HomeMy WebLinkAbout05/20/2008, PH 4B - 2008 SEWER FUND REVIEW �I
council. "'�°� May 20,2008
j acEnaa Repojzt I�N
CITY OF SAN LUIS O B I S P O
FROM: John Moss, Utilities Directo
Prepared By: Kathe Bishop, Senior Admi strative Analyst
SUBJECT: 2008 SEWER FUND REVIEW
CAO RECOMMENDATION
1. Review and accept the 2008 annual sewer fund financial review.
2. Direct staff to return in July 2008 with a report on sewer rate structure and/or rate
modifications needed to close the projected sewer revenue shortfall upon completion of
the sewer rate structure analysis, with implementation of any recommendations in
September 2008.
3. Approve the amended Capital Improvement Plan(CIP)for 2007-08 and 2008-09, and
rephasing of the Calle Joaquin Lift Station project.
REPORT IN BRIEF
For 2007-08, sewer fund revenues have fallen below prior projections, with a revenue shortfall
for the year projected at $1.5 million. This shortfall is due to our change to a volume based
residential rate structure in July 2007. While customer use data from the 2006-07 fiscal year was
used to develop the rate model and establish the fixed and commodity charges for the current rate
structure, customer response to the rate structure change was difficult to predict, and at this time
it appears that our customer's response and ability to moderate their use to attain a lower rate has
exceeded expectations. As noted when the volume-based rate was proposed, it has the
significant advantage over a fixed-charge system of better linking sewer usage with fees. On the
other hand, since it is variable within a narrow range residential usage, it also brings with it the
potential for revenue volatility. In short, the possibility that adjustments to the new rate structure
might be needed to ensure revenue neutrality was clearly on our radar.
In an effort to close the revenue shortfall, staff is recommending a reduced and rephased sewer
fund CII'. Staff and our rate Consultant, HDR Engineering, are also analyzing our customer use
data from 2007-08 to determine what (if any) modifications to our sewer rate structure may be
appropriate in addition to any increase in sewer rates. The $1.5 million revenue shortfall, after
off-setting CIP reductions and deferrals, would require an additional 9% increase in rates to
mitigate the shortfall. Due to the noticing requirements of Proposition 218, any additional
increase in rates beyond that already approved will not occur until September 2008. Upon
completion of the rate and rate structure analysis, staff will return with a recommendation and
alternatives for closing the revenue shortfall beyond the reductions in CIP identified in this
report.
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2008 Sewer Fund Review Page 2
DISCUSSION
This report presents the annual review of the sewer fund. The 2008 sewer fund analysis shows a
significant shortfall in sewer revenues resulting from the change in sewer rate structure from a
fixed to a largely volume based rate as implemented in July 2007. The analysis projects a $1.5
million shortfall in revenues for 2007-08. This results in sewer revenues falling below the
funding requirements needed to continue to provide quality wastewater services in compliance
with state and federal regulations, meet debt service obligations and develop and maintain the
sewer infrastructure needed to serve the community.
In addition to the revenue shortfall, there have been increased costs/expenditures, most notably
the Tank Farm Lift Station project. The impact of these increased costs is lessened by the fact
that the project is being debt financed. However, in the 2007 analysis, debt service payments for
Tank Farm were projected at $525,900 annually. With increased project costs, the 2008 analysis
updates debt service payments to $759,400 annually for Tank Farm Lift Station.
In June 2007, Council approved a multi-year rate increase for the sewer fund with a ten percent
(10%) increase effective July 1, 2007 and ten percent (10%) effective July 1, 2008. The revenue
shortfall projected in this analysis will require rate and/or rate structure modifications sufficient
to generate an additional roughly 9% in revenues in the coming year.
In order to offset the revenue shortfall in the current year, staff is recommending deferral of
$895,000 of 2007-08 sewer fund capital improvements, and delaying the Wastewater Master
Plan implementation project to upgrade the Calle Joaquin (formerly Howard Johnson) lift station
by two years, from 2008-09 design and 2009-10 construction, to 2010-11 design and 2011-12
construction. Additionally, staff is recommending deferral of$1,075,000 in sewer fund capital
improvements in 2008-09 and reprogramming of the sewer fund CIP in the out years beyond
2008-09 without increasing projected CIP expenditures beyond those previously identified. To
resolve the ongoing revenue shortfall in the sewer fund, additional analysis will be required and
may involve modifications to the current rate structure, future CIP programming and general
purpose rate increases to position the sewer fund to meet its current obligations and projected
future obligations.
