HomeMy WebLinkAboutAgenda Bill 3.F 12/06/2010j85$
DATE: December 6, 2010
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Pamela Tuft, Interim Director, Department of Water Resources & Conservation
SUBJECT: Adoption of Resolution of the City Council of the City of Petaluma Amending the
Rate Schedule for Wastewater Service and Resolution No. 2007 -023 N.C.S. to
Reduce Wastewater Service Charges for the Period January 1, 2011 through
December 31, 2011
RECOMMENDA'T'ION
It is recommended that the City Council adopt the attached Resolution of the City Council of the
City of Petaluma amending the schedule for wastewater service and Resolution No. 2007 -023
N.C.S. to reduce wastewater service charges for the period January 1, 2011 through December
31, 2011.
BACKGROUND
Starting January 1, 2011, the final year of the City's current five -year water and wastewater rate
program will commence. The current water and wastewater rates were adopted in January, 2007
based on a 2007 Rate Study that provided for a 13% increase in wastewater rates and a 5%
increase in water rates taking effect January 2011. The City has commissioned an updated water
and wastewater rate study that reexamines the needs of the water and wastewater enterprises for
2011 and subsequent years. The Draft Financial Plan and Rate Study presented to the City
Council and the public on November 1, 2010, recommends a 9 % increase in wastewater (rather
than the 13% increase already adopted for 2011) and a 5 % increase in water rates for January
2011 (the same increase already adopted for 2011). Although water and wastewater service
charges are considered property - related fees subject to the requirements of Article XIIID of the
California Constitution (known as Proposition 218), only new fees and fee increases are subject
to special rate payer notification and other requirements; fee reductions are not. Therefore, the
proposed reduction in the City's wastewater rates for 2011is not subject to Prop 218 notice
requirements. According to the 2010 Water and Wastewater Financial Plan and Rate Study, the
2011 wastewater rates may be reduced by 4% and still sufficiently provide for enterprise
operations, capital, debt service and reserve requirements for 2011.
The Draft Water and Wastewater Financial Plan and Rate Study was presented to the City
Council on November 1, 2010 and a public workshop on the Study was held on November 30,
Agenda Review:
City Attorney Finance Director City Manage 1
2010. Following Council discussion and deliberation on the 2010 Study, a Resolution has been
prepared to adopt the recommendation presented in the Study to reduce the previously- adopted
wastewater rate increase from 13% to 9 %, resulting in a 4% rate reduction. The 2010 Study
recommends no change to water service rates for 2011, therefore Staff recommends that the
previously approved water rate increase of 5% for 2011 remain unchanged and take effect
January 1, 2011 in accordance with Resolution No. 2007 -023 N.C.S. and the 2007 Rate Study.
The 2010 Water and Wastewater Financial Plan and Rate Study also includes recommendations
for modifying water and wastewater rate structures, as well as adjusting the rates to meet revenue
needs from 2012 through 2015. Council raised various concerns regarding the recommended
rate structures at both its November 1 St meeting and the November 30 workshop. Staff will
provide additional information to address those concerns in the next few months, after which
Council will be asked to set a Public Hearing for Consideration of Proposed Water and
Wastewater Service Rates Pursuant to the 2010 Water and Wastewater Financial Plan and Rate
Study and direct Staff to provide required notice. At the public hearing Staff will recommend
that the City Council adopt the Final Financial Plan and Utility Rate Study and utility rate plans
for 2012 -2015.
DISCUSSION
The first year operating costs of the Ellis Creek Water Recycling Facility and the adopted
wastewater enterprise budget for the second year (FY 10 /11) provided a complete picture of
existing and projected conditions and costs for inclusion in the wastewater rate analysis process,
and provided the Reed Group and City staff a basis for reconsidering wastewater enterprise
revenue requirements for the 2011 rate year. As those requirements appear less than previously
anticipated, the five -year financial plan and rate recommendations presented in the 2010 Study
anticipate modifying the previously- adopted 13% increase in Wastewater rates for 2011 and
address the 2012 through the 2015 rate years.
The Executive Summary of the 2010 Study outlines: the purpose of the work effort; the five -year
financial plan for both utilities; recommendations for both utilities; and summarizes the
recommended rate structures for each utility. The 2010 Study recommends reducing the
wastewater increase approved in 2007 for rate year 2011 from 13% to 9 %, and proposes
adjustments tied to the rate of inflation (CPI) to provide adequate revenues to cover anticipated
costs for the following four rate years. No change to the previously adopted water rate
adjustment of 5% for the 2011 rate year is recommended; adjustments tied to the rate of inflation
(CPI) and pass through of Sonoma County Water Agency rate increases, if implemented, are
proposed for the period through 2015 for the water enterprise. Specifics of the 2010 Rate Study
will be discussed by the City Council during the public hearing which is expected to be
conducted during the Spring of 2011.
