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Agenda Report - February 5, 2020 C-17
AGENDA ITEM iCao/7 A% CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Adopt Resolution Foregoing 2020 Pre -Approved Engineering News Record Adjustment for Usage -Based and Flat Water Rates for Residential, Commercial, and Industrial Customers MEETING DATE: February 5, 2020 PREPARED BY: Public Works Director RECOMMENDED ACTION: Adopt resolution foregoing 2020 pre -approved Engineering News Record adjustment for usage -based and flat water rates for residential, commercial, and industrial customers. BACKGROUND INFORMATION: The City Council has made numerous water rate decisions over the past several years. On March 20, 2019, City Council approved a five-year rate plan in accordance with the Proposition 218 rate setting process. The proposed rate adjustments are needed to generate sufficient revenue to meet projected operation and maintenance costs and debt service obligations, as well as, necessary capital maintenance improvements. For the water and wastewater utilities, the annual rate adjustment, if approved, is the lesser of the Engineering News Record (ENR) index change or three percent, with the exception of the proposed January 1, 2021 water rate adjustment that includes a projected 5.3 percent decrease, to January 1, 2016 levels. A summary of the past years water rate adjustments relative to the ENR index change is provided in Attachment A. The purpose of this table is to demonstrate that past actual rate increases have frequently been below the approved maximum. The previous year's ENR index change was 1.3 percent. After evaluating the water utility's rate revenue model, it has been determined the utility can meet its revenue requirements without implementing this year's planned rate increase. Based on this evaluation, staff is recommending Council forego the 2020 pre -approved rate increase because the adjustment is anticipated to generate less than $175,000 over the calendar year; and this revenue requirement can be offset by the favorable bids received for Phase 8 of the water meter program. Additionally, in this unique case, the revenue increase will not compound into the future since on January 1, 2021, rates will be rolled back by 5.3 percent, to January 1, 2016 levels, in accordance with Council Resolution No. 2017-23. The City's Financial Plan (Attachment B), reflects that despite foregoing the pre -approved rate increase, fund balances are projected to steadily rebound toward the maximum reserve target of 50 percent starting in Fiscal Year 2023/24, as large Water Meter Program expenditures are no longer needed. FISCAL IMPACT: The Water Utility is anticipated to remain financially sound based on the recommended one-time rate postponement. APPROVED: ity Manager UWMUTILITY RATES\W__WW12020 W_WW Rate Increase\CC Forego_WaterRates2020.doc 1/21/2020 Adopt Resolution Foregoing 2020 Pre -Approved Engineering News Record Adjustment for Usage -Based and Flat Water Rates for Residential, Commercial, and Industrial Customers February 5, 2020 Page 2 FUNDING AVAILABLE: Not applicable. (I �_ Charles E. Swimley, Jr Public Works Director Prepared by Rebecca Areida-Yadav, Public Works Management Analyst CES/RAY/tc Attachments K:\WP\UTILITY RATES\W_WW\2020 W_WW Rate Increase\CC Forego_WaterRates202O doc 1/21/2020 Attachment A Programmed and Implemented Rate Adjustments Water Year Programmed Implemented 