HomeMy WebLinkAboutItem 3d: Proposition 218 Balloting Procedures to Establish Water Rates for 2011/2012 to 2015/2016 i IFORn,, ' i ,
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0%7.7.--,„:7,-;" STAFF REPORT
Public Works Services Department
DATE: April 5, 2011
TO: Mayor and City Council
FROM: Tom Tait, Public Works Services Director P
Prepared by: Ken Herman, Deputy Public Works Services Director
SUBJECT: DIRECT THE PUBLIC WORKS SERVICES DEPARTMENT TO FOLLOW
PROPOSITION 218 BALLOTING PROCEDURES TO ESTABLISH
WATER RATES AND CONDUCT A PUBLIC HEARING AT THE JUNE 7,
2011 MEETING WITH A PREPARED RESOLUTION AUTHORIZING
THE PROPOSED WATER RATE SCHEDULES FOR FISCAL YEARS
2011/2012, 2012/2013, 2013/2014, 2014/2015 AND 2015/2016 FOR
PRESENTATION TO THE CITY COUNCIL
Recommendation: Approve
SUMMARY
Water rates fund the operations and maintenance of the City's water system. Every
year it is necessary to evaluate current water rates to ensure proper funding to provide
quality services to the residents of Arcadia.
On January 18, 2011 the City Council directed staff to proceed with the implementation
of a three -tier water rate structure based on the approved Tiered Water Rate Study.
After review of the Public Works Services Department's proposed 2011/12 Operating
Budget, Capital Improvement Plan, and Water Master Plan, it is recommended that the
City Council consider implementing a tiered water rate structure and adjust the water
rate by the 2010 California Consumer Price Index (CPI) of 1.07 %.
In addition, staff believes that a tiered water rate structure will help the City to comply
with the States SBX7 -7 Water Conservation Plan, which calls for a twenty percent
(20 %) reduction in per- capita water use by 2020.
Therefore, staff is recommending that the City Council direct the Public Works Services
Department to follow Proposition 218 balloting procedures for a tiered water rate
structure and conduct a public hearing at the June 7, 2011 City Council meeting with a
prepared resolution authorizing the proposed rate increase that includes a 1.07% Cost
of Living Adjustment (COLA) for fiscal year 2011/12 and an automatic COLA adjustment.
Page 1 of 5
Mayor and Council
April 5, 2011
DISCUSSION
The cost of operating the City's water system has increased as a result of the
uncertainty of replacement water and the significant increased cost of replacement
water from the Metropolitan Water District (MWD). Most recently, MWD increased the
cost of replacement water and treated surface water. Replacement water has
increased from $450 per acre foot to $587 per acre foot ( +30 %). In Addition, MWD has
stated that replacement water will only be available 3 out of every 10 years. In the past,
replacement water had been available 7 out of every 10 years. The impact to the City
of Arcadia is that groundwater levels in the Main San Gabriel Basin will continue to
decrease if replacement water is not delivered to the Basin on a more consistent basis.
The City of Arcadia relies on MWD to supplement water pumped from the Main San
Gabriel Basin and the Raymond Basin to meet annual water demands.
On average, annual water demands for the City's water system are approximately
16,500 acre feet. As a result, on average the City annually supplements groundwater
supplies by purchasing approximately 2,500 acre feet of replacement water.
Water supplies in California are recovering as a result of a wet year and water levels in
many of the state's key reservoirs are at or near normal levels for this time of the year.
However, water levels in local groundwater basins have not recovered from all time
record low levels as a result of the recent drought. Furthermore, conditions on the Delta
system that involve environmental concerns and dilapidated infrastructure will continue
to put a great importance on local water conservation efforts to ensure that a
sustainable supply of potable water is available for use by Southern Californians.
On January 18, 2011 the City Council approved the implementation of a three -tier water .
rate structure in response to the passage of Senate Bill SBX7 -7, which directs urban
water retailers to reduce per capita water use by 20% by year 2020. Based on
recommendations of the Tiered Water Rate Study prepared by Raftelis Financial
Consultants, staff has developed a revised bi- monthly service charge schedule and a
three -tier water commodity rate structure for single family and multi - family water users
intended to provide an incentive to meet water conservation efforts. The service charge
depends on the customer's water meter size which affects the level of demand in the
water system. It also includes the customer service component charges (e.g. meter
reading, billing, accounts receivables, and accounting) and the equipment component
necessary to deliver water to the properties. A commodity charge, on the other hand, is
based solely on water consumption.
The proposed tiered water rate structure is designed to provide for the reliable and
affordable supply of water to Arcadia residents, enhance water conservation measures,
meet State mandates of SBX7 -7, continue to generate sufficient revenue to fund
continued operations and maintenance activities, and to continue to maintain a reserve
fund following the completion of capital improvement projects, and in the case of a
catastrophic event. The value of the City's water system is estimated at $200 million
and industry standards recommend a ten percent (10 %) reserve to offset costs in the
Page 2 of 5
Mayor and Council
April 5, 2011
event of a catastrophic event or emergency that would affect the water system's
infrastructure.
