
radio systems upgrade.
Attachment 1
Page 10
EXHIBIT A
2007 WATER FUND
FINANCIAL SCHEDULES
Z/-43
T / Attachment 1
_ Exhibit A.1.
8 sgg $Cn oboe sC s s s N
N t
u � b Q• ao 00 C O o0 00
N O O t� vi 7 O 00 a N CO Vl OrO
N aD N M �D y 7 N V1 V O� f�
T v v V^
N N ON M M
= 8 Iq 8N88ell 88cp 8n 0(i 8 8 8 0
M M M V a C oo eIj — oD O ri .. Do DD 7 r rr
N F N vhf W Oro M V'1 — M goon b c0 N e�+� T 7 eN+f o00
GGG
.• r M 7 N N Q h 7
M 8 o( S 8 S ol8 r1i0 8 S � Q
06 r o0 N N O M 10 0o O. O �o
NLE N O r vi 00 N Vl 00 N en f� v r b e+I q�
$ S S 8 8 8 8 8 8
0 8 8 8 8 0 8 8 0 00 8 g
00
N m r oo �M�pp
N �O 7 M .-. M tZ O h V7 R Oro CMS.
�D M..
^ �• — R r N N N "•' v 7 Q
S m O NO SSS %q ell S � 80880, 8 88 O� O O O
00 M NO r 7 00 T N w W 0o V1 h V7 O en
N N N h V1 M C M C T Wi_ R 7 O 000 •�.• p0 00 b
O M Vt n N N N V7 Q
Z
7 8 O 8 S O 8 S S SpQ S 8 S S S S S O S 8 8
U O OO S O O� O V: eO.�} �D l L N O: Cw N ei Cyy O O p�pp
N •O S O vOi b h er+f O M n n V1 O147, W N �O n h 00 vO`i H b
LU a
d' oo M N vi e1 w. r v — C %q
W
Q
� 8 pQ 8 pQ S pQ qp 8800 pQ p 8 p
V1 U ? O In O l� O pO N S n pp O
Z $ Q a0 00 ^ a N M v'1 Cr 0D a0 w9 O O N N C
O M M ON N M N 0 — 00 a` 7 0 0 Oz R a} �p O0 N
NT C O 00 h 7 GGG t-t ZD es M M N �+
C C)
N_r
O
CL
J
Q E o
a cueg U L
Z 9 ° u a y
Q v u 00 00 C O �+
u u �' p C •C N '� C u W
LL 43 yg� a ei 0 cJ o0 O U a ?n C
00 U .W C C p a 4 C C G 61 .�
Z ad '3 `e3 ai ccY3 fCJ G L {L i.L E O 'W L o 6i e o
E e E 'o C u U v, h L O Pa W
W n s c U E y o= >o .". o a=i .7v E E U
v .9Uti� � o � ao E •� W � "y' ocq •o a�iCCO m m
Z a� E � n � p � � c � ^go SCG � � a
m o u c o o� 'O r o C y .c. Q `u c C
s 3 3 C U ¢ Q O F 6. U� F U F ag O ea a F w w
z = a a0 � 3v v a c `0 0
Attachment ]
Exhibit A.2.
0 0 0
0 0 0
tJ 00
n o CoV'i COp I 00 G o o o 0 001 000_
I-TN C6 LO Cl) CoO 01 r O pj
N O MLo
6 L NN Cl) O aND T
69
fA e r
N m
r D 4J fA O EOA K O rO O Cq
O W[7m Wm
NO rl N Cl)LO 0 a;CM CY
°
Co Cl)f769(O 00D
!9 ER
O 00 0
p N e O N O qj O O ° O ( '00
R M
r C] M r % O1 N 0 O 10 O O N Lo O m
N Co Co NO M < 0� N 01 1� 'O
60 tl9 ER � f9 N� Cl)
O
0
Cli
ui
sO O 1
c "! O c OD u o p. w
_ O N r- C
C tD W N N Cl)i LO mm M r u Co r CooN m
N to 6s !9 <9
to O � m
01
O
O O O O
4 Lnmg o oC, g o S o o
c rn ? n nr(�1
N Co m O N V O Co N � N N O 3 t0 O
�z 69us W o C a
f/1
tO
m 7
m E
Coo C
_ o 00 po v
m 0 0OO O W o o V' u o p N
Cl) ul) W
fG O
7 N N to Cl) 1() Co W C7 U m
N m _ N N 1f1 LO m
f9 6s
� m
m
� U
Z m O O Co
0 vC7 m
NCMC
Co
F m M E
V 0
W m z � cm
C C N 00 m
m U ? W >
IL o 08
Z c m c m o M
(L 0 m C N 0 m = m
m O m °1 m w o v1 _ >
� m m C m C o .0
CO O UL
W Wcc a .0 m E 3 m N y H .0 O.!'
