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HomeMy WebLinkAboutAgenda Report - March 17, 2010 J-02AGENDA ITEM4�Z CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Approve Water Meter Cost, Extended Payment and Payment Deferral Plan MEETING DATE: March 17, 2010 PREPARED BY: Public Works Director RECOMMENDED ACTION: Approve water meter cost, extended payment and payment deferral plan. BACKGROUND INFORMATION: At the March 2,2010 Shirtsleeve meeting, the City Council was presented a number of alternative construction schedule, payment, and payment deferral options. The City Council requested additional information be provided relative to extending the construction timeframe by two years and extending the payment deferral timeframe by one or two years. Additionally, the City Council expressed interest in a $1,200 cap for property owners for installing new meter services and that information also be provided relative to using Community Development Block Grant (CDBG) funds for grants to very low- and low-income property owners. Staff has performed these additional analyses, and the results are reported below. Based upon staffs review of the results, the following Water Meter Program construction schedule and property owner payment plan is recommended for approval by the City Council. The final City Council action setting usage -based water rates, water meter costs, extended payment option, and payment deferral plan will occur at the close of the Public Hearing scheduled for July 21, 2010. Recommended Plan A. Five-year construction schedule beginning 2011 and ending 2015. B. Set cost now for five classes of meter service installations. Costs would be set as follows: 1. Meter and electronic radio transmitter [ERT] ($300) 2. Meter and ERT installed in an existing nonstandard box ($450) 3. Replace Rich Box assembly in rear yard ($1,200) 4. Replace Rich Box assembly in front yard ($1,100) 5. Install new service and meter assembly from new water main to residence ($1,200) C. Optional lump sum payment by property owners or seven-year payment installment plan (fixed interest rate at City's Investment Portfolio rate — around 1.5 percent). D. Lump sum payment period from April 1, 2011 through June 30, 2011. E. Payment installments begin for all property owners on July 1, 2011. F. Payment assistance program for very low- and low-income property owners. Five -Year Construction Schedule. The Water Meter Program combines the replacement of 22.5 miles of substandard water transmission mains with the installation of approximately 13,306 water meters. The estimated total cost of construction is $37,000,000 including design, construction administration, inspection and construction. Funding for construction is coming from infrastructure replacement revenue and water meter charges. Construction will be divided into five approximately equal phases sequenced APPROVED: r �r� a" Blair King. f=.anager K:\WP\PROJECTS\WATER\Meters\CWaterMeterFinancing.doc 3/10/2010 Approve Water Meter Cost, Extended Payment and Payment Deferral Plan March 17, 2010 Page 2 across the community in a northwest to southwest direction. Construction activities will occur from April through October in each year 2011 though 2015. Previously, a three-year construction timeframe has been at the forefront of discussions with the Council. As presented below, the results of analyses demonstrate that the shortened construction schedule has a negative impact on the cash flow of the Water Capital fund that is partly mitigated by extending the construction timeframe to five years. Optional Lump Sum or Payment Installments. ExhibitA provides a summary of cost by installation cost, recommended property owner charge by class, and payment installments by class for varying time periods. The six- and seven-year alternatives have been added at City Council's request. The total of all payment installments for the seven-year option is also provided. At the Shirtsleeve meeting, five classes of installation types were reviewed and a diagram of each is provided in Exhibit B. The installation costs vary from $300 to $2,000 with an estimated 3,623 properties in the Class 5 category at a cost of $2,000 each. Results of the water model analysis capping the Class 5 cost at $1,200 are provided below. Set Costs Now for Five Installation Classes. Staff recommends that the City Council approve a fixed -cost schedule at the levels presented in ExhibitA for the Water Meter Program. This is a departure from staffs prior recommendation that property owner meter costs be based upon actual construction bids. The recommendation, if approved, will establish equity across all installation classes and simplify the billing and collections process. It is consistent with the methodology incorporated