HomeMy WebLinkAbout05/00/1990, 5 - REVENUE REQUIREMENTS FOR WATER AND SEWER FUNDS �IY�y� IIIIII,IIIAll�lll 1" MEETING DATE:
u�Wl Ilul cityo san lugs osIspo
WINZA COUNCIL Aql@iNDA REPORT "
FROM: William T. Hetland� William C. Statler
Utilities Director Finance Director
PREPARED BY: Allen Short John Moss Cassidy Rowland
Water Div. Manager Wastewater Div. Manager Adm. Analyst
SUBJECT: REVENUE REQUIREMENTS FOR WATER AND SEWER FUNDS
CAO RECOMMENDATION:
By motion receive report on water and wastewater revenue requirements and direct staff to
return with appropriate rate ordinances/resolutions that incorporate the following concepts:
1. Water rate increase of 62% effective June 1, 1990. An
additional rate increase may be required June 1, 1991
depending on the City's water supply situation.
2. Water Connection fee increase from the current fee of $345
per single family connection to $1,500 per single family
connection effective June 1, 1990.
3. Wastewater rate increase of$2.00 per month effective June 1,
1990 and an additional$2.00 per month each June for the next
four years ($8.50 to $16.50).
4. Establish a Wastewater Connection fee of $1950 per single
family connection.
Misco
DISCUSSION
CICILBACKGROUND SA Lusumco.BA
11 C/Sa
The City is in a difficult water shortage situation. Mandatory water conservation efforts have been
in effect for over a year and have recently been increased. As a result of this water shortage, the
City has undertaken a number of projects and activities which would not have been normally
initiate. In addition, a number of other key project studies and designs have been completed. The
City's operating and capital requirements for the wastewater programs have been subject to
significant review and discussion over the past several years. It is now necessary for the City to
move ahead with identifying and implementing funding sources for these programs and projects.
This report analyzes the basic revenue requirements based on the Council adopted 1989-1991
Financial Plan and identifies necessary revenue enhancements. Additional revenue requirements due
to the current water conservation program and anticipated water and wastewater capital
improvement projects are also identified and funding sources presented.
WATER REVENUE REQUIREMENTS
Table 1 Water Fund Operations Budget, outlines the existing operations budget for the Water Fund.
This is based on the Council approved 1989-1991 Financial Plan and identifies $4,021,300 in net
expenditures for 1990-1991. These costs are based on normal operations in a non-water
conservation mode. Costs associated with the expanded water conservation program are included in
the new programs and projects described below.
411111111l111.WJJcity of san iui s OBI SPO
WInGs COUNCIL AGENDA REPORT
Revenue Requirements for Water and Sewer Funds
Page 2
Under the current rate structure, annual water Table 1 Water Fund Operations Budget
revenues are approximately$3.9 million. Under
the proposed 35% conservation mode the
revenues would only be $3.2 million. 1990 - 1991
Accordingly, each one percent increase in rates BUDGET EXPENDITURES BUDGET***
will generate about $32,000 to fund new ............
programs or cover revenue shortfalls under 35% operations and Maintenance
conservation. source of supply 1,495,800
Treatment 1,225,000
By deferring $400,000 of the $484,000 for Pay Distribution 691.800
As You Go Capital Projects, the City would be Total Operations and Maintenance 3,412,600
able to generate revenues that could cover the Pay as You Go Capital Projects 484,000
current expenses at the 25%water conservation
level. At the proposed 35% conservation level, Debt Service, Existing 679,700
a rate increase of 14% is required in order to
generate the $3,621,300 ($4,021,300 minus Non-Yater Rate Revenues (555.000)
$400,000) in revenues to fund the normal Total Basic Water Fund Expenses 4,021,300
operation and maintenance budget.
***without conservation
Table 2 New Programs and Projects, lists new
programs and projects which the Water Fund
has or is proposing to undertake. These
programs and projects are divided into operation and maintenance related programs and capital
improvement projects. Each is briefly explained below:
Operation and Maintenance: `
.Extended Water Conservation Program-This covers the increased costs associated with the water
conservation program over and above the City's normal water conservation efforts.
Groundwater Well Phase I and II - These costs relate to the operations and maintenance costs
associated with the current groundwater well program, and include staffing, power, chemical,
and repair.
Groundwater Well Program Phase III - This is an estimate of the additional operation and
maintenance costs that may be experienced after the phase III program is operational.
