HomeMy WebLinkAbout06-14-2016 Items 1-4, Mattingly-GrigsbyCOUNCIL MEETING:--G 61 1,-1 IZO1 %
ITEM
, Council Memorandum
DATE: June 14, 2016
TO: City Council
FROM: Carrie Mattingly, Utilities Director
Daryl Grigsby, Public Works Director
VIA: Katie Lichtig, City Manager
SUBJECT: Response to Questions Regarding usiness Items 1 — 4, Enterprise Fund Reviews,
on the June 14, 2016 City Council Agenda
The following memorandum has been prepared to answer questions presented by a Council
Member regarding Business Items 1 — 4, Enterprise Fund Reviews, on the June 14, 2016 City
Council Agenda as well as other clarification items for the Fund reviews.
WATER FUND
1. On page 13, the revenues derived from the Drought Surcharge are not separately
identified. Can you provide that breakdown, please?
The purpose of the drought surcharge is to ensure adequate revenues are received to
effectively run the water utility. It is anticipated the drought surcharge will remain in place
throughout fiscal year 2016-17. The drought surcharge on base fee revenue is estimated at
$132,000. The drought surcharge on volumetric revenue is estimated at $2,100,000.
2. "Agency Sales" have been adjusted down by six percent; it would seem logical that
overall water sales would be adjusted down somewhat too. Why the reduction for
agency sales? What are "Agency Sales"?
"Agency Sales" are to Cal Poly. All water sales projections were adjusted downward during
the 2015-16 budget work. Cal Poly was further reduced during this supplement to the
Financial Plan as it has demonstrated an even greater reduction in water consumption.
3. On page 14, a CIP request for $1,470,000 is noted for an "expanded groundwater
program". Please explain why this "expanded" program is needed and how we will be
able to spend this amount of money in a single year. On page 28, three line items are
shown, with a $70,000 item for Study, $250,000 for "DN" (presumably, "design"), and
$1.15 million for "CN" (presumably, "construction"). The $1.15 million seems to be
fairly precise number — do we already know how many wells we're talking about?
Transmission pipes? Storage facilities? Also — most importantly: How does this request
relate to our groundwater planning program under the Sustainable Groundwater
Management Act, which is just getting underway with several other agencies?
Enterprise Funds Agenda Correspondence Page 2
An expanded groundwater program will allow the City to have greater water source
resiliency and could be used to augment existing supplies during times of drought or water
shortages.
There are two components of the expanded groundwater program request. The first
component (the $1.15 million) funds the work necessary to bring an existing well, located in
one of the most productive areas of the aquifer, back into production on the WRRF site. As
the well casing is already in place, it is expected the project will be complete in less than a
year. Being located near the recycled water tank, groundwater could be used to augment
recycled water for potable water offsets. Additionally this location will be studied for its
ability to withdraw highly treated wastewater in the future as part of a potable water reuse
system.
The second component of the expanded groundwater program funds the study and design for
a potable well field for use when and if it should become necessary to expand the use of this
water supply source.
This request is timely with the Sustainable Groundwater Management Act. Part of the study
phase would involve the determination of the amount of water that can be safely withdrawn
from the groundwater basin. The City has a long history of utilizing groundwater for both
potable and non -potable purposes. This strategy of securing water source diversification has
served the City well during the current drought.
Funding for this project comes from the rescheduling of existing projects to better reflect the
time they will require to both design and construct. These projects have now been separated
into design in the first year and construction in the second year. Staggering of the
construction phase allowed the funding of this project to be considered while continuing the
replacement of aging infrastructure.
4. On page 14, the originally -proposed "Reservoir Replacement" item for $5.3 million is
no longer recommended at that figure; indeed, the table shows it at "0" — however, on
page 25, the 5 -year forecast shows it still being programmed for 2017-18. Why is this
project being deferred? It had been presented as a matter of some urgency in the
original Financial Plan last year.
Water supply resiliency is a top priority. With the normal rainfall last winter not filling
reservoirs, maximizing all available City water resources displaced reservoir replacement by
a year. The replacement of Reservoir 2 remains a critical high priority project. The study and
design phase is currently underway, although exploring the opportunity for incorporating a
hydro -electric facility at the site is extending the timeframe for completion of those phases.
Construction of the reservoir is anticipated in 2017-18 and should more closely align with the
completion of the study and design phases.
