HomeMy WebLinkAboutAgenda Report - July 20, 2005 K-02 PHAGENDA ITEM VW*L
J& CITY OF LODI
COUNCIL COMMUNICATION
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AGENDA TITLE: Establish Proposed Rates and Set Public Hearing on September 21, 2005, to
Hear Protests on Resolution Adopting Water Rate Increase
MEETING DATE: July 20, 2005
PREPARED BY: Public Works Director
RECOMMENDED ACTION: That the City Council establish proposed rates and set a public
hearing on September 21, 2005, to hear protests on a resolution
adopting a water rate increase.
BACKGROUND INFORMATION: For many years now, the City has been coping with the legal and
technical issues surrounding PCE and TCE contamination in the
Central City area. The net cost for these activities has been borne
by the water fund until FY 04105 in which approximately half was
also advanced from the wastewater fund. This includes use of some of the funds collected for the
purpose of infrastructure replacement. While the total and final cost of remediation is not precisely
known, it has been reasonably estimated. The City must raise water rates in order to maintain the cash
flow of the utility. Not doing so will place the General Fund at risk, thus jeopardizing public safety and
other services provided by the General Fund.
The City recently retained the services of Bartle Wells Associates to analyze the water and wastewater
funds and make recommendations regarding rates. The results of their work will be presented at the
Shirtsleeve Session on Tuesday, July 19, 2005. However, one early conclusion they reached was that
the rate increase should be applied to the water utility only. In reviewing the wastewater fund and
examining existing bond covenants, they felt that including the wastewater fund in this program would
result in rate increases higher than necessary for the PCEITCE program in order to maintain coverage
requirements, and it would complicate future financings in the wastewater utility, which will be necessary
for improvements at the White Slough Water Pollution Control Facility.
Based on past Council actions and discussion and meetings between staff and Bartle Wells, the rate
analysis is being done with the following assumptions and direction:
The net amount of money for the PCEITCE program (total costs minus third party recoveries) is
$45.7 million. This is an "all -in" cost that includes capital, operating, legal and regulatory
oversight expenses for an estimated 30 -year remediation time frame and also includes
"repayment" of approximately $12.2 million in past expenses advanced by the water and
wastewater funds through FY 04105. While the majority of these costs are directly for remediation
efforts, a significant portion is related to settlement of claims which are considered confidential
because revealing the amounts the City has set aside to settle remaining claims would
compromise our ability to settle them; thus, a breakdown is not being provided.
• The above net cost is spread over 30 years based on anticipated cash flow requirements with the
"repayment" starting in three years and spread over fifteen years. Given capital requirements for
the remediation systems, the cash flow is heavily front -loaded.
APPROVED:
'
J:IUTILITY RATESIW WWICSetPH Rateincrease2oO5.doc
Blair Kin Manager
7113/2005
Establish Proposed Rates and Set Public Hearing on September 21, 2005 to Hear Protests on
Resolution Adopting Water Rate Increase
July 20, 2005
Page 2
• The water utility's General Fund contribution will be maintained at current levels; i.e., the rate
increase will be revenue neutral to the General Fund.
• The analysis includes estimates of general operating cost increases and restoration of the
infrastructure replacement program at previously contemplated levels. In addition, an allowance
has been made for the cost of retrofitting water meters as required by State law. Provisions for
minor annual increases based on the Consumer Price Index (as was recently done for the Water
Utility) will significantly help maintain this level of service.
• The analysis to be presented will include alternative approaches to funding the PCEITCE issue.
One approach involves stepped increases with supplemental outside financing. While this will
reduce the initial rate increases, financing costs over the long term will mean the increases will
need to be in place longer. Another approach is to have a relatively higher initial increase to
avoid financing and allow for rate reductions once the capital and other early costs are paid.
• The public will be notified under a Proposition 218 notice; property owners by direct mail and
utility customers with a notice in the bill. This process provides for a majority protest by property
owners in accordance with the State Constitution. The notice will include provisions for future
increases based on the Consumer Price Index.
Bartle Wells will be at the Shirtsleeve Session, as well as at the Council meeting on July 20, to present
the results of their analysis and make recommendations for Council consideration. Note that with the
extended public notice time frame, staff and Bartle Wells will have time to evaluate and respond to public
and Council questions.
FISCAL. IMPACT: To be determined.
FUNDING AVAILABLE: Not applicable.
Richard C. Prima, Jr.