FINANCIAL IMPACTS
The financial impacts associated with adoption of the recommendations identified in the 2010
Rate Study are discussed in the Five -Year Financial Plan section (Section II) of the October 27,
2010 draft study report, which provides background, a summary of funding and rate structures
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and cash flows within the two utility funds, assumptions reflected in the analysis, customer and
account characteristics, capital improvement program funding, long -term debt financing,
operating reserves, and conclusions and recommendations. The intent of the 2010 Study is to
maintain fiscal sustainability and accountability for both the water and wastewater utilities for
the five -year study period.
ATTACHMENTS
1. Resolution of the City Council of the City of Petaluma amending the schedule for
wastewater service and Resolution No. 2007 =023 N.C.S. to reduce wastewater service
charges for the period January 1, 2011 through December 31, 2011
2. Rate Study Addendum
The Financial Plan and Water and Wastewater Rate Study was distributed for the November 1,
2010 Council meeting and the November 30, 2010 workshop and is not attached to this report;
an additional copy may be obtained by contacting the Department of Water Resources &
Conservation at 778 -4546. The 2010 Study will be incorporated into the Resolution.
An addendum dated November 23, 2010 to the Financial Plan and Water and Wastewater Rate
Study has been prepared by the Reed Group to specify the proposed reduced wastewater rates
schedules for 2011 and is attached.
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Attachment 1
A RESOLUTION OF THE CITY COUNCIL- .OF' THE .CITY OF PETALUMA
AMENDING THE RATE SCHEDULE FOR WASTEWATER SERVICE AND
RESOLUTION NO. 20.07-023 TO REDUCE WASTEWATER SERVICE CHARGES FOR
THE PERIOD JANUARY 1, 2011 . THROUGH DECEMBER 21, 2011
WHEREAS, the City of Petaluma operates and maintains a wastewater collection,
treatment, disposal and recycling system; and
WHEREAS, in 2000, the City. issued wastewater revenue bonds ( "2000 Bonds ") in the
principal amount of $8,895,000 and entered related agreements requiring that the City maintain
charges for the wastewater system during each fiscal year-which are .sufficient to yield net
revenues, excluding connection.fees, at least equal to one hundred percent (100 %) of the
was enterprise debt service, and net revenues including connection fees at least, equal to
one hundred twenty -five percent (125%) of the wastewater debt service; and
WHEREAS, in 2005., the. City entered line of credit,loan agreements -with PNB Paribas
and, Zions First National Bank ( "Lines of Credit" ), requiring that the City impose wastewater
service rates and collect wastewater service rate proceeds so that net revenues of the wastewater
enterprise, including connection fee proceeds, equal at least 125% of the enterprise's annual debt
service obligations, and the City ultimately borrowed approximately $23.7 million against such
loan agreements; and
WHEREAS, in August, 2006, the City entered into a loan Agreement under the State
Revolving Fund loan program ( "State Revolving Fund Loan ") in the approximate amount of
$126, million, and the City's agreement with the State Water Resources Control Board governing
the State Revolving Fund Loan requires the City to: maintain a user charge system sufficient to
meet the requirements of Section 204(b)(1) of the federal Clean Water Act (which, together with
its implementing regulations, requires development of a user charge system that generates
sufficient revenue to pay the total operation and maintenance costs necessary for the proper
operation, maintenance and replacement of treatment works, and requires each recipient of
wastewater services to pay its proportionate share of the costs); and to set rates sufficient to yield
net revenues which are equal to the debt service of the wastewater enterprise and the State
Revolving Fund.Loan prohibits the City from reducing wastewater service rates (unless the .net .
