HomeMy WebLinkAbout01/12/1993, Agenda & WATER RATE STRUCTURE REVIEWTuesday. January 12. 1993 - 7:00 PM
Council Chamber, City Hall
990 Palm Street, San Luis Obispo
CALL TO ORDER: Mayor Peg Pinard * *Lead Person - Item to come back to Council
* Denotes action by Lead Person
PLEDGE OF ALLEGIANCE No Asterisk - Information Only
ROLL CALL: Council Members Penny Rappa, Dave Romero, Allen K. Settle,
Vice Mayor Bill Roalman, and Mayor Peg Pinard
i ..BUSINESS: <ITEM
► 1. WATER RATE STRUCTURE REVIEW (STATLER /516 - 90 min.)
Consideration of a new water rate structure that eliminates minimum charges and retains the
current two tier commodity charge structure.
♦ RECOMMENDATION: By motion, direct staff to schedule a public hearing with appropriate
resolution for Council adoption.
Stater" FINAL ACTION. 1) Eliminate ready -to -serve minimum service charges (4 -1, PR -no), and 2) Draft
a three- tiered rate structure treating residential and non - residential customers the same (5 -0).
=IONS (not to exceed 15 minutes)
any Council Member or the City Administrative Officer may informal
%ommunications. and ask for comment and /or discussion. Due to
proval -may not be taken. Action on items may be scheduled at
1
Council Agenda January 12, 1993
A. -RECESSED TO CLOSED SESSION REGARDING PROPERTY NEGOTIATIONS
B. RECOVENED IN OPEN SESSION TO REPORT ON ACTION TAKEN,
No action taken.
C. ADJOURNMENT..
2
�uOV�l��all� MY Of San WIS OBISPO
COUNCIL AGENDA
Tuesday, Janua t 12, 1993 - 7:00 PM
Council Chamber, City Hall
990 Palm Street, San Luis Obispo
CALL TO ORDER: Mayor Peg Pinard
BUSINESS ITEM .
R. 1. WATER RATE STRUCTURE REVIEW (STATLER /516 -
ADJOUKNED KEGULAK
MEETING
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I Telegram- Tribune
For L U E 6/30/91 on & 1992:
Consideration of a new water rate structure that eliminates minii Cits.Ping.Alliance /C.Sanders
two tier commodity charge structure. I Earth News /Terry Dunnivent
ECOSLO /Kurt Kupper
Res.forQual.Neighbor. /D.Connor
♦ RECOMMENDATION: By motion, direct staff to schedule a pub Sierra Club /Tom Knepher
for Council adoption. SLO Prop.OwnersAssoc.(&St.Rpt)
II Subscriptions Paid or
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The City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities.
r Telecommunications Device for the Deaf (805) 781 -7410
1
Council Agenda January 12, 1993 _
A. RECESS TO CLOSED SESSION REGARDING PROPERTY NEGOTIATIONS
B. RECOVENE IN OPEN SESSION TO REPORT ON ACTION TAKEN.
C. ADJOURNMENT.
0)
t
MEMORANDUM
January 5, 1993
TO: Kim Condon
FROM: Linda Asprion
i
SUBJECT: WATER RATE STRUCTURE COUNCIL AGENDA
Per your request, the following is a list of individuals and businesses which should receive
the Water Rate Structure Council Agenda
Mr. Charlie Palmer Creekside Mobile Home Park
485 Estero Avenue 3960 S. Higuera Street
Morro Bay, CA San Luis Obispo, CA 93401
Mr. Ray Macias, C.P.M.