Monthly Utility Billing This is the Water Fund share of increased costs to convert the City to
monthly utility billing instead of the current bi-monthly billing program.
Off-Setting Savings - These represent the savings that other budgets areas should experience
because of the greater reliance on groundwater and a reduction in surface water use.
Capital Improvement Proiects:
Deferred Capital Program - These are the $400,000 of the Pay as You Go water distribution
replacement projects deferred from the normal budget in order to avoid a rate increase under the
existing program and reduce the required rate increase under the 35% conservation program.
Salinas Reservoir Expansion - This project will expand the storage capacity and yield of the I
Salinas Reservoir.
Groundwater Development Phase III - This project will expand the well water system and may
m1111111011111� city or San mals OBiSPO
Nia; COUNCIL AGENDA REPORT
Page 3
Table 2 New Programs and Projects
include the Hansen and Gularte
Creek project.
Water Treatment Plant U rade NEW PROGRAMS Annual Costs
Pg Operations and Maintenance
- The plant upgrade is required Extended Yater Conservation Program 230,000
to meet the current and Groundwater well Program, Phase I, 1I 520,000
Proposed regulatory Groundwater Yell Program, Phase III 325,000
requirements and to update the Monthly Utility Billing 110,700
City's 25 year old facility. off-Setting Savings
Source of Supply (50,000)
Treatment (30.0000Capital Appropriations - This Total
New Programs 1,105,700
represents money available in
the Water Fund that can be used NEW PROJECTS
to fund the above projects. Deferred Capital Projects 400,000
New Master Plan Projects
Funding all the new programs and Salinas Reservoir Expansion 6,500,000
projects listed in Table 2 would Groundwater Development, Phase Ilt 2,500,000
Yater Treatment Plant Upgrade 7,500,000
require a rate increase of 92%. This Capital Appropriations (2.500.000)
increase would provide $2,905,700 Total New Projects 14,000,000
in new revenue. Debt Service, New Projects a 10% 1.400.000
An overall rate increase of 106% Total New Programs and Projects 2,905,700
would fund both the shortfall in
revenue due to conservation and
provide funds for new projects and
programs.
This rate increase could be staged over two years. The first year increase would be 62%and would
fund the identified programs except for the Salinas Reservoir Expansion and the Water Treatment
Plant Upgrade. These two projects will take at least another year to complete permits and design
before they are ready for bid. Deferring these
two projects would have the benefit of Table 3 Rate Increase By Program and Project
providing adequate revenues initially and would
allow staff to reevaluate the need for the second
rate increase during a time when the City may
or may not be in water shortage situation. If rations and Maintenance Programs
Program Extended Yater Conservation m 7.27%
the drought were to end and consumption Groundwater Well Program, Phase 1, 11 16.447;
return to normal levels, the amount of the rate Groundwater Well Program, Phase III 7o.z z
increase would not have to be as great in order Monthly Utility Billing 3.50%
to fund the new projects. Off-Setting Savings -2.53%
Table 3 Rate Increases by Program and Project, Total New Programs 34.95%
outlines the amount of rate increase necessary New Proiects
under the 35% conservation level for each of Deferred Capital Projects 1264%
the proposed new programs and projects and New Master Plan Projects
reflects the relationship each plays in the Salinas Reservoir Expansion 20 9SL
overall revenue shortfall. Groundwater Development, Phase 111 7.90%
Yater Treatment Plant Upgrade 23.71%
A summary of the Water Revenue Capital Appropriations -7.901;
Requirements from which the above tables were Total New Projects 568)X
developed is included as Attachment #1.
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411111111f W11 l city of san LUIS OBI Spo
COUNCIL AGENDA REPORT
Revenue Requirements for Water and Sewer Funds
Page 4
An option for funding the $457,700 revenue shortfall due to the 35% conservation program would
be to use general fund moneys instead of a 14% rate increase. Although this approach has the
advantage of not increasing rates because of the water conservation program it also has the
disadvantage of taking money from the general fund which, is also in a difficult,long term financial
situation. Additionally, this would be inconsistent with the adopted City policy of requiring the
enterprise funds to be self supporting and to fund all operations costs through the rate structure.
Connections Fees
Connection fees are a common means of providing revenue for capital projects. The fees are charged
against new connections to cover those capital costs associated with providing new service. Capital
projects related to new supply and treatment would result in a connection fee in the range of$1200
to$1500 per connection. Current connection fees are about$345 per connection. Staff will present
a more detailed analysis with the final revenue recommendation.
