HomeMy WebLinkAboutAgenda Report - February 18, 2004 I-02AGENDA ITEM 1040
• CITY OF LODI
COUNCIL COMMUNICATION
TM
AGENDA TITLE: Discussion and Direction Regarding Adjusting Water and Wastewater Rates
MEETING DATE: February 18, 2004
PREPARED BY: Public Works Director
RECOMMENDED ACTION: That the City Council direct staff on the issues described below in
preparation for adjusting water and wastewater rates.
BACKGROUND INFORMATION: Water and wastewater rates were last adjusted in 2001 to fund a major
infrastructure replacement program. Rate increases were implemented
in two steps. Three significant expenses were not included at that time,
which need to be addressed. Staff needs direction on these items in
order to calculate the necessary rate adjustments. Action on wastewater rates is needed in the next month or
so in order to complete the financing for the Phase 2 project which is underway. Action on water rates should
also take place in a timely manner.
Water
The first major item is in the water utility - the 2003 water purchase contract with the Woodbridge Irrigation
District. This contract, which costs $1.2 million per year, began in the second quarter of this fiscal year. At the
time of adoption, staff indicated a rate increase would be necessary and planned to incorporate this action
with discussion on how to utilize this water. However, due to various workload and other delays, this
discussion is not yet ready to occur. Yet, the financial pressure on the water utility from this contract and the
PCEITCE issue is such that a rate increase should not be delayed.
Annual revenue from water sales is approximately $5.68 million. The annual cost increase of $1.2 million
represents an additional gross revenue need of 24°1x. An option of lowering the General Fund in -lieu tax
transfer from 12% to 10% would reduce the increase to 21 % and keep the General Fund revenue essentially
at current levels. This would be consistent with past practice and allows the amount to automatically adjust
with growth but does not unduly add to the general fund when rates are increased for some major program.
This option, along with other items presented below, is summarized in Table 1. Another way to accomplish
this would be to set a base figure and provide some growth factor independent of the rate structure.
Wastewater
The State -mandated White Slough Water Pollution Control Facility improvements are being funded through
certificates of participation which will increase annual debt service requirements by approximately $2 million.
in addition, operating costs will increase with the additional improvements.
Staff and our consultants are developing a cost and revenue model that brings these factors together and
presented a preliminary version to the City Council in October 2003. The model is still being refined as we
proceed on the 2004 financing, including analysis of required revenuelexpense coverage ratios. The two
outstanding debts have different criteria on how coverage and "additional bonds test" are calculated and all
must be satisfied in order to issue the Phase 2 project COP's. Our financial consultants are recommending a
healthy coverage ratio rather than minimum levels in order to obtain the best possible interest rates. These
APPROVED:
W_W W Rates. doc
H. Dion Flynn, City Manager
2/9/2004
Discussion and Direction Regarding Adjusting Water and Wastewater Rates
February 18, 2004
Page 2
requirements, along with unavailability of the low-interest State Revolving Loan fund, are also driving up the
recommended rate increases.
The rate increase shown in Table 1 is for April 2004 with another in 2005 assuming we can meet the required
additional bonds test; if not, we will need one larger increase this year. A third increase would occur in 2006,
but staff is recommending this not be adopted at this time as the actual amount will depend on the Phase 3
project final costs and financing. Staff will bring this item back to the Council at the appropriate time, along
with other recommendations concerning rate structure, as discussed in the October 2003 shirtsleeve session.
An option similar to water concerning the in -lieu transfer exists for wastewater and is also summarized in
Table 1. A similar decrease in the following year's transfer would occur with future rate increases.
In addition to wastewater service rates, the White Slough Water Pollution Control Facility improvements also
include capacity for future growth. Consistent with past practice, a portion of the costs have been allocated to
"growth" and as described in the October 2003 shirtsleeve session, staff proposes to combine the "capacity"
fee, currently charged with building permits, into the wastewater impact mitigation fee (IMF) program. The
current capacity fee for a 2 -bedroom home is $2,099. The current wastewater IMF is $544/acre or $108.80
assuming five homes per acre. The new combined fee, including the White Slough project increase, is
approximately $3,600 per 2 -bedroom home. Making these modifications will require changes to the City
Code, which will be presented at later meeting.
