HomeMy WebLinkAbout05/31/2007, BUS 5 - 2007 SEWER FUND REVIEW J
council M.EnD` May 31,2007
j acEnaa nEpont " ' . S
CITY OF SAN LUIS O B I S P O
FROM: John Moss, Utilities Directo
Prepared By: Kathe Bishop, Senior Administrative AnalystV
SUBJECT: 2007 SEWER FUND REVIEW �`
CAO RECODNENDATION
1. Review and accept the 2007 annual sewer 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 the proposed volume based sewer rate structure as considered by
Council on May 1, 2007, pending final budget review and rate structure adoption on June 19,
2007; and
4. Conceptually approve increasing sewer service charges by eleven percent (11%) effective
July 1, 2007, and ten percent (10%) effective July 1, 2008, pending final budget review and
rate setting adoption on June 19,2007.
DISCUSSION
This report presents the annual review of the sewer fund. The 2007 Sewer Fund analysis
includes revised projections to continue to provide quality services to meet regulatory
requirements and complete Wastewater Master Plan improvements needed to serve the City to
build-out of the General Plan. With the recommended rate increases, the Sewer Fund will
continue to be healthy and stable, capable of supporting the continuing operations and capital
programs, and positioned to meet current and future debt financing requirements. This report
recommends conceptual approval of sewer rate changes for the next two years — with sewer
rates increased by I I% effective July 1, 2007, and 10% effective July 1, 2008 — pending the
June 19, 2007 final budget review and rate adoption.
Within this analysis, which forecasts the sewer fund's financial position until 2014, the City is
positioned to fund the projected long-term financing costs for Master Plan Improvements
including the Tank Farm Gravity Sewer and Lift Station project, the Calle Joaquin Lift Station
project (formerly referred to as the Howard Johnson Lift Station), and the Water Reclamation
Facility (WRF) Upgrade project to meet capacity and regulatory requirements. This analysis also
includes projected funding for the WRF Disinfection Modifications project to address pending
regulatory requirements for removal of Trihalomethanes (THMs) from the wastewater effluent,
and an ongoing level of capital maintenance projects required to maintain the City's sewer
infrastructure assets.
2007 Sewer Fund Review Page 2
Annual rate increases are forecast to position the sewer fund to meet its current obligations and
projected future obligations based on the most current information available at this time. It is
important to note that the forecast includes significant infrastructure projects including the Tank
Farm Lift Station project which is in the 90% design phase, and a number of other significant
infrastructure upgrade projects that are in the conceptual (pre-design) phase. As these projects
proceed, more information will be forthcoming and cost estimates will be refined accordingly.
Last year, in the 2006 sewer fund analysis, rates were forecast to increase 10% in 2007-08 and
11% in 2008-09. The recommended rate increases of 11% in 2007-08 and 10% in 2008-09 are
comparable and driven by a number of factors including: (1) increased operating and capital costs
to continue to meet regulatory, environmental and health standards; (2) revised costs for Master
Plan Improvements and the WRF Disinfection Modifications projects; (3) increased replacement
of our wastewater collection system infrastructure to continue to meet our policy level of
replacement at 2% of system value annually, and; (4) increased infrastructure maintenance
requirements at the Water Reclamation Facility to continue to meet current maintenance service
levels. In addition, this analysis includes projected debt obligations for major initiatives,but also
includes retirement of some debt obligations in 2012-13 and 2013-14. A summary of
recommended operating program changes and capital improvement plan requests is as follows:
Significant Operating Program Change Requests
Prograln ion 2007.08 2008-09
Water Reclamation Facility WRF Maintenance projects 35,000 15,000
Water Reclamation Facility Maintenance technician for WRF 51,800 72,100
Water Reclamation Facility Laboratory supplies 21,900 21,900
Water Reclamation Facility Equipment maintenance warranty 11,500 11,500
Wastewater Admin/Engr WW Master Plan revisions 40,000 0
Wastewater Admin/Engr Temporary salaries for records system improvements 3,700 4,700
Total $163,900 $125,200
Capital Improvement Plan Requests
Program Description 2007-08 2008-09