Public Works Director
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J:WTILITY RATrSkW WW\CSetPH Ratelncrease2005.doc 7!13!2005
Item K-2
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Proposition 218 Notification
NOTICE TO PROPERTY OWNERS OF PUBLIC HEARING
ON PROPOSED WATER RATE INCREASE
Hearing Date & Time: Wednesday September 21, 2005 at 7:00 p.m. or as soon thereafter as the matter may be heard
Hearing Location: City of Lodi Council Chambers, at the Carnegie Forum
305 West Pine Street, Lodi, CA 95240
Why a Water Xate Increase is Needed
The groundwater supply for the City of Lodi has been contaminated by PCE/TCE, two chemical solvents determined by federal and
state health and environmental agencies to be hazardous to public health. In response to the presence of these pollutants, the City
began identifying the source of contamination and also began action to remove PCE/TCE from its groundwater supply. Additionally,
the City took legal action against potentially responsible parties and began efforts to comply with the regulatory requirements of the
state agencies with jurisdiction over the presence and remediation of PCE/TCE in the groundwater supply.
The City and its technical consultants estimate the net cost of remediation to be $45.7 million. Included are capital, operations and
maintenance, administrative and legal costs. From the finding of PCE/TCE in the groundwater supply to the present, the City incurred
over $12 million of remediation, Iegal and regulatory expenses. These expenses were paid from City Utility funds that must now be
repaid and are included in the above total.
He._.. art
Proposition 218 requires that the City provide a notice of the proposed rate schedule to all property owners forty-five (45) days prior
to holding a public hearing. In order for the increase to "not take effect", a majority of the property owners (not renters) are required
to file opposition to the increase.
Property owners may file a written and signed protest against the proposed increases with the City Clerk at or before the close of the
public hearing. A protest must contain a description of the property owned sufficient to identify the property. (The address or
assessor's parcel number shown on this mailing is sufficient.) If you own more than one parcel, you may file a single protest but it
must identify each parcel you own. If the name on the written protest is not shown on the last equalized assessment roll of San
Joaquin County as the owner of the property, the signer of the protest must also submit written evidence of ownership. At the hearing,
Council shall hear all protests and tabulate the ballots. The ballots in this case are written protests against the increases.
The City Council will hold a public hearing on the proposed increases on Wednesday, September 21, 2005, at 7:00 p.m. or as soon
thereafter as the matter may be heard, in the City Council Chambers at the Carnegie Forum, 305 West Pine Street, Lodi, California.
Written protests may be mailed to: City of Lodi
Attn: City Clerk
P.O. Box 3006
Lodi, CA 95241-1910
Written protests may also be delivered in person to the City Clerk, 221 West Pine Street, Lodi, California, or at the public hearing.
Basis of Pro ed Water Rate increase
An independent financial firm developed a water rate that will fairly and equitably recover the projected cost of remediation and the
payments due to other City funds for expenses incurred prior to the settlement. The increase is based on and was calculated using the
projected cost of the remediation and the repayment of expenses incurred.
Impact of Proposed PCE/TCE Remediation Rate Increase
The proposed increases would be implemented in three phases beginning January 1, 2006. The proposed increases would initially
add $3.50 to the monthly water bill of a 3 -bedroom home, (the largest customer group in Lodi) beginning January 1, 2006. Two
subsequent increases in July 1, 2007 and July 1, 2008 would each add an additional $3.50 to the monthly bill. The rate for other
customer groups is proportionate to the ratios established in the City's existing rate structure. Proposed rates for each customer
category are detailed in the Water Rates Table attached.
Water rates could also be adjusted each July 1 by the change in the Consumer Price Index as previously approved by Council action.
Dated:
Susan Blackston
CITY CLERK, City of Lodi
If you have questions or comments about the proposed water rate increases, you may:
Address the Council: Attend the Public Hearing on September 21, 2005
Telephone Public Works: 209-333-6706
Email: pwdepA WodLgov
Write the City Clerk: P.O. Box 3006, Lodi, CA 95241-1910
To file a protest, please see the instructions above in this notice.
M Notice Rate Table
City of Lodi Water Utility
Proposed Water Rates Fiscal Years 2005/06 - 2007108
(1) Rates effective each July 1 *11 be adjusted for changes in the Consumer Price Index
(2) plus 20% for each additional bedroom
(3) Monthly total for metered commercial customers depends on amount of water used
(4) Estabffished City Utility Discounts apply to above rates
7/20/2005
Current Rates
Rates Effective
Rates Effective (1)
Rates Effective (1)
Effective 5/1/2005
1/1/2006
7/1/2006
7/1/2007
Single -Family
PCE/
Monthly
PCEI
Monthly
PCEI
Monthly
PCE!
Monthly
Residential
Base
Infr.