Sewer Fund Rate Structure
After several years of study, community input and Council consideration of alternatives, a
revised sewer rate structure was approved in 2006 and became effective in July 2007. The rate
structure change moved the sewer fund away from a fixed residential rate structure to a volume
based residential rate structure. Consultants from HDR Engineering assisted the City with the
development of the current rate structure which uses metered water use as the basis for charging
for sewer. The sewer rates for residential customers are capped by averaging the residential
customer's winter water use which is presumed to be most representative of the customer's
wastewater generation.
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2008 Sewer Fund Review Page 3
The table below displays how the rates and rate structure changed for what was assumed to be an
"average" single family residential customer in July 2007.
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/ccf 35.35 $5.56/ccf 38.92
Total $35.56 $40.35 $44.42
Includes general purpose sewer rate increase of I I%in 2007-08 and 10%in 2008-09
Individual customer water use data for the winter months of December 2006, January and
February 2007 were averaged to set the individual customer's sewer billing cap for the coming
year (2007-08). This cap represents the most a customer would have to pay for monthly sewer
service for that year, but the customer could pay less if metered use fell below the cap. The
information developed in 2006-07 was used to set the amount of the fixed and volume based
components of the new rate structure necessary to provide the projected revenue requirements for
the sewer fund for the 2007-08 fiscal year.
In setting the rate components, certain assumptions had to be made regarding the customer's
response to the new rate structure. At this time, our consultants with HDR Engineering are
analyzing the customer use data from the 2007-08 fiscal year to determine the actual response of
our customers as compared to those assumptions. Included in the analysis is the second year
winter water consumption data for December 2007 and January and February 2008 that will
establish new sewer caps for implementation in July 2008. Until this analysis is completed, it is
premature to make a recommendation to the Council regarding the appropriate change to our rate
and/or rate structure to correct the revenue shortfall.
Rate Study and Analysis Schedule
The table below outlines the proposed schedule for completing the rate structure analysis by
HDR Engineering and the presentation of recommended modifications to the sewer rates and/or
rate structure necessary to close the revenue shortfall and meet revenue requirements.
Following Council acceptance of any recommended changes, staff will complete the required
Proposition 218 public notice and protest process before implementing any convective actions.
The Proposition 218 process includes notification to all sewer customers of proposed changes
with a 45 day protest period, followed by a public hearing to consider any protests received and
adoption of the recommended rate and/or rate structure change.
The next steps are outlined in the following table.
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2008 Sewer Fund Review Page 4
Pro osed Rate Study and Analysis Schedule
Wastewater Rate Study and Analysis Completion Date
Data Collection Complete
Data Review and Analysis May 30, 2008
City Staff Review of Sewer Rate Model and HDR Engineering Update June 10, 2008
Final Report and Documentation July 15, 2008
City Council Tentative Approval and Initiation of Prop 218 Process July 15, 2008
Public Information and Outreach—Beg' July 16, 2008 September 1, 2008
Public Hearin -Adoption of Revised Sewer Rate/Rate Structure September 2,2008
Because of the delayed implementation of any proposed rate modifications_resulting from the
requirement to complete the Proposition 218 process, the projected 9% increase in revenues
shown in the attached sewer fund analysis for the 2008-09 fiscal year assumes a September 2008
implementation date for any recommended change to the rate and/or rate structure and,
implementation of the already approved 10%rate increase effective July 1, 2008.
2007-09 Financial Plan Supplement: 2008-09 Budget
Significant Operating Program Changes
There are no new Significant Operating Program Changes for the Sewer Fund 2008-09 Budget.
Those continuing program changes already identified and approved in the 2007-09 Financial Plan
and 2008-09 Budget are included in this analysis.
Capital Improvement Plan Changes
As stated previously, the sewer fund CIP has been modified to aide in closing the revenue
shortfall for 2007-08 and future fiscal years. Included in this fund analysis, staff is
recommending:
1. Reduced collection system improvements budget of$650,000 in 2008-09
2. Continuation of the voluntary service lateral rehabilitation program at $130,000
3. Design of the Water Reclamation Facility(WRF) disinfection modifications at$600,000
4. Reduced Water Reclamation Facility major maintenance of$695,000 in 2008-09
This results in a total of $2,075,000 for wastewater services CIP in 2008-09. . The projected
wastewater services CIP for the 2009-10 fiscal year is $9,676,800, including $4 million for
design of the WRF Master Plan improvements project and $3.5 million for construction 'of the
WRF disinfection modifications needed to comply with the California toxics rule requirements
for disinfection by-products reduction.
