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HomeMy WebLinkAbout06/01/1993, 4 - WATER FUND RATE REVIEW Q�ill��tlfl►INIIII�IIIII I III C�11/ O� SA1 1 LUIS OB�SpO MEETING TE: ►ILU _ aftma COUNCIL AGENDA REPORT ITEM NUMBER: FROM: William C. Statler, Director of Finance Prepared by: Linda Asprion, Revenue Manager SUBJECT: WATER FUND RATE REVIEW CAO RECOMMENDATION Adopt a resolution increasing water rates by six percent (6%) effective July 1, 1993. DISCUSSION Overview The City has not had a water rate increase for the past three years. The last water rate increase was approved in June of 1990, with a revenue neutral rate structure change implemented in March of 1993. The Water Fund rate review performed in June of 1992 projected a 6%rate increase would be necessary in 1993,with this year's analysis confirming that projection. Further, based upon this analysis of the Water Fund it is anticipated that a 6% rate increase will be necessary in 1994-95 to maintain City and State standards, policies and requirements. Background The 1991-93 Financial Plan policies require the City to perform an annual review of the financial needs of the Water Fund and adjust fees and rate structures as required to ensure that they remain appropriate and equitable. Fees and rates are to be set at levels which will ; My cover the total cost of providing water services, including operations, capital outlay, and debt service (page B-5 of the 1991-93 Financial Plan). This report analyzes the revenue j requirements of the Water Fund based on the 1992-93 Budget changes and the preliminary 1993-95 Financial Plan. I Water Rate Review Resolution No. 6447 states the primary goals of the City's water utility are to provide quality water service to its citizens and to function as a self-sufficient enterprise. The water should meet all health standards, be free of bad taste and odors, provide adequate fire protection, and assure reliability and continuity of service to users. This annual review of the Water Fund has been performed with these goals and philosophy in mind. Provided in Exhibit 1 is a summary projection of revenues, expenditures and changes in financial position for the Water Fund through fiscal year 1996-97. This projection outlines the operations and capital improvement budget for the Water Fund as presented in the preliminary 1993-95 Financial Plan. The assumptions used in this financial position projection are detailed in Exhibit 2. ���H�m►iil►lilllllllll�► ll�Ill City of San LUIS OBISPO - COUNCIL AGENDA REPORT Based upon this analysis, a six percent (6%) rate increase for revenue purposes is proposed for fiscal year 1993-94. This proposed,increase is based upon a 30% conservation rate from our customers from 1987 consumption levels and is consistent with the 1991-92 Water Fund review which projected a modest level rate increase of 6% over the next four years. Summary of Key Assumptions Based upon the assumptions in Exhibit 2, the financial position projections indicate that water rates require a modest increase of 6% annually during the 1993-95 Financial Plan period. The following is a summary of key assumptions for expenditures and revenues: ■ Annual decreases in water conservation from 1987 levels over the next five years ranging from 30% in 1993-94 to 15% in 1996-97. i ■ Operations and maintenance as projected in the preliminary 1993-95 Financial Plan with an inflation rate of 4% thereafter. ■ Debt service for the water treatment plant is based upon the 1993 Water Revenue Bond payment schedule. ■ Rate increases for other agencies who receive their water from the City. The City has a signed agreement with Cal Poly and is finalizing negotiations with Cuesta. i ■ Water customer growth rate .at less than 1% until 1996-97. This projection corresponds with the assumptions used in the March 13, 1993 Budget Workshop. I E Capital improvement charges are estimated as a percentage of the 'base projection" of $688,400 which is the estimated amount of fees that would be collected at a 1% growth rate. These revenues are then discounted by 87% due to the retrofit credit currently in place, which is projected to be discontinued with the construction of the Salinas Reservoir expansion. ■ Connection and meter charges are projected at the inflation rate. ■ Expansion of Salinas Reservoir is estimated to cost $1,300,000 for study and design during the 1993-95 Financial Plan period. Construction is projected for 1995-96 with an annual debt service of $960,000 for the $9.6 million project. ■ The water reclamation program has not been included in these projections as there is insufficient information on cost versus revenues to include in this analysis. E The cost of receiving water from Nacimiento is not included in these projections as preliminary cost estimates are unavailable. As reflected above, these assumptions do not include two anticipated projects - water reclamation and Nacimiento. It should be noted that the cost of these projects would/not . `T ������iniiil►IIIIIIIIIIP►i�u►�����II City Of San L"IS OBISPO - COUNCIL. AGENDA REPORT affect water rates for 1993-94, although it would impact future water rate increases as necessary to cover additional debt service or operating requirements. As plans and specification for these projects are prepared, any required modifications to existing projections for future rate increases will be reviewed and presented. I FISCAL IMPACT Effective March 1, 1993, a two-tiered rate structure was implemented as approved by the Council. The proposed 6% rate increase will affect the monthly water rates as follows: i Current Proposed Rates Rates 1 to 5 ccf $2.25 per ccf $2.40 per ccf over 5 ccf $2.80 per ccf $2.95 per ccf ccf = one hundred cubic feet Based upon the consumption of the average residential customer at 30% conservation from 1987 consumption (which is the conservation rate used in the Water Fund analysis for 1993- 94), the proposed rate increase will increase the monthly water bill as follows: Current Proposed Water Bill Water Bill Difference 9 ccf $22.45 $23.80 $1.35 ALTERNATIVES There is one alternative available which would defer a 1993-94 rate increase- deferring well water development until 1994-95. However, based upon this analysis, deferral of well water . development would then require a 10% rate increase in 1994-95. As such, this alternative is not recommended. ATTACHMENT Resolution adopting water service rates EXHIBITS 1. Changes in water fund balance 2. Assumptions for water fund projections 3. Summary of water fund capital projects --3 RESOLUTION NO. (1993 SERIES) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING WATER SERVICE RATES 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 analysis of Water Fund operating, capital, and debt service needs has been performed for fiscal years 1992-93 through 1996-97. NOW THEREFORE BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Resolution No. 8121 (1993 Series) is hereby rescinded. SECTION 2. Chapter 420.060 of the Municipal Code is hereby amended as set forth in Exhibit A attached hereto. SECTION 3. The rates set forth in Exhibit A shall be effective July 1, 1993. SECTION 4. All other provisions of Chapter 4.20 of the Municipal Code remain in ® full force and effect. On motion of seconded by . and on the following roll call vote: AYES: NOES: .ABSENT: The foregoing Resolution was adopted on this day of 1993. Mayor Peg Pinard ATTEST: City Clerk Diane Gladwell APPROVED AS TO FORM: TV Exhibit A RATES FOR WATER SERVICE PER MONTH J Rates for water service per month consist of commodity charges as follows: Commodily Charges Per CCF Inside City Outside City Construction Site Meters Only 0 to 1 ccf $ 2.40 $ 4.80 In excess of 1 ccf thereafter $160.00 $320.00 All Others 1 to 5 ccf $ 2.40 $ 4.80 More than 5 cd $ 2.95 $ 5.90 ccf = one hundred cubic feet �r� Ilz :.: Exhibit 3�.yh�.} m d0app. n iy vp�pp N�pp � � a o ve eh c h n N M et t+'1 O� N 4D 00 O%I N O M [� �O .•. �p M �O h V� a+ O O � 8 °°� el Gp CH �O hr- N R [� c�1 N 8 N \O e4 OIL a� WEIa :Oki 3•v`: ;�.::: h O+ eM+1 @ n N VNi V1 e•r1 pppp N ��pp O C.4 00 }'{n C'YtMl 8 ... 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