California Polytechnic State University
San Luis Obispo, CA 93407
Silver City Mobile Home Park
3860 S. Higuera Street
San Luis Obispo, CA 93401
Mustang Village
1 Mustang Village Drive /
San Luis Obispo, CA 93405
Laguna Lake Company
1801 Perfumo Canyon Road
San Luis Obispo, CA 934Qe,
Sierra Vista Hospital
1010 Murray Avenue
San Luis Obispo, CA 9340,/
Chumash Village
3057 S. Higuera Street
San Luis Obispo, CA 93401
SLO Boniface Affiliates
333 Madonna Road
San Luis Obispo, CA 934041/�
SLO Coastal Unified School District
1350 California
San Luis Obispo, CA 93401
Madonna Road Apartments
1550 Madonna Road
San Luis Obispo, CA 934W30�
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l a�cEd.CJ • GGS�s''cE�..c
�l� 930
mimllnulli MY OfSMIUIS OBISPO
COUNCIL AGENDA
Tuesday, January 12. 1993 - 7:00 PM
Council Chamber, City Hall
990 Palm Street, San Luis Obispo
CALL TO ORDER: Mayor,Peg Pinard .
AjjjVUnnr.i1 KL'%xULAn
MEETING
ROLL CALL: Council Members Penny Rappa, Dave Romero, Allen K. Settle,
Vice Mayor Bill Roalman, and Mayor Peg Pinard
BUSINESS ITEM
► 1. WATER RATE STRUCTURE REVIEW (STATLER /516 - 90 min.)
Consideration of a new water rate structure that eliminates minimum charges and retains the current
two tier commodity charge structure.
♦ RECOMMENDATION: By motion, direct staff to schedule a public hearing with appropriate resolution
for Council adoption.
The City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities.
r Telecommunications Device for the Deaf (805) 781 -7410
1
January 12, 1993
A. RECESS TO CLOSED SESSION REGARDING PROPERTY NEGOTIATIONS
B. RECOVENE IN OPEN SESSION TO REPORT ON ACTION TAKEN.
C. ADJOURNMENT.
2
III II y� S�1 1 �u MEETING DATE:
�����II����IlVlllll�llll�lllul�l �� of �5 OBISp0 -ITEM NUMBER: /
COUNCIL AGENDA REPORT
FROM: William C. Statler, Director of Finance Zl
Prepared by: Linda Asprion, Revenue Managerr�
SUBJECT: WATER RATE STRUCTURE REVIEW
CAO RECOMMENDATION
Conceptually approve a new water rate structure (Type E, Exhibit 2) that eliminates
minimum charges and retains the current two tier commodity charge structure. Based on
Council direction, staff will schedule a public hearing and return with an appropriate
resolution for Council adoption.
DISCUSSION
Overview
The purpose of this report is to provide Council with an overview of the different types of
water rate structures available in meeting adopted rate goals; to compare these various rate
structures to the City's current rate structure; and to propose a change in the City's water
rate structure. The recommended rate structure encourages conservation, recognizes that
the marginal cost of adding new water resources is high, is easier for our customers to
understand, and is equitable among classes of customers.
Background
In June, 1992, staff brought to Council the annual review of the financial needs of the Water
Fund. Although no rate increase was recommended, there was a rate change proposed that
would modify the existing basis for single meter residential minimum charges to address
concerns relating to meter oversizing for fire protection purposes (excerpt from June 1, 1992
Council Agenda Report provided in Exhibit 1). The proposed rate change was not accepted
by Council. Instead, Council requested a water rate structure review with the intent of
analyzing the entire water rate structure and not just single meter residential. This report
is in response to Council's request.
Revenue Requirements Versus Rate Structure
The Financial Plan policies require the City to perform an annual review of the revenue
requirements of the Water Fund and adjust the rate structure as necessary to ensure that
an adequate amount of revenue is generated and that it is generated in an equitable manner
from customers. Although we consider both revenue requirements and rate structure
together in the annual review of the Water Fund, we need to recognize that the revenue
required to operate the water facilities and the rate structure by which the revenue is
generated are really two separate issues.