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2008 Sewer Fund Review Page 5
2008 Sewer Fund Analysis
Attached to this report is the 2008 Sewer Fund Analysis including the details of the process,
changes in financial position and assumptions used to complete the analysis, along with an
update on major activities and programs. Exhibit A.2. of the fund analysis presumes an
additional increase in rate revenues of 9% effective in September 2008. As stated previously, the
final recommended solution to the current and projected revenue shortfall may include
modifications to the sewer rate structure and not necessarily an across the board increase in sewer
rates.
Sewer Rate History
Sewer rates have been steadily increasing over the last ten years as regulatory impacts, facilities
operations and maintenance costs, and capital improvements needs have all increased.
Construction of major facilities upgrades and the resultant increase in operations and
maintenance costs have been the most significant drivers of rate increases, however increased
maintenance needs and facilities replacements such as lift station upgrade projects, due to an
aging infrastructure are also significant contributors to increased costs for sewer service. This
find analysis projects the need for continued annual sewer rate increases of 6% to 10% through
2012-13. With the exception of additional new regulatory driven facilities upgrades, the sewer
fund should stabilize and increases are forecasted to return to inflationary levels in 2013-14 when
debt service obligations will be met on 1991 State Revolving Fund loans and the Energy Project.
Sewer Rate Increase Projection
Projected sewer rate increases are required to fund the City's high level of ongoing services and
to meet debt service obligations for the new Tank Farm Lift Station and Wastewater and WRF
Master Plan projects. The following schedule shows the projected sewer rate increases over the
next five years. Staff will return to the Council with a more defined multi-year rate
recommendation following completion of the rate structure analysis by HDR Engineering in July
2008. Should project or other significant information change over time, further adjustments may
be recommended with annual rate reviews. The following table displays the previously adopted
rate increase for 2008-09 and projected future rate increases through 2013-14, including_ an
additional 9%rate increase in September 2008.
Date Approved Rate Increase
July 2008 10%
Projected Rate Increases
September 2008* 9%
July 2009 10%
July 2010 9%
July 2011 8%
July 2012 6%
July 2013 3%
*As noted previously,this will not necessarily be an across-the-board
increase,and the rate change amount will depend on the results of the
analysis to be presented to the Council in July 2008
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2008 Sewer Fund Review Page 6
Development Impact Fees
Wastewater Development Impact Fees have been developed to be consistent with City policy that
new development pay its share of the resources required to serve it, and are consistent with the
requirements of AB 1600. Wastewater Development Impact fees are currently being reviewed
and updated to reflect updated costs for the Tank Farm Lift Station, the WRF and Wastewater
Master Plan updates and changes to service boundaries associated with the approval of the
Airport Area Specific Plan. Revised fees are projected to be presented to Council in July 2008.
SUMMARY
In summary, the 2008 sewer fund analysis identifies that several more years of additional
significant rate increases are needed to meet regulatory requirements and provide for needed
maintenance and upgrade of our wastewater infrastructure. Adjustments to the recently adopted
volume based residential sewer rate structure will be required to compensate for the
unanticipated customer response to the current rate structure.
Sewer rates and sewer impact fees are being developed over multiple years to be able to fund the
various Wastewater Master Plan improvements to our collection system and the significant WRF
Master Plan improvements projected to begin construction in 2011-12. The current cost
projections for the WRF Master Plan address only capacity and capital replacement at the WRF
and do not include additional treatment to remove nutrients, as those requirements are currently
under appeal by the City.
ALTERNATIVES
As stated previously, staff is reviewing alternative approaches to resolving the revenue shortfall
in the sewer fund. The switch from a fixed residential rate to a volume based rate structure in the
sewer fund has resulted in the current revenue shortfall Staff and our rate structure consultant
will return to Council by September 2008 with alternatives for how best to resolve the revenue
shortfall through adjustments to the rate and/or rate structure and in keeping with the rate
structure objectives of the Council as adopted in 2006. Additionally, staff has reviewed both the
sewer fund operating and CEP budgets and has included in this analysis a significantly reduced
CIP. Staff does not at this time recommend any further reductions in either capital or operating
program budgets, as further reductions will adversely affect our ability to properly operate and
maintain our sewer infrastructure.