WASTEWATER REVENUE REQUIREMENTS
The Sewer Fund is easier to analyze since it is basically a flat rate system that is not influenced by
water conservation programs. Attachment #2 Summary of Sewer Revenue Requirements, outlines
the proposed revenues and expenditures for 1989-1990 and for 1993-1994, the first year of full
operations of the Wastewater Management Plan. This summary show that the Sewer Fund is
currently in good condition as revenues exceed expenditures. But with the beginning of construction
of major capital projects, it becomes necessary to increase rates and to establish connection fees in
order to generate the necessary revenues.
The new projects for the Sewer Fund have been identified in the City's Wastewater Management
Plan and are outlined in Table 4 Wastewater Management Plan Projects. The City has applied for
a State Revolving Fund (SRF) Loan for
financing of these projects. The maximum Table 4 Wastewater Management Plan Projects
dollar amount to be funded is determined at the
concept approval stage in the SRF loan process.
SWRCB staff granted concept approval of the unit 3 Treatment Plant $18,294,000
City's facilities plan for the above projects on unit 4 Treatment Plant 8,507,300
April 13, 1990. The facilities plan and the Phase 1 collection system 7.738.900
SWRCB staff recommendation will be reviewed Total $34,540,200
by the SWRCB at a workshop held in
Sacramento on May 2, 1990. Facilities plan
approval from the board is expected to be
granted on May 17, 1990. This will essentially guarantee low interest loan funding of the City's
projects although the actual loan contracts will not be made until the construction contract for each
phase is awarded.
A detailed financial plan and revenue program developed by Brown and Caldwell ( a copy is in the
Council file in the City Clerk's Office) recommend rate increases of 15%, 50% and 12.5% to be
implemented in 1991, 1992, and 1993 respectively. These increases represent about a 94% overall
increase and would raise the existing single family resident rate of $8.50 per month to $16.50 per
month. At $16.50 per month, revenues would be adequate to meet the projected needs of 1993 -
1994.
Based on a Council suggestion,staff is recommending the rate increases be implemented 1990, 1991,
J t�
���► � i�iIlllppp�q�lU city of San LUIS OBISpo
HORZA COUNCIL AGENDA REPORT
Page 5
lessen the impact of any one rate increase on the community and still provide adequate funding to
cover debts and expenses as they are anticipated to arise. Single family dwelling unit rates would
increase from the current $8.50 per month to $10.50 per month in 1990/91, $12.50 per month in
1991/92, $14.50 in 1992/93 and $16.50 in 1993/94. These rates would be adjusted at the end of
project construction to account for actual costs.
Connection Fees
As with water,staff is recommending implementation of a wastewater connection fees to again more
equitably distribute the burden of funding. Currently the City does not have any connection fees
for wastewater service. The detail analysis performed by Brown and Caldwell recommends that a
connection fee of $1,950 per connection be established. The connection fee would be adjusted
annually based on the Engineering News Record construction index.
RECOMMENDATION
By motion receive report on water and wastewater revenue requirements and direct staff to return
with appropriate rate ordinances/resolutions that incorporate the following concepts:
1. Water rate increase of 62% effective June 1, 1990. An additional rate increase may be
required June 1, 1991 depending on the City's water supply situation.
2. Water Connection fee increase from the current fee of$345 per single family connection to
$1,500 per single family connection effective June 1, 1990.
3. Wastewater rate increase of$2.00 per month effective June 1, 1990 and an additional $2.00
per month each June for the next four years until existing single family rate of $8.50 per
month reaches $16.50 per month.
4. Establish a Wastewater Connection fee of $1950 per single family connection.
Attachment #1 Summary of Water Revenue Requirements
Attachment #2 Summary of Sewer Revenue Requirements
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SUMMARY OF SEWER FUND REVENUE REQUIREMENTS A- tachment.,.
------------------------------------------------------------------------------------------------------------------
1989-90 1993-94*
----------------------------- --------------------------------------------------------
REVENUES
Sewer Service Charges 2,166,000 4,417,900
Capital Improvement Charges 590,000
Interest Earnings 50,000 84,100
Other Revenues 70,000 138,900
------------------------------
Total Revenues $2,286,000 $5,230,900
EXPENDITURES
Operations and Maintenance
Collection 492,500 513,300
Treatment 1,088,900 2,226,600
------------------------------
TotaL Operations and Maintenance 1,581,400 2,739,900
Ongoing Capital Projects 506,000 365,800
Debt Service on Master Plan Projects 0 2,094,900
------------------------------
Total Expenditures $2,087,400 $5,200,600
* %1993-94 is the first full year of operation after the compoletion of the planned project improvements
O
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RECOMMENDED SINGLE FAMILY RESIDENTIAL
MONTHLY RATE IMPLEMENTATION
-----------------------------------------------------------------`------------------------------
Current $8.50
1990-91 $10.50
1991-92 $12.50
1992-93 $14.50
1993-94 $16.50
�10A
v8`:OtCS actor.by lead Person
I Respcnd by:
,
'•_r,�'Council
V CAO
V Acry.
r Cleric�rtg.