• Revenue requirements tell us how much revenue is needed to fully recover the total cost
of providing water services, including operations, capital outlay, and debt service. Rate
i1111i71�� ►iI�IIIIIIIIP °�� °IIIIII� city of San IRIS OBISpo
i COUNCIL AGENDA REPORT
structure tells us how these costs will be distributed among different types of customers. It
is important to recognize that any rate structure can be designed to ensure revenue:
adequacy. The type of rate structure used will depend on the "rate structure goals ". In May
1988, the Council adopted the following water rate structure goals:
■ Comply with legal requirements
■ Ensure revenue adequacy to fully meet system operating and capital needs
■ Encourage conservation
■ Provide equity and fairness between classes of customers
■ Be easy to understand by our customers and easy to administer
■ Provide for ongoing review in order to facilitate rate stability
As we review the various types of rate structures, it will become apparent that some of these
goals are potentially in conflict. For example, a rate structure that provides rate stability
will probably not encourage conservation efforts; and a rate structure that is easy to
understand by our customers will not necessarily be equitable between classes of customers.
As stated above, the rate structure tells us how costs will be distributed among the various
types of customers. Under almost any rate structure, the average customer will pay about
the same. What the various rate structures tell us is not how the "average customer" will
be affected, but how the "non- average customer" will be affected. For example, for a lower
than "average" water user, how will the bill be affected by various types of rate structures?
And conversely, how will the various rate structures affect the higher than "normal' user?
Water Rate Structure Typologies
In considering water rate structures, we thought it would be useful to categorize potential
rate structures based on the primary "goal' that they are intended to accomplish, viewing
them as a continuum ranging from a strong bias towards rate stability to a strong bias
towards water conservation. Exhibit 2 provides five basic "types" of water rate structures
using this "continuum" approach. Under each type is listed the characteristics of that
particular rate structure along with their advantages, disadvantages, and neutral qualities.
Some of these qualities are purposeful and others are more of an by- product based upon
customer reaction to the rate structure. But regardless of the type, each rate structure is
comprised of two basic components: minimum charges and commodity charges. In the five
typologies presented, primary rate structure goals are achieved based on the reliance of the
structure on either fixed (minimum charges) or variable (commodity charges) components.
Mbdmum Chmgm The minimum charge component is basically a flat rate that is unrelated
to consumption. Although a minimum charge can include a consumption allowance,
consumption is not the basis for the rate. The flat rate (minimum charge) is typically based
��►n��►�►i►IVlllllllll�° IIUI city of San t.,oS OBISPO
COUNCIL AGENDA REPORT
upon either:
■ Type of account (i.e. residential or commercial)
■ Meter size
■ Flat rate per account
Commodity Chmges On the other hand commodity charges are based upon consumption.
Commodity charges consist of the following possible components:
■ Same rate for each unit of water consumed
■ Inclining rates for each unit of water or tier of units (i.e. 1 - 10 units one rate, 11 -
20 units a higher rate)
■ Declining rates for each unit of water or tier of units (i.e. 1 - 10 units one rate, 11 -
20 units a lower rate)
■ Combination of the above components (i.e. 1 - 20 units one rate, 21 - 40 units a
higher rate, 41+ units a lower rate)
In the "typologies" presented in Exhibit 2, Type A represents the primary rate goal of
stability, and recognizes that the costs of delivering water at any one point in time are
primarily fixed. For example, 90% of the City's costs of delivering water to our customers
do not directly vary with consumption. At the other end of the continuum, Type E
represents the primary rate goal of encouraging water conservation, and recognizes that the
marginal cost of acquiring new water supplies is very high. Types B, C, and D simply
represent other points in this continuum. As reflected in this chart, it is the varying
combinations and reliance of each type on minimum versus commodity charges that
primarily establish its position on the continuum.
It is important to note that all types have the neutral qualities of providing revenue
adequacy and meeting legal requirements. Therefore, the question really becomes:
What is the rate shuctwe trying to achieve and how does that compare to the City's objectives?