Water/Wastewater — PCE/TCE
The cost of PCE/TCE litigation and investigative work has affected the water fund and could affect the
wastewater fund. While nearly all the costs have been covered by water fund balance and the Lehman
financing, these sources have been exhausted. We still have ongoing costs, and rough estimates for
technical work needed to meet State and Federal requirements in designing a complete cleanup program are
in the $7 million and up range. While we anticipate that much of this cost will eventually be recovered, we still
need funding to make progress until that recovery occurs.
As mentioned above, the water fund has been the source for City funding on this issue since the water supply
is at risk. However, given the alleged potential for City liability is partly due to the wastewater system, it would
be reasonable to share this cost between the two enterprises. Since neither fund has substantial cash
balance, staff feels it would be prudent to include some allowance in the rates for these expenses and is
suggesting for discussion purposes 10% in both water and wastewater which would provide approximately $1
million annually.
Low -Income Discount Program
The City's current discount for qualified low-income water and wastewater customers is 10%. These are
customers who are eligible for certain Social Security payments. Under a separate Council item, staff is
recommending that the eligibility criteria be broadened and made consistent with other electric utility
programs. However, that action does not include establishing the actual discount, which is the subject of this
item. While this is not a significant revenue issue and thus is not included as one of the three significant items
driving the recommended rate adjustment it should be included in our calculations. Staff feels it is appropriate
to consider establishing a meaningful discount at the same time rates are adjusted.
A 20% discount on both water and wastewater would largely negate the effects of the proposed rate
increases. The revenue impact at this percentage with the expanded eligibility criteria is estimated at roughly
$95,000 annually and should be included in the rate model. Assuming the recommended ordinance is
adopted, the discount rate would be set by resolution. Staff proposes to also present this at the meeting when
rate adjustments are considered.
W_W W Rates.doc 2/12/2004
Discussion and Direction Regarding Adjusting Water and Wastewater Rates
February 18, 2004
Page 3
Summary
The following table summarizes the adjustments discussed with two options - one under current policies, the
other with the transfer reduced as noted above. The intent of the summary is to provide an approximation of
the rates with the adjustments described. The new rates are not final numbers and the adjustments would
apply to the total bill and include all customers including septic haulers. Note that the reduced in -lieu
percentages changes depending on the magnitude of the rate increase in order to keep the transfer at current
levels. With Option 1, the combined bill for water and wastewater for a 2 -bedroom home would increase by
approximately $10.13 per month, and under Option 2, the total increase is $8.82 per month. Rates charged
by other agencies are attached for comparison.
Table 1 - Summary of Water/Wastewater Rate Adjustments - July 2004
Direction
Staff is requesting direction on the following items so as to reduce the number of variables that would be
considered in calculating a recommended rate adjustment:
Should the in -lieu transfer be maintained per policy or reduced as described?
Should we include an amount for the PCE/TCE issue, and if so, how much?
What should the low-income discount be?
FUNDING: Not applicable.
RCP/pmf
cc: Vicky McAthie, Finance Director
J
Richard C. Prima, Jr.
Public Works Director
W WWRates.doc 219/2004
Option 1 -Current Policy
Option 2 -- reduced in -lieu
12% in -lieu
in -lieu as noted
% Increase
2 -Br rate $/mo.
% Increase
2 -Br rate $/mo.
increase new total
(new in -lieu)
increase new total
Water
Current Rate: $16.22
Water -
WID purchase
24%
$3.89 $20.11
21.3% 10%
$3.45 $19.67
Water -
PCE/TCE
10%
$1.62 $17.84
8.8% (11%
$1.43 $17.65
Water
Combined
34.0%
$5.51 $21.73
29.6% (9%)
$4.80 $21.02
Wastewater
Current Rate: $12.97
Wastewater -
Im rovements
25%
$3.24 $16.21
22% 10%
$2.85 $15.82
Wastewater -
PCCITCE
10.6%
$1.37 $14.34
9.4% 11%
$1.22 $14.19
Wastewater
Combined
35.6%
$4.62 $17.59
1 31.0% 9°/n
$4.02 $16.99
Direction
Staff is requesting direction on the following items so as to reduce the number of variables that would be
considered in calculating a recommended rate adjustment:
Should the in -lieu transfer be maintained per policy or reduced as described?
