HomeMy WebLinkAboutAgenda Report - May 20, 2009 K-01AGENDA ITEM • '
A% CITY OF LODI
COUNCIL COMMUNICATION
im
AGENDA TITLE: Consider Waiving CPI Increase for Water Fund for Fiscal Year 2009/10 and/or
Amend Water Rate Schedule as Approved by Council on April 16,2008
MEETING DATE: May 20,2009
PREPARED BY: PublicWorks Director
RECOMMENDED ACTION: Consider waiving the CPI increase for the Water Fund for
Fiscal Year 2009/10 and maintain the water rate schedule as
approved by Council on April 16, 2008. Alternative - direct
staff to prepare resolution to amend the water rate schedule as
approved by Council on April 16,2008.)
BACKGROUND INFORMATION: Under normal circumstances, a recommendation for a Consumer
Price Index (CPI) adjustmentwould be broughtto the City Council at
this time. However, uncertainties relative to funding of future
activities within the utility including but not limited to PCE cleanup,
accelerated water meter installation, and infrastructure replacement suggest a rate increase nor
decrease may not be justifiable. An increase in the water rate schedule at this time would require a
Proposition 218 validation procedure. A rate decrease can take place by resolution of the City Council.
Over the period from 2002 to the present, the City Council has adopted a series of water -rate increases
required to fund specific activities within the utility. Background information on each of these rate
increases is provided below and a summary is presented in Exhibit A.
January 2002 The first of two 25 -percent rate increases was put into effect to fund the water
infrastructure replacement program. This rate has been adjusted using the Consumer Price Indexfor the
past four years and is currently $7.83 for a three-bedroom home.
May 2004 A 35 -percent increase was put into effect to fund the Woodbridge Irrigation District (WID)
water purchase and to fund ongoing PCE/TCE litigation -related expenses. Including CPI adjustments,
this component of the rate is currently $7.34 for a three-bedroom home and is divided $4.12 for WID
water purchase and $3.22 for PCE/TCE expenses. The PCE/TCE component of the rate increase was
also added to the wastewater rates at the same time. Resolution No. 2004-77 setting these new rates is
provided as Exhibit B. Please note in Section 4 it states, "the rates associated with the Environmental
Abatement (PCETTCE) Program shall sunset in 2014."
January 2006 The first of three $3.50 increases was put into effect to fund the PCE/TCE Cleanup
Program, and this component of the rate is currently $10.90 for a three-bedroom home. After reviewing
the background report in which it assumed legal expenses would end in fiscal year 2008, it is clear the
revenue from 2004 PCE/TCE increase was utilized to minimize this 2006 rate increase.
A breakdown of the current flat rate for a three-bedroom home into components of Base Rate, WID
Water Purchase, Infrastructure Replacementand PCE/TCE Clean Up is provided in Exhibit C.
Justifications for maintaining the current rates are provided below.
APPROVED: ZQ;�P,
Blair Kin Citi Manager
KAWMUTILITY RATESIW WW\2009 W WW Rate Increase= NoChange.doc 5/15/2009
Consider Waiving CPI Increase for Water Fund for Fiscal Year 2009/10 and Amend Water Rate
Schedule as Approved by Council on April 16,2008
May 20,2009
Page 2
The Base, WID Water Purchase, and Infrastructure Replacement components of the rate comprise
almost 75 percent of the total rate. The Infrastructure Replacement funds are at minimum levels to fund
the replacement of old pipes and water services in the City in order to meet the 2026 State mandate to
install water meters on all residential services. Also, as the City transitions to usage -based rates, there
needs to be a reserves buffer to accommodate unknown revenue reductions resulting from user
conservation.
The City is just entering the PCE/TCE cleanup phase and has yet to receive State approval of any
required elements of the cleanup plan. Approval of three milestone documents is required over the next
couple years. The Engineering Evaluation and Cost Analysis (EECA) and the Clean Up and Abatement
Order (CAO) were submitted this year, and we are awaiting State comments. The final milestone is the
Remedial Action Plan (RAP) and this will be started after approval of the EECA and CAO. State approval
of the RAP is anticipated approximately 12 months after starting. Following State approval of the RAP,
the City's cleanup requirements will be fully defined and documented, but until that happens there is
insufficient new information relative to State cleanup requirementsto set aside any portion of the 2006
rate action by the City Council.