The City's current water rate structure is most closely aligned with Type D. The City
charges a minimum flat rate based upon meter size, which does not include any water
consumption. The minimum rate comprises approximately 25% of our rate revenue
requirements. The remaining 75% of the revenue requirement is comprised of two tiers of
commodity charges (1 - 5 units @ $1.20 per unit and 6+ units @ $2.40 per unit on a
monthly basis). This type of rate structure encourages conservation goals and provides
customer equity as the rates increase with higher consumption. However, this rate structure
is difficult for some customers to understand, since there is a minimum charge even if there
is no water consumed. Additionally, this rate structure is relatively unstable, since revenue
generated under it is highly dependent upon consumption. Lastly, as discussed last June,
there are circumstances where meter size, which determines minimum charges, is not related
mH�ibN►��IIIIIIIIII�' ��l�lll City Of San L.41S OBispO
COUNCIL AGENOA..REPORT
to projected water needs, but rather, fire - sprinkler requirements. This results in many single
meter residential having larger water bills solely. due to this factor.
Accordingly, we are proposing that the City's water rate structure be changed to a'Type E"
with two tiers of rates, which is the same as our current rate structure, but eliminates
minimum charges. This type of rate structure encourages conservation, recognizes that the
marginal cost of adding new water resources is high, and is easier than our current rate
structure for customers to understand. It is equitable among classes of customers, as no one
group is being required to carry a disproportionate share of system costs. The primary
disadvantage is that the rate may be very unstable if the customers have inconsistent
consumption patterns. However, as noted above, our current rate structure is already highly
unstable. Although the proposed rate structure will make it slightly more unstable, we
believe that this is a reasonable trade -off given the other benefits of the proposed structure.
In summary, we believe that this proposed water rate structure is more closely aligned with
the City's objectives.
Water Rate Comparisons
Exhibit 3 provides water rate comparisons for monthly charges for each type. The examples
are all based upon raising the same amount of revenue, $5,638,200, which is the projected
revenue requirement for fiscal year 1992 -93 (see Exhibit 4 for five year projection presented
last June) and based upon a 70% consumption level from the water consumed in 1987, the
last year prior to drought conditions. Monthly billing comparisons for each type are
provided for 5/8' and 1' meter sizes, and for varying levels of consumption (5, 10, and 20
units monthly - one unit equals 100 cubic feet, or 748 gallons). The mid -range monthly
consumption (10 Units) reflects an average single family customer. Each type has two
examples: one with meter size rate variances as under the City's current rate structure; and
the other without meter size rate variances. The exception to this is Type E, which is
unaffected by meter size as the rate is based totally on consumption. For Type E, one
example is based upon two tiers of increasing rates; and the other example is based on each
unit of water costing the same.
It is important to recognize that Exhibit 3 needs to be analyzed both vertically and
horizontally. Horizontal analysis demonstrates the difference in monthly rates among the
types between 5 units, 10 units, and 20 units of consumption - each example is for twice the
number of units consumed. Additionally the average cost per unit can be compared for
each type and each level of consumption.
Vertically, the analysis is between the two meter sizes (5/8" and 1 "), with the difference
being dependent on whether the example is with meter size rate variances or without meter
size rate variances.
In the water fund rate review presented to Council in June, 1992, we presented the option
of revising the rate structure to charge all single meter residential accounts the same
minimum charge regardless of meter size. The proposal was to charge the current minimum
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i COUNCIL AGENDA REPORT
charge for 5/8" meters and have that minimum charge become the base minimum rate for
all residential customers. Because the rate structure for single meter residential remains an
issue, we have included examples for rate structures incorporating meter size variances and
rate structures without meter size variances.
With the exception of types A -2, B -2, and C -2, which are calculated without meter size
variances, there is very little difference in monthly cost between categories for our "average"
customer (5/8" meter using 10 units of water): monthly bills range from $21.24 to $28.50,
compared with out current rate structure billing of $23.90.