Wastewater Collection Collection system improvements 1,780,000 1,450,000
Wastewater Collection Calle Joaquin Lift Station-design 0 235,000
Wastewater Collection Voluntary Lateral Rehabilitation Program 130,000 130,000
Wastewater Collection Materials separator -25%share 6,300 0
Wastewater Collection Fleet expansion:trailer mounted wastewater pump 51,100 0
Water Reclamation Facility Master Plan implementation—study and design 250,000 4,000,000
Water Reclamation Facility Disinfection modifications-design 0 600,000
Water Reclamation Facility Facility major maintenance 630,000 970,000
Water Reclamation Facility Laboratory equipment 100,000 0
Continued on next page
�-- z
2007 Sewer Fund Review Page 3
Continued from previous page
Program._ . tion 2007-08 2008-09
Water Reclamation Facility Fleet replacement: V/z ton pickup 22,000 0
Water Reclamation Facility Fleet replacement: three(3)utility carts 39,600 0
Water Reclamation Facility Fleet expansion: sedan 17,700 0
Water Reclamation Facility Fleet expansion: dump truck 78,900 0
Pretreatment Sampling and flow monitoring equipment 20,000 0
Pretreatment Fleet replacement: pickup 22,000 0
WW Admin/Engr Telemetry system upgrade—40%share 40,000 0
WW Admin/Engr Fleet replacement: sedan 19,800 0
Total Wastewater Services CIP $3,207,400 $7,385,000
Shared Technology requests: Voice Over IP,Sharepoint,Utility billing system upgrade 14,000 75,000
Total Sewer Fand CIP $3,221,400 $7,460,000
2007 Sewer Fund Analysis
Attached to this report is the 2007 Sewer Fund Analysis including the details of the process and
assumptions used to complete the analysis, along with an update on major activities and
programs (Attachment 1). Annually staff reviews the sewer fund and recommends appropriate
rates to meet the financial and programmatic requirements. This annual rate review recommends
increases to the 2007-08 and 2008-09 sewer service charges.
Sewer Rate Structure Changes
On May 1, 2007, the Council considered the final recommended volume based sewer rate
structure and implementation schedule. Implementation of the volume based sewer rate structure
is included as part of this 2007-09 Financial Plan and the sewer fund review (Attachment 1), with
final adoption of the recommended volume based sewer rate structure to occur with final
adoption of the Financial Plan on June 19, 2007. Moving from a fixed sewer rate charge to a
volume based sewer rate structure will not have any impact on the "average" customer — up or
down. The recommended rate structure is revenue neutral compared with our current one: based
on underlying usage assumptions (which we have been developing over the past two years; and
refined with the most recent "winter use" information from December 2006 and January and
February 2007), this rate structure will generate the same amount of revenue as our current rate
structure.
The goal for the new rate structure is to provide greater equity between customers based on their
use of the sewer system — like we do for our water customers— while at the same time providing
the same revenue adequacy as our current rate structure. In addition, the number one request
from our customers was for the City to provide a residential sewer rate billing structure that is
based on individual usage as opposed to the current fixed billing rate. Benefits of the proposed
volume based sewer rate structure include: (1) encourages conservation; (2) provides equity and
fairness between classes of customers; (3) allows customers choice and control of their utility
costs, and; (4)ensures revenue adequacy to fully meet system operating and capital needs.
Z' -3
2007 Sewer Fund Review Page 4
Sewer Rate Changes for the Average Residential Customer
What does this mean to the average residential customer? For the average residential customer,
assuming an average winter water consumption (AWWC) "sewer cap" of seven (7) units ("ccf')
monthly, the following illustrates the changes to the monthly bill with the recommended
increases.
Average Residential Sewer Customer Monthly Bill Sample
Assuming Average Winter Water Consumption"Sewer Cap"of Seven(7)Units
Fiscal Year: 2006-07 2007-08' 2008-09
Rate.Structure: Fiied Rate Volume Based Volume Based Volume Based Volume Based
Charge Rates Charges Rates Charges
Base Charge: $35.56 $5.00 5.00 $5.50 5.50
Volume Charge: n/a $5.05/ccf 35.35 $5.56/ccf 38.92
Total $3556 $4035 $44.42
1 Includes general purpose sewer rate increase of I I%in 2007-08 and 10%in 2008-09
With the recommended rate changes 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.
