HomeMy WebLinkAboutStaff Report 13962
City of Palo Alto (ID # 13962)
Utilities Advisory Commission Staff Report
Meeting Date: 3/2/2022
City of Palo Alto Page 1
Title: Staff Recommendation That the Utilities Advisory Commission
Recommend the City Council Adopt a Resolution Approving the FY 2023
Wastewater Collection Utility Financial Plan Including Reserve Transfers and
Increasing Wastewater Rates by Amending Rate Schedules S-1 (Residential
Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection
and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7
(Commercial Wastewater Collection and Disposal – Industrial Discharger)
From: Director of Utilities
Lead Department: Utilities
RECOMMENDATION
Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council:
1. Adopt a resolution (Attachment A) approving:
a. The Fiscal Year (FY) 2023 Wastewater Collection Financial Plan (Linked
Document); and
b. Transfer amount of up to $5.33 million from the Capital Improvement Projects
Reserve to the Operations Reserve in FY 2022; and
c. Increases to Wastewater Collection Utility Rates Via the Amendment of Rate
Schedules S-1 (Residential Wastewater Collection and Disposal), S-2
(Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater
Collection and Disposal) and S-7 (Commercial Wastewater Collection and
Disposal – Industrial Discharger) (Attachment B)
EXECUTIVE SUMMARY
The FY 2023 Wastewater Collection Utility Financial Plan (Linked Document) includes
projections of the utility’s costs and revenues through FY 2027. The Financial Plan projects costs
to rise over the forecast horizon due primarily to increasing treatment costs related to capital
improvements and increasing operational costs at the Regional Water Quality Control Plant
(RWQCP), as well as increasing collection system and Capital Improvement Program (CIP) costs.
A 3% overall revenue increase is needed in FY 2023, and staff projects overall revenue increases
of approximately 5% annually through FY 2027 to cover current and projected costs.
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BACKGROUND
Every year staff presents the UAC with Financial Plans for the Electric, Gas, Water, and
Wastewater Collection Utilities. The Financial Plans recommend rate adjustments if necessary
to maintain the financial health of these enterprises. These Financial Plans include a
comprehensive overview of the operations of each enterprise, both retrospective and
prospective, and are intended to be a reference for UAC and Council members as they review
the budget and staff’s rate recommendations. Each Financial Plan also contains a set of
Reserves Management Practices describing the reserves for each utility and the management
practices for those reserves.
The City’s sewer system collects wastewater from Palo Alto residents and delivers it to the
RWQCP for treatment. The City of Palo Alto runs the RWQCP, which also treats wastewater for
five other partner agencies (Stanford, East Palo Alto Sanitary District, Los Altos Hills, Los Altos,
and Mountain View). Some of the wastewater for certain partner agencies is also transported
across the City’s wastewater collection system.
The Wastewater Collection Utility has two main costs: the costs of operating the collection
system and Palo Alto’s share of the cost of running the RWQCP.1 Both cost components have
been increasing and are expected to continue to increase. The RWQCP has been in operation
since 1934. Aging equipment, new regulatory requirements, and the movement to full
sustainability will require rehabilitation, replacement and new processes. Palo Alto has seen
increases in operational costs in recent years, and debt service for the plant is expected to
increase substantially in coming years as a major rehabilitation and replacement plan adopted
in 2012 (Long Range Facilities Plan) is implemented. Rehabilitation and replacement of plant
equipment that has been in use for over 40 years is necessary to ensure the city can provide
wastewater treatment safely and in compliance with regulatory requirements for the discharge
of treated wastewater 24 hours a day. Collection system costs are also increasing, though not
as much as treatment costs. This is primarily driven by increases in collection system capital
costs. The cost of underground construction to replace aging sewer mains has nearly doubled
since 2008. Other operational costs have also increased (e.g., salaries and benefits and
administrative overhead), but more slowly than treatment and collection infrastructure-related
costs.
This Financial Plan projects revenue reductions due to COVID-19 primarily from the Restaurant
and Commercial customer classes. Staff expects annual revenue reductions related to COVID-19
to be highest during FY 2022 at approximately $1 million and projects a linear recovery through
FY 2025. Total revenue reductions included in the estimate is $2.4 million from FY 2022 through
FY 2025 for the Wastewater Collection utility.
1 The costs associated with the RWQCP are shared among Palo Alto and the partner agencies based primarily on
wastewater flows and the composition of the wastewater each agency sends to the treatment plant. Palo Alto’s
share varies from year to year, but is roughly one third of the total cost.