This confirms our basic rate structure premise: "average" customers are not significantly
affected by different rate structures. However, "non- average" customers - greater than 5/8'
meter or higher or lower than average users - are affected. For comparison purposes, the
following is a summary of average unit costs based on the current and proposed structure
for different types of customers depending on their meter size and water use characteristics:
The examples provided above primarily reflect residential customers, who account for about
65% of the City's water use. The following is a comparison of our current versus proposed
rates for larger water users:
Current
Structure
Average Unit Cost
Proposed
Structure
Percent
Change
5/8" Meter, 5 Units
$2.38
$1.66
(30 %)
1" Meter, 5 Units
$5.19
$1.66
(68 %)
5/8" Meter, 10 Units
$239
$2.49
4%
1" Meter, 10 Units
$3.28
$2.49
(24 %)
5/8" Meter, 20 Units
$2.40
$2.91
21%
1" -Meter, 20 Units
$2.84
$2.91
2%
The examples provided above primarily reflect residential customers, who account for about
65% of the City's water use. The following is a comparison of our current versus proposed
rates for larger water users:
The current and proposed rate structures are summarized below on a monthly basis:
Average Unit Cost
Current
Proposed
Percent
Structure
Structure
Change
1"
Meter, 50 Units
$2.58
$3.15
1894,
2"
Meter, 200 Units
$2.67
$3.26
18%
3"
Meter, 450 Units
$2.62
$330
21%
6"
Meter, 1650 Units
$2.57
$3.31
22%
The current and proposed rate structures are summarized below on a monthly basis:
+ ++�►niiiIV11111111� IIIIhI city Of San L.AIS OBISpO
COUNCIL AGENDA REPORT
Current
,Structure
Minimum Charges
5/8" Meter $ 5.90
3/4" Meter $ 8.85
1" Meter $14.75
1 1/2" Meter $35.50
Commodity Charges
0 to 5 Units $1.20 per unit
More than 5 Units $2.40 per unit
FISCAL IMPACT
Proposed
Structure
None
None
None
None
$1.66 per unit
$3.32.per unit
As indicated previously, any rate structure will provide revenue adequate to meet the City's
requirements. The issue is solely how this revenue is generated by different kinds of
customers.
ALTERNATIVES
There are numerous rate alternatives that the Council could consider. However, as has
been discussed, all the various alternatives are comprised of either minimum charges or
commodity charges, or some combination of the two. Staff has presented ten possible rate
alternatives considered to be the basis for the full spectrum of rate alternatives. The ten
examples presented provide the basis for Council's direction to make appropriate changes
to the City's water rate structure.
SUMMARY
`.... C3..
The purpose of this report is to provide Council with an overview of the various types of
water rate structures that meet the City's adopted rate goals; to compare these rate
structures to the City's current rate structure; and to propose a change in the City's water
rate structure. Staff is recommending the City change from a rate structure with minimum
charges and two increasing block rate commodity charges, to a structure with no minimum
charges and that retains the increasing block rate commodity charges. The proposed rate
structure meets all of the adopted rate goals, except that it is highly sensitive to
consumption, and as such, is relatively unstable. However, this is also true of the City's
current rate structure. Once staff receives Council direction, we will schedule a public
hearing and return with an appropriate resolution for Council adoption.
EXHIBITS
1. Excerpt from June 1, 1992 Council Agenda Report
2. Water rate structure typologies
3. Water rate comparisons for monthly billings
4. Revenues, expenditures and changes in financial position for the water fund /�6
ExhiblLal
EXCERPT FROM JUNE 1, 1992 COUNCIL AGENDA.REPORT
Single Meter Residential Rates
On July 6, 1990, Ordinance No. 1170 became offective. requiring all
new residential units to have fire sprinklers. With this new
requirement came the need to have a larger water meter (usually 1
inch) which would provide for the additional pressure needed if the
fire sprinklers were activated. Without a sprinkler system, a 5/8
inch or 3/4 inch meter would normally be adequate.
The City's current readiness to serve charge is a flat rate based
upon the size of the meter, with the rate increasing as the size of
the meter increases. As such, some customers may be paying a
higher readiness to serve charge based primarily on fire protection
rather than water service needs. Below is a chart showing the
three levels of readiness to serve charges currently in effect for
all customers:
Meter Size Readiness to Serve Charge
5/8 Inch
3/4 Inch
1 Inch
$ 5.90 Monthly
$ 8.85 Monthly
$14.75 Monthly
Concerns with the impact of this rate structure on some of our
customers have been recognized by staff and voiced by affected
customers, as well as by the Council. Provided in Exhibit 4 is a
memorandum from the Fire Chief to the Director of Finance
summarizing this issue.