Proposition 218 Notification and Public Participation
Notification of a public hearing on the proposed sewer rate structure changes and sewer 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 sewer
rate increases of 11% in 2007-08 and 10% in 2008-09, which are the final recommended sewer
rate changes for Council consideration. As outlined in the Prop 218 notice, the recommended
sewer rate structure changes and general purpose sewer 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`h 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 Sewer Fund Analysis
Exhibit A—Updated Financial Schedules
A.1. Changes in Financial Position
A.2. Assumptions for Fund Projections
A.3. Capital Improvement Plan Requests
2. Proposition 218 Notification
G:UITI Kathe\FiscaAFWANCIAL PLANS\2007-09 Financial Plan\2007 Fund Analysis\Sewer\2007 Sewer Fund CAR.doc
ATTACHMENT 1
2007 Sewer Fund Analysis
May 31, 2007
Prepared by the
Utilities Department
city of San WIS OBISPO
Attachment 1
Page 2
City of San Luis Obispo
2007 Sewer Fund
TABLE OF CONTENTS
I. OVERVIEW
H. 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. Current and Proposed Rates and Rate Structure
C. Rate History
IV. ASSUMPTIONS
A. Revenues
B. Expenses
C. Debt Service Payments
V. MAJOR ACTIVITIES AND PROGRAMS
A. 2006-07 Update
B. 2007-09 and Forecast
EXHIBIT A—UPDATED FINANCIAL SCHEDULES
A.1 Changes in Financial Position
A.2 Assumptions for Fund Projections
A.3 Capital Improvement Plan Schedule
z
Attachment 1
Page.3
city of
Ali san lUls OBISPO
2007 Sewer Fund Analysis
I. OVERVIEW
This report presents the financial condition of the Sewer Fund, based on the 2007-09 Financial
Plan operating program budgets, and recommended program and capital requests to address the
identified needs in the Wastewater 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
Wastewater Collection 826,300 863200
Pretreatment 236,300 246,600
Water Reclamation Facility 3,128,600 3,206,700
Administration/Engineering 429,300 408,900
Wastewater Tares and Fees 437,300 481,100
Total Wastewater Services 5,057,800 5,206,500
Operating program descriptions are provided in the Preliminary Financial Plan,pages D-56 to 64.
B. Significant Operating Program Change Requests
2007-08 2008-09
BUDGET BUDGET
Water Reclamation Facility
WRF maintenance projects 35,000 15,000
WRF Maintenance Technician 51,800 72,100
Laboratory supplies 21,900 21,900
Equipment maintenace warranty 11,500 11,500
Wastewater Administration and Engineering
Temporary salaries for records system improvements 3,700 4,700
Wastewater Master Plan Update 40,000
Total Wastewater Services 163,900 125,200
Detailed documents for each of the requrest is provided in Appendix A of the Preliminary Financial Plan,
pages 49-65.
Attachment 1
Page 4
C. Capital Improvement Plan Requests
2007-08 2008-09 2009-10 2010-11
BUDGET BUDGET PROPOSED PROPOSED
Wastewater Collection
Collection system improvements 1,780,000 1,450,000 1,690,000 1,740,000
Calle Joaquin lift station 235,000 1,900,000
Voluntary lateral rehabilitation program 130,000 130,000 130,000 130,000
Materials separator for corporation yard-shared 6,300
Fleet expansion:Trailer Mounted WW Pump 51,100
Fleet replacement: 1/2 ton pickup 23,300
Reclamation Facility
Master plan implementation
Study 250,000
Design 4,000,000
Construction 32,600,000
Construction Management 6,000,000
Water reclamation facility disinfection modifications 600,000 3,500,000
Water reclamation facility major maintenance 630,000 970,000 515,000 475,000
Water reclamation laboratory equipment 100,000
Fleet replacement
1/2 ton pickup 22,000
3-gasoline powered utility carts 39,600
Fleet expansion
Sedan 17,700
Dump Truck 78,900
Pretreatment
Sampling and Flow Monitoring Equipment 20,000
Fleet replacement: Pickup 22,000
Administration and Engineering
Telemetry system upgrade-share 40,000
Exterior painting of 879 Morro building-share 8,500
Fleet replacement: Sedan 19,800
Total Wastewater Services Requests 3,207,400 7,385,000 7,766,800 40,945,000
Shared City Information Technology CIP 14,000 75,000 2,500 14,300
Total Sewer Fund CIP 3,221,400 7,460,000 7,769,300 40,959,300
Detailed supporting documents for each project is provided in Appendix B of the Preliminary Financial Plan,pages 3-126 to 174;
and pages 3-497 to 512 for shared Information Technology projects.