-revenues from such reduced rates will at all times be sufficient to meet the loan agreement
requirements); and.; and
WHEREAS, such indebtedness pursuant to the 2000 Bonds, the Lines of Credit and the
State Revolving Fund`Loan on behalf of the City's wastewater enterprise has been necessary to
fund needed capital projects of the enterprise, including construction of the City's new Ellis
Creek Water Recycling Facility project to replace the City's Hopper Street sewer facility, which
was completed in 1938; and
WHEREAS, wastewater services currently provided by the City include collection,
treatment, and discharge of treated wastewater, treatment and distribution of recycled water, and
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collection and disposal of storm water, and use of the term "wastewater services" in this
resolution refers to all of those services; and
WHEREAS, the. City retained Bartle Wells Associates to develop a Wastewater and
Water Rate Study and Financial Plan ( "2007 Study "); and
WHEREAS, the Petaluma City Council conducted duly noticed public hearings on the
proposed rates pursuant to the 2007 Study on December 4 2006 December 18, 2006, and
January 22, 2007 -and on January 22, 2007, adopted water and wastewater service rates for 2007,
2008, 2009, 2010 and 2011; and
WHEREAS, the City retained The Reed Group to develop a Financial Plan and Water
and, Wastewater Rate Study ( "2010 Study "), which 2010 Study included analysis of 2011 rates
(the last year of rates contained in the 2007 Study) as well as of rates for 2012 through 2015; and
WHEREAS, the 2010 Study supports that a 9% increase in wastewater rates for 2011,
rather than 13% as previously adopted is sufficient to meet debt service obligations, capital
improvement program needs, and maintain an adequate reserve, and accordingly the 2010 Study
recommends a 4% reduction in the wastewater rates already adopted for 2011; and
WHEREAS, none of the wastewater service rates established pursuant to this resolution
is a "tax" as defined in Section 1, paragraph (e) of Article XIIIC of the California Constitution
(referred to as Proposition 26), because: such rates are imposed for a specific government
service or product provided directly to the payor that is not provided, to those not charged, and
which does not exceed the reasonable cost to the local government of providing the service or
product; and
WHEREAS, the case of Bighorn-Desert View Water Agency v. Verjil, (2006) 39 Cal.4`
205, held that water and wastewater service fees are property related fees subject to the
requirements of Article XIIID of the California Constitution (referred to as Proposition 218); and
WHEREAS, Proposition 218 requires that public agencies imposing new or increased
property related fees or charges must satisfy specified procedural requirements, including:
identifying the parcels upon which proposed fees will be imposed; calculation of the fee
proposed to be imposed upon each parcel; provision of written notice by mail of the proposed
fees, the fee basis, the reason for the fee, and the date, time and location of apublic hearing on
the2 fee for each record owner of parcels for which fees are: proposed; conducting a public hearing
on the proposed fee not less than 45 days after mailed notice to property owners; and refraining .
from imposing the fees if a majority of owners of identified parcels submit written protests; and
WHEREAS, Proposition 218 imposes certain substantive requirements on existing, new
or increased property related fees or charges, including that: the revenue derived from such fees
or charges shall not exceed the funds required to provide the property related service; the
revenue derived from the fee or charge shall not be used for any purpose other than that for
which the fee or charge was imposed; the amount of the fee or charge imposed upon any parcel
or person as an incident of property ownership shall not exceed the proportional cost of the
service attributable to the parcel; and that no fee or charge may imposed for a service unless
that service is actually used by or immediately available to the owner of the property; and
WHEREAS, the 4% wastewater service rate reduction proposed pursuant to the 2010
Study and this resolution does not involve new or.increased property related fees or charges, and
is therefore not subject to the procedural requirements of Proposition 218; and
WHEREAS, after due consideration, the Petaluma City Council finds based on the 2010
Study and the November 23, 2010 addendum ( "Addendum ") that:
Findings '
1. The proposed wastewater rate decrease of 4% pursuant, to the 2010 Study and the
Addendum is sufficient to achieve full recovery of the costs of providing wastewater services to
residents and businesses in Petaluma in accordance with applicable. law and applicable
requirements of the 2000 Bonds, the Lines of Credit, and the State Revolving Fund Loan, as
reflected in the 2010 Study (see, for example, Exhibits IV -3, IV -4, and IV -5 in the 2010 Study);
2. The proposed rate reduction of 4% pursuant to the 2010 Study and the Addendum
will not generate revenue in excess of the funds required to provide wastewater services in
accordance with the requirements of Proposition 218, as reflected in the 2010 Study (see, for
example, Exhibits IV -3, IV -4, and IV -5 in the 2010 Study);
3. The proceeds of the proposed reduced rate pursuant to the 2010 .Study will not be
used for purposes other than providing wastewater services in accordance with the requirements
of Proposition 218, in that such rate proceeds will be deposited and accounted for in restricted
accounts available only for authorized expenses of the wastewater enterprise;
4. The rate or charge imposed on any parcel or person as an incident of property
ownership shall not exceed the proportional cost of the service attributable to the parcel, as
reflected in the 201.0 Study (see, for example, Exhibits IV -3, IV -4, and IV -5 in the 2010 Study)
and in accordance with the requirements of Proposition 218; and
WHEREAS, adoption of revised rates and charges .pursuant to this resolution involves the
establishment,.modification, restructuring or approval.of rates and charges, as identified and
analyzed in the Study, including rates and charges to obtain funds for meeting operating
expenses, purchasing or leasing supplies, equipment or materials, meeting financial reserve
needs and requirements and /or obtaining funds for capital projects necessary to maintain service
within existing service areas. Therefore, adoption of this resolution setting rates and charges is
not a project under the California Environmental Quality Act pursuant to California Public
Resources Code Section 21080(b)(8)(D) and 14 Cal. Code Regs. Section 15273;
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NOW, THEREFORE, BE IT RESOLVED, by the Petaluma City Council as follows:
1. The above recitals are hereby declared to be true and correct and to be findings of the
City Council of the City of Petaluma and are made a part of this resolution, and the 2010 Study
and the Addendum are approved and incorporated into and made a part of this Resolution.