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The UAC reviewed the preliminary financial forecasts at its December 1, 2021 meeting (UAC
Report #13659) and the Finance Committee reviewed the preliminary financial forecasts at its
February 1, 2022 meeting (Staff Report 13839).
DISCUSSION
Staff completes an annual assessment of the financial position of the City’s wastewater
collection utility to ensure adequate revenue to fund operations, in compliance with the cost of
service requirements set forth in the California Constitution (Proposition 218). This includes
making long-term projections of market conditions, the physical condition of the system, and
other factors that could affect utility costs, and setting rates adequate to recover these costs.
The rates proposed in this Financial Plan were developed based on the Cost of Service and Rate
Study completed by Raftelis Financial Consultants, Inc., the “City of Palo Alto 2021 Wastewater
COS Report.”2
Proposed Actions
1. Increase rates by 3% for Rate Schedules S-1 (Residential Wastewater Collection and
Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant
Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and
Disposal – Industrial Discharger); and
2. Transfer up to $5.33 million from the CIP Reserve to the Operations Reserve in FY 2022.
The FY 2023 Wastewater Collection Financial Plan (Linked Document) describes these proposed
actions in detail. Staff proposes to adjust wastewater rates as shown in Table 1 below, effective
July 1, 2022. The adjustments increase the system average rate by 3%. These proposed rate
changes are included in the amended rate schedules (Attachment B). Residential customers pay
a monthly fixed service charge while commercial customers are charged based on average
winter water usage for the months of January, February and March, and applied in the
following July to minimize the effects of irrigation. Restaurant customers are charged based on
monthly water usage as they generally lack irrigation, but are charged higher rates due to
higher grease and oil discharges necessitating additional treatment costs. Currently there are
no customers on the S-7 (Industrial) rate schedule; however, CPAU continues to maintain the S-
7 rate schedule in case of future need.
Table 1: Current and Proposed Wastewater Collection Charges
Current
(9/1/2021)
Proposed
(7/1/2022)
Change
$/mo. %
2 A cost of service study is a study using industry-standard techniques to determine how the costs of running the
utility should be recovered from its customers. Charges to each customer are set in proportion to the cost of
serving that customer.
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Monthly Service Charges ($/month)
S-1 (Residential) Service
charge
$43.32 $44.62 $1.30 3%
Quantity Rates
S-2 (Commercial) $/CCF 8.09 8.33 0.24 3%
S-6 (Restaurant) $/CCF 12.07 12.43 0.36 3%
FY 2023 Financial Plan’s Projected Rate Adjustments for the Next Five Fiscal Years
Table 3 shows the projected rate adjustments included in the Wastewater Collection Utility
Financial Plans and their impact on a residential wastewater bill.
Table 3: Projected Rate Adjustments and Residential Bill Impact, FY 2023 to FY 2027
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Wastewater Collection Utility 3% 5% 5% 5% 5%
Estimated Bill Impact for
Residential Customers ($/mo) $1.30 $2.24 $2.35 $2.47 $2.59
As noted above, one of the main drivers for the increase in the Wastewater Collection Utility’s
costs (and therefore rates) over the next several years is the cost for wastewater treatment,
which is projected to increase by about 7.7% per year from FY 2021 to FY 2027 as the City
makes several upgrades to the RWQCP. A major project at the RWQCP, the Sludge Dewatering
and Truck Loadout Facility, was completed in 2019 which allowed the retirement of the Plant’s
two sewage sludge incinerators in operation since 1972. Future projects include secondary
treatment upgrades as well as replacement of the headworks facility. Beyond FY 2027 some of
the upward pressure on treatment costs is expected to be relieved, as the projected growth in
treatment costs decreases to approximately 2.3% on average annually between FY 2027 and FY
2032.
