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Home My WebLink About06-18-2019 Item 11 - 2019 Sewer Rate Adoption Department Name: Utilities Cost Center: N/A For Agenda of: June 18, 2019 Placement: PH3 Estimated Time: 20 minutes FROM: Aaron Floyd, Utilities Director Prepared By: Jennifer Metz, Utilities Project Manager SUBJECT: 2019 SEWER RATE ADOPTION REVIEW RECOMMENDATION 1. Approve Sewer Fund budget for FY 2019-20 as presented at the June 4, 2019 City Council Meeting; and 2. Adopt a Resolution (Attachment A) to adopt sewer rates for the 2019-20 and 2020-21 fiscal years. DISCUSSION The goal of the rate setting process is to provide sustainable funding to the City’s Sewer Fund for operation, maintenance, and capital project needs. Rates must be developed that are equitable, and cost-based in compliance with California Constitution Article XIII C and D, commonly referred to as Proposition 218 (Prop 218). The City implemented the new sewer rate structure and sewer rates for fiscal year 2018-19 based on the comprehensive Water and Wastewater Cost of Service Study (2018 Study). In January 2019, the City hired HDR to review revenue under the newly implemented rate structure and rates to confirm Council’s goals were being met. Findings from that analysis (Attachment A) include an increase in Sewer Fund revenue from fixed charges to achieve revenue and rate stability and predictability. Prior to completing the sewer rate structure changes, 11.5 percent of Sewer Fund revenue came from fixed charges and 88.5 percent came from variable charges. Under the sewer rate structure that was implemented in July 2018, 27 percent of Sewer Fund revenue is from fixed charges and 73 percent from variable charges. Although the City has prepared the Sewer Fund to have adequate cash flow for the upcoming Water Resource Recovery Facility Project, recommended sewer rate increases are less than projected in the 2018 Study. Packet Pg 215 Item 11 Based on the recommendations of the 2019 Rate Study Confirmation, the City’s proposed sewer rates for 2019-21 are provided in Attachment B. Sewer rates are proposed to increase by 5.5 percent in 2019-20 and five percent in 2020-21. Under the proposed rate changes, a typical single-family home with a sewer cap of four units can expect the sewer portion of their monthly bill to increase from $50.09 to $52.84 in July 2019, and to $55.47 in July 2020. NOTE: One unit equals 748 gallons. Proposition 218 Under Proposition 218, property owners and/or customers directly responsible for the payment of the fee subject to the proposed rate increase may submit a written protest against the proposed rate increases. The protest must be received by the City Clerk at or before the public hearing on June 18, 2019, identify what is being protested, and contain the service address. The party signing the protest must be listed on the account as the person responsible for payment of the water bill and/or the property owner. In the event that a protest is submitted by the owner and by the tenant responsible for payment of the bill, then one valid protest is counted for the account. If written protests are filed by a majority (50 percent plus one), the proposed water rate may not be imposed. For the proposed sewer rate, a majority of 14,813 customers is 7,407 plus one. As of June 6, 2019, approximately 750 written protests have been received by the Office of the City Clerk. All protests will need to be validated regarding property ownership and duplicate addresses. The City Clerk will provide an updated summary of the protests received at the conclusion of the Sewer Fund Review public hearing on June 18, 2019. Average Monthly Residential Bill under Current Sewer Rates Average Monthly Residential Bill under Proposed Sewer Rates 2019-20 Rates, Effective July 1, 2019 2020-21 Rates, Effective July 1, 2020 Sewer (base fee + four units) $50.09 $52.84 $55.47 Packet Pg 216 Item 11 Public Outreach The City is committed to helping the public understand the recommended sewer rates. Online bill