5. On page 23, there is a stranded line following the "Total Expenditures" line, and these
numbers (beginning with $16,645,250) need to be identified or eliminated.
This line should be eliminated. Attachment 1 is the corrected table.
Enterprise Funds Agenda Correspondence Page 3
6. The overall 2016-17 CIP total in the 5 -year plan on page 29 shows a total of $2,958,493.
Why the variation from the figure of $2,520,000 shown on page 14?
The table on page 14 shows only the specific CIP that was realigned during this budget
period. The difference between the table on page 29 and page 14, in the amount of $438,493,
reflects those projects that remain unchanged from the 2015-17 Financial Plan CIP.
SEWER FUND
1. On page 33, the adopted budget for Wastewater Administration is proposed to be
raised 20%, from the adopted estimate of $797,829 to $956,406. Why is this? (Note: the
overall operating expenditures budget is almost identical to, and even slightly smaller
than, the original figure).
Two control system positions approved in the 2015-17 Financial Plan were previously
funded by multiple Utilities Department operating sections that utilize these resources. In
order to streamline accounting practices, the decision was made to shift the funding of both
positions into water and wastewater administration.
2. Page 40 has a brief discussion about the revenue from Cal Poly, estimated to drop
somewhat due to reduced flows. Aren't we expecting that Cal Poly will be developing a
"scalping" plant to divert some of its wastewater for purposes of on -campus use of the
recycled water? Shouldn't we be anticipating reduced revenue from the University, as a
result?
Cal Poly's revenues are based on prior year's water use which continues to fall. The
conversation with Cal Poly continues regarding its analysis of a "scalping plant", and
providing recycled water at the University. City staff have met with and discussed several
options and alternatives of partnering with Cal Poly on its water needs. Ongoing discussions
and alternatives will continue this next year. It is not anticipated Cal Poly will bring a project
of this nature forward in the next fiscal year.
3. On pages 45-46, the CIP identifies line items for the Laguna and Buckley Road Lift
Stations, but doesn't show any monies being reserved for either of these facilities within
the 5 -year CIP. Why list them at all in the 5 -Year CIP? Are these "place -holders" and
do we expect to spend some money for them in future "out years"?
Laguna Lift Station has been successfully completed and the project closed. Buckley was
originally proposed to be built by the City, but is anticipated to be built by the developers of
the Avila Ranch project so no funding has been identified for that project nor is it anticipated
for future. The CIP list will be amended to reflect the changes during the 2017-19 Financial
Plan process.
Enterprise Funds Agenda Correspondence Page 4
4. Why is the WRRF upgrade being deferred from 2016-17 to 2017-18?
Securing the major project funding has been deferred to align with the current schedule;
current expenses are paid for with cash. The original construction time frame was placed in
the 2015-17 Financial Plan prior to the design engineer, CH2M, being hired. The most recent
WRRF project schedule shows construction beginning in the winter/spring of 2018. The
construction budget has been adjusted to reflect the change.
5. On page 34, and detailed later on page 45, it is proposed to defer the construction of the
collection system improvements for Santa Barbara/Osos/Church, pushing off to 2017-18
the $630,000 + $60,000 for construction management. Why? The 5 -year plan shown on
page 45 shows that we would be doing some construction as well as design on each of
the next three segments in 2018-19 through 2020-21. Why can't we do all this in 2016-17
coming up now?
Several projects have been rescheduled to better reflect the time it will require to design and
construct and allow adequate funding due to rising costs and significantly reduced revenues
from the drought. The listed projects are separate and individual segments and Public Works
and Utilities staff worked to ensure that the rescheduled projects are aligned with department
work programs and pavement management schedules.
TRANSIT FUND
1. It appears that we are re -negotiating the agreement with Cal Poly and will be operating
on only a one-year extension of the current agreement, with the long-term agreement
postponed until we have a better understanding of the route/scheduling changes that
will be adopted in the Short -Range Transit Plan. Is it wise, then, for the city to enter
into a new four-year contract with First Transit? What if — worst case — the University
were to drop the students' contract with the City? Do we have an opportunity to
renegotiate the agreement with First Transit in such an event?
The first stage in setting the Cal Poly subsidy amount is to establish our operational costs to
the greatest extent we can. Hence, adopting the multi-year Operations and Maintenance
contract is appropriate at this time.
The proposed contract with First Transit, Inc. contains Section 23 (Page 76 of the Staff
report) "Changes" which addresses the potential need for reopening the contract if certain
service hours are exceeded or reduced.