ATTACHMENT
2008 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
G:\UTU.UCathe\Fiscal\FINANCIAL PLANS\2007-09 Financial Plan\2008-09 Budget\Staff Reports\Sewer\2008 Sewer Fund CAR-DOC
ATTACHMENT
2005 Sewer Fund Analysis
May 20, 2008
Prepared by the
Utilities Department
City Of SAA tui S OBI SPO
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Attachment
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City of San Luis Obispo
2008. Sewer Fund
TABLE OF CONTENTS
I. OVERVIEW
II. 2007-09 FINANCIAL PLAN SUPPLEMENT: 2008-09 BUDGET
A. Summary of Operating Programs
B. Capital Improvement Plan
III. RATE SETTING
A. Methodology
B. Sewer Rate History
C. Adopted Sewer Rates and Structure
IV. ASSUMPTIONS
A. Revenues
B. Expenses
C. Debt Service Payments
V. MAJOR ACTIVITIES AND PROGRAMS
A. 2007-08 Update
B. 2008-09 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
Attachment
Page 3
A J city of
lMft;i san lues OBISp0
2008 Sewer Fund Analysis
I. OVERVIEW
This report presents the financial condition of the Sewer Fund, based on the 2007-09 Financial
Plan Supplement: 2008-09 Budget operating and capital programs to address the identified needs
in the Wastewater Master Plan, regulatory requirements, and adopted City financial policies.
II. 2007-09 FINANCIAL PLAN SUPPLEMENT: 2008-09 BUDGET
A. Summary of Operating Programs
2008-09
BUDGET
Wastewater Collection 868,000
Pretreatment 248,200
Water Reclamation Facility 2,975,600
Water Quality Laboratory 522,800
Administration/Engineering 443,600
Wastewater Taxes and Fees 481,100
Total Wastewater Services 5,539,300
B. Capital Improvement Plan
2008-09 2009-10 2010-11 2011-12
BUDGET PROPOSED PROPOSED PROPOSED
Wastewater Collection
Collection system improvements 650,000 1,500,000 1,525,000 1,550,000
Calle Joaquin lift station 250,000 2,100,000
Voluntary lateral rehabilitation program 130,000 130,000 130,000 130,000
Fleet replacement: 1/2 ton pickup 23,300
Reclamation Facility
Water reclamation facility major maintenance 695,000 515,000 475,000 500,000
Water reclamation facility disinfection modifications 600,000 3,500,000
Master plan implementation
Design 4,000,000
Construction 32,600,000
Construction Management 6,000,000
Administration and Engineering
Exterior painting of 879 Morro building-share 8,500
Total Wastewater Services CIP 2,075,000 9,676,800 2,380,000 42,880,000
Shared City Information Technology CIP 75,000 2,500 14,300
Total Sewer Fund CIP 2,150,000 9,679,300 2,394,300 42,880,000
Attachment
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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. Development impact fees
c. Revenues from other agencies(Cal Poly)
d. Other service charges(industrial user 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. Sewer Rate History
The table below shows a five-year history of the fixed sewer charge for single family households
from 2002 to 2006.
Year Monthly Charge
2006-07 35.56
2005-06 32.33
2004-05 28.36
2003-04 26.63
2002-03 25.24
C. Adopted Sewer Rates and Structure
After several years of study, community input and Council consideration of alternatives, a
revised sewer rate structure was approved in 2006 and became effective in July 2007. The rate
structure change moved the sewer fund away from a fixed residential rate structure to a volume
based residential rate structure. Consultants from HDR Engineering assisted the City with the
development of the current rate structure which uses metered water use as the basis for charging
for sewer. The sewer rates for residential customers are capped by averaging the residential
customer's winter water use which is presumed to be most representative of the individual
customer's wastewater generation. The table below displays how the rates and rate structure
changed for what was assumed to be an"average" single family residential customer.