2. Resolution no. 2007 -023 N.C.S. adopted January 22, 2007, is hereby amended as follows:
a. Paragraph (D) of Section 1.1 of Article 1 is hereby replaced by the following:
(D) Study. This resolution and the wastewater charges established in this
resolution are based on the 2007 Wastewater and Water Rate Study and Financial
Plan prepared by Bartle Wells Associates ( "2007 Study ") and the , Water and
Wastewater Financial Plan and Rate Study prepared by'the Reed Group ( "2010
Study "), published October 27, 2010, and the Addendum prepared by the Reed
Group published November 23, 2010 ( "Addendum "). The 2007 Study, the 2010
Study and the Addendum are attached to and made a part of this resolution as
Exhibits A, Al, and A2, respectively.
b. Section 3.1 of Article III is hereby replaced by the following:
SECTION 3.1 FIXED MONTHLY FEES (A) Residential Users. The
fixed monthly fee for Residential users, per dwelling unit, shall be as set forth in
Table 1.
(B) Non- Residential Users. The fixed monthly fee for Non - residential
Users shall be as set forth in Table 1.
Table 1. Fixed Monthly Wastewater Charges
Wastewater Customer
Fixed Monthly Charge For Billings Rendered On Or After the
Classification
Dates: Indicated. Below
Feb. 1,
January 1,
January 1,
January 1,
January 1,
2007
2008
2009
2010
2011
Single- Family Residential
/mo
$10.29
$11.63
$13.14
$14.85
$16.1;9
Multi -Unit Residential,
p er dwelling unit $ /mo
$10.29
$11.63
$13.14
$14.85
$1.6.19
Unmetered Residential,
p er dwelling unit $ /mo
$49.96
$56.45
$63.79
$72.0.8
$78.57
Commercial ($ /mo)
Low- Strength
$10.29
$11.63
$13.14
$14.85
$16.19
Medium - Strength
$10.29
$11.63
$13.14
$14.85
$16.19
High - Strength
$10.29
$11.63
$13.14
$14.85
$16.19
Metered Industrial Users
($ /mo)
$10.29
$11.63
$13.14
$14.85
$16.19
C. Section 3.2 of Article III is hereby replaced by the following:
SECTION 3.2 USER CHARGES
(A) Residential Users In addition to the fixed monthly fee set forth in Section 3.1
and Table 1, there shall be a user charge for Residential Users as set forth in Table 2, based
on the amount of wastewater discharged. The amount of wastewater discharged shall be
established based on the average amount of water used each month during the winter
months. The winter months shall generally be December, January and February, but actual
winter months used for this determination may vary depending. individual billing cycles, as
determined by the Director. The average becomes effective each July and is based on the
most recent average winter water usage.
(B) Non - residential Users 'In additional to the fixed monthly fee set forth in Section
3.1 and Table 1, there shall be a user charge for Non - residential Users, based on the amount
of water used or discharged, as set forth in Table 2.
(1) User Charge For Non- Residential Users with Shared Water Meters If a
water meter is used by Non - residential Users in different customer classes, the user charge
shall be based on the Non - residential User with the higher wastewater strength. For
example, if a Low Strength user and a. High Strength user use the same water meter, the
wastewater user charge shall be based on the High ;Strength user rate.
(2) Commercial Customers Commercial customers shall be assessed a
variable user charge based on the strength of the wastewater, Low, Medium, or High.
Assignment to Low, Medium, or High strength shall be as determined by the Director, or
based on laboratory analyses of the Non - residential User's wastewater. A State of California
Certified laboratory must conduct the laboratory analysis.