If Cal Poly decides to discontinue the current subsidy agreement, the SLO Transit system
would require adjustments to reflect the likely change in demand that would occur. It is
difficult to speculate what those changes would need to be, since the variety of replacement
programs range from no subsidy at all to simply finding a new funding source for the free
fare system. The 12 month window allows for the City and Cal Poly to jointly explore these
issues and determine what is the best strategy for continued partnership in university use of
the SLO Transit system.
Enterprise Funds Agenda Correspondence Page 5
2. With respect to the Cal Poly agreement, do we have (or could we have) any provision
within the contract cost that would vary their costs in relation to Cal Poly ridership? If
we did so, it would possibly give an incentive to our Transit system to improve service
and ridership.
We will consider this in our multi-year agreement discussions with the University. The down
side to this type of arrangement would be that the converse would be equally true. Thus, if
Cal Poly ridership fell for any reason, their subsidy level may reduce similarly thereby
making farebox recovery objectives problematic.
3. Council Reading File — Clarification
Due to the size of the RFP and the proposal from First Transit, Inc., they were not included
as a full attachment to the Council Agenda Report for the Transit Enterprise Fund. However,
copies are available for the City Council and the public as part of the Council Reading File
within the City Clerk's Office if Council wants to review those documents. These documents
are the exhibits to the proposed Contract for Maintenance and Operations and include:
1. Exhibit A - Scope of Work
2. Exhibit B - Transit Services RFP
3. Exhibit C — First Transit Proposal and best and final offer letter
PARKING FUND
1. It appears that revenue from the metered lots is significantly reduced, as expected due
to the closure of Lots 2, 3, and 11. On the other hand, revenues from the structures are
also reduced from the 2016-17 budget (from $1,183,700 to $1,054,700). Why are we not
getting higher revenues from the structures, given that vehicles from Lots 2, 3, and 11
were assumed to be shifting to the structures? (Or to street meters — but these, too, do
not appear to be significantly higher and the estimate of street -meter revenue is being
reduced by about 4.2%).
Actual revenues in parking locations have already started to occur, particularly when the
lower parts of Lots 3 & 11 were closed for Chinatown Phase I last year.
Revenues
2014-15
Actuals
2015-16
Mid -Year
201.6-17
Revised
Parking Meter Collections
Lots
Streets
$516,750 $174,200
$166,200
$1,383,927 $1,523,800
$1,539,100
Parking Structure Collections
$863,077
$1,044,200 $1,054,700
Both the 2015-17 Financial Plan and 2015-16 mid -year maintained the assumption that the
upper portions of parking lots 3 and 11 would close in FY 2015-16.
Enterprise Funds Agenda Correspondence
Page 6
Closures of the remainder of 3 & 11 actually occurred in January of this year and we have
been able to observe some of the actual redistributions of parking since that time.
Observations of Downtown construction impacts are significant and parking trends are
sporadic. As such we have been conservative in making significant changes to the revenue
forecasts at this time for FY 2016-17 and have actually reduced some to be overly
conservative.
2. The increase in fines for parking citations is substantial, from 13% to 43% in the
nominal fines. Yet on page 103, it is noted that these increased fines will generate only
$6,000 in added revenue — out of a total of almost $700,000 in parking fines, according
to Table 3. Please check that estimate of $6,000 — it appears to be significantly lower
that what SHOULD be realized. How many of each type of citation are being issued on
an annual basis?
The following table shows the total number of citations issued for the subject violations for
calendar 2015. As can be seen the total volume of each citation is low when compared to the
overall 23,000 citations that were issued in that year.
No Permit — Lots
Number ol'
in 2015
119
Proposed
Fine
Increase
$5
Projected
Revenue
$595
Overtime Parking
1,103
$5
$5,515
Storage of Vehicles on Streets
1
$10
$10
Prohibited (72 -Hour)
Nighttime Parking of Large
0
$10
$0
Vehicles Prohibited
TOTAL
$6,120
There were no citations issued last year for Nighttime Parking of Large Vehicles Prohibited.
3. In Table 4 on p. 104, the overtime parking fine in Arroyo Grande is stated at $53. Yet
AG has very little metered parking, all of it in the Village, and that city provides free
parking in nearby surface lots. I don't believe that they are a good comparison. Paso
Robles is a better comparison, and its fine for overtime parking is only $33. Please
comment.