Attachment
Page 5
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/ccf 35.35 $5.56/ccf 38.92
Total $35.56 $40.35 $44.42
Includes general purpose adopted sewer rate increase of 11%in 2007-08 and 10%in 2008-09
The adopted 2008-09 rates are the same for all customers (excluding schools and vehicles
discharging) with the variability between customer types, now being addressed through a volume
based concept that includes a "sewer cap" based on average winter water consumption for
residential customers without a separate irrigation meter. The goal for the volume based rate
structure is to provide equity and fairness between customers based on their use of the sewer
system. The following table displays, by customer type, the adopted sewer rates for 2008-09.
Customer Account Type Effective July 1,2008
Monthly Sewer Rates: Residential Customers
Single family dwelling,including Minimum charge: $5.50 per dwelling unit
single meter condominiums and Volume charge per unit:$5.56
townhouses
Total monthly fee capped based on average winter
water consumption(AWWC)
Master-metered multi-family Minimum charge:$5.50 per account
dwellings in any duplex,apartment Volume charge per unit: $5.56
house,rooming house,mobile home
or trailer park Accounts without separate irrigation meter:
Total monthly fee capped based on AWWC
Accounts with separate irrigation meter:
No cap
Monthly Sewer Rates: Non-Residential Customers
Public,private,or parochial school, $4.91 per ADA
average daily attendance(ADA)at
the school
All Other Accounts Minimum charge:$5.50 per account
Volume charge per unit: $5.56
Each Vehicle Discharging Sewer into the City System
Minimum charge $143.06
Additional charge per 100 gallons in $8.61
excess of 1,500 gallons discharged
Attachment
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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, then adjusted based on year-to-date revenue trends and future revenue
projections.
2. Sales to Cal Poly are based on 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.
Wastewater Development Impact fees are currently being reviewed and updated to
reflect updated costs for the Tank Farm Gravity Sewer, Lift Station and Force Main,
the WRF Disinfection Modifications and the Wastewater Master Plan updates
which include a change in service boundaries associated with the approval of the
Airport Area Specific Plan. Revised fees are projected to be presented to Council in
July 2008. Adjustments to the development impact fees are not projected in this
fund analysis and are not anticipated to have a significant affect on the rate
recommendations. Any affects to the rates as a result of updated impact fees will be
included in the 2009 Sewer Fund Review as part of the 2009-11 Financial Plan
process.
B. Expenses
Operating and maintenance costs, historically, were adjusted assuming an inflation rate of 3%
annually. However, based on recent trends for operating and maintenance expenses and
considering the all counties consumer price index (CPI) of 4.1% in December 2007, this analysis
assumes an inflation rate of between 3%-4% annually with the goal of achieving funding
requirements to meet an inflation rate of 4% in the 2009-11 Financial Plan process, assuming
inflationary trend continues.
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Attachment
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The sewer fund Capital Improvement Plan has been modified to aide in closing the revenue
shortfall for 2007-08 and future fiscal years. This fund analysis includes:
1. Reduced collection system improvements budget of$650,000 in 2008-09
.2. Continuation of the voluntary service lateral rehabilitation program at$130,000
3. Design of the Water Reclamation Facility(WRF) disinfection modifications at$600,000
4. Reduced Water Reclamation Facility major maintenance of$695,000 in 2008-09
This results in a total of $2,075,000 for wastewater services CIP in 2008-09. Capital budget
deferrals in 2007-08 and 2008-09 are a key component to closing the revenue shortfall.
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 in 1991 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 paid 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 will be paid in August 2012, when the State Revolving Loan
debt obligation will be met.
2. Debt service payments for the energy conservation projects are $279,700 in 2008-
09. This project resulted in a reduction of electrical energy consumption 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 and the radio
system upgrades is projected at $56,500 beginning in 2008-09, with an average
payment of$78,300 annually thereafter.
4. Debt service payments for the Tank Farm Gravity Sewer, Lift Station and Force
Main project is projected at $294,900 beginning in 2008-09, with projected average
payment of$759,400 annually thereafter. Financing contracts will be finalized in
early summer 2008, when actual financing costs will be known.
5. Debt service interest only payments for design of the Water Reclamation Facility
Master Plan Implementation project are projected at $300,000 annually beginning
in 2009-10 for a period of three years.
6. Debt service is currently projected at $257,500 annually beginning in 2010-11 to
pay for an estimated $4,100,000 for Disinfection Modifications that may be
required to meet pending regulatory requirements for the removal of
Trihalomethanes from the Water Reclamation Facility's effluent.