Wastewater Collection operations and CIP costs (excluding costs associated with treatment) are
projected to increase by approximately 4.2% annually from FY 2021 to FY 2027; operations
costs are expected to grow an average of 2.9% annually over the same time period. This plan
reflects the same budget reductions for sanitary sewer main replacements that Council
adopted in FY 2022. However, this budget does not continue with the deferrals of the next two
upcoming sewer main replacement projects in order to maintain the City’s sewer main
replacement program. The Wastewater Collection Utility undertakes a larger main replacement
project every other year. A project is occurring in the current year and the next project is
scheduled for FY 2024. Undertaking a larger main replacement project every other year allows
staff to continue replacing wastewater mains that are in poor condition, while easing
scheduling difficulties for inspection coverage due to shared staffing across water, wastewater,
gas and large development services projects. Over the last few years, main replacement costs
have been increasing for utilities due to economic activity in the Bay Area causing construction
cost inflation. It is likely that this trend will continue in the short term. Staff has not observed
any dip in construction costs although more information will be known once the Utilities
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Department issues more construction bids. Additionally, the California Construction Cost index
increased from 2.8% in December 2020 to 13.4% in December 2021.3
Figure 1 and 2 below illustrate the increase in the Wastewater Collection Utility’s costs. The
figures use FY 2016 as a comparison year because FY 2017 and FY 2018 are atypical years, due
to one-time cost savings related to delayed main replacement projects. Note that Figure 1
reflects the capital funded by rate revenue in FY 2016, while the FY 2027 bar shows the capital
program contribution to the CIP Reserve. In the following figure, all RWQCP costs for the
Wastewater Collection Utility are included in “Treatment,” while “Capital” and “Operations”
include only collection system costs.
Figure 1: FY 2016 and FY 2027 Costs ($ Millions)
3 https://www.dgs.ca.gov/RESD/Resources/Page-Content/Real-Estate-Services-Division-Resources-List-
Folder/DGS-California-Construction-Cost-Index-CCCI
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Figure 2: Percentage of Cost Increase From FY 2016 to FY 2027 Attributed to Treatment, and
Operations Costs
Figure 1 and 2 show that 70% of the increase from FY 2016 to FY 2027 is due to treatment cost
increases, 30% is due to increases in operations costs; 13% of this is from distribution
operations, 10% is from allocated charges, and 5% is from customer service, each of these are
driven by increases in salaries and benefits. Collection capital costs are not expected to increase
on average over this time period due to the reductions in size of sewer main replacement
projects to keep rate increases to a minimum.
To promote rate stability and provide continuity in collection system CIP expenditure levels, this
plan continues the steady annual capital program contribution to the CIP Reserve. The CIP
Reserve will then absorb annual spending fluctuations, reducing or eliminating the impact on
rates. Figure 3 below shows the projected CIP Reserve balances and Figure 4 below shows year-
end reserve balance levels for each reserve from FY 2022 and projected through FY 2027.
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Figure 3: Projected Capital Reserve Balances, FY 2022 to FY 2027
Figure 4: Wastewater Collection Utility Year-End Reserve Levels, FY 2021 to FY 2027
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Table 4: Operations, Rate Stabilization and CIP Reserves Starting and Ending Balances,
Revenues, Transfers To/(From) Reserves, Expenses, Capital Program Contribution To/(From)
Reserves, and Operations Reserve Guideline Levels for FY 2022 to FY 2027 ($000)
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Starting Balance
(1) Operations
6,578
5,124
4,443
4,020
3,801
4,316
(2) Rate Stabilization
342
342
-
-
1,000
2,000
(3) CIP
3,178
1,598
2,161
1,351
2,228
1,373
Revenues
(4) Total Revenue 20,793 21,816 23,260 24,703 26,062 27,331
Transfers
(5) Operations - 342 - (1,000) (1,000) 2,000
(6) Rate Stabilization - (342) - 1,000 1,000 (2,000)
(7) CIP - - - - - -
Capital Program
Contribution
(8) Operations
(3,750)
(3,750)
(3,750)
(3,750)
(3,750)
(3,750)
(9) CIP
3,750
3,750
3,750
3,750
3,750
3,750
Expenses
(10) Total Expenses other than
CIP and Debt Service
(18,368) (18,961) (19,803) (20,172) (20,797) (24,296)
(11) Debt Service (129) (129) (129) - - -
(12)* Planned CIP
(5,330)
(3,188)
(4,560)
(2,873)
(4,605)
(2,919)
Ending Balance
(1)+(4)+(5)+(8)
+(10)+(11) Operations
5,124
4,443
4,020
3,801
4,316
5,601
(2)+(6) Rate Stabilization
342
-
-
1,000
2,000 -
(3)+(7)+(9)+
(12) CIP
1,598
2,161
1,351
2,228
1,373
2,204
Operations Reserve
Guideline Levels
(13) Minimum
2,781
3,231
3,143
3,460
3,278
4,130
(14) Maximum
6,952
8,076
7,859
8,650
8,195
10,326
* Planned CIP (item 12) is reflected as an expense in the CIP Reserve and does not include CIP
funded through Reappropriations or Commitments reserves. This Financial Plan requests
Council approval to transfer the Planned CIP of $5.33 million from the CIP Reserve to the
Operations Reserve in FY 2022.