Should we include an amount for the PCE/TCE issue, and if so, how much?
What should the low-income discount be?
FUNDING: Not applicable.
RCP/pmf
cc: Vicky McAthie, Finance Director
J
Richard C. Prima, Jr.
Public Works Director
W WWRates.doc 219/2004
Monthly Rate Comparisons
Other San Joaquin County Agencies:
Wastewater Rates:
Monthly Rates - All
Adv. Secondary
Tertiary
Low $4.25
$7.13
Updated
Basis
Linden CWD
$19.70
1-04
all SF resid.
Stockton
$18.80
1-04
all SF resid.
Country Club SD
$25.30
1-04
all SF resid.
Lathrop
$18.39
1-04
all SF resid.
Tracy
$22.25
1-04
all SF resid.
Escalon
$11.32
1-04
all SF resid.
Manteca
$23.48
1-04
all SF resid.
Lockeford CSD
$11.80
1-04
all SF resid.
Ripon
$13.82
1-04
all SF resid.
Woodbrid a SD
$14.70
1-04
3 Bedroom
Low
$11.32
Average
$17.96
High
$25.30
Lodi
$16.23
3 Bedroom
State of California - FY 01/02 Survey Report -
Wastewater Rates:
516 agencies reporting
Monthly Rates - All
Adv. Secondary
Tertiary
Low $4.25
$7.13
$5.90
Median $17.43
$20.25
$19.93
Average $20.46
$21.97
$22.84
High $118.88
$57.00
$76.17
Lodi $16.23 (3 Bedroom
Black & Veatch - Statewide surveys
2002 Wastewater
2003 Water
526 agencies
459 agencies
Monthly Rates:
Low
$5.00
$7.50
Median
$16.50
$30.93
Average
$20.17
$30.33
High
$187.98
$112.60
Lodi (3 Bedroom) $16.23 $19.45
J:\COUNCIL\04\W-WWRateAttachment.xis
Water Rates as of January 2004
Typical Residence Criteria: Units (agency affected)
Water Use: 15,000 gallons/month ( 2,005 cu. ft.)
Parcel Area: 5,000 square feet (Madera, Merced, Ripon, Roseville, Woodland)
Meter Size: V size of service pipe is typically 1' minimum, meter is usually smaller
Rooms: 6 number (Turlock)
Bedrooms: 3 number (Lodi)
*: user tax added
Ripon, Merced, Woodland, and Roseville meter commercial and have flat rates for residential customers. Roseville is intalling meters at all
conections and will be metering all customers in the future.
J:\COUNCIL\04\W-WWRateAttachment.xis
Total for
typical
City
Base Charge
Water Charge
residence
Comments
Escalon
Metered
$11.29 /mo.
$0.8185 /1000 gal.
$23.62 /mo.
$0.9004/1,000 gals. for 50,000-80,000 gal., greater than 80,000 gal.
$0.6122 /100 cu. ft.
$0.9904/1000 gal.
Lathrop
Metered
$9.71 /mo.
$1.5100 /1000 gal.
$32.36 /mo.
$1.1295 /100 cu. ft.
Manteca
Metered
$13.70 /mo.
$0.65 /100 cu. ft.
$29.10 /mo.
Water charge is $0.85/100 cu. ft. for amount over 2,000 cu. ft. User tax of
$2.35 added to all accounts.
Ripon
Flat Rate
$19.59 /mo.
n/a
$19.59 /mo.
Lot size up to 10,000 SF.
Metered
$14.24 /mo.
$1.000 /100 cu. ft.