May 8, 1990 i' �-;yr4c,
rZAZ
To: Mayor Ron Dunin and City Council Members
Subject: Increased water rates
I am concerned with the proposal from Mr. Bill Statler and the
Utilities Division of increasing water rates in the City of San
Luis Obispo because the citizens of this community have done such
a good job of conserving water that revenues are down. Doesn't
this defeat the whole purpose of conserving? I have been very
watchful over the amount of water that is used in my household,
but this to me destroys one of the main purposes in conserving.
I did not want to pay the financial penalty imposed by going over
my allotment, but even through saving water it appears that we
may be in danger of paying a penalty--brought about by our very
Jact of saving! !
Please consider the damage which might be done to the incentive
of citizens to conserve water by punishing us anyway by raising
the rates by the proposed 62%. Why bother to continue to
conserve if we are going to have to pay the price anyway.
It also seems inappropriate to me to go to a monthly billing
cycle. I don't understand what would be gained by it, especially
since it would require 4 additional City employees to implement
it. If we are truly interested in conserving, wouldn't we want
to conserve in many areas--there would be extra paper, postage,
and time required for this extra billing. Why not also conserve
in those areas?. As a taxpayer in this City I would urge you to
vote "No" on this proposal..
Barbara Vance
1359 Bishop Street
San Luis Obispo, CA 93401
Ciro Cr:;.i^:CIL
S;.i1 _...51'C. CA
MEETING AGENDA
DATE rrE l
May 8. 1990
City Council Members
City of San Luis Obispo
. 990 Palm Street
San Luis Obispo, CA 93401
Pear Council Members
I am compelled to write. to express my disbelief at the proposal
to raise the water rates to offset the lack of billings due to
the peoples incredible effort to conserve. What a slap in the
face! You are .punishing the . peoples effort to conserve water,
not encouraging it! . What are we supposed to think?
On top of that, I read in the Telegram Tribune that the costs to
bill the customers 'every .month instead of every other month will
costs the consumers an extra dollar a month. Why do something
that costs more money? Why do we need to hire four more people
and then raise rates to offset the hiring for something that
won't do a thing to raise real revenues? Am I really supposed to
think that this is 'reeponeible government?
Please pull the money from other source if you really must, but
don' t hurt the efforts of the city to conserve water with this
misguided proposal. We have a group of volunteers in every
household and you are going to tell them that they doh'}mean a
damn.
Sincerely,
s
a Cen.w-s oa�n by!.e,•c Fey sur:
Garth Ko nrei.chRespond by
Councii
rates-1,2o3 iCi:/air
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43- STNlLe�
RECEIVE ®
MAY 8 1990
CITY CLERK
SAN'LUIS OBISPO.CA
#Denotes ahiun Dy Lead Person
RespoW by MEETING AGENDA
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May 8, 1990 j
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TO: CITY COUNCIL
FROM: Kim Condon & Sherry Stendah
SUBJ: CALLS REGARDING WATER RATE INCREASE - 5/8190
As of 2:30 this afternoon, we had received the following calls from
citizens regarding the water rate increase:
Anne Cruikshanks, 1792 Conejo, objects to the water rate increase.
She just paid $180 to have three dead trees removed that had
perished due to the drought and a rate increase on top of.this is
just too much.
Carol Pierce, 864 Mission, said that she feels she is being taken
advantage of. For you to think that she will pay more for less
water is an insult. If she pays for more water, she wants more
water.
Judith Ramp, 570 Peach St. , #30, expressed opposition to the
proposed water rate increase.
Sue Davis, 967 Broad Street, is upset that water rates are being
raised because they (citizens) are using less water. Thinks it is
just crazy.
Wendy Beckett, phone 543-2142 , is against the water rate hike..
There's something wrong when we're using less water and getting
charged more.
x Dencie::action by lead Per cn j
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