Capital Projects and Reserves
The CIP Reserve aims to stabilize uneven annual funding associated with ongoing CIP projects
including sanitary sewer main replacements that are scheduled to occur every other year, and
is a source for one-time or immediately needed projects. In June 2021 Council approved
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consistent annual funding from the Operations to the CIP Reserve and approved a transfer of
up to $4.35 million from the Operations Reserve to the CIP Reserve in FY 2022 (Resolution
9980). This Financial Plan projects that a capital program contribution of $3.75 million in FY
2022 (see line 9 of Table 8) from the Operations Reserve to the CIP Reserve will be sufficient
based upon actual and projected revenue and expenses as well as FY 2021 year-end reserve
balances.
Withdrawals from the CIP Reserve for use on capital projects require Council action.4 This
Financial Plan therefore requests Council approval to transfer up to $5.33 million from the CIP
Reserve to the Operations Reserve to pay for estimated CIP in FY 2022. This figure is the portion
of planned CIP that will not be paid for through funds collected in prior years (essentially the FY
2022 Capital budget, less funds available in the Reappropriations and Commitments Reserves),
shown in line 12 of Table 4. The need for each of the transfers will be re-evaluated once the
year end reserve balances for FY 2022 are known.
Wastewater Bill Comparison with Surrounding Cities
The annual sewer bill for a Palo Alto resident is $519.84 under current rates, 28% lower than the
average neighboring community. Table 5 shows the monthly sewer bills for residential
customers compared to what they would be in surrounding communities. These communities
are the same six cities that Palo Alto compares itself to in the annual budget across Water,
Wastewater, Gas, and Electric utilities.
Table 5: Residential Monthly Equivalent Sewer Bill Comparison ($)
Palo Alto
Neighboring Communities
Menlo
Park
Redwood
City
Santa
Clara
Mountain
View Los Altos Hayward
43.32 104.58 89.28 44.53 46.40 40.83 37.17
If Council adopts the proposed wastewater rate change, and assuming other agencies do not
change their sewer rates, Palo Alto’s residential rates would remain 26% lower than the average
neighboring community. Furthermore, under the attached Financial Plan (Linked Document),
Palo Alto’s residential monthly bills would rise to $54.27 per month in FY 2027 which is still
under the current neighboring community average of $60.47 per month. Staff has no
information at this time as to whether or when the surrounding communities are planning
wastewater rate changes. However, as most agencies are also requiring renovations to their
respective treatment plants, increases at other agencies are likely. Note that as partners in the
RWQCP, Mountain View and Los Altos will be affected by the same treatment cost increases as
Palo Alto.
4 See Section 5(b) of the Wastewater Collection Utility Reserves Management Practices; Appendix C to the
attached Wastewater Collection Financial Plan.
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Table 6 shows the monthly sewer bills for Commercial and Restaurant customers. Palo Alto is
less competitive with surrounding cities with regards to commercial sewer rates, but is not the
most expensive jurisdiction. Palo Alto’s commercial bills are 7% higher than the neighboring
community average while Palo Alto’s restaurant bills are 14% below the neighboring community
average. Table 6 assumes 14 units of water for general commercial and 56 units of water for
restaurants.
Table 6: Non-Residential Monthly Equivalent Sewer Bill Comparison ($)
Palo Alto
Neighboring Communities
Menlo
Park
Redwood
City
Santa
Clara
Mountain
View Los Altos Hayward
General
Commercial
113.26 141.54 117.74 74.06 144.90 70.13 85.54
Restaurant 675.92 1,192.8 1,128.40 845.04 665.28 280.51 627.20
Changes from Prior Financial Forecasts
Staff projects the need for ongoing annual wastewater rate increases from FY 2023 through FY
2027. Table 7 compares current rate projections to those projected in the last two year’s
Financial Forecasts. The proposed revenue increases for FY 2023 in this Financial Plan are the
same compared with the rate projection from the FY 2022 Financial Plan but lower than
projected in FY 2021. This is in part because of the reduction in size of sanitary sewer
replacement projects to lower collection system costs. The FY 2023 projections reflect current
information on capital improvement costs both in Palo Alto’s sewer system as well as at the
RWQCP.
Table 7: Proposed/Projected Wastewater Rate Changes for FY 2023 to FY 2027
Projection FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
Current Plan (FY 2023) 3% 5% 5% 5% 5%
FY 2022 Financial Plan 3% 5% 5% 5% N/A
FY 2021 Financial Forecast5 5% 5% 5% N/A N/A
NEXT STEPS
The Finance Committee will consider the recommended wastewater rate changes in March or
April 2022. Assuming the Finance Committee supports the proposed rate adjustments, around
April staff will send notification of the potential rate increases to customers as required by
Article XIIID of the State Constitution (added by Proposition 218). The City Council will consider
the proposed Financial Plans and amended rate schedules with the FY 2023 budget, which is
5 Presented to the Finance Committee, April 21, 2020.
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expected to be in June 2022, at which time the public hearing required by Article XIIID of the
State Constitution will be held.