2009 3.10M 0 2010 0.73M 0 2011 5.98 (2) 2.0 2012 2.53 (3) 2.2 2013 2.50 (3) 2.5 2014 3.30 (3) 2.5 2015 2.00 (3) 2.0 (4) 2016 1.975 (3) 1.975 (4) 2017 3.36 (3) 3.0 (4) 2018 3.98 (3) 0 (5) 2019 2.90 (3) 2.5(5) 2020 1.30(3) 0(4) (1) Consumer Price Index change (2) Consumer Price Index change (December 2008 through December 2010) (3) Engineering News Record Index change (4) Recommended by Staff (5) Implemented by Council WATER OPERATING FUND (FUND 560) Beginning Balance Operating Revenues Flat Rate Revenue Service Charge Revenue Usage Charge Revenue BABs Subsidy Miscellaneous Revenue Interest Earnings Trans. from Water IMF Fund for DS Total Operating Revenues Operating Expenses and Transfers Water Administration WID Water Purchases Operating Transfer Out Damage to Property Water Production Electricity Water Distribution Surface Water Treatment Facility Electricity Water Conservation DBCP Debt Service Transfer to Capital Fund (Fund 561) Total Oper. Expenses and Transfers Ending Balance Operating Reserve (50%) Available Funds Debt Service Coverage (min. 1.25) WATER CAPITAL FUND (FUND 561) Beginning Balance Revenues and Transfers In Transfer from Operating Fund Transfer from Water IMF Fund Total Revenues and Transfers In Capital Program Expenditures Capital Projects Total Capital Prog. Expend. Ending Balance Exhibit II -8 City of Lodi Water System Financial Plan FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 2.5% 0.0% -5.3% 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% April January January January January January January January January January January January $ 3,226,236 $6,683,400 $2,897,800 $3,357,700 $3,957,300 $4,825,500 $6,837,100 $5,906,100 $6,395,000 $7,742,500 $8,519,200 $9,334,500 $ 3,318,659 $ 3,437,000 $ 2,901,000 $ 2,631,000 $ 2,304,000 $ 1,469,000 $ 500,000 $ - $ - $ - $ - $ - $ 5,274,601 $ 5,343,000 $ 5,478,000 $ 5,577,000 $ 6,002,000 $ 6,547,000 $ 6,971,000 $ 7,268,000 $ 7,466,000 $ 7,669,000 $ 7,878,000 $ 8,063,000 $ 4,751,212 $ 4,687,000 $ 4,798,000 $ 4,844,000 $ 5,149,000 $ 5,750,000 $ 6,490,000 $ 6,984,000 $ 7,161,000 $ 7,356,000 $ 7,553,000 $ 7,734,000 $ 620,998 $ 662,000 $ 662,000 $ 662,000 $ 643,200 $ 622,800 $ 601,000 $ 577,700 $ 550,100 $ 521,300 $ 491,400 $ 460,200 $ 384,700 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 369,200 $ 216,148 $ 215,500 $ 86,900 $ 100,700 $ 118,700 $ 144,800 $ 205,100 $ 177,200 $ 191,900 $ 232,300 $ 255,600 $ 280,000 $ 14,566,318 $ 14,713,700 $ 14,295,100 $ 14,183,900 $ 14,586,100 $ 14,902,800 $ 15,136,300 $ 15,376,100 $ 15,738,200 $ 16,147,800 $ 16,547,200 $ 16,906,400 $ 1,468,223 $ 1,637,390 $ 1,687,200 $ 1,737,900 $ 1,789,900 $ 1,843,300 $ 1,898,400 $ 1,955,100 $ 2,013,500 $ 2,073,400 $ 2,135,600 $ 2,199,600 $ 1,450,952 $ 1,477,430 $ 1,517,600 $ 1,558,900 $ 1,601,400 $ 1,645,100 $ 1,691,400 $ 1,739,000 $ 1,789,300 $ 1,841,100 $ 1,894,400 $ 1,949,200 $ 821,900 $ 860,640 $ 886,500 $ 913,100 $ 940,500 $ 968,700 $ 997,800 $ 1,027,700 $ 1,058,500 $ 1,090,300 $ 1,123,000 $ 1,156,700 $ - $ 4,150 $ 4,300 $ 4,400 $ 4,500 $ 4,600 $ 4,700 $ 4,800 $ 4,900 $ 5,000 $ 5,100 $ 5,200 $ 573,927 $ 737,960 $ 760,300 $ 783,000 $ 806,400 $ 830,700 $ 855,600 $ 881,100 $ 907,400 $ 934,600 $ 962,600 $ 991,500 $ 316,874 $ 290,590 $ 301,400 $ 312,600 $ 324,300 $ 336,400 $ 349,300 $ 362,700 $ 376,900 $ 391,600 $ 406,900 $ 422,800 $ 1,150,742 $ 1,059,980 $ 1,091,700 $ 1,124,300 $ 1,157,800 $ 1,192,500 $ 1,228,100 $ 1,264,700 $ 1,302,400 $ 