Table 2. Variable Wastewater User Charges
Wastewater Customer
Variable User Charge For Billings Rendered On Or After the Dates
Classification
Indicated Below
January 1,
January. 1,
January 1,
January 1,
Feb. 1
2008
2009
2010
2011
Single - Family Residential
$/hc
$4.88
$5.51
$6.23
"$7.04
$7.67
Multi -Unit -Residential
($/hcf)
$4.88
$5.51
$6.23
$7.04
$7.67
Commercial ($/hef)
Low- Strength
$4.86
$5.49
$6.20
$7.01
$7.64
Medium - Strength
$5.78
$6.53
$7.38
$8.34
$9.09
High - Strength
$7.48
$8.45
$9.55
$10.79
$11.76
Metered Industrial Users
Flow ($/hef)
$3.62
$4.09
$4.62
$5.22
$5.69
BOD ($ /lb)
$0.35
$0.40
$0.45
$0.51
$0.56
TSS ($ /lb)
$0.38
$0.43
$0.49
$0.55
$0.60
3. This Resolution shall become effective immediately.
4. Except as expressly modified above in this resolution, Resolution 2007 -023 adopted January
22, 2007, remains unchanged and in full force and effect. -
5. The individual rates and all other portions of this resolution are severable. Should any of the
rates or any portion of this resolution be adjudged to be invalid and unenforceable by a body of
competent jurisdiction, then the remaining rates and/or resolution portions shall be and continue
in full force and effect, except as to those rates and/or resolution .portions that have been
adjudged invalid. The City Council of the City of Petaluma hereby declares that it would have
adopted each of the rates set forth in this resolution, and this resolution and each section,
subsection, clause, sentence phrase and other portion thereof, irrespective of the fact that one or
more of the rates, or sections, subsections, clauses, sentences, phrases or other portions of
resolution may be held invalid or unconstitutional.
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Exhibit 1-2 - REVISED
Exhibit IV-6 REVISED
City of Petaluma- Department of Water Resources and Conservation
Previously Approved and Proposed W I Rates
Previously Approved _(1)
Proposed (4)
Jan, 2010
Jan.
20111
Jan. 2011
Restructure
Monthly Service Charge
Single Family Residential
14.85
$
16.78
$
16-19
S
17.22
Unmetered
72.08
$
81,45
S
78.57
$
.77.05
Mulb-Family Resid. (per DU)
S
14.85
S
16.78
$
16.19
$
15.00
Non-Residential (2)
$
14.85
$
1618
S
1619
Up to 3/4" meter
$
17,22
1" meter -
I
25
1 112" meter
$
47.65
2" meter
$
73.77
3" meter
$
134,75
4" meter
S
221.85
6" meter
$
439.41
Metered Industrial (2)
S
14.85
$
1638
S
16.19
2' ultrasonic meter
$
200,04
10" ultrasonic meter
$
439.45
2" magnetic meter
$
134.75
3" magnetic meter
S
287,10
4" magnetic meter
S
439.45
6" magnetic meter
$
1,092.38
Wastewater Usage Charge, (Slhcf)
Single Family Residential
$
7.04
$
7.96
$
7.67
$
7.45
Mufti- Family Residential
$
7.04
S
7.96
$
7.67
S
7,45
Non-Residential
Low strength
$
7.01
$
7.92
$
7.64
$
719
Medium strength
$
8.34
$
9'.42
$
9,09
$
9,02
High strength
S
10.79
$
12,19
$
11.76
$
11.82
Metered Industrial (3)
Flow ($Ihcf)
5.22
$
5.90
$
5.69
S
5,75
BOD ($11b)
$
OZI
$
0,57
$
0.56
$
0.57'
TSS ($Jib)
$
155
$
0.63
$
0.60
$
0.66
(1) Effective January 1 each year.
(2) Non-residential and industrial users currently pay the same service charge regardless of
strength characteristics (low, mediurn: and high) or meter size.
(3) Includes industrial customers , for which wastewater flows are sampled and tested to determine
appropriate charges:
(4) Proposed rates for January 2011 reflect an increase of 9 percent: relative to the January 2010 rates
(or about a 4 pe decrease relalivelJoprevisously approved rates for January 2011). The
proposed rate restructbrinTwould be.overall revenue neutral to the proposed rates for January
2011, but will requi . re,a formal rate approval process before they can be acloptecland implemented.
Replaces Exhibit 1-2-onpaoe 9 o the Water and Wastewater Financial Plan and Rate Study- Final
Draft Report , dated ; October 27, 201
Replaces -,Exhibit IV-&on page 53 of the Water and Wastewater Financial Plan and Rate Study - Final
Draft Report dated October 27, 2010.
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