RESOURCE IMPACT
Staff projects normal year revenues for the Wastewater Collection Utility to increase by
approximately 3% ($600,000) annually beginning in FY 2023 as a result of the proposed rate
changes. The City is also a wastewater customer, and staff projects required general fund cost
for wastewater service to increase in FY 2023 by approximately $4,500 as a result of the
proposed rate changes. See the FY 2023 Wastewater Collection Utility Financial Plan for a more
comprehensive overview of projected cost and revenue changes for the next five years.
POLICY IMPLICATIONS
The proposed wastewater rate adjustments are consistent with Council-adopted Reserve
Management Practices that are part of the Financial Plans. Staff developed the wastewater rate
adjustments using a cost of service study and methodology that was completed in compliance
with the cost of service requirements of Proposition 218.
ENVIRONMENTAL REVIEW
The UAC’s review and recommendation to Council on the proposed FY 2023 Wastewater
Collection Financial Plan (Linked Document) and rate adjustments do not meet the definition of
a project, pursuant to Section 21065 of the California Environmental Quality Act, thus no
environmental review is required.
Attachments:
• Attachment A: Resolution
• Attachment B: FY 2023 Rate Schedules S-1, S-2, S-6, and S-7
• Attachment C: Presentation
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Attachment A
* NOT YET APPROVED *
6055605
Resolution No. ___
Resolution of the Council of the City of Palo Alto Approving the
FY 2023 Wastewater Collection Utility Financial Plan, Including Reserve
Transfers, and Adjusting Wastewater Rates by Amending Rate
Schedules S-1 (Residential Wastewater Collection and Disposal), S-2
(Commercial Wastewater Collection and Disposal), S-6 (Restaurant
Wastewater Collection and Disposal) and S-7 (Commercial Wastewater
Collection and Disposal – Industrial Discharger)
R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities
with the goal of ensuring adequate revenue to fund operations. This includes making long-term
projections of market conditions, the physical condition of the system, and other factors that
could affect utility costs, and setting rates adequate to recover these costs. It does this with the
goal of providing safe, reliable, and sustainable utility services at competitive rates. The City
adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made a
part of the Financial Plans.
C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility services,
fees and charges.
D. On ____, 2022, the City Council held a full and fair public hearing regarding the
proposed rate increase and considered all protests against the proposals.
E. As required by Article XIII D, Section 6 of the California Constitution and
applicable law, notice of the ________ 2022 public hearing was mailed to all City of Palo Alto
Utilities wastewater customers by _______, 2022.
F. The City Clerk has tabulated the total number of written protests presented by
the close of the public hearing, and determined that it was less than fifty percent (50%) of the
total number of customers and property owners subject to the proposed wastewater rate
amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the FY 2023 Wastewater Collection Utility
Financial Plan.
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Attachment A
* NOT YET APPROVED *
6055605
SECTION 2. The Council hereby approves the following transfer as described in the FY
2023 Wastewater Collection Utility Financial Plan:
a. Up to $5,330,000 in FY 2022 from the Capital Improvement Projects
Reserve to the Operations Reserve.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule S-1 (Residential Wastewater Collection and Disposal) is hereby amended to read
as attached and incorporated. Utility Rate Schedule S-1, as amended, shall become effective
July 1, 2022.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-2 (Commercial Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-2, as amended, shall become effective July 1,
2022.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-6, as amended, shall become effective July 1,
2022.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) is hereby
amended to read as attached and incorporated. Utility Rate Schedule S-7, as amended, shall
become effective July 1, 2022.
SECTION 7. The Council finds that the revenue derived from the wastewater rates
approved by this resolution do not exceed the funds required to provide wastewater service, and
the revenue derived from the adoption of this resolution shall be used only for the purposes set
forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 8. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor that
are not provided to those not charged, and do not exceed the reasonable costs to the City of
providing the service or product.