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 p
c. Debt service obligations(existing and projected) �O
Attachment 1
Page 5
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.)
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.
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. Current and Proposed Sewer Rates and Structure
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.
TYPE OF ACCOUNT EDUs 2006-07
Rates
• Single family dwelling,including single meter condominiums
and townhouses 1 35.56
Multi-family dwelling in any duplex,apartment house or $ 28.01
rooming house,per each dwelling unit
Mobile home or trailer park,pereach dwelling unit .6 21.14
Public or private school,based on average daily attendance at 4.02
the school
All non-residential accounts 1 35.56
Plus additional charge for every 100 cubic feet of water used 4.29
in excess of 500 cubic feet of metered water consumption
Minimum charge 117.16
Additional charge per 100 gallons in excess of 1500 gallons 7.05
discharged
The proposed rates and rate stricture will be the same for all customers with the variability
between customer types, now being addressed through a "volume based" concept as opposed to
EDU estimates.
.5"- 9
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Attachment 1
Page 6
The following compares the current sewer rate structure with the proposed one. For an "apples to
apples" comparison, both are based on an 11% general purpose rate increase effective July 1,
2007.
Account Txpe Current Pro osed Lwwj
Monthly Sewer Rates: Residential Customers
Single family $39.47 per dwelling unit Minimum charge:$5.00 per dwelling unit
dwelling, Volume charge per unit:$5.05
including single
meter Total monthly fee capped based on average
condominiums and winter water consumption(AWWC)
townhouses
Master-metered $31.09 per dwelling unit Minimum charge:$5.00 per account
multi-family Volume charge per unit:$5.05
dwellings in any
duplex,apartment Accounts without separate irrigation
house or rooming meter.
house Total monthly fee capped based on AWWC
Accounts with separate irrigation meter:
No cap
Mobile home or $23.47 per dwelling unit Minimum charge:$5.00 per account
trailer park Volume charge per unit:$5.05
Accounts without separate irrigation
meter:
Total monthly fee capped based on AWWC
Accounts with separate irrigation meter.
No cap
Ni 'lonthly Sewer Rates: Noii--Res-idential Customers
Public,private,or $4.46 per ADA $4.46 per ADA
parochial No Change No Change
school,average daily
attendance(ADA)at
the school
All Other Accounts Minimum charge:$39.47 per account Minimum charge:$5.00 per account
Excludes irrigation Additional charge for every 100 cubic feet Volume charge per unit: $5.05
accounts:there are in excess of 500 cubic feet of metered
no sewer service water consumption:$4.76 per unit
charges for these
Fach Vehicle Discharging SeNver into City SYsteni
Minimum charge $130.05 $130.05
Additional charge per $7.83 $7.83
100 gallons in excess No Change No Change
of 1,500 gallons
discharged
Attachment 1
Page 7
Council considered the final recommended volume based sewer rate structure and
implementation schedule on May 1, 2007. The goal for the new rate structure is to provide
greater equity and fairness between customers based on their use of the sewer system. In
addition, the number one request from our customers was for the City to provide a residential
sewer rate billing structure that is based on individual usage as opposed to the current fixed
billing rate. Benefits of the proposed volume based sewer rate structure include: (1) encourages
conservation; (2) provides equity and fairness between classes of customers; (3) allows
customers choice and control of their utility costs, and; (4) ensures revenue adequacy to fully
meet system operating and capital needs.
The following illustrates the proposed volume based sewer rates and rate structure for the
average residential customer, assuming an average winter water consumption (AWWC) "sewer
cap of seven (7) units ("ccf') monthly, and includes the recommended general purpose rate
increases.