calculators and Frequently Asked Questions were made available at the Utilities Department’s website to assist customer’s understanding the impacts of the proposed sewer rate changes. Staff has responded to questions in person at the Utilities Department office, by phone, and via email on how customer’s bills would be affected by the proposed increases. Open houses were held on June 3rd and June 11th to answer public questions. Outreach efforts will continue until final consideration of the rate structure and rates on June 18, 2019. CONCURRENCE The City’s Finance Department concurs with the recommended action. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378. FISCAL IMPACTS Budgeted: Yes Budget Year: FY 19-20 and FY 20-21 Funding Identified: Yes Fiscal Analysis: If approved, the 2019-20 sewer rates go into effect July 1, 2019. The first full billing cycle applying the new rates will be in August 2019. Packet Pg 217 Item 11 ALTERNATIVES Continue Consideration of the Proposed Sewer Rates. Council may elect to continue consideration of the proposed sewer rates. The proposed sewer rates were identified to meet the needs of the City’s Sewer Fund in providing for the sewer service for the community. The proposed sewer rates were also prepared in compliance with Prop. 218. Staff believes that the services, operating programs, and Capital Improvement Plan (CIP) components of the Sewer Fund represented by the recommended rates are necessary, consistent with prior policy/program direction of the City Council and required for compliance with state and federal laws. Therefore, this alternative is not recommended. Attachments: a - Resolution Adopting Sewer Rates for 2019-20 and 2020-21 b - COUNCIL READING FILE - 2019 Water & Sewer Rate Study Update Packet Pg 218 Item 11 R ______ RESOLUTION NO. _____ (2019 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, ESTABLISHING SEWER RATES FOR FISCAL YEAR 2019-20 AND 2020-21 WHEREAS, it is the policy of the City of San Luis Obispo to review enterprise fund fees and rates on an ongoing basis and to adjust them as required to ensure that they remain equitable and adequate to fully cover the cost of providing services; and WHEREAS, a comprehensive wastewater rate study was completed in May 2018 by HDR Engineering, Inc including analysis of Sewer Fund operating, capital, and debt service needs for fiscal years 2018-19 through 2022-23; and WHEREAS, a wastewater rate study update was completed in May 2019 by HDR Engineering, Inc including analysis of Sewer Fund operating, capital, and debt service needs for fiscal years 2019-20 through 2023-24; and WHEREAS, on June 4, 2019 the City Council reviewed the Sewer Fund and preliminary sewer rates based on updated revenue and expenditure information and necessary to meet system operating, capital, and debt service requirements; and WHEREAS, a public hearing was properly noticed and held on June 18, 2019; and WHEREAS, a majority protest, as contemplated by Article XIII D of the California Constitution, was not received by the conclusion of the public hearing. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. The sewer rates set forth in Exhibit “A” are hereby adopted, establishing rates effective July 1, 2019. Resolution No. 10010 (2018 Series) is hereby rescinded effective 11:59 p.m. June 30, 2019. Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: Packet Pg 219 Item 11 Resolution No. _____ (2019 Series) Page 2 R ______ The foregoing resolution was adopted this _____ day of _____________________ 2019. ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Teresa Purrington City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, 2019. ____________________________________ Teresa Purrington City Clerk Packet Pg 220 Item 11 Resolution No. _____ (2019 Series) Page 3 R ______ EXHIBIT A Usage: Proposed 2019-20 Rates Proposed 2020-21 Rates Single-Family and Multi-Family Residential Per Unit Cost (Up to Sewer Cap)* $8.28 $8.69 Non-Residential Per Unit Cost (for All Water Consumption)* $8.28 $8.69 Monthly Base Fee: Proposed 2019-20 Rates Proposed 2020-21 Rates Single-Family Residential $19.72 $20.71 Multi-Family and Non-Residential By Water Meter Size: ¾ inch or less $19.72 $20.71 1-inch meter $32.93 $34.58 1.5-inch meter $65.66 $68.94 2-inch meter $105.10 $110.36 3-inch meter $197.18 $207.04 4-inch meter $328.70 $345.14 6-inch meter $657.19 $690.05 8-inch meter $1,051.54 $1,104.12 10-inch meter $1,511.75 $1,587.34 * One Unit = 748 Gallons Packet Pg 221 Item 11 Page intentionally left blank. Packet Pg 222 Item 11 1010 Marsh St., San (805) 546-8208 -1 PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF CALIFORNIA, County of San Luis Obispo, I am a citizen of the United States and a resident of the county aforesaid; I am over the age of eighteen years, and not a party interested in the above entitled matter. I am the principal clerk of the printer of the New Times, a newspaper of general circulation, printed and published weekly in the City of San Luis Obispo, County of San Luis Obispo, and which has been adjudged a newspaper of general circulation by the Superior Court of the County of San Luis Obispo, State of California, under the date of February 5, 1993, Case number CV72789: that notice of which the annexed is a printed copy (set in type not smaller than nonpareil), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to -wit: 6 in the year 2019. I certify (or declare) under the the penalty of perjury that the foregoing is true and correct. Dated at San 1,uis Obispo, California, this daY_-&-of "SJ AC 2019, Patricia Horton, New Times Legals Admin & Personal •MA1G Admin'N1FNJG 0ffiWf3"1 lFSS1Publlc Notic !Rool of Pub PP(;EIVE® SAN LUIS OBISPO CITY COUNCIL NOTICE OF PUBLIC HEARING Titre San Luis Obispo City Council invites all interested persons to attend a public hearing on Tuesday, June 18,2019, a16:00 p.m. in the City Hall Cnunril Chamber. 990 Palm Street. San Luis Obispo, Calilornia, relative to the following: •2019-20 AND 2020-21 WATER & SEWER RATE STRUCTURE AND RATE ADOPTION A public hearing to consider adopting: 1. A Resolution entitled "A Resolution of the City Council of the City of San Luis Obispo, California, Establishing Water Rates for Fiscal Year 2019-20 and 2020-21." 2. A Resolution entitled "A Resolution of the City Council of the City of San Luis Obispo, California, Establishing Sewer Rates for Fiscal Year 2019-20 and 2020-21." On April 29, 2019, all property owners and customers of record received a form to protest the proposed water and sewer rate structure and the proposed water and sewer rates, as required under Proposition 218. Signed protests must be received by the City Clerk, 990 Palm Street. San Luis Obispo CA 93401, at or before the time of the protest hearing ;June 18, 7.019). For more Information please contact Jennifer Metz of the City's Utilities Department at (805) 781-7239 or by email at jmetz@slocity.org. 2019-20 SOLID WASTE RATE STRUCTURE AND RATE ADOPTION A public hearing to consider adopting: 1. A Resolution entitled "A Resolution of the City Council of the City of San Luis Obispo, California, establishing Integrated Solid WasteRates." On May 4, 7.019, all property owners and customers of rocord received a form to protest the proposed water and sewer rate stri.icture and the proposed water and sewer rates, as required under Proposition 218. Signed protests must be received by the City Clerk, 990 Palm Street, San Luis Obispo CA 93401, at or before the time of the protost hearing (June 18i2019). For more information, please contact Mychal Boorman of the City's Utilities Department at (805) 781- 7217 or by email at mboerman@slocity.org. The City Council may also discuss other hearings or business items before or after the items listed above. If you challenge the proposed project in court, you may be limited to raising only those issues you or someona also raised at the public hearing described in (his notice, or in written correspondence dalivored to the City Council at, or priorto, the public hearing. Reports for this meeting will be available for