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Attachment A
* NOT YET APPROVED *
6055605
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SECTION 9. The Council finds that the adoption of this resolution approving the FY 2023
Wastewater Financial Plan and Reserve transfers does not meet the California Environmental
Quality Act’s definition of a project under Public Resources Code Section 21065 and CEQA
Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will
not cause a direct or indirect physical change in the environment, and therefore, no
environmental review is required. The Council finds that the adoption of this resolution
changing Wastewater collection rates to meet operating expenses, purchase supplies and
materials, meet financial reserve needs and obtain funds for capital improvements necessary
to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant
to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of
Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to
Council, the Council incorporates these documents herein and finds that sufficient evidence
has been presented setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
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RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-1-1 Effective 79-1-20221
dated 97-1-202119 Sheet No S-1-1
A. APPLICABILITY:
This schedule applies to each Occupied Domestic Dwelling unit.
B.TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wastewater Service.
C. RATES:
Per Month
Each Occupied Domestic Dwelling unit ................................................................................
$44.6243.32
D.SPECIAL NOTES:
1. Any dwelling unit being individually served by a Water, Gas, or Electric Meter will be
considered continuously occupied.
2.For two or more Occupied Domestic Dwelling units served by one Water Meter, the monthlyWastewater charge will be calculated by multiplying the current Wastewater rate by thenumber of dwelling units.
3.Each developed separate lot shall have a separate service lateral to a sanitary main ormanhole.
{End}
Attachment B
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COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
CITY OF PALO ALTO UTILITIES Issued by the City Council
Supersedes Sheet No S-2-1 Effective 79-1-202221
dated 97-1-202119 Sheet No S-2-1
A. APPLICABILITY: This schedule applies to all commercial establishments other than those served under Utility Rate
Schedule S-1 (Residential Wastewater Collection and Disposal), Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) or Rate Schedule S-7 (Commercial Establishments Wastewater Disposal – Industrial Discharger). B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides Wastewater Services. C. RATES: Quantity Rate, per 100 cubic feet (See Section D.1) .......................................................... $8.3309 D. SPECIAL NOTES: 1. The monthly charge for the quantity rate set forth in Section C of this rate schedule will be based upon the average Water usage for the months of January, February and March, and applied in the following July. If a Water Meter is identified as exclusively serving irrigation landscaping, such Meter will be exempted from Wastewater charge calculations. Customers without an applicable usage history will be rebuttably presumed to have usage of 4.8 ccf per month until such time as such usage may reasonably be established by the City of Palo Alto Utilities Department. 2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City and the Customer. {End}
:\\I/~ -.....;: :;.,.,,,"' PAI E CITY OF PALO ALTO
aaJ\" UTILITIES
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RESTAURANT WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-6
CITY OF PALO ALTO UTILITIES Issued by the City Council
Supersedes Sheet No S-6-1 Effective 79-1-20221
dated 97-1-202119 Sheet No S-6-1
A. APPLICABILITY: This schedule applies to all restaurants.
B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides Wastewater Services. C. RATES: Quantity Rates, per 100 cubic feet of monthly metered Water usage ...................................$ 12.4307
D. SPECIAL NOTES: 1. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City and the Customer. {End}
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COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL – INDUSTRIAL DISCHARGER
UTILITY RATE SCHEDULE S-7
CITY OF PALO ALTO UTILITIES Issued by the City Council
Supersedes Sheet No S-7-1 Effective 79-1-20221
dated 97-1-202119 Sheet No S-7-1
A. APPLICABILITY:
This schedule applies to any establishment requiring sampling of industrial discharges in excess
of 25,000 gallons per day, or special discharge monitoring, as defined in Rule 23, Section C. B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wastewater Services.
C. RATES: 1. Collection System Operation, Maintenance, and Infiltration Inflow:
$4.1402 per 100 cubic feet of metered water use.