by other communities. Lump Sum Payments. Canvassing of the 13,306 meter installation locations will be completed by April 1, 2011. By that time, notices will be sent to property owners informing them of their installation class and cost. There will be a 60 -day property owner review period and lump sum payments would be accepted through June 30, 2011. Payment Installments. Payment installments as presented in ExhibitA will be added to the customers' billing (if the property owner) or sent separately to the property owner beginning July 1, 2011 and continue for seven years. Initiating the payment installments at a uniform time and early in the Water Meter Program has a positive impact on the cash flow in the Water Capital fund. Provisions for early retirement of the payment installments will be available. Conversion of a lump sum paymentto a payment installment program will not be available. Upon transfer or sale of the property, the payment installment plan will terminate and the balance due will be required to be paid upon notice of service termination. Payment Assistance Program for Very Low- and Low -Income Property Owners. Staff recommends dedicating CDBG funds to provide grants to at least very low- and possibly low-income property owners receiving a new meter service. The grant program would be initiated this year and grant applications will need to be returned by December 31, 2010 so that property owner eligibility and coverage of the grant program could be determined by the City Council. For example, if eligible grant applications from very low and low income property owners amounted to $1,500,000 and the work was evenly distributed across the community, the City Council would be asked to commit an average of $300,000 per year for the next five years. On the other hand, if eligible grant applications amounted to $3,000,000 and no additional CDBG were available, the City Council might consider funding only the very low-income category and part or none of the low-income category. This decision would be presented to the Council early in 2011 prior to the start of payment installments on July 1, 2011. Analyses Results. Five different cash flow analyses have been prepared as described in Exhibit C. The fifth alternative resulted from comments at the Shirtsleeve Session and is similar to Alternative 2 but with a five-year construction timeframe. Embedded assumptions in these alternative analyses include: 1. I -percent rate indexing in the first year and 4 -percent rate indexing each of the following nine years. K:\WP\PROJECTS\WATER\Meters\CWaterMeterFinancing.doc 3/10/2010 Approve Water Meter Cost, Extended Payment and Payment Deferral Plan March 17, 2010 Page 3 2. 30 percent of property owners in the Classes 1 and 2 pay lump sum. 3. 10 percent of property owners in Classes 3 through 5 pay lump sum. 4. Payment installments begin in the year of construction for Alternatives 1 through 4 and on July 1, 2011 for Alternative 5. 5. Infrastructure replacement revenue is dedicated to the pipeline replacement (22.5 miles) portion of the water meter program. 6. PCEITCE cleanup revenues are reserved. Results of the five analyses are presented in bar chart form in Exhibit D. The results are described below. Alternative 1. Three-year construction, five-year extended payment plan, payment installments begin in year of construction, and no cap on meter charges —fund deficit occurs over a three-year period with the peak reaching minus $8.2 million but recovering two years later. Alternative 2. Three-year construction, five-year extended payment plan, payment installments begin in year of construction, and $1,200 cap on meter charges —fund deficit occurs over a four-year period (because the water fund is covering the difference between $2,000 and $1,200) with the peak reaching minus $9.3 million and recovering three years later. Alternative 3. Five-year construction, five-year extended payment plan, payment installments begin in the year of construction, and no capon meter charges —fund deficit occurs over a three-year period with the peak reaching minus $4.5 million and recovery occurs a little more than a year later. Alternative 4. Five-year construction, five-year extended payment plan, payment installments begin in the year of construction, and $450 capon meter charges —fund deficit occurs for five years reaching a peak minus $9.8 million and recovery occurs four years later. Alternative 5. Five-year construction, seven-year extended payment plan, payment installments begin July 1, 2011, and $1,200 capon meter charges —fund deficit occurs for just over three years reaching a peak of minus $6.5 million with recovery in just over two years. Alternative 5 is recommended over Alternative 2 if the meter cost is capped because the