The City's existing water reserve fund targets are:
• Operating Reserve - 25% of annual operating expenses
• Facility Reserves - $20 million following the completion of capital projects
• Equipment Reserve - as needed
In addition, the proposed tiered water rate structure illustrates the fund balance for each
reserve fund for the next five fiscal years. (Exhibit A)
In preparation of the 2011/12 budget, staff has evaluated each account, and where
possible, reduced operation and maintenance expenditures while continuing to maintain
the reliability of the water system, complying with water quality standards and retaining
the existing level of service and maintaining the necessary reserve balances.
The City currently implements a uniform commodity rate of $1.33 per unit for all
customers regardless of the amount of water consumption (1 unit = 100 cubic feet or
748 gallons). Staff is proposing to implement a three -tier water rate structure for single
family and multifamily customers. Additionally, the proposal is to keep the non -
residential customers at a uniform water rate. The unit price for the proposed inclining
three -tier rate structure matches the City's current water rates. For FY 2011/12, staff
recommends adjusting single family, multi - family, and non - residential water rates with a
Cost of Living Adjustment (COLA) increase of 1.07% according to the 2010 CPI and
then subsequently increase rates for the following four (4) fiscal years with an assumed
2% COLA.
Bi- monthly service charges and commodity rates for all customer classes and tiers are
shown in the table below.
Bi- Monthly Service Charge
Meter Existing 11 -12 12 -13 13 -14 14 -15 15 -16
size Charge Proposed Proposed Proposed Proposed Proposed
5/8" $10.95 $10.94 $11.16 $11.38 $11.61 $11.84
3/4" $12.32 $10.94 $11.16 $11.38 $11.61 $11.84
1" $13.69 $14.21 $14.49 $14.78 $15.08 $15.38
1 -1/2" $20.53 $22.37 $22.82 $23.27 $23.74 $24.21
2" $28.75 $32.16 $32.80 $33.46 $34.13 $34.81
3" $50.64 $55.06 $56.16 $57.28 $58.43 $59.60
4" $75.29 $87.67 $89.42 $91.21 $93.04 $94.90
6" $143.03 $169.30 $172.69 $176.14 $179.66 $183.26
8" $225.06 $267.25 $272.60 $278.05 $283.61 $289.28
Page 3 of 5
Mayor and Council
April 5, 2011
Commodity Rates
Tiered Rates
(per HCF)
Existing Tiers 11 -12 12 -13 13 -14 14 -15 15 -16
Customer Class Rate (HCF) Proposed Proposed Proposed Proposed Proposed
(per HCF)
SFR $1.33 16 $1.06 $1.08 $1.10 $1.12 $1.15
64 $1.34 $1.37 $1.40 $1.43 $1.46
$1.60 $1.63 $1.66 $1.70 $1.73
Multi- Family $1.33 8 $1.06 $1.08 $1.10 $1.12 $1.15
12 $1.34 $1.37 $1.40 $1.43 $1.46
$1.60 $1.63 $1.66 $1.70 $1.73
Non Residential $1.33 $1.34 $1.37 $1.39 $1.42 $1.45
Staff also conducted a survey of cities within the Los Angeles county area that has
tiered water rate structure. The survey looked at typical bi- monthly water bills which
consist of customers using a 1" meter and 64 hundred cubic feet (hcf) of water. Based
on this data, it was found that even considering the proposed water rate adjustment,
Arcadia's water rates continue to remain the lowest (Exhibit B).
For the purpose of complying with the notification requirements of Proposition 218, staff
is recommending that the City Council approve automatic increases not -to- exceed the
California Consumer Price Index (CPI) for fiscal years 2011/12, 2012/13, 2013/14,
2014/15 and 2015/16. Doing so will eliminate the need to publicly notify the residents
annually of proposed rate adjustments within CPI, which will save the City
approximately $10,000 annually for not having to print and mail notices. Staff will
present proposed annual adjustments for Council's approval as part of the budget
process in each of these years. However, if extraordinary increase that exceeds CPI is
necessary, the City will then follow notice requirements as mandated by Proposition
218.
CONCLUSION
Staff is recommending that the City Council direct the Public Works Services
Department to follow Proposition 218 balloting procedures for tiered water rate structure
and conduct a public hearing at the June 7, 2011 City Council meeting with a prepared
resolution authorizing the proposed rate increase that includes a 1.07% Cost of Living
Adjustment (COLA) for fiscal year 2011/12 and is an automatic not -to- exceed COLA
adjustment according to the California Consumer Price Index (CPI) for fiscal years
2012/2013, 2013/2014, 2014/2015 and 2015/2016.
Page 4 of 5
Mayor and Council
April 5, 2011
FISCAL IMPACT
Water rate increases are necessary to fund the Capital Improvement Program and the
Operating Budget, maintain a reserve fund balance in case of a natural disaster or
emergency, enhance water conservation measures, and meet new state mandates.
The lack of a rate increase would not allow the City to recover increasing operations
and maintenance costs of running the City's water system.
RECOMMENDATION
Authorize the Public Works Services Department to follow Proposition 218
balloting procedures to establish water rates and conduct a public hearing at
the June 7, 2011 Council Meeting with a prepared resolution to adopt the
proposed water rate schedules for fiscal years 2011/12, 2012/2013, 2013/2014,
2014/2015 and 2015/2016.
Approved by: — 1) pP ,,,.J
Donald Penman, City Manager
Attachments
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