After reviewing several options, staff believes that the best way
of addressing this concern is to charge all single meter
residential (SMR) accounts the same readiness to serve charge
regardless of the meter size (up to the 1" level). Since 70% of
our residential customers have 5/8" meters, it is recommended that
this become the base rate for this new service classification.
However, decreasing the readiness to serve charge on our current
SMR accounts with 3/4" and 1" meters will reduce Water Fund
revenues by approximately $155,000 per year.
To compensate for this reduced revenue, a $ .15 increase per unit
of consumption (one hundred cubic feet) over 10 units (bimonthly)
would be required. Accordingly, the per unit price of $1.20 for
the first ten units of consumption will remain the same, with the
per unit price of $2.40 increasing to $2.55 for consumption over
ten units. This modest increase will affect all water customers
with consumption over 10 units in a billing period.
The following is a summary of the monthly change in costs for
residential customers based upon using 22 units of water during a
standard billing cycle (which is 90% of the household average in
/- r
1987) at different meter size rates if this revised rate structure
is adopted:
Meter
Current
Revised
size
Rate
Rate
5/8 inch
$26.30
$27.20
3/4 inch
$29.25
$27.20
1 inch
$35.15
$27.20
This adjustment to the over 10 unit consumption
have a modest impact on the average customer yet
necessary revenue to compensate for the reduction
serve charges.
Impact of this rate change
Increase
(Decreasel
$ .90
($ 2.05)
($ 7.95)
rate -tier would
will provide the
in readiness to
As discussed in the rate analysis above, no rate increases for
revenue purposes are required for 1992 -93. However, with this rate
structure change, some customers will see increases (or decreases)
in their billing, although total revenues will remain the same.
Effectively communicating this rate structure change in the general
context of "no rate increases" for 1992 -93 will be difficult.
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January 8, 1993
Bill Roalman, Councilman
City of San Luis Obispo
City Hall
San Luis Obispo, CA 93401
Dear Bill,
KING AGENDA
DATE TEM #
COPIES TO:
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I would appreciate your assistance in alleviating the continuing
thrust to charge more and more for water. If the TT news article of
1 -8 -93 has any truth to it, it seems that some one is pushing to
increase the water rates again, particularly if you happen to be a
larger quantity user.
As you know, we have a lot that is larger than the smaller parcels,
but it is on a slope of 20% and we have tried to make it attractive by
using drought tolerant species in the landscaping. Drought tolerant
plants still need some water, and we would like to try to keep the
planting alive during the summer and fall to protect against erosion
and make it esthetically pleasing.
I would like to make a plea for a simple single rate for water that
treats each user fairly. The proposed multiple rate system simply is
grossly unfair. If there is a water shortage, such as we have had,
then I can understand the need for some upper cap to encourage
conservation, and perhaps a surcharge to help enforce that concept,
but even that concept doesn't deal well with the problem of
comparing larger lot use with small lot use.
I know that everyone has more
proposed approach is not really
assistance to help alleviate the
nc ely,
02 � ,
Roy
756 2807
gripes thaff kudos, but I believe the
the best solution and request your
problem.
RECEIVED
JAPE 1 1993
CITY COUNCIL
SAN LUIS OBISPO, CA
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112 Broad Street
San Luis Obispo
CALIFORNIA 93405
January 11., 1993
The City Council
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Dear Council Members:
Regarding the water rate restructuring:
MEETING AGENDA
DATE 11A-'F g ITEM =
1. The proposal to eliminate the metering fee and to roll it
into the rate structure is A GREAT STEP TOWARDS EQUITY FOR
THOSE WHO FOLLOW THE MUNICIPAL COMMANDMENT TO CONSERVE. This
change has my full support, and I urge you to move in this
direction.
