HomeMy WebLinkAboutStaff Report 2679
City of Palo Alto (ID # 2679)
Finance Committee Staff Report
Report Type: Meeting Date: 4/18/2012
April 18, 2012 Page 1 of 10
(ID # 2679)
Summary Title: Wastewater Collection Utility Rate Adjustments
Title: Utilities Advisory Commission Recommendation on Proposed Wastewater
Collection Utility Rate Adjustments Effective July 1, 2012
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council adopt a resolution (Attachment A) to:
1. Increase overall retail wastewater collection rates and annual revenues for Wastewater
Collection Utility by 5.0 percent, or $715,000, effective July 1, 2012;
2. Effect a change to utilize winter-based water usage rates for commercial customers under
Rate Schedule S-2 Section C.3; and
3. Amend Wastewater Collection Utility Rate Schedules S-1 and S-2, and add new Wastewater
Collection Utility Rate Schedules S-6 and S-7, as attached.
The recommended rate changes will trigger the notice and protest hearing procedures under
Proposition 218.
Executive Summary
On March 6, 2012, the Finance Committee reviewed the long-term financial projections for the
Wastewater Collection Fund, which showed a revenue requirement increase of 5% for the Fund
for Fiscal Year (FY) 2013. This proposed 5% revenue increase, effective July 1, 2012, applies
equally to all customer classes. The impact of the rate increase on residential customers’ bills is
an increase of $1.90 per month. The impact of the proposed changes on commercial
customers’ bills will vary depending on individual account water usage levels.
The recommended rates include a change to the billing basis for commercial customers.
Currently, monthly wastewater charges are based on monthly water usage for some customers
and winter water usage for other customers with large irrigation usage. To remove the effect
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of water used for irrigation, which does not flow into the wastewater system, the proposed
commercial wastewater rate structure uses the winter-based water consumption for all
commercial customers, except restaurants and the industrial dischargers. Restaurant rates are
based on monthly water usage since water used in restaurants is largely for indoor use, which
flows through the wastewater collection system. The bill impact for commercial customers due
to the revision in billing basis depends on individual account water usage levels and seasonal
water usage patterns.
Background
The Wastewater Collection Fund’s revenue requirement consists of a number of components
including: treatment cost, collection system operations, Capital Improvement Program (CIP)
projects, prudent funding of the Wastewater Collection Rate Stabilization Reserve (WW -RSR),
and debt service payments. Any change in one or more of these components, or a change in
retail revenue levels, can trigger a change, up or down, to the revenue re quirement.
The last revenue increase to Wastewater Collection rates was a 5% overall revenue increase
that went into effect on July 1, 2009. On July 1, 2011, Wastewater Collection rates were
revised to implement a revenue-neutral cost of service adjustment to align rates with the cost
of service. That alignment resulted in an average bill increase of 13% for residential customers
and a decrease of 8% to commercial customers, but included no change to overall revenues.
In March 2012, the Finance Committee reviewed the financial projections and revenue
requirements for the Wastewater Collection Fund for FY 2013 through FY 2017. The financial
projections showed the need for a 5% increase in revenue requirements for the Wastewater
Collection Fund in FY 2013 followed by increases of 9%, 9%, 8% and 3% for the following years
of the 5-year forecast horizon.
Discussion
Financial Projections
Table 1 below shows the financial projections for the Wastewater Collection Fund for FY 2013
through FY 2017 as well as actual figures for FY 2011 and budgeted and projected figures for FY
2012.