Average Residential Sewer Customer Monthly Bill Sample
Assuming Average Winter Water Consumption"Sewer Cap"of Seven(7)Units
Fiscal Year: 2006-07 2007-08' 2008-09'
Rate Structure: Fixed Rate Volume Based Volume Based Volume Based Volume Based
Charge Rates Charges Rates . _ Charges
Base Charge: $35.56 $5.00 5.00 $5.50 5.50
Volume Charge: n/a $5.05 35.35 $5.56 38.92
Total $35.56 $4035 $44.42
Includes general purpose sewer rate increase of I I%in 2007-08 and 10%in 2008-09
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. Year
As noted previously, the proposed rate structure will be 2006-07 35.56
volume based. The proposed rates under the new proposed 2005-06 32.33
rate structure will be: $5.00 monthly per account, plus $5.05 2004-05 28.36
per unit ("ccf') in 2007-08, and; $5.50 monthly per account,
plus $5.56 per unit ("ccf') in 2008-09. Sewer billing for single 2003-04 26.63
family residential customers and multi-family customers 2002-03 25.24
without a separate irrigation meter will be capped based on the 2001-02 24.50
individual customer's average winter water consumption. 2000-01 23.79
1999-00 22.88
1998-99 21.79
1997-98 21.47
1996-97 20.95
j
Attachment 1
Page 8
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 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 effluent flow trends and the 2007 Agreement between
the City and the University. This agreement, covering the period beginning July 1,
2007 and extending through June 30, 2012, set the proportion (82%) 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 current impact fee establishment. Development 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 and capital expenses are based upon projections to 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. Capital expenses are based upon projections
to the end of 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. 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 1
Page 9
2. Debt service payments for the energy conservation projects are $279,400 in 2007-
08 and $279,700 in 2008-09. Electrical energy consumption is down by 30% at the
Water Reclamation Facility and the operating budget for electric utility service has
been reduced accordingly.
3. Debt service for the sewer fund's share of the new dispatch center is projected at
$36,000 annually beginning in 2008-09.
4. Debt service for the sewer fund's share of the radio system upgrades is projected at
$42,000 annually beginning in 2008-09.
5. Debt service is projected at $525,900 annually beginning in 2008-09 to pay for the
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.
6. Debt service interest only payments the design of the Water Reclamation Facility
Master Plan Implementation project are projected at $200,000 annually beginning
in 2008-09 for a period of three years.
7. Debt service is currently projected at $314,800 annually beginning in 2010-11 to
pay for an estimated $4.1 million for Disinfection Modifications that may be
required to meet pending regulatory requirements for the removal of
Trihalomethanes from the Water Reclamation Facility's effluent.
8. Debt service is currently projected with a pro-rated payment of$2,350,900 in 2011-
12 and annual payment of$3,134,600 beginning in 2012-13 to pay for the estimated
$42.6 million in Master Plan improvements to upgrade the capacity and treatment
of the Water Reclamation Facility.
V. MAJOR ACTIVITIES AND PROGRAMS
A. 2006-07 Update
1. Tank Farm Gravity Sewer and Lift Station
Tank Farm Lift Station Project is projected to bid later this summer. Environmental
work has been completed and final design comments are being incorporated into the
bid documents. Changes to the project have included alignment issues, additional
study of alternative construction methods through the Chevron property, and
placement of environmental findings into the specifications. Negotiations with
property owners are moving forward and staff anticipates bringing agreements and
financing documents to Council in the near future.
2. Disinfection Modifications at the Water Reclamation Facility(WRF)
A pilot study utilizing Chlorine Dioxide as an alternative disinfectant that does not
create Trihalomethanes (THMs) will begin this summer. Staff believes this pilot
study will provide adequate data for the design and construction of a disinfection
process that will meet the State's mandated 2010 compliance deadline. Chlorine
—1,3
Attachment 1
Page 10
dioxide may likely provide a less costly, more effective alternative than other
disinfection processes. This requirement, unlike several others being driven by the
municipal and domestic (MUN) beneficial use, has a federal nexus that required the
placement of a final compliance limit in the WRF's permit by 2010 and has
required the City to move forward with study and possibly design prior to all
regulatory issues being resolved. Staff has identified $600,000 for design in 2008-
09 and$3,500,000 for construction in 2009-10.