However, the proposed rate restructuring stops short of being
one that will encourage conservation because a single cost
breaking point is insufficient incentive to conserve. For
those who use huge quantities of water, the marginal price for
each successive unit used will still be less than the city's
cost of producing that unit. Therefore, I urge you to continue
towards a second goal in this rate restructuring:
2. To institute a number of.price break points, possibly with
a reward (in the form of lower rates than proposed) for those
who use only a minimum amount of water; and sharply higher
prices at the top end for those residential users who continue
to use more than their fair share. If people want to be water
hogs, they should pay accordingly so that they can pick up
their fair share of the cost of developing the supplemental
water their profligacy will require.
My belief is that you will NEED AT LEAST FOUR. PRICING LEVELS
to foster conservation this way. An EVEN MORE INTRIGUING
method is the price structure Charles Palmer of Morro Bax has
said he will help you create, free of charge: one in which
EACH SUCCESSIVE UNIT OF WATER CONSUMED COSTS MORE THAN THE
PREVIOUS UNIT. The billing computer will have no trouble doing
this calculation. It is my understanding the City of Morro Bay
has such a graduated structure, which is the ultimate in
equity when it comes to assessing the fair costs for
operating, maintaining and expanding the municipal utility
system.
Sincerely,
/(�Y 7D iiCC' G(.U7lC/Yl I
RECE&VE0 Richard Schmi ft
JAN 1 2 1993
CITY CLERK
SAN LUIS OBISPO, CA
COPIFSTO:
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JAMES F. ARNDT
1080 BLUEBELL WAY
SAN LUIS OBISPO, CA 93401
(805) 546 -9709
JANUARY 12, 1992
The Honorable Peg P:inard, Mayor
City Council members and City staff.
RE: SAN LUIS OBISPO RESIDENTAL WATER RATE STRUCTURE
CITY COUNCIL MEETING JANUARY 12, 1993 ORAL PRESENTATION
JAMES F.ARNDT, 1480 Bluebell Way, S.L.O.
I studied the water rate structure last August, 1992 and prepared
a recap of my findings and recommendations which I provided to
the City Council on September 1, 1992. Last Thursday I updated
the cover letter and provided copies to the r_urrent City Council.
The major- recommendation of my findings was that the residential
water rate=_ be made more equitable by charging the same rates for
all water meter sizes. A news item in the Telegram- Tribune that
same day, January 7, 1993 reported that City Staff also makes
this recommendation with the addition of dropping minimum
charges.
Herewith, I would like to make a few additional comments:
1) . In future news releases use bi- monthly instead of monthly
charges since we are billed every two months and it will be less
confusing in making direct comparisons.
2). I believe that a basic charge should be included. This
should be applied to the depreciation accounts of the capital
investments in plant and equipment. Quantity water usage
charges, whatever they are, should be considered as expense
charges and be applied to the cost of water and delivering it.
Small water companies in the surrounding area which meter- water-
consumption use this charge and accounting procedure.
This would also compensate -for those who leave their residences
unli.ved in for a period of time when fire protection water
delivery must be maintained.
,). The proposed water rate structure should be made readily
available -to the public long before a public hearing is Held.
This should include rationale and the costs and expenses for-
building and operating the water supply system.
Thank: You,
JAMES F. ARNDT
In
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7
I
IvulTING AGENDA
DATE 1- 13ITEM #-
JAMES F. ARNDT
1080 BLUEBELL WAY
SAN LUIS OBISPO, CA 93401
(805) 546 -9709
JANUARY 7, 199$
The Honorable Peg Pinard, Mayor
Bill Roalman, Vice -Mayor
Penny Rappa, Councilmember
Dave Romero, Councilmember
Allan Settle, Councilmember
SLO City Clerk's Office
Bill Statler, Finance
Attached is a discussion concerning residential water rates
charged by the City of San Luis Obispo based upon the size of the
water meter. Conclusions and recommendations of this discussion
are as follows:
ConcluaionaandrP— csmmgndatjons =_
1. Single family residences should be billed equitably and not
based upon the size of the water meter.