$20.29 /mo.
Base charge includes first 1400 cu. Ft.
Stockton (City)
Metered
$14.20 /mo.
$0.690 /100 cu. ft.
$30.28* /mo.
$0.59/100 cu. ft. for amount over 30,000 cu. ft. plus 8% user tax.
Tracy
Metered
$9.85 /mo.
$0.85 /100 cu. ft.
$27.61 /mo.
Water charge increases to $1.20 over 1,200 winter/1,800 summer cu. ft.,
$1.40 over 1,900w/2,900s cu. ft., $1.50 over 19,O00w/28,700s cu. ft.
Average
Flat Rate
NA
NA
Metered
$12.17 /mo.
$0.92 /100 cu. ft.
$27.21 /mo.
rates per 1000 gal. adjusted to 100 cu. ft.
Lodi
Flat Rate
$19.45 /mo.
n/a
$19.45 /mo.
ranges from $13.51 for 1 bedroom to $40.35 for 7 br's.
Metered
$11.43 /mo.
$0.524 /100 cu. ft.
$21.94 /mo.
Base charge does not include any water allowance.
Typical Residence Criteria: Units (agency affected)
Water Use: 15,000 gallons/month ( 2,005 cu. ft.)
Parcel Area: 5,000 square feet (Madera, Merced, Ripon, Roseville, Woodland)
Meter Size: V size of service pipe is typically 1' minimum, meter is usually smaller
Rooms: 6 number (Turlock)
Bedrooms: 3 number (Lodi)
*: user tax added
Ripon, Merced, Woodland, and Roseville meter commercial and have flat rates for residential customers. Roseville is intalling meters at all
conections and will be metering all customers in the future.
J:\COUNCIL\04\W-WWRateAttachment.xis
City of Lodi Water Rate Survey January 2004
Typical Residence Criteria: Units (agency affected)
Water Use: 15,000 gallons/month ( 2,005 cu. ft.)
Parcel Area: 5,000 square feet (Madera, Merced, Ripon, Roseville, Woodland)
Meter Size: %" size of service pipe is typically 1' minimum, meter is usually smaller
Rooms: 6 number (Turlock)
Bedrooms: 3 number (Lodi)
user tax added
Ripon, Merced, Woodland, and Roseville meter commercial and have flat rates for residential customers. Roseville is intalling meters at all
conections and will be metering all customers in the future.
J:\COUNCIL\04\W WWRateAttachment.xls
Total for
City
Base Charge
Water Charge
typical
Comments
residence
Updated
Davis
Metered
$8.68 /mo.
$0.63 /100 cu. ft.
$21.31 /mo.
Water charge increases to $0.68/100 cu. ft. for amount over 3600 cu. Ft.
Jan -04
Escalon
Metered
$11.29 /mo.
$0.8185 /1000 gal.
$23.62 /mo.
$0.9004/1,000 gals. for 50,000-80,000 gal., greater than 80,000 gal.
$0.6122 /100 cu. ft.
$0.9904/1000 gal.
Jan -04
Lathrop
Metered
$9.71 /mo.
$1.5100 /1000 gal.
$32.36 /mo.
$1.1295 /100 cu. ft.
Jan -04
Madera
Flat Rate
$13.62 /mo.
n/a
$13.62 /mo.
For 1st 5,000 sq. ft. lot. Increases $0.16 per additional 100 sq. ft.
Jan -04
Metered
$2.37 /mo.
$0.5156 /100 cu. ft.
$12.71 /mo.
Jan -04
Manteca
Metered
$13.70 /mo.
$0.65 /100 cu. ft.
$29.10* /mo.
Water charge is $0.85/100 cu. ft. for amount over 2,000 cu. ft. User tax of
$2.35 added to all accounts.
Jan -04
Merced
Flat Rate
$21.75 /mo.
n/a
$21.75 /mo.
$21.75 for first 10,000 SF, per table up to $72.87 for 46,000 SF
Metered
$21.75 /mo.
$0.562 /100 cu. ft.