April 18, 2012 Page 3 of 10
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Table 1: Five-Year Financial Plan – (in $thousands)
Adopted Actual Adopted Projected
2011 2011 2012 2012 2013 2014 2015 2016 2017
1
2 % CHANGE IN RETAIL RATE 0%0%0%0%5%9%9%8%3%
3 PROJECTED CHANGE IN RETAIL SALES REVENUE - - - - 715 1,352 1,473 1,428 578
4
5 RETAIL SALES REVENUE 14,356 14,294 14,371 14,304 14,990 16,315 17,783 19,213 19,826
6 CONNECTION AND CAPACITY FEES 730 1,081 740 740 750 761 771 794 817
7 OTHER / TRANSFERS IN 393 300 278 278 278 278 278 278 278
8 INTEREST 445 454 480 480 414 364 332 325 336
9 TOTAL SOURCES OF FUNDS 15,924 16,129 15,868 15,802 16,431 17,717 19,164 20,609 21,257
10
11 TREATMENT 7,499 7,414 7,954 7,954 8,556 8,984 9,433 9,905 10,400
12 DISTRIBUTION OPERATIONS 4,472 4,316 4,606 4,626 5,015 5,115 5,217 5,322 5,428
13 DEBT SERVICE 129 129 129 129 129 129 129 129 129
14 RENT 115 115 106 106 108 110 113 115 117
15 OTHER/ TRANSFERS OUT 567 401 88 88 88 88 88 88 88
16 CAPITAL IMPROVEMENT PROGRAMS 4,130 4,630 4,274 4,274 4,404 4,516 4,705 4,793 4,990
17 TOTAL USES OF FUNDS 16,912 17,005 17,158 17,178 18,300 18,942 19,685 20,351 21,152
18
19 INTO / (OUT OF) RESERVES (988) (876) (1,289) (1,376) (1,869) (1,225) (521) 258 105
20
21 ENDING RATE STABILIZATION RESERVE 5,784 5,896 4,078 6,382 4,513 3,288 2,767 3,024 3,129
22 ENDING PLANT REPLACEMENT RESERVE 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
23 ENDING COMMITMENTS & REAPPROPRIATIONS 10,250
24
25 SHORT TERM RISK ASSESSMENT VALUE 1,815 1,815 1,879 1,879 1,958 2,105 2,275 2,431 2,513
26
27 LONG TERM RATE STABILIZATION GUIDELINES
28 MINIMUM 2,156 2,156 2,156 2,156 2,253 2,456 2,677 2,891 2,978
29 MAXIMUM 4,311 4,311 4,311 4,311 4,506 4,911 5,353 5,782 5,955
30
Fiscal Year
City of Palo Alto
Wastewater Collection
FINANCIAL PROJECTIONS
(FY 2013 - FY 2017)
($'000)
The total use of funds for the Wastewater Collection Fund is projected to increase from the FY
2012 budget of $17.2 million to $21.2 million in FY 2017, an average annual increase of 4.7%.
The Wastewater Collection Fund did not have an overall revenue increase since July 1, 2009. In
FY 2011, total retail sales revenue was $14.3 million (Table 1, Line 5). Sales revenue has
generally been very stable since almost 60% of revenues comes from the residential customer
class where 100% of revenue collection is through a fixed monthly customer charge.
Revenue Requirement
The revenue requirement of the Wastewater Collection Fund is the total amount of revenue it
must collect in order to meet its operations and maintenance (O&M) expenses, debt service
payments, rate-financed CIP expenditures and reserve requirements. This revenue is collected
through wastewater rates, and may be supplemented by revenues from service connection and
capacity fees, interest income, transfers in from other funds, and other miscellaneous
revenues.
The Wastewater Collection Fund is expected to have revenue shortfalls of $1.4 million and $2.6
million in FY 2012 and FY 2013, respectively. Due to healthy reserve levels in FY 2011, no
revenue increases for wastewater collection services were requested in FY 2012. In order to
April 18, 2012 Page 4 of 10
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maintain sufficient reserves and avoid double digit rate increases in future years a r evenue
increase of 5% is proposed in FY 2013. With projected rate adjustments of 9%, 9%, 8% and 3%
in the subsequent four fiscal years, the Wastewater Collection Fund will be able to maintain
reserve levels within the Wastewater Rate Stabilization Reserve (WW-RSR) Guidelines.
Reserves and Risk Assessment
The City Council establishes guidelines for the WW-RSR. As required by the reserve guidelines,
staff performs an assessment of short-term risks for the fund on an annual basis. Table 2 below
summarizes the end-of-year balances for the WW-RSR, the short-term risk assessment level and
the long-term reserve guideline levels. The long-term reserve guidelines were established to
manage risks over the longer term. The short -term risk assessment level was provided to the
Finance Committee as part of the Wastewater Collection Fund’s financial forecast in March
2012. Staff does not recommend any changes to the WW-RSR guideline levels at this time.
Table 2: Wastewater RSR Balance, Guideline Levels and Risk Asse ssment Level ($M)
Wastewater Rate Stabilization Reserve FY 2012 FY 2013 FY 2014
Estimated End of Year Balance 6.4 4.5 3.3
Risk Assessment Level 1.9 2.0 2.1
Reserve Minimum Level 2.2 2.3 2.5
Reserve Maximum Level 4.3 4.5 4.9
The WW-RSR ended FY 2011 with a balance of $5.9 million. The expected balance at the end of
FY 2012 of $6.4 million is above the long-term maximum guideline level. For FY 2013, with the
proposed 5% revenue increase, the balance is projected to be at the long -term maximum
guideline. With projected rate adjustments of 9%, 9%, 8% and 3% in the subsequent four fiscal
years, the WW-RSR balance is expected to be maintained within reserve guideline levels.
Wastewater Collection Fund Customer Profile and Revenue Collection
As of June 2011, the Wastewater Collection Fund had approximately 22,080 wastewater service
accounts. While approximately 93% of customer accounts fall into residential rate classification
(S-1), this represents 60% of revenues. The remaining 40% of revenues are collected from
commercial customers under Rate Schedule S-2.