deficit is smaller with a quicker recovery. Alternative 3 is superior to Alternative 1 if the full meter cost is charged to the property owners and minimizing the size and duration of the deficit is important. Alternative 4 is not recommended unless the construction timeframe was extended to seven years or longer. For all alternatives, fund balance in other sub -funds is sufficient to cover the short-term deficit and the addition of CDBG funds to the program has not been accounted for in the analyses. At this time, staff is not recommending any further exploration of alternative scenarios. City Council is requested to approve a plan setting water meter costs, the extended payment option and payment deferral as recommended by staff or modified by the City Council. FISCAL IMPACT: Not applicable. FUNDING AVAILABLE: Not applicable. F. Wally S delin PublicWorks Director FWS/pmf Attachments K:1WPIPROJECTSIWATER\Meters\CWaterMeterFinancing.doc 3/10/2010 Exhibit A LUMP SUM OR PAYMENT INSTALLMENT ALTERNATIVES Per Month Pavment Class Description cost Recommended Charge 3 -Year 5 -Year 6 -Year 7 -Year PaVMe'gts y 1 Meter and ERT $300 $300 $8.53 $5.19 $4.36 $3.76 $315.84 2 Noxstandard Meter $450 $450 $12.79 $7.79 $6.54 $5.65 $474.60 3 Rich Box in Front Yard $1,100 $1,100 $31.27 $19.04 $15.99 $13.80 $1,159.20 4 Rich Box in RearYard $1,200 $1,200 $34.11 $20.77 $17.44 $15.06 $1,265.04 5 New Meter Service on $2,000 $1,200 $34.11-7 $20.77 $17.44 $15.06 $1,265.04 New Main Recommended K:\WP\PROJECTS\WATER\Meters\C WaterMeterFi nancing_ExhibitA, doc Installation Edge of Street Corp Stop Std. Meter Box Existing Service Main in StreetCD ��. 41) CD t-_ Install Water Meter w/ ERT f Replace Non -Std. Meter Box _ --------wl Std. Meter Box e CD �83 Lr ------ -- Install Water Meter w/ ERT Connect to Existing Curb Stop Install Std. Meter Box & --- Water Meter w/ ERT t I : ' Connect to �I" C i Remove ll `�j''- I____Existing Rich Box II Service Install New Service Line Replacement Exhibit B Class Install Std. Meter Box & Property Line 4. Pre -1979 Connect to Existing Service Install Std. Meter Box & Install Service from Water Meter w/ ERT Main to Box Install Service from Box to Residence New Main in Street Connect to Existing Corp Hose Bib Stop Connect to Existing YSitdrideAllay Mast>n Main in Rear Yard/Alley Curb Stop Disconnect Existing Service 5 Pre -1979 Residence; ' i \ Rich Box Abandon Main Property Line Exhibit C CASH FLOW MODEL ALTERNATIVES Alternative Construction Timeframe Meter Service Cost Extended Payment Period 1 3 Years I No Cap 5 Years 2 3 Years $1,200 Cap 5 Years 3 5 Years No Cap 5 Years 4 5 Years $450 Cap 5 Years 5 5 Years $1,200 Cap 7 Years Exhibit D Three -Year Construction, Five -Year Extended Payments, No Cost Cap ---sza,Ooo,Doo sIs.ODo�ooO � — - i j 510.000:000 -- . Fr 00-30 0-Y 1611 FV ZZ -12 5t FV 23-36 FV 1617 0-Y 17-1= FV 10-19 FV a9-20 i S{S.DDgODO) 3{10.000.000) Three -Year Construction, Five -Year Extended Payments, $1,200 Cost Cap sz _OOKL000 SIs.00MOM — - -- -- ---- sia000 000 S%Ooo 000 S_ - �- - - -,- -, -- - - 0-Y 00-10 FY 7631 FV 11-12 F'S6 FV 3617 FY 17-10- FY 11-19 FV 19.20 3[5.000 000) S(XG 000.000) 1 S(ISAMMO00) Five -Year Construction, Five -Year Extended Payments, No Cost Cap SISAMMOM sza000 000 ssooD o00 s- _ f FV 00.30 FV 10-11 FV 11-12 r. -FV 12-13 FY 13-14 "2.0-:X7 FY 17-16 FV 1119 FV 1}Z0 .- 3 S(10.000600W Five -Year Construction, Five -Year Extended Payments, $450 Cost Cap Five -Year Construction, Seven Year Extended Payments, $1,200 Cost Cap The City of Lodi Public Works Water Services Water Meter Cost and Payment Plan Item J2 March 17, 2010 Background • 1979 to 1993 — Lodi began installing meter ready residential services (2,500) • 1992 — State law requires meters on all new residential services (3,200) • 2004 — State law (AB 2752) requires all residential services to be metered (13,000 +) 1-0 1.. a;_- Recommendation ➢Five-year Construction (2011 through 2015) ➢ Fixed Cost for Five Classes of Installation ➢Lump Sum Payment for Seven Year Payment Installments ➢Payment Installments Begin July 1, 2011 ➢Payment Assistance Program for Very Low and Low Income Property Owners 4 Meter Set Components 41 Installation Edge of Street Corp Main in stop Std. Meter Box EAsting Service Street Install Water Meter w/ ERT Restore Surface Improvements Restore Surface I mprownents Replace Nor�Std. Meter Box w/ Std. Meter Box Install Water Meter w/ ERT Connect to asting Curb Stop . MGM . Install Std. Meter Box & Water Meter w/ ERT Install New Service Line REoacemmnt Connect to Bdsting Service Class Installation Class owl Restore Surface Irrprovernents Install Std. Meter Box & Water Meter w/ ERT ._MOM_. Install New Ser\nce Property Line Connect to asting in in Rear Service Connect to asting Yard/Alley Curt) Stop Install