TCE
Total
Base
Infr.
TCE
Total
Base
Infr.
TCE
Total
Base
Infr.
TCE
Total
1 BR - House
13.67
4.97
0.00
18.64
13.67
4.97
2.43
21.07
13.67
4.97
4.86
23.50
13.67
4.97
7.29
25.93
2 BR - House
16.41
5.97
0.00
22.38
16.41
5.97
2.92
25.30
16.41
5.97
5.84
28.22
16.41
5.97
8.76
31.14
3 BR - House
19.68
7.15
0.00
26.83
19.68
7.15
3.50
30.33
19.68
7.15
7.00
33.83
19.68
7.15
10.50
37.33
4 BR - House
23.64
8.60
0.00
32.24
23.64
8.60
4.20
36.44
23.64
8.60
8.41
40.65
23.64
8.60
12.61
44.85
5 BR - House
28.36
10.32
0.00
38.68
28,36
10.32
5.04
43.72
28,36
10.32
10.09
48.77
28.36
10.32
15.13
53.81
6 BR - House
34.03
12.38
0.00
46.41
34.03
12.38
6.05
52.46
34.03
12.38
12.10
58.51
34.03
12.38
18.16
64.57
7 BR - House
40.82
14.85
0.00
55.67
40.82
14.85
7.26
62.93
40.82
14,85
14.52
70.19
40.82
14.85
21.78
77.45
Multi -Family
Residential
1 BR -APT
11.73
4.27
0.00
16.00
11.73
4.27
2.09
18.09
11.73
4.27
4,17
20.17
11.73
4.27
6.26
22.26
2 BR - APT
14.07
5.12
0.00
19.19
14.07
5.12
2.50
21.69
14.07
5.12
5.00
24.19
14.07
5.12
7.51
26.70
3 BR - APT
16.88
6.14
0.00
23.02
16.88
6.14
3.00
26.02
16.88
6.14
6.00
29.02
16.88
6.14
9.01
32.03
4 BR - APT 2
2016
7.38
0.00
27.54
20.26
7.38
3.60
31.24
20.26
7.38
7.21
34.85
20.26
7.38
10.81
38.45
Flat - Rate Commercial Customers - Varies
Flat rates increase 13.05% 01/01/06
Flat rates increase 11.545% 07/01/07
Flat rates increase 10.35% 07/01/07
Metered
Base
Infr.
PCEI
Base
Infr.
PCE/
Base
Infr.
PCEI
Base
Infr.
PCF)
Commercial (3)
Base
$/ccf
$/ccf
TCE
Base
$/ccf
$/ccf
TCE
Base
$/ccf
$2cf
TCE
Base
$/ccf
$/ccf
TCE
Comm. -75"
15.77
0.490
0.233
0.00
15,77
0.490
0.233
3.50
15.77
0.490
0.233
7.00
15.77
0.490
0.233
10.50
Comm. 1"
23.65
0.490
0.233
0.00
23.65
0.490
0.233
5.25
23.65
0,490
0.233
10.51
23.65
0.490
0.233
15.76
Comm. 1.5"
31.53
0.490
0.233
0.00
31.53
0.490
0.233
7.00
31.53
0.490
0.233
14.00
31.53
0.490
0.233
21.01
Comm. 2"
39,43
0.490
0,233
0.00
39.43
0.490
0.233
8.76
39.43
0.490
0.233
17.51
39.43
0.490
0.233
26.27
Comm. 3"
55.19
0.490
0.233
0.00
55.19
0.490
0.233
12.26
55.19
0.490
0.233
24.51
55.19
0.490
0.233
36.77
Comm. 4"
70.96
0.490
0.233
0.00
70.96
0.490
0.233
15.78
70.96
0.490
0.233
31.52
70.96
0,490
0.233
47.28
Comm. 6"
102.60
0.490
0.233
0.00
102.60
0.490
0.233
22.77
102.60
0.490
0.233
45.53
102.60
0.490
0.233
68.30
Comm. 8"
134.06
0.490
0.233
0.00
134.06
0.490
0.233
29.75
134,06
0.490
0.233
59.50
134.06
0.490
0,233
89.25
Comm. 10"
165.60
0.490
0.233
0.00
165.60
0.490
0.233
36.75
165.60
0.490
0.233
73.50
165.60
0.490
0,233
110.25
(1) Rates effective each July 1 *11 be adjusted for changes in the Consumer Price Index
(2) plus 20% for each additional bedroom
(3) Monthly total for metered commercial customers depends on amount of water used
(4) Estabffished City Utility Discounts apply to above rates
7/20/2005