Overtime Parking citations are issued to vehicles that park beyond the time limit in non -
metered timed zones as well as metered timed zones. The agencies were listed for
informational purposes only and not used to make a recommendation to Council for
establishing San Luis Obispo's overtime fine amount. Each of the jurisdictions has varied
parking issues and objectives. As such, they may not give a good indication for San Luis
Obispo to establish overall fines and forfeitures to promote compliance.
se Funds Agenda Correspondence
4. Updated attachment to Parking Fund Analysis
Page 7
Included in the Fiscal Year 2016-17 Parking Fund Review Fund Analysis (Attachment A),
the last page of the document includes a 5 -Year Forecast change in working capital for the
Parking Fund. In final preparation for the Council presentation of the fund, staff has
discovered an error in the Parking Fund spreadsheet. Inadvertently, a spreadsheet cell
linkage was tied incorrectly to the adopted FY 2016-17 Year -End Working capital column,
as opposed to the revised FY 2016-17 Year -End working capital.
This caused an incorrect year-end working balance amount to be shown in the "out" years of
the Fund (FY 2019-20 to FY 2020-21). The error only affects the outgoing years of the 5 -
Year Forecast and does not affect the proposed FY 2016-17 Budget that is being
recommended for adoption by Council.
Attachment 2 is the revised 5 -Year Forecast which shows the long-term nature of the Parking
Fund.
ATTACHMENTS
1. Revised Changes in Financial Position - Water Fund
2. Revised Changes in Financial Position - Parking Fund
T:\Council Agenda Reports\2016\2016-06-14\Enterprise Fund Reviews\Enterprise Funds Agenda Correspondence-docx
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CHANGES FINANCIAL PARKING
Revenues
Service Charges
Parking Meter Collections
Lots
Streets
Parking Structure Collections
Long-Term Parking Revenues
Lease Revenues
Parking In-Lieu Fees
Other Service Charges
BUDGET
Mid-Year
2015-16
174,200
1,523,800
1,044,200
430,600
480,500
2,787,530
100
Adopted
2016-17
166,200
1,606,200
1,183,700
434,900
482,900
20,200
100
Revised
2016-17
166,200
1,539,100
1,054,700
434,900
500,500
20,200
100
Projected
2017-18
Projected
2018-19
Projected
2019-20
155,400 170,900
172,600
1,554,500 1,709,900
1,727,000
1,065,200 1,171,700
1,276,000
439,300 483,200
488,000
502,900 531,800
534,500
20,400 22,400
22,600
100 100
100
Total Service Chor67es
Investment and Property Revenues
Fines and Forfeitures
Other Revenues
6,440,930
28,300
663,2DO
3,894,200
45,500
673,000
3,715,700
48,200
669,900
3,737,800
4,090,000
4,220,800
54,900 14,500
9,000
666,600 733,300
740,600
Total Revenues
Expenditures
Operating Programs
Transportation
General Government
7,132,430
2,328,330
711,587
4,612,700
2,188,099
711,587
4,433,800
2,188,099
684,603
4,459,300
4,837,800
4,970,400
2,296,693 2,574,833
684,603 684,603
2,663,305
684,603
TotalOperafing P7agrams
Capital improvement Plan Projects
Debt Service
3,039,917
1,952,970
970 817
2,899,686
50,798
969,389
2,872,702
50,798
969,400
2,981,296
23,641,272
3,259,436
83,485
3,347,908
120,998
2,053,434 2419 570
2,412,187
Total Expenditures
Other Sources (Uses)
Cashflow adjustment for working capital
Operating Transfers In
Operating Transfers Out
Proceeds from Debt Financing
Other 1 1
GST Loan per Council Approval
Total Other Sources
Uses
Revenues and Other Sources; Over (Under)
rrditures and Other Uses
5,963,704
38,071
38,071
1,206,797
3,919,873
692,827
3,892,900
(500,000)
(11,198)
(511,198)
29,702
28,676,002
5,762,491
5,881,093
(151,011) (186,930)
(43,100)
17,600,000
_
17,448,989 (186,930)1
(6,767,713) (1,111,621)
(43,100)
(953,793)
Working Capital, Beginning of Year
lWorking Capital, End of Year
8,436,557
9,643,354
10,279,336
10,972,163
9,643,354
9,679,056 1
9,673,056
2,905,343
1,793,722
2,905,343 1,793,722
839,929