In summary, waiving of the CPI adjustment at this time is predicated upon wide-ranging uncertainties
over the funding requirements of future activities within the water utility and the lack of strong justification
to either increase or decrease the rates. Any increase in the rate would trigger a Proposition 218
procedure. Any decrease is notjustifiable due to the lack of any new information supporting a retreat
from past City Council action.
FISCAL IMPACT: Deferral of the annual adjustmentwill reduce budgeted Fiscal Year 2009/10
revenues by 3 percent.
FUNDING AVAILABLE: Not applicable.
Au" JIOA4d&
F. Wally Sa5relin
PublicWorks Director
FWS/pmf
Attachments
KAWP\UTILITY RATES\W WW\2009 W WW Rate Increase\CC NoChange,doc 5/15/2009
Exhibit A
Water Rate Increase History
July -08 3.84% CPI based
July -07 3.44% CPI based; plus $3.50 PCE/TCE final charge (total $10.50)
July -06 1.95% CPI based; plus $3.50 PCE/TCE second charge (total $7.00)
January -06 $3.50 PCE/TCE first charge
July -05 2.2% CPI based
May -04 35 % WID purchase and PCE/TCE expenses
July -02 25% Infrastructure replacement program second step
January -02 25% Infrastructure replacement program first step
Exhibit B
RESOLUTION NO. 2004-77
A RESOLUTION OF THE LODI CITY
COUNCIL<S"ALISHING WATER SUPPLY,
WAS`iEWATER.DISPOSAL, AND REFUSE
COLLECTION SERVICES RATES
WHEREAS, the Council of the City cf Lodi finds as follows:
1. The City of Lodi provides water supply, wastewater disposal, and refuse
collection services to its citizens;
2. The City charges customers cf these utilities a charge to fund the on-
going operation and maintenance of the water supply, wastewater
disposal, and refuse collection services;
3. The City Public Works Director and staff have prepared a plan outlining
the costs cf operating these utilities, and the City Public Works Director
has recommended increases to the current water, wastewater disposal,
and refuse collection rates;
4. The Council directed that notice of a hearing thereon be given to the
property owners in the City, with such notice to include, among other
matters, the information required to be included pursuant to California
law;
5. Such notice has been mailed to those property owners, at least 45
days before the hearing, as evidenced by a Certificate cf Mailing on file
with the City Clerk;
6. The Council also directed that notice cf a hearing thereon be given with
such notice to include the information required to be included pursuant
to Government Code section 54354.5;
7. Such notice has been published once each week for two weeks, in
accordance with Government Code section 54354.5, in the Lodi News -
Sentinel as evidenced by Proofs of Publication on file with the City
Clerk;
8. On April 27, 2004, the City Council conducted said public hearing, at
which time the City Council heard all objections and protests to the
proposed increased rates;
9. Written protests against the proposed increased rates were not
presented by a majorityof the property owners; and
10. The proposed water, wastewater disposal, and refuse collection service
rates are not discriminatory or excessive, are sufficient under
Government Code section 54515, comply with the provisions or
covenants of any outstanding revenue bonds of the City payable from the
revenues cf the respective enterprise, comply with the provisions Cr Title
5, Division 2, Chapter 6 of the Government Code, and are in compliance
with all other applicable law.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi
as follows:
Section 1 A Recitals. The foregoing recitals are true and correct.
Section 2. Levy of Charaes. Pursuant to Sections 13.08.010, 13.12.240, and
13.16.110 of the Lodi Municipal Code, the increased water, wastewater disposal, and
refuse collection service rates as attached hereto as Exhibits "A, B & C are hereby
approved.
Section 3. Subseauent AdiustLn2nts. The rates shown in Exhibits A, B, & C
may be adjusted periodically by resolution, with Council approval following a public
hearing, in an amount not to exceed the percentage change in the Consumer Price
Index since the previous adjustment. The index used shall be the unadjusted San
Francisco — All Urban Consumers Index as published by the United States Bureau of
Labor Statistics or other index as approved by the City Council by resolution.