review in the City Clerk's Office and online at www.slocity. org on Wednesday, June 12, 2019. Please call the City Clerk's Office at (805) 781-7100 for more information. The City Council meeting will be televised live on Charter Cable Channel 20 and live streaming on www. slocity.org. Teresa Purrington City Clerk City of San Luis Obispo June 6, 2019 10 2019 (_TY CLERK 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 1 2019-21 Water and Sewer Rates City Council June 18, 2019 Presentation Overview 1. Water and Sewer Rate Background 2. Proposed Water and Sewer Rates 3. Open Water Rate Public Hearing 4. Open Sewer Rate Public Hearing Recommendations: 1. Adopt the 2019‐20 and 2020‐21 Water and Sewer rates. 2. Adopt the 2019‐20 Water and Sewer Fund Budgets. 1 2 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 2 Rate Structure Review Background Began work in June 2017 Review and prioritization of the City Council’s goals Goal to develop a rate structure to stabilize revenue Adopted new rate structure June 2018, effective July 2018 Rate Structure Goal Prioritization 1 Revenue Stability and Predictability 2 Discourage Wasteful Use (Water Fund Only) 3 Stability and Predictability of Rates 4 Fair Allocation of Total Cost of Service Among Customer Classes 5 Reflect all Present and Future Costs Rate Structure Review ‐ Water A greater percent of revenue collected through base fee Base fee based on water meter size for multi‐family and non‐residential customers 3 4 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 3 Rate Structure Review ‐ Sewer A greater percent of revenue collected through base fee Base fee based on water meter size for multi‐family and non‐residential customers Comprehensive Rate Study Water & Wastewater Rate Study was completed by HDR Recommended adjustments to meet operating and capital costs of providing service Proposed adjustments maintain City’s financial health and provide long‐term sustainable funding levels Study looked out five years, term of proposed rate increase is two years 5 6 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 4 Recommended Water Rate Increases 7 2019-20 2020-21 Water Base Fee 5.5% 5.5% Volume Charges 5.5% 5.5% Average Monthly Residential Bill under Current Water Rates Average Monthly Residential Bill under Proposed Water Rates 2019-20 Rates, Effective July 1, 2019 2020-21 Rates, Effective July 1, 2019 Water (base fee + six units) $56.98 $60.09 $63.39 Recommended Sewer Rate Increases 8 2019-20 2020-21 Sewer Base Fee 5.5% 5.0% Volume Charges 5.5% 5.0% Average Monthly Residential Bill under Current Sewer Rates Average Monthly Residential Bill under Proposed Sewer Rates 2019-20 Rates, Effective July 1, 2019 2020-21 Rates, Effective July 1, 2019 Sewer (base fee + four units) $50.09 $52.84 $55.47 7 8 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 5 Public Outreach Website: Hot Topic Held Open Houses on June 3 and June 12 Public Outreach 9 10 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 6 Public Outreach Notice of Public Hearing Legal notification 45 days prior to public hearing June 18 hearing date, official notification date of May 4 April 26 the City mailed over 16,200 notices Notices are provided to property owners and account holders The form identified two potential protest items: 1) Water Rate 2) Sewer Rate Proposition 218 Notification 11 12 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 7 Protest Validation ‐ Water 15,318 active water accounts 7,660 protests to establish a successful protest (50% +1) A protest is valid when received from a property owner or an account holder responsible for water service charges One protest is valid per service address for the Water Rate Proposition 218 Notification Protest Validation ‐ Sewer 14,813 active sewer accounts 7,408 protests to establish a successful protest (50% +1) A protest is valid when received from a property owner or an account holder responsible for sewer service charges One protest is valid per service address for the Sewer Rate Proposition 218 Notification 