2. Advanced Waste Treatment Operations and Maintenance Charge: $1.650 per 100 cubic feet of metered water use
3. $202.23196.34 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)
4. $487.58473.38 per 1000 lbs of SS (Suspended Solids) 5. $3,369.05270.92 per 1000 lbs of NH3 (Ammonia) 6. $ 14,781.25 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver, and zinc) D. SPECIAL NOTES: 1. Water usage will be determined as defined in Rule 23, Section C. If a Water Meter is identified as exclusively serving irrigation landscaping, such Meter will be exempted from Wastewater charge calculations. 2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City of Palo Alto and the Customer. 3. Charges for large discharges will be determined on the basis of sampling as outlined in Utilities Rule 23, Section C. However, for purposes of arriving at an accurate flow estimate, discharge Meters, if installed, can be utilized to measure outflow for billing purposes. Annual charges will be determined and allocated monthly for billing purposes. {End}
~,,,~
-.....;: ;..,--Iii! ~ CITY OF PALO A. LTO
aaJ\" UTILITIES,
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March 2, 2022 www.cityofpaloalto.org
WASTEWATER COLLECTION UTILITY FINANCIAL PROJECTIONS
Attachment D •
CITY OF
PALO ALTO
UTILIT
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2
WASTEWATER PROJECTIONS
•FY 2023 proposal:
•3% overall revenue increase
•Transfer $5.33 million from the CIP Reserve to the
Operations Reserve in FY 2022
•Transfer $1 million from Operations Reserve to Rate
Stabilization Reserve FY 2025 -FY 2026 to prepare for
increasing treatment debt service costs in FY 2027
•COVID non-residential revenue impacts $1 million
decrease estimated in FY 2022 with recovery by FY 2026
•Future projections
•5% annually FY 2024 –FY 2027
~CITY OF
~PA ILO ALTO
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3
WASTEWATER OPERATIONS RESERVE PROJECTIONS
• CITY 01
PALO
ALTO
$ 10 -----------------------------------------------------------------------------------------------------------------------------
$9 _,,,,,_--........... --------------------
$8
s 7· -------------------------------------------------------------------------------------------------------------------------... _. .... ~
$6 ----~ --...----.... - -_. _,,,--~ --..... .,,. --0 C ~ $5
..... .,,,.
-------~--,--,___--:E $4 -$3
$2
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----------------------------------------------------=-----~-----~-----......__,__-----;.;;..,.,------..---~
-·· -·it
$0 -+-------r-----,--------r----r-----.----r------,
2021
Actual
2022 2U23,
Fiscal Yea1r
2024 202.5 2026 2027
Proj,ect,edl
-Reserve (Year-End)
-Reserve Min/Max
- -Reserve Target
-•Risk Assessment
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4
RESIDENTIAL AND NON-RESIDENTIAL RATE IMPACTS
(1) Monthly charges for S-1 (Residential) are fixed monthly charges.
(2) For S-2 (Commercial) customers, the quantity charges are based upon the average water
usage for the months of January, February and March and applied in the following July. For
Restaurant customers, the quantity charges are based on monthly metered water usage.
(3) Currently there are no customers on the S-7 (Industrial) rate schedule; however, CPAU
continues to maintain the S-7 rate schedule in case there is a need for the rate schedule in the
future.• .
CITY OF
PALO
ALTO
Mo ervice Cha $/month
Se rvice en a r ,e
Qua t· , .· Rates:
S-2 (Commercia l!) $/CCF
S-6 ··Resta ura n · ·.CCF
Cur ent Proposed
as of effective $C ange %Cha ge
9/ /2021) 7/1/2022)
$ 43 32 $ 44 6.2 $1.30 3.0%
8.09 8.33 0.24 3.0%
12.07 12.43 0 36 3.0%
7.c
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5
RESIDENTIAL AND NON-RESIDENTIAL BILL IMPACTS
Note: Non-residential bill impacts will vary due to each customer’s utilization of the
system.
• .
CITY OF
PALO
ALTO
S-1 { Re.si d e nt1a i)
S-2 { Co m 1m e rci a II) -:14. CCF
S-6 { Re.st aura nt ) -5 6 CCF
Cur ent
as of
9/1/202 1)
$ 43.32
113 . .26
675.92.
Propose
[effective
C ange
7/1/2022) $/mo. %
$ 44.62. $1 . .30 3.0%
116.66 3.40 3.0%
696.20 20.28 3.0%
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6
WASTEWATER UTILITY COST STRUCTURE
Palo Alto’s share of
the cost to treat
sewage at Palo Alto’s
Regional Water
Quality Control Plant
Cost to collect sewage
within Palo Alto, including:
maintaining and replacing
sewer infrastructure,
customer service, billing,
administration, etc.
Treatment
$11.7 million
51%
Collections
$11.1 million
49%
• .
CITY OF
PALO
ALTO
111111 Treatment ■ Operations ■ Capital & !Debt Service
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7
WASTEWATER UTILITY BASICS
•Five partners: Stanford, East Palo Alto, Los Altos Hills, Los Altos, and
Mountain View
•Wastewater drains from partner systems through the City of Palo
Alto Collection System, and into the City of Palo Alto Regional Water
Quality Control Plant (RWQCP) for treatment
•City of Palo Alto Utilities Department manages collection system,
Public Works manages the RWQCP
ood c,-,y----,., ----------------~--~-----,
Atherton
Menk> P11tk ,-{sd it Palo Alto
Weat /.,..,_Un};:. ly,
Menlo Pork L/ y
Slanf ..