Section 4. Termination/Sunset Rate. The portion of attached rates
representing an increase from immediately proceeding rates related to the 1) water
purchase contract shall sunset in 2044, 2) rates related to the White Slough Water
Pollution Control Facility improvements shall sunset in 2044, and 3) the rates associated
with the Environmental Abatement (PCE/TCE) Program shall sunset in 2014.
Section 5. Effective Date. This resolution shall take effect from and after the
date of its passage.
Dated: April 27,2004
hereby certify that Resolution No. 2004-77 was passed and adopted by the City
Council of the City of Lodi in a special meeting held April 27, 2004, by the following vote:
AYES: COUNCIL MEMBERS — Hitchcock, Howard, Land, and Mayor Hansen
NOES: COUNCIL MEMBERS —Beckman
ABSENT: COUNCIL MEMBERS— None
ABSTAIN: COUNCIL MEMBERS — None
SUSAN J. BLACKSTON
City Clerk
2004-77
Tabs : A: mater gLifity Present Rate May -€i4
Residential Flat Rate (per month)
Single Family Unit (one bedroom)
(two bedrooms)
(three bedrooms)
(four bedrooms)
(five bedrooms)
(six bedrooms)
(seven bedrooms)
Multiple Family Unit (one bedroom)
(twobedroorns)
(three bedrooms)
Gomrnerciallindustriai flat Rate
(Existing accounts only. New accounts are metered.)
Metered Rate $0.524 per 100 cu. ft.
approx. $0.70 per 1,000 gallons
$11.43 3/" meter
$17.14 1" meter
$22.85 1'/a" meter
$28.58 2" meter
$40.00 3' meter
$51.43 4 meter
$74.29 6" meter
$97.16 8" meter
n1a 10" meter
$13.51
$16.22
$19.45
$23.36
$28.04
$33.64
$40.35
$11.60
$13.91
$16.69
varies add
plus monthly base charge:
Construction Water Charges:
$0.524 per 100 cu. ft.
$1$.24
$21.90
526.26
$31.54
$37.85
$45.41
$54.47
$15.66
$18.78
$22.53
+ 20%for ea. add I by-droom
35%
$0.707
approx. $0.91 per 1,000gallons
$15.43
$23.14
$30.85
$38.58
$54.00
$69.43
$100.29
$131.17
$762.04
$0.707
Note: Charges are total, including infrastructure replacement charge, which will remain the same and increasevvili be shown in tete service charge.
4/28/2004 2004Rates4-19-04_nodiscounts.xls
Exhibit C
Water Rate Summary
Three -Bedroom Home
Rate Component
Base Rate
WID Water
Infrastructure Replacement
PCE/TCE Clean Up
Amount
$17.43
$4.12
$7.83
$10.90
Total $40.28
Recommended Action
Waive CPI Increase
Alternatives
➢Implement 3.0% CPI Increase
➢Other
ngr
Sales
Other (interest, rent, misc.)
Operating
Debt Service
Cost of Services Payment To General Fund
Net Increase in Undesignated Reserves
4,824,238
127,647
2,905,396
43,320
795,092
1,208,077
;a. ,
,a P
PCE/TCE Settlements
PCE/TCE Rates (185)
Total
14,661,592
2,255,511
28,250,950
History
Date
Base
Infr Repl
PCE
WID
Total
Jan -02
$12.45
$3.11
$15.56
Jul -02
$12.45
$7.00
$19.45
May -04
$19.26
$7.00
$4.12
$26.26
Jul -05
$23.43
$7.15
$4.12
$30.58
Jan -06
$15.93
$7.15
$3.50
$4.12
$26.58
Jul -06
$20.06
$7.29
$7.00
$4.12
$34.35
Jul -07
$20.75
$7.54
$10.50
$4.12
$38.79
Jul -08
$21.55
$7.83
$10.90
$4.12
$40.28
Jul -09
$22.20
$8.06
$11.23
$4.20
$41.49
D 11P.Stlr