1,341,200 $ 1,381,400 $ 1,422,700 $ 1,124,617 $ 1,630,930 $ 1,680,200 $ 1,730,500 $ 1,782,000 $ 1,835,200 $ 1,889,900 $ 1,945,800 $ 2,003,500 $ 2,063,200 $ 2,124,600 $ 2,187,700 $ 165,540 $ 200,000 $ 207,500 $ 215,200 $ 223,200 $ 231,500 $ 240,400 $ 249,600 $ 259,300 $ 269,400 $ 279,900 $ 290,800 $ 59,866 $ 101,650 $ 104,600 $ 107,600 $ 110,700 $ 113,800 $ 117,000 $ 120,300 $ 123,800 $ 127,300 $ 131,000 $ 134,700 $ 62,789 $ 102,780 $ 105,900 $ 109,200 $ 112,500 $ 115,900 $ 119,400 $ 122,900 $ 126,600 $ 130,500 $ 134,500 $ 138,500 $ 2,969,156 $ 2,969,756 $ 2,967,956 $ 2,966,556 $ 2,952,656 $ 2,929,520 $ 2,907,259 $ 2,885,452 $ 2,856,572 $ 2,829,500 $ 2,798,914 $ 2,764,815 $944,590 $ 7,426,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 $ 11,109,175 $ 18,499,256 $ 13,835,156 $ 13,584,256 $ 13,717,856 $ 12,891,220 $ 16,067,259 $ 14,887,152 $ 14,390,672 $ 15,371,100 $ 15,731,914 $ 16,372,215 $ 6,683,378 $ 2,897,844 $ 3,357,744 $ 3,957,344 $ 4,825,544 $ 6,837,081 $ 5,906,142 $ 6,395,048 $ 7,742,528 $ 8,519,201 $ 9,334,486 $ 9,868,685 $ 5,082,000 $ 5,537,000 $ 5,658,000 $ 5,782,000 $ 5,903,000 $ 6,024,000 $ 6,150,000 $ 6,280,000 $ 6,411,000 $ 6,549,000 $ 6,689,000 $ 6,832,000 $ 1,601,378 $ (2,639,156) $ (2,300,256) $ (1,824,656) $ (1,077,456) $ 813,081 $ (243,859) $ 115,048 $ 1,331,528 $ 1,970,201 $ 2,645,486 $ 3,036,685 $ 2.83 $ 2.50 $ 2.21 $ 2.11 $ 2.18 $ 2.20 $ 2.22 $ 2.24 $ 2.30 $ 2.38 $ 2.46 $ 2.52 $ 144,410 $ 500,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 944,590 $ 7,426,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 $ 500,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,444,590 $ 7,426,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 $ 1,089,000 $ 7,926,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 $ 1,089,000 $ 7,926,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 $ 500,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - WATER IMF FUND (FUND 562) Beginning Balance $ 1,079,382 $ 1,600,100 $ 2,423,550 $ 3,046,350 $ 3,710,150 $ 1,466,950 $ 2,130,450 $ 2,838,850 $ 3,594,550 $ 4,399,850 $ 5,257,550 $ 6,170,150 Revenues and Transfers In Interest Earnings $ - $ 48,000 $ 72,700 $ 91,400 $ 111,300 $ 44,000 $ 63,900 $ 85,200 $ 107,800 $ 132,000 $ 157,700 $ 185,100 Water IMF Revenue $ 1,021,758 $ 775,450 $ 550,100 $ 572,400 $ 595,500 $ 619,500 $ 644,500 $ 670,500 $ 697,500 $ 725,700 $ 754,900 $ 785,400 Total Revenues and Transfers In $ 1,021,758 $ 823,450 $ 622,800 $ 663,800 $ 706,800 $ 663,500 $ 708,400 $ 755,700 $ 805,300 $ 857,700 $ 912,600 $ 970,500 Water IMF Expend. & Transfers Water IMF Projects $ 1,000 $ - $ - $ - $ 2,950,000 $ - $ - $ - $ - $ - $ - $ - Transfer to Cap. Fund for Debt Service $ 500,000 $ $ $ $ - $ $ $ $ $ $ $ Total Water IMF Expend. $ 501,000 $ $ $ $ 2,950,000 $ $ $ $ $ $ $ Ending Balance $ 1,600,140 $ 2,423,550 $ 3,046,350 $ 3,710,150 $ 1,466,950 $ 2,130,450 $ 2,838,850 $ 3,594,550 $ 4,399,850 $ 5,257,550 $ 6,170,150 $ 7,140,650 Owed Fund 560 for Debt Service $ 9,333,233 $ 10,871,737 $ 12,409,041 $ 13,945,411 $ 15,485,048 $ 17,022,861 $ 18,560,367 $ 20,098,868 $ 21,636,517 $ 23,175,316 $ 24,713,659 $ 26,250,069 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 Oper. & Maint. Costs $ 7,195,429 $ 8,103,500 $ 8,347,200 $ 8,596,700 $ 8,853,200 $ 9,117,700 $ 9,392,000 $ 9,673,700 $ 9,966,100 $ 10,267,600 $ 10,579,000 $ 10,899,400 Debt Service Costs $ 2,969,156 $ 2,969,756 $ 2,967,956 $ 2,966,556 $ 2,952,656 $ 2,929,520 $ 2,907,259 $ 2,885,452 $ 2,856,572 $ 2,829,500 $ 2,798,914 $ 2,764,815 Capital Prog. Transfer $ 944,590 $ 7,426,000 $ 2,520,000 $ 2,021,000 $ 1,912,000 $ 844,000 $ 3,768,000 $ 2,328,000 $ 1,568,000 $ 2,274,000 $ 2,354,000 $ 2,708,000 Proposed Revenues $ 14,566,318 $ 14,713,700 $ 14,295,100 $ 14,183,900 $ 14,586,100 $ 14,902,800 $ 15,136,300 $ 15,376,100 $ 15,738,200 $ 16,147,800 $ 16,547,200 $ 16,906,400 Ending Balance $ 6,683,378 $ 2,897,844 $ 3,357,744 $ 3,957,344 $ 4,825,544 $ 6,837,081 $ 5,906,142 $ 6,395,048 $ 7,742,528 $ 8,519,201 $ 9,334,486 $ 9,868,685 Target Oper. Reserve $ 5,082,000 $ 5,537,000 $ 5,658,000 $ 5,782,000 $ 5,903,000 $ 6,024,000 $ 6,150,000 $ 6,280,000 $ 6,411,000 $ 6,549,000 $ 6,689,000 $ 6,832,000 Min. Oper. Reserve $ 2,541,000 $ 2,768,500 $ 2,829,000 $ 2,891,000 $ 2,951,500 Current Revenues $ 14,149,845 $ 14,390,700 $ 14,121,100 $ 14,002,900 $ 14,015,100 $ 13,935,800 $ 13,833,300 $ 13,804,100 $ 13,872,200 $ 13,963,800 $ 14,039,200 $ 14,077,400 Exhibit II -9 City of Lodi Water System Financial Plan Summary Rate Adjustments --> 2.9% I 3.0% -8.4% 3.0% 3.0% 2.0% 2.0% I 2.0% 2.0% 2.0% 2.0% 2.0% $25,000,000 Oper. & Maint. Costs Debt Service Costs Capital Prog. Transfer —Proposed Revenues —Current Revenues —Ending Balance — — Target Oper. Reserve --- Min. Oper. Reserve $20,000,000 $15,000,000 $10,000,000 $5,000,000 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 Rate Adjustments --> 2.9% I 3.0% -8.4% 3.0% 3.0% 2.0% 2.0% I 2.0% 2.0% 2.0% 2.0% 2.0% RESOLUTION NO. 2020-25 A RESOLUTION OF THE LODI CITY COUNCIL FOREGOING 2020 PRE -APPROVED ENGINEERING NEWS RECORD ADJUSTMENT FOR USAGE -BASED AND FLAT WATER RATES FOR RESIDENTIAL, COMMERCIAL, AND INDUSTRIAL CUSTOMERS WHEREAS, on March 20, 2019, City Council approved a five-year rate plan in accordance with the Proposition 218 rate setting process; and WHEREAS, the proposed rate adjustments are needed to generate sufficient revenue to meet projected operation and maintenance costs and debt service obligations, as well as necessary capital maintenance improvements; and WHEREAS, for the water and wastewater utilities, the annual rate adjustment, if approved, is the lesser of the Engineering News Record (ENR) index change or three percent, with the exception of the proposed January 1, 2021 water rate adjustment that includes a projected 5.3 percent decrease, to January 1, 2016 levels; and WHEREAS, the previous year's ENR index change was 1.3 percent, but after evaluating the water utility's rate revenue model, it has been determined the utility can meet its revenue requirements without implementing this year's planned rate increase; and WHEREAS, staff recommends foregoing the 2020 pre -approved Engineering News Record adjustment for usage -based and flat water rates for residential, commercial, and industrial customers. NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby forego the 2020 pre -approved Engineering News Record adjustment for usage -based and flat water rates for residential, commercial, and industrial customers. Dated: February 5, 2020 I hereby certify that Resolution No. 2020-25 was passed and adopted by the City Council of the City of Lodi in a regular meeting held February 5, 2020, by the following vote: AYES: COUNCIL MEMBERS — Chandler, Mounce, Nakanishi, and Mayor Kuehne NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — Johnson ABSTAIN: COUNCIL MEMBERS — None PAMELA M. FARRIS Assistant City Clerk 2020-25