¢ > m m E m m E 3
Q ¢ c m a m p a c m m E v - cmi
G 3 O m o ¢ m o U o ® o m o m m e
m N Q
CD 0 > > U m
w m � m m a m m m E o � ¢ m O m m o • E —
a ¢ Q m c m E ¢ c E m E m m 'c v o f
E m m m m
(L V C U E N Um m U y 0 tr ::(D a � m LL > m mCD r 0 >
m p7 O a ¢ z m L () L m m U U oLO :p .0. ap
� _Z m m Co y m m O m E m
CM
V. ~ .Q r2 C N W C N O ¢ Co m E O m coc m N O C D
p� a m m c m ° m 3 " a m $ o > m
O m c c 2 Z 2 2 2 2 E m m o > m
> > a m m m m m m m m U Z m m o
O N m E ti m m tp to y Cl) o y 'c Cn m m o v
O N CD
0 m m m m m m 0 m Co .o Q m e m '� O m c ¢ ~
N Q 3 o z o 0 0 0 0 0 0 a 3 0 ¢ 3
y i�
Attachment 1
Exhibit A.3.
0 0 0 0
0000
O O O O O
0 O O N O n n
N0.O N N 7 M
N N
Cq
a
wo 0 0 o 0
-. rn o 0000
cO o 0000 kn tn
p p
N N
0.
"•" A O O O O O O O O p
O V) O Ch O O O O �°
O O O O W O O
N N N M M tn N
N N
o.
A O O O O O O p O p
O V7 O O O O h N N q
Qr O W) kn kn 00 N M Q
Q Cq
N N M M N N
R� N N
a
E o 0 0 0 0 o p o p
o ^VC o 0 0 0 0 o
N r� N N M O 00q
m M a
p E" O O O O O O cc cc 0 p O p
W O O o coo 00 O O O p O p
(J" O O --� O O O t- Q; O �o �o p� N .r
wl
N O O .�.^ O p O 06 N, ,r. O N
m N N y to 7 Q
N N
�r
E'
C�
F d
U s.
.. N
0
o
a r
H a y
W E e6
� N �
r °
a Q s e
• Z X ° m r o
c
b o 3
• ar a c TY E u ° W Q a`o ? � 2 y 4 c g V a •- y c p• is r
Y 'a U
4 n o=i E a°i o > y C, v s u ° = g ° a E a $
A c4 E g E o = E y '' E a . o y
o~i
tunv � 'S '5 E v _ 9 i .9
g o 9
yam/
Attachment 2
C::Z;A
sari luis onispo
NOTICE OF PUBLIC HEARING
PROPOSED RATE
INCREASE FOR
WATER AND SEWER
SERVICE RATES -
PROPOSED SEWER RATE
STRUCTURE CHANGE
y/7
Attachment 2
Dear Customer:
Pursuant to the requirements of Proposition 218 and California Constitution Article XIII,this notice provides information regarding
proposed rate increases for City of San Luis Obispo Water and Sewer service customers,and, a proposed rate structure change for
residential sewer service,moving from a flat rate to a volume based sewer rate.A comprehensive budget workshop on the proposed
Water and Sewer operating and capital programs for the 2007-2009 fiscal years will be held on Thursday May 31 at 7:00 pm in the
San Luis Obispo Council Chambers.The proposed rate increases and the change in the sewer rate structure will be presented to the
San Luis Obispo City Council for adoption on the date,time and location specified below in the NOTICE OF PUBLIC HEARING.This
notice also provides information on the reason for the required rate increases and how customers can obtain added information on
how the proposed rate increases and sewer rate structure change will affect their water and sewer bills.