3. Regulatory Requirements
The City continues to work with the Regional Water Quality Control Board
(RWQCB) to address the MUN beneficial use designation for San Luis Obispo
Creek. A study to determine the most appropriate uses of San Luis Obispo referred
to as a Use Attainability Analysis (UAA) has been completed by the City and
submitted to the RWQCB. The MUN designation is the driver for stringent
discharge limitations in the WRF's permit that meet or exceed drinking water
requirements. These limits include nitrates and Trihalomethanes (THMs) and will
likely include a host of additional constituents in the future. Work also continues
with RWQCB staff on renewal of the WRF's National Pollutant Discharge
Elimination System (NPDES) system permit. Staff will return to Council with
alternatives if regulatory efforts can not be resolved in a satisfactory manner.
B. 2007-09 and Forecast
1. Lateral Program
The Voluntary Lateral Rehabilitation Program returns after more than two years of
being discontinued due to high costs. The revised program will replace or repair
100 laterals annually at the maximum reimbursement of $1,000 and offer City
technical support. This request identities $130,000 annually for the program which
include $30,000 for direct cost reimbursement to the general fund for inspection
services.
2. Calle Joaquin Lift Station and Update of the Wastewater Master Plan
Replacement of the Calle Joaquin Lift Station to address maintenance and
operations issues and meet future flows is identified in the Wastewater Master Plan.
This request identifies $235,000 for design, environmental work and easement
acquisition in 2008-09 and$1,900,000 for construction on 2009-10.
To provide a road map of sewer infrastructure for the western portion of the airport
area, this fund analysis also includes a request for$40,000 to update the Wastewater
Master Plan. Since completion of the plan, boundaries have changed significantly,
changing the infrastructure needs in this portion of the Airport Area. Once
complete, this study will provide staff and property owners with a defined plan of
required infrastructure.
3. Water Reclamation Facility Master Plan Implementation
Studies have almost been completed for the Water Reclamation Facility Master
Plan. An additional $250,000 has been requested to complete the studies and
provide adequate and thorough information for design. The City's consultant and
staff are working closely to identify the most cost effective and flexible design to
Attachment 1
Page I I
meet discharge limitations and reduce maintenance and operations costs. Ultimate
design and costs are dependant upon the success of the City's regulatory
negotiations relative to the MUN designation and the WRF National Pollutant
Discharge Elimination System (NPDES) permit. Staff has identified that
$4,000,000 in 2008-09 for design and $38,600,000 for construction and
construction management in 2010-11 will be required to meet the minimum
projected requirements.
4. 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 expenditures of$1,780,000 in 2007-08 and $1,450,000 in
2008-09. 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.
Attachment I
Page 12
EXHIBIT A
2007 SEWER FUND
FINANCIAL SCHEDULES
Attachment I
1 ; Exhibit A.1.
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Attachment 2
city of
i� san Luis osispo
NOTICE OF PUBLIC HEARING
PROPOSED RATE
INCREASE FOR
WATER AND SEWER
SERVICE RATES -
PROPOSED SEWER RATE
STRUCTURE CHANGE
s -�
-- 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
(%) increase in the rates.
Table 1. PROPOSED WATER AND SEWER RATE INCREASE(S)
July 1,2007 July 1,2008
WATER 13% 13%
SEWER 11% 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
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 month,per account) $5.00 $5.50
Volume Charge(perunit**) $5.05 $5.56
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* $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.slocity.org/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)
to provide added treatment capacity, upgrade and replace aging equipment,and meet current water treatment standards.
Sewer
The proposed sewer rates will continue to fund required upgrades to our water reclamation facility needed to meet added regulatory
requirements for protection of San Luis Obispo Creek by removing additional pollutants from our discharge.In addition,the proposed
rates will assist in funding improvements to our wastewater collection system,such as a new Tank Farm lift station in the southern
portion of town,which will provide added efficiency over the current system of three lift stations,and provide service to the City's
future 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.
For questions regarding the City's Water and Sewer operations and maintenance programs, and details regarding the specific
projects and programs driving these rate increases,please contact the City Utilities Department at (805) 781-7215.
- Attachment 2
c '
HOW DO 1 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.
CO Presorted Standard
san LUIS OBis o U.S.Postage
1" PAID
Permit No.7
Utilities Department San Luis Obispo
879 Morro street CA,93401
San Luis Obispo,CA 93401
Postal Patron
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