$21.75 /mo.
Base charge includes water allowance up to amount under quantity rate
(3,000 cu. Ft. for W).
Jan -04
Ripon
Flat Rate
$19.59 /mo.
n/a
$19.59 /mo.
Lot size up to 10,000 SF.
Jan -04
Metered
$14.24 /mo.
$1.000 /100 cu. ft.
$20.29 /mo.
Base charge includes first 1400 cu. Ft.
Jan -04
Roseville
Flat Rate
$15.60 /mo.
n/a
$15.60 /mo.
For single family lot between 4,901 and 8,900 SF; per table for other sizes
Jan -04
Metered
$10.35 /mo.
$0.22 /100 cu. ft.
$16.53 /mo.
Water charge increases to $0.44/100 cu. ft. for 1,200-5,000; $0.66/100 cu.
ft. for >5,000 cu.. ft.
Jan -04
Stockton (City)
Metered
$14.20 /mo.
$0.690 /100 cu. ft.
$30.28" /mo.
$0.59/100 cu. ft. for amount over 30,000 cu. ft. plus 8% user tax.
Jan -04
Tracy
Metered
$9.85 /mo.
$0.85 /100 cu. ft.
$27.61 /mo.
Water charge increases to $1.20 over 1,200 winter/1,800 summer cu. ft.,
$1.40 over 1,900w/2,900s cu. ft., $1.50 over 19,000w/28,700s cu. ft.
Jan -04
Turlock
Flat Rate
$13.45 /mo.
n/a
$13.45 /mo.
$7.05 for 0 to 5 rooms, $7.90 for 6-8, $8.70 over 8 plus charge based on
parcel area ($5.55 up to 5,500 SF, $0.85 for each add'I 2000 SF)
Jan -04
Metered
$9.45 /mo.
$0.47 /1000 gal.
$16.50 /mo.
Water charge decreases to $0.40 over 50,000 gallons, $0.17 over 150,000
$0.352 /100 cu. ft.
gallons
Jan -04
Vacaville
Metered
$16.49 /mo.
$0.72 /100 cu. ft.
$33.02 /mo.
Water charge increases to $1.00 over 1,200 cu. ft. 15% discount for senior
citizens on base and consumption charge.
Woodland
Flat Rate
$16.09 /mo.
n/a
$17.54' /mo.
For single family lot 5,000 to 10,000 SF; $13.05 under 5,000 SF, $19.00
over 10,000 SF (9% user tax reviewed every other year.)
Jan -04
Metered
$1.24 /mo.
$0.99 /100 cu. ft.
$22.99* /mo.
Yuba City
Flat Rate
$26.38 /mo.
n/a
$26.38 /mo.
Jan -04
Metered
$14.09 /mo.
$0.881 /100 cu. ft.
$17.66 /mo.
Includes 1,600 cu. ft. minimum quantity
Average
Flat Rate
$15.81 /mo.
n/a
$15.99 /mo.
Metered
$11.01 /mo.
$0.667 /100 cu. ft.
$23.50 /mo.
rates per 1000 gal. adjusted to 100 cu. ft.
Lodi
Flat Rate
$19.45 /mo.
n/a
$19.45 /mo.
ranges from $13.51 for 1 bedroom to $40.35 for 7 br's.
Metered
$11.43 /mo.
$0.524 /100 cu. ft.
$21.94 /m0.
Base charge does not include any water allowance.
Typical Residence Criteria: Units (agency affected)
Water Use: 15,000 gallons/month ( 2,005 cu. ft.)
Parcel Area: 5,000 square feet (Madera, Merced, Ripon, Roseville, Woodland)
Meter Size: %" size of service pipe is typically 1' minimum, meter is usually smaller
Rooms: 6 number (Turlock)
Bedrooms: 3 number (Lodi)
user tax added
Ripon, Merced, Woodland, and Roseville meter commercial and have flat rates for residential customers. Roseville is intalling meters at all
conections and will be metering all customers in the future.
J:\COUNCIL\04\W WWRateAttachment.xls