NOTICE OF PUBLIC HEARING
Public hearings on the proposed rate increases to water and sewer rates,and the proposed rate structure change to the
residential sewer rate will be held on:
Date: Tuesday,June 19,2007
Time: 7:00 pm
Place: City of San Luis Obispo,Council Chambers
990 Palm Street,San Luis Obispo CA 93401
The hearings will cover the proposed 2007 and 2008 rate increases for water and sewer services,and the proposed rate
structure change for residential sewer service.
This notice has been sent to all customers whose properties currently receive any of these services provided by the City
of San Luis Obispo Utilities Department.If adopted,the proposed rate increases will become effective July 1,2007 and
July 1,2008. If adopted,the proposed sewer rate structure change will become effective July 1,2007 and will be reflect-
ed in the individual customer's first bill representing a full billing period following that date.This notice also describes how
to file a protest against the proposed rate increase(s)and/or the proposed sewer rate structure change(see back page).
BACKGROUND INFORMATION-Water and Sewer Rates
The City of San Luis Obispo Utilities Department conducts annual analyses of the revenues and expenditures for the Water and
Sewer Funds to ensure that sufficient revenues are collected to provide for the water and wastewater service needs of the community.
These analyses typically include a minimum five year look ahead at operating and capital program costs in order to adequately prepare
the funds for upcoming expenses and avoid significant unexpected increases in rates. Modest rate increases over a number of years
to achieve planned service and resource objectives is the preferred method for ensuring rate and fund stability.
Based on this year's analysis and projecting forward for at least five additional years,the following table shows the rate increases
needed for both the Water and Sewer Funds to achieve the planned service and resource objectives for each fund.The proposal is
to adopt rates for the next two years (2007 and 2008).Table 1 includes the required across the board rate increase as a percentage
No) increase in the rates.
Table 1. PROPOSED WATER AND SEWER RATE INCREASE(S)
July 1,2007 July 1.2008
WATER 13% 13%
SEWER 1 11% 1 10%
Sewer Rate Structure Change
In 2006 the City Council provided tentative approval of a revised residential sewer rate structure that would be based on the volume
of wastewater produced,as opposed to the flat rate system currently in place.The volume of wastewater produced is estimated by
averaging the customer's metered winter water use(assumed to be most reflective of actual indoor water use and wastewater gen-
eration).Creation of this"volume based rate structure"was the number one request of our customers when surveyed in 2006.With
the City Council's tentative approval, our customers were notified of the pending change in rate structure and monthly winter water
use for each customer was recorded and averaged for the months of December 2006,January and February 2007 This information
1-1-le-
Attachment 2
was then analyzed to determine the"per unit rate" required to implement the new volume based residential sewer rate structure.Com-
mercial customers have always been on a volume based rate structure.The proposed rate structure affects commercial customers by
reducing the current base charge component of their bill and increasing the variable charge (per unit rate)to be consistent with that
proposed for all other sewer customers.
Table 2 provides the proposed per unit rate and base charge for all City of San Luis Obispo sewer customers:
Table 2. PROPOSED SEWER RATE STRUCTURE'
July 1,2007 July 1,2008
Base Charge(per mouth,per account) $5.00 $5.50
Volume Charge 1perunit••) $5
The proposed sewer rate structure and charges indicated in this Table include the proposed rate increases identified in Table 1.
•A unit of water(or wastewater)equals 100 cubic feet or 748 gallons
Table 3 provides an example of the monthly impact to a typical residential customer (assumes 10 units of water use per month
and a Sewer Cap of 7 units per month).
Table 3. SAMPLE RESIDENTIAL CUSTOMER WATER AND SEWER BILLS
Current July 1,2007 July 1,2008
WATER $36.96 $41.76 $47.19
SEWER $35.56(flat rate) $40.35* J $44.39*
Base charge plus volume charge @ 7 units
HOW CAN I FIND OUT HOW THESE PROPOSED CHANGES AFFECT MY WATER AND SEWER BILLS?