7. Debt service is currently projected at $3,134,600 annually beginning in 2012-13 to
pay for the estimated $42,600,000 in Master Plan improvements to upgrade the
capacity and replace aging facilities at the Water Reclamation Facility.
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V. MAJOR ACTMTIES AND PROGRAMS
A. 2007-08 Update
1. Tank Farm Gravity Sewer, Li Station and Force Main
The Tank Farm Lift Station Project will begin construction in early summer 2008
with a projected completion of late summer 2009. The contractor, construction
management and environmental consultants have been hired to implement. the
project. Negotiations with property owners continue with a focus on acquiring right
of entry agreements for construction concurrently with negotiating appraisal offers.
Staff anticipates bringing agreements and financing documents to Council in the
near future.
2. Disinfection Modifications at the Water Reclamation Facility (WRF)
The pilot study utilizing Chlorine Dioxide as an alternative disinfectant that does
not create Trihalomethanes (THMs) is nearly completed with good results. After
completion of the pilot study the City's consultant will develop a final report that
will provide the basis for design. Design will cost $600,000, as approved in 2008-
09 and construction costs are projected at $3,500,000 proposed in 2009-10 with
construction to be debt financed. Staff is working with the Regional Water Quality
Control Board to determine the likeliness of extending the State's 2010 compliance
deadline to better coordinate funding and construction with the Water Reclamation
Facility Master Plan.
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. The City's Use Attainability Analysis (UAA) has been completed by the
City and submitted to the RWQCB and currently RWQCB staff is analyzing the
document. 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. Currently the WRF's National Pollutant
Discharge Elimination System(NPDES) permit has been administratively extended
until the outcome of the UAA. Staff will return to Council with alternatives if
regulatory efforts cannot be resolved in a satisfactory manner.
4. Lateral Program
The Voluntary Lateral Rehabilitation Program continues to be very popular with
over 75 applications since its return this fiscal year. The retroactive program has
seen a tremendous response with nearly 50 applications for reimbursement. The
retroactive program will sunset on June 30, 2008. However, funding for the
Voluntary Lateral Rehabilitation Program includes $130,000 approved in 2008-09
for current applications for reimbursement.
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B. 2008-09 and Forecast
1. Wastewater Master Plan Update
The Wastewater Master Plan Update has been recently submitted by the City's
consultant to address deficiencies in the existing Wastewater Master Plan and to
better identify wastewater service needs and costs in the southwestern portion of the
Airport Area Annexation. Staff will be bringing the Wastewater Master Plan Update
to Council later this year.
2. Calle Joaquin Lift Station and Update of the Wastewater Master Plan
Replacement of the Calle Joaquin Lift Station has been deferred for two years to
ensure continuity with the Wastewater Master Plan Update. Preliminary information
from the master plan suggests that upgrading the Calle Joaquin lift station may not be
the best long term solution to meet the wastewater needs in the western portion of the
Airport Annexation Area. As part of the 2007-09 Financial Plan funding was
approved for design at $235,000 in 2008-09 and construction was proposed at
$1,900,000 in 2009-10. With project deferral staff proposes rephasing at $250,000 for
design, environmental work and easement acquisition in 2010-11 and $2,100,000 for
construction in 2011-12 which includes an inflationary factor.
3. Water Reclamation Facility Master Plan Implementation
Completion of the Water Reclamation Facility Master Plan is projected for late Fall.
The City's consultant and staff are working closely to identify the most cost effective
and flexible design to meet discharge limitations and reduce maintenance and
operations costs. Staff will present Council the master plan and seek authorization to
begin design. Ultimate design and cost is 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. As part of the 2007-09
Financial Plan funding was approved for design at $4,000,000 in 2008-09 and
construction was proposed at $32,600,000 and construction management at
$6,000,000 in 2010-11. With project deferral for one year, staff proposes rephasing
at$4,000,000 for design in 2009-10 and construction at $32,600,000 and construction
management at $6,000,000 in 2011712 will be required to meet the minimum
projected requirements. Projected costs will be updated after Council review and
consideration of the Water Reclamation Facility Master Plan in late Fall 2008.
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Attachment
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EXHIBIT A
2008 SEINER FUND
FINANCIAL SCHEDULES
GAttachment
Exhibit A.1.
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