2. The water bill should be broken down into a basic or minimun
charge and then the number of water units consumed at each of the
dollar rates of each unit added to it.
3. The rational behind the basis of water usage charges should"be.
available to the public so that City.employees can give rational_
answers to such an inquiry.
I plan to attend the City Council meeting on January 12, 1992
during which water rate structures are scheduled to be- discussed '
and would appreciate being permitted to speak to this dubject.
hank ypu1
GAMES F. (AR�ND(T�-
uECE V E D
JAN - 71993
QTY Q, ERK
SAW LW5 OBISPO, CA
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JAMES F. ARNDT
1 030 BLUEBELL ',NAY ^
SAN LUIS OBISPO, CA 93401
(0805) 546-9709
HI)TEMBER 1, 1992
. Zia
The "Summer Hills Condominiums" were constructed in three phases. It seems
that for the condominiums in the first phase, the size of the water meters was
31/4 inch. The subsequent second phase was also serviced with 3/4 inch meters
while the final third phase was assigned 1 inch meters. We have lived in one of
the units in the third phase for about three years.
Since the water service charge is based upon the size of the meter as well as the
quantity of water consumed, it provides a disparity in the water service •charge
for the consumption of equal amounts of water depending upon the size of the
meter.
I was curious as to this disparity so I sought an explanation from an appropriate
representative employee of the City of San Luis Obispo. It turned out I received
several explanations from several persons none of which was satisfactory. Upon
asking to whom I should appeal for a satisfactory answer, I was referred to the
Mayor and City Council. I was informed that the WATER RATE STRUCTURE was to
be discussed by the members of the City Council on September 7, 1992 at 7:00 P.M.
(subsequently moved to September 22, 1992) in the committee meeting room.
That is the reason for this inquiry and so that the Council assembled will have my
questions in writing along with responses from City Employees and my
observations.
• • , 1 here three different sizes of meters to serve •. 1
same size of ! "I and similar residents?
ANSWERS: "The developer specified the size of meters and it was not the
City's decision." Come now, the City is very specific in all building decisions
such as this.
"The larger meters are required because they are at a higher elevation
and the fire sprinklers in the condominiums need larger pipes to
deliver an adequate supply of water in case of emergency." The small
difference in elevation in this subdivision cannot make that much variation in
water pressure.
1- - • 11 1 � -1 1 1- 1. 1< •- • 1-
1 • • ' 1 IN 11
ANSWERS: "A larger m�. _r requires that the city ins�_..I larger water
mains and pipes and provide a larger reserve of water and bigger
pumping capacities in case of fire emergency." It seems to me that there
is the same amount of reserve and pumping capaclty for fires regardless of the
size of a residential meter. Also if the larger meters require larger mains and
reserves and users are charged more for this privilege, then those with larger
meters should have been granted larger allotments during the recent water
rationing program.
SENSUS PRICE: SLO CHARGE:
Bimonthly Total 3 years
5/3 Inch meter: $31.21 $11.80 $212.40
3/4 Inch meter: $56.16 $17.70 $318.60
1 inch meter: $79.56 $29.50 $531.00
I can understand a basic charge for water due to investment, fire protection,
reserves and minimum charges assuming no water consumption, but I cannot
rationalize the above differences for the same residential service and same water
consumption usage. I will be happy to purchase my own meter and pay for
installation if it costs the City that much for installation and maintenance. The
telephone company was forced Into allowing customer purchase of telephones
instead of requiring a rental /maintenance charge.
During the recent water rationing program, the penalty for overusage was based
upon a double or triple charge of the entire water bill. Doubling or tripling the
water meter charge included in the water bill seemed very inequitable. I can
accept the penalty charged based upon water usage but not based upon the meter
size.
1. Single family residences should Tie billed equitably and not based
upon the size of the water meter.
2. The water bill should be broken down into a basic or minimum charge
and then the number of water units consumed at each of the dollar
rates of each unit added to it.
3. The rational behind the basis of water usage charges should be
available to the public so that City employees can give rational
answers to such an inquiry.
JANES F. ARNDT
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