You may obtain specific information regarding your water use,calculated sewer cap,and estimated charges for your property by con-
tacting the City of San Luis Obispo Utility Billing Section of the Finance and Information Technology Department at(805) 781-7097,
or the City Utilities Department Conservation Office at(805)781-7258. In addition,information may be obtained from the Utilities
Department Web site at www.slocityorg/utilities.
WHY ARE THE WATER AND SEWER RATES BEING INCREASED?
Water
There are a number of factors driving the need to increase water rates,one of which is the need to develop new and more reliable
sources of water.These new sources will provide for far more secure and reliable supplies in the event of another drought or cata-
strophic loss of one of our major water supply sources,and will also provide the water needed to achieve the City's General Plan
goals for future housing and development.The new supply projects include the Water Reuse project which will generate over 1,000
acre-feet per year of drought proof supply suitable for irrigation and other non-potable use throughout the southern portion of the
community,and the Nacimiento Pipeline project which will provide the community with 3,380 acre-feet per year of additional potable
water supply.In addition to water supplies,these rate increases will support ongoing maintenance and operating programs needed to
ensure that our water treatment and delivery systems are operated and maintained so as to avoid system failure and interruption in
service.In addition,a portion of this increase will be used to pay for the upgrade to our water treatment plant(currently in progress)
b provide added treatment capacity, upgrade and replace aging equipment,and meet current water treatment standards.
Sewer
rhe proposed sewer rates will continue to fund required upgrades to our water reclamation facility needed to meet added regulatory
-equirements for protection of San Luis Obispo Creek by removing additional pollutants from our discharge. In addition,the proposed
*es will assist in funding improvements to our wastewater collection system,such as a new Tank Farm lift station in the southern
)ortion of town,which will provide added efficiency over the current system of three lift stations,and provide service to the City's
vture expansion areas(Airport,Margarita and Orcutt) needed to allow the expansion of housing and commercial development as
envisioned in the General Plan.Finally,the proposed rates are needed to fund ongoing operations and maintenance costs for an
aging infrastructure.
moor questions regarding the City's Water and Sewer operations and maintenance programs, and details regarding the specific
2rojects and programs driving these rate increases, please contact the City Utilities Department at (805) 781-7215.
Attachment 2
HOW DO I PROTEST THE PROPOSED RATE INCREASE AND/OR RATE STRUCTURE CHANGE?
Under Proposition 218, if you are the owner of record for a parcel or parcels or a tenant directly liable for payment of the fees
subject to the proposed rate changes,you may submit a written protest against each proposed rate increase (water, sewer)
and/or the proposed change to the sewer rate structure. Protests must be presented to the City Clerk of the City of San Luis
Obispo at or before the time of the public hearings. In your protest you must specifically identify what you are protesting,the
water and/or sewer rate increase(s)and/or the sewer rate structure change. If written protests are filed by a majority of the
affected customers,the applicable proposed rate change will not be imposed.
A written protest must contain the service address and the water and sewer service account number.The party signing the
protest must be listed on the account as the person responsible for payment of the water and sewer bills.
Written protests regarding the proposed rate change(s) may be mailed to: City of San Luis Obispo, City Clerk, 990 Palm
Street, San Luis Obispo CA 93401. Written protests may also be personally delivered to the City Clerk at this address.
To be valid, a protest must be in writing and received by the City Clerk at or before the time of the protest hearing.
A comprehensive budget workshop on the proposed Water and Sewer operating and capital programs for the 2007-2009
fiscal years will be held on Thursday May 31 at 7:00 pm in the San Luis Obispo Council Chambers.
The public hearing on the proposed rate increases to water and sewer rates, and the proposed rate structure change to
the residential sewer charges, will be held on:
Date: Tuesday,June 19,2007
Time: 7:00 pm
Place: City of San Luis Obispo,Council Chambers
990 Palm Street,San Luis Obispo CA 93401
Customers are encouraged to attend both the workshop and public hearing.
MY Oft y�
SAI ! UIS omp0 Presorted Standard
U.S.Postage
PAID
Permit No.7
Utilities Department San Luis Obispo
879 Morro Street CA,93401
San Luis Obispo,CA 93401
Postal Patron
-/-2D