13 14 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 8 Questions? Recommendation: Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Water Rates for Fiscal Year 2019-20 and 2020-21,” and approve the Water Fund budget for Fiscal Year 2019-20. Water Fund Budget and Rates 15 16 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 9 Proposition 218 Official Protest Count – Water Rates 17 Mayor •Open the Public Hearing •Call for any written protests from the public •Receive public comments •Close the Public Hearing City Clerk •Confirm number of written protests received •Confirm total number of valid protests Council may not adopt the proposed rates if 7,660 valid protests (50% plus 1) are filed. Recommendation: Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Sewer Rates for Fiscal Year 2019-20 and 2020-21,” and approve the Sewer Fund budget for Fiscal Year 2019-20. Sewer Fund Budget and Rates 17 18 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 10 Proposition 218 Official Protest Count – Sewer Rates 19 Mayor •Open the Public Hearing •Call for any written protests from the public •Receive public comments •Close the Public Hearing City Clerk •Confirm number of written protests received •Confirm total number of valid protests Council may not adopt the proposed rates if 7,408 valid protests (50% plus 1) are filed. 19 20 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 11 Recommended Water Rate Increases 21 2019-20 2020-21 Water Base Fee 5.5% 5.5% Volume Charges 5.5% 5.5% Packet Page 235 2019-20 2020-21 2021-22 2022-23 2023-24 To/From Reserves $(1,168,553.00) $118,145.00 $115,061.00 $134,686.00 $973,771.00 Projected Rate Increase 5.5% 5.5% 5.5% 3.0% 3.0% $(1,500,000.00) $(1,000,000.00) $(500,000.00) $- $500,000.00 $1,000,000.00 $1,500,000.00 To/From Reserves Projected Rate Increase Proposition 218 Notification Year Valid Protest Count 2009 – 11 141 2011 – 13 Data not available 2013 – 15 181 2015 – 17 729 2017 ‐ 18 553 2018 ‐ 19 638 2019 ‐ 21 732 21 22 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 12 Recommended Water Rates 23 Current Rates Proposed 2019‐20 Rates Proposed 2020‐21 Rates Monthly Base Fee $20.61 $21.74 $22.94 Usage (per unit cost) Tier 1: 0 to 5 units $5.90 $6.22 $6.56 Tier 2: 6 to 12 units $6.87 $7.25 $7.65 Tier 3: 13+ units $12.59 $13.28 $14.01 Current Rates Proposed 2019‐20 Rates Proposed 2020‐21 Rates Base Fee by Water Meter Size Monthly Base Fee ¾ inch or less $20.61 $21.74 $22.94 1‐inch meter $34.40 $36.29 $38.29 1.5‐inch meter $68.65 $72.43 $76.41 2‐inch meter $109.85 $115.89 $122.26 3‐inch meter $206.10 $217.44 $229.40 4‐inch meter $343.55 $362.45 $382.38 6‐inch meter $686.95 $724.73 $764.59 8‐inch meter $1,099.15 $1,159.60 $1,223.38 Usage (per unit cost) 2 Per Unit Cost Multi‐Family– all use $6.73 $7.10 $7.49 Non‐Residential– all use $8.17 $8.62 $9.09 LandscapeIrrigation– all use $10.02 $10.57 $11.15 Water System AccessCharge 3 $83.57 $88.17 $93.02 Sewer Rates 24 USAGE Current Rates1 Proposed 2019‐20 Rates Proposed 2020‐21 Rates Single‐Family and Multi‐Family Residential Per Unit Cost (Up to Sewer Cap) 2 $7.85 $8.28 $8.69 Non‐Residential Per Unit Cost (for All Water Consumption)2 $7.85 $8.28 $8.69 MONTHLY BASE FEE Current Rates1 Proposed 2019‐20 Rates Proposed 2020‐21 Rates Single‐Family Residential $18.69 $19.72 $20.71 Multi‐Family and Non‐Residential By Water Meter Size: ¾ inch or less $18.69 $19.72 $20.71 1‐inch meter $31.21 $32.93 $34.58 1.5‐inch meter $62.24 $65.66 $68.94 2‐inch meter $99.62 $105.10 $110.36 3‐inch meter $186.90 $197.18 $207.04 4‐inch meter $311.56 $328.70 $345.14 6‐inch meter $622.93 $657.19 $690.05 8‐inch meter $996.72 $1,051.54 $1,104.12 10‐inch meter $1,432.94 $1,511.75 $1,587.34 23 24 06‐18‐2019 Items 10 ‐ 11 Staff Presentation 6/18/2019 13 Water and Wastewater Low- Income Assistance 15% Discount • Temporary Assistance for Needy Families (CalWORKS) • Cal Fresh (Food Stamps) • Supplemental Social Security Income • Veteran Survivor Pension Benefits Proposed Statewide Low-Income Water Rate Assistance Program 25