>lo Valley
ndy H II ( n Spect1
eserve
• .
CITY OF
PALO
ALTO
~·1-l OS Altot ►·tills
foothill
College
Q roorh1lts P1rk
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View
Sunnyv1
Loyola ~
Rancho San
AnromoO~ ~
Space Preserve
Cupe~
Permanente
Stevens Crffk @
County Park
7.c
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8
TREATMENT COST DRIVERS
•Regional Water Quality Control Plant needs rehabilitation
•Long Range Facilities Plan completed in 2012
•Near Term Major Projects:
•Sedimentation Tank ($19.4M)
•New Outfall Pipeline ($17.4M)
•Secondary Treatment Upgrades ($148M)
•Advanced Water Purification System ($20M)
•Headworks Facility ($48.6M)
•Lab/Ops Building ($48.5M)
~CITY OF
~PA ILO ALTO
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9
OPERATIONS/CAPITAL COST DRIVERS
Operational Costs
•Salary and benefit costs for existing staff
•2-3% annual inflation for other operating costs
•One-time revenue loss due to COVID-19 $1 Million in FY
2022, with recovery by FY 2026
Capital Costs
•Underground construction cost increases
•Sanitary Sewer Replacements
•Includes cost reductions adopted in FY 2022 Financial
Plan
~CITY OF
~PA ILO ALTO
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10
WASTEWATER MEDIAN MONTHLY RESIDENTIAL BILL ($)
In FY 2022, Palo Alto is 28% below
comparison city average
• .
CITY OF
PALO
ALTO
-eirn lo
Pa~o A lito Pa r k
43~32 104.58
Neigh bor ing Com1 irn ities
Re d w ood Sant a 0 nt a iirn
Cit Clara ■ Los A itos a ··d 1e w
89.28 .5.3 '0.83 37'.[7
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11
WASTEWATER MONTHLY NON-RESIDENTIAL BILL ($)
Commercial: Palo Alto is 7% higher than
comparison city average
Restaurant: Palo Alto is 14% below
comparison city average
• ,
CITY OF
PALO
ALTO
Ge ·er al
C eircial
Resta
Me I
Pao Alto Pank
113.26 1 ' .54
675~92 1.,192.8
Neig ··borir11g · ities
Rechvoo , Sa a Mo
Ci Clara 'V'i e L· s Alltos Hay
117.74 74.06 144.90 70.13 85.54
1.,128.40 845.04 665.28 280 . .51 627.20
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12
WASTEWATER COST AND REVENUE PROJECTIONS
• C ITV 01
PALO
ALTO
$30
$25
-1,1)
C
.Q $20
~
-<I)-
~ $15
C
Q) > Q) t s10
1,1)
0 u
$5
$0
5%
7% 3%
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Actual Projected
Fiscal Year
□Coll ection Capita l & Debt
□Coll ection Ope rations
•Treatment Capita l & Debt
□Treatment Operations
-Revenue
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13
WASTEWATER CIP RESERVE PROJECTIONS
• C ITV O,
PALO
ALTO
------------------------------------------------------------------------------5,000
4,500
4,000
---------------------------------------------=:::--------=----::----=-:::::::.:.: ---------------------·
--------------------------------------------------------------------------
3,500 -------------------------------------------------------------------------------·
(/) -g 3,000 --------------l"CI ----------------------------------(/) -------------------------------·
:::J 2,500 _g ---------------------------------------------------·
1-2,000 -------------~ ~ '-V.FfL,UL. -<.I). -------------------,:,
1,500
1,000 -
500 ----~
2
2022
-------' ~ ~ ~~
-i
2023
r. -------·~~------~~
~ --------------~ ~
r. ~ ~ ~ ~ ~
~ ~ ~ ¼
I -i I
2024 2025 2026
Fisca l Vear
r.
-------
-------
~
I 7
2027
~CIP Reserve (Vear-End)
-Reserve M in/Max
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14
RECOMMENDATION
Staff requests that the UAC recommend that the Council:
•Adopt a resolution approving:
•The Fiscal Year 2023 Wastewater Collection Financial Plan, including
3% overall revenue increase
•Transfer up to a $5.33 million from the Capital Improvements
Projects Reserve to the Operations Reserve in FY 2022
•Increase Wastewater Collection Utility Rates Via the Amendment of
Wastewater Collection and Disposal Rate Schedules S-1
(Residential), S-2 (Commercial), S-6 (Restaurant) and S-7 (Industrial
Discharger)
~CITY OF
~PALO ALTO
7.c
Packet Pg. 150
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