Std. Meter Box & Install Service from Water Meter w/ ERT Main to Box Install Service from Box to Residence New Main in Street c . MOM . Property tine Rich Box Seven Year Payment Plan Class Description Recommended Monthly Total All Charge Payment Payments 1 Meter & ERT $300 $3.76 $315.84 2 Nonstandard Meter $450 $5.65 $474.60 Box 3 Rich Box Front Yard $1,100 $13.80 $1,159.20 4 Rich Box Rear $1,200 $15.06 $1,265.04 Yard/Alley 5 New Service on $1,200 $15.06 $1,265.04 New Main Seven Year Payment Plan • Lump Sum Through June 30, 2011 • Monthly Billing Starts July 1, 2011 • No Penalty For Early Payoff • Lump Sum Cannot Convert After July 1, 2011 • Payoff Required Upon Sale/Transfer Payment Assistance ➢ Funding by CDBG ➢ Estimated Need $1.5 - $4.0 Million ➢ Application Period September through December 2010 ➢ Reconcile Need to Funding 1 St Quarter 2011 Program Cash Flow Five -Year Construction, Seven Year Extended Payments, $1,200 Cost Cap Lao Questions? 0AMOOO FF 09-20 FF IG-22 FY 11-32 IF PIF 15p--1G PF 26-17 FT 17-3d FF 1A-29 FY 19-2U Three -Year Construction, Five -Year Extended Payments, $1,200 Cost Cap SzouMaao s1movowmxQuo SM���odo S - $110.(MMM FY MAU FF Ila] t FY 1012 FY 1 ,13 F 1-:111-14FIR5p 5 FY 2&47 FV 3F -3E FF 1S1S FY 19YOU s aulatom 1Abou ME too ONO �r�C�� 11�r Pro�� FT mit � n-32 FT U-13 Fr i � � � lis -05 � �z� LODI WATER METER MANDATE (MARCH 17TH, 2010, AGENDA ITEM J-2) PERSPECTIVES AND CLARIFICATION REQUEST 1. The Intent and Spirit of installing water meters in Lodi (Thank You) a, Shows a truly 'green' essence in our community b. Shows commitment to a true capitalist conversion of city services (e.g. People who own pools vs. those who just shower) 2. The Application Plan for the Water Meters could be Incompatible?, a. Nothing in agenda that states how 'homeowners' will be charged b. Do you mean charging City of Lodi account holders? c. Account holders are not necessarily the owners of the home occupied d. Does City of Lodi utility accounts indicate owner vs, renter? e, Should Renters be held liable for'cty mandated' modifications? 3. Abandonment and Accoinintabi>;t_y issues: a. Example 1: If 'homeowner' pays meter ill Ur "o years, sells ho as L-, ind new owner i z : n : will I : ew homeowner be chargi d:? Tracking histoYy of meter installat c)n payments" headache. 1. Example Z . , opex ty is abandoned AF ER meter is I but not yet PAID OFF, who aghs up the Terence, C ity o Citi ; e 9 F 3: 'Homeowner' pays the amount 7 years, and tb a after amount of time ells the a c t I i e. new owner reaps it. [ the benefits? 4. Water Raters and Comparison of Rates a. Shouldn't proposed water rates be clearly indicated? b. The WHOLE PACKAGE not just part of it (what we're getting into) c. Justifiable Rate Comparison sample of Cities metering water NOW - North, Central and especially Southern California recommended d, What is the Average Estimate a household will be charged via rates? e. Urban vs. Agricultural vs. Scholastic vs. City Building vs. Business.. . - Hope this doesn't hurt Agricultural in any way (Wine Industry) -- OVER -- 5. City vs. Community ("Potential" Compromise Imbalance) a. Proverbial 'give and take' is one-sided b, Disparity of "Potential" Compromise Chart: PROPERTY OWNER I. Pays per Water USED (e.g. Bottle of Water) 1L Pays for the Meter Installed 111 Pays for Taxes on Project CITY OF LODI I. Phases out Conservation Dept? (Rules and Enforcement Removed) 11. ? (Lower Rates Perhaps?) 111. ? (Tax Credits/Breaks.?,) 6. Class l through 5 ore,—fir inirinn on a home Ina ro riate? a. ar1. ula r ly,tb pre �I 7 section on classification P I .� 0 s. $l J00) b,. Long standing hoirne owners, with properly x d, d and paid ur homes: et the 'tong shaft )it this mandate, C. es this go against any ii, housing/discriminati codes? TFA.L . « � e piping is no 1.^, g'WIr'up to code' but: has been until now. does that infrinon pouety owners xigIEby "t." singled out? rV If you gi ahcad with chargi g owners for meter installation,, y will hear a tremendous outcry especially ) n this part" ox the P 1..i 7. Consider the Questions and Resolution a. Most likely more questions will arise from other folks - If I am asking these questions now... b. Research into possible FUNI?ING/STIMULUS/TAX CREDITS? -A "RESPONSIBLE ACT OF CONSERVATION" is proposed c. It would be understandable to withdraw, take this quickly back to the drawing board and resubmit a new plan d. There is a lot that needs to be CLARIFIED before any action taken e. Success of a plan is not just in the application, but the execution f. I am still in favor of metering, please get this right g. Water is a very tricky issue for this community, tread carefully Thank you for allowing me the time to submit this to your attention. X Christopher B. Vigil Date: 03-17-2010,