Recommended New Rate Schedules S-6 and S-7
Currently, Rate Schedule S-2 (Commercial Wastewater Collection and Disposal) contains
subsections for three distinct customer groups: Restaurants (section C.1), Industrial Dischargers
(section C.2), and Other (section C.3). Staff recommends revising Rate Schedule S-2 to apply
only to customers covered under existing section C.3, and creating two new rate schedules:
namely, S-6 (Restaurant Wastewater Collection and Disposal), applicable to customers currently
covered under section C.1, and S-7 (Commercial Wastewater Collection and Disposal –
Industrial Dischargers), applicable to customers currently covered under section C.2. The
proposed change will clarify the applicability of commercial wastewater service rate schedules.
This change is reflected in Table 3 below. Additionally, subsection D2 and D3 describing
April 18, 2012 Page 5 of 10
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Dischargers of Unmetered Contaminated Groundwater and Industrial Waste Discharge Fees are
removed from Rate Schedule S-2 as these fees are better suited for inclusion under Municipal
Fee Schedules.
Current Billing Basis Under Rate Schedule S-2
Customers on Rate Schedule S-2 are charged for wastewater services based on water usage.
However, customers maintaining extensive irrigated landscaping may request to be billed for
wastewater based on winter water usage (average water usage for the months of January
through March) since water used for irrigation does not flow through the wastewater collection
system. Water use for dedicated irrigation meters (Water Rate Schedule W -7) is exempt from
wastewater collection charges. Table 3 provides the distribution of wastewater service
accounts by rate schedule, billing basis, and revenue collection FY 2012.
Table 3: Customer Profile and Revenue Collection
Current
Rate
Schedule/
Section
Proposed
Rate
Schedule
Customer
Class
Billing Basis Number of
Customers
Billing Water
Consumption
(ccf/year)
Total
Revenue
($/year)
S-1 S-1 Residential Fixed Charge 20,708 1,542,480(*) 8,610,123
S-2/C.3 S-2 Commercial Monthly Water Use 1,266 834,335 3,963,093
S-2/C.3 S-2 Commercial Winter Water Use 84 190,535 905,040
S-2/C.1 S-6 Restaurant Monthly Water Use 157 107,850 896,707
S-2/C.2 S-7 Industrial
Dischargers
Monthly or Winter
Water Use
0 0 0
Total 22,215 2,675,257 14,374,963
(*) Assumes annual indoor water consumption based on 5 ccf per month per customer,
adjusted to include approximately 5,000 apartment dwellings
Recommended Changes to Billing Basis Used Under Rate Schedule S-2
Staff recommends placing all non-residential customers, except for restaurants and
commercial/industrial dischargers, on a winter-based billing method. Industrial dischargers
billing basis is defined in Rule 23 Section D and is based on indi vidual customer water use
conditions. Since restaurant customers’ water usage is almost exclusively for cooking, cleaning
and restroom applications, which are all activities that use the wastewater collection system
exclusively, the current billing basis (monthly water use) is appropriate for restaurants.
Recommended Changes to Quantity Rates Due to the Proposed Revisions to Billing Basis
Proposed changes to the revised billing basis apply only to the quantity rates applicable under
Section C.3 of Rate Schedule S-2. Using winter water usage as the basis instead of monthly
water usage for these customers will lower the billing basis so that the rate would need to
increase to result in the same revenue from the customer class. Table 4 shows the impact of
changing the billing basis on the quantity rate both to be revenue -neutral and with the
April 18, 2012 Page 6 of 10
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proposed across-the-board 5% rate increase. The monthly revenue includes revenues from the
minimum monthly charge.
Table 4: Quantity Rate with Different Billing Bases for Non-residential Customers
Monthly
Usage (ccf)
Monthly
Revenue ($)
Average
Rate ($/ccf)
Current – Mixed Billing Basis 85,817 407,630 4.75
Proposed – All Winter Billing Basis 75,756 ” 5.38
Proposed Change to Quantity Rate
Current Quantity Rate 4.75
Quantity Rate with all winter billing basis 5.38
Proposed Quantity Rate (with winter billing basis and 5% rate increase) 5.65
Customer Bill Impact Due to Revised Billing Basis
Figure 1 below shows the impact on commercial customers, excluding restaurants and
industrial dischargers, of the proposed change to the quantity rate and billing basis. About 23%
of customers would see no change to their bills since their water usage is low enough that only
the minimum charge is paid. About 40% of customers would see a bill decrease. The remaining
37% would see higher bills, but only 9.5% of all customers would see impacts of greater than
$50 per month.
Figure 1: Bill Impact on Commercial Customers on Rate Schedule S-2, Section C.3.
-$600
-$400
-$200
$0
$200
$400
$600
0%10%20%30%40%50%60%70%80%90%
M
o
n
t
h
l
y
b
i
l
l
c
h
a
n
g
e
Percent of Customer accounts
Monthly Bill Impact: Commercial Customers
40.2% of customers
see a bill decrease
Nine customers will see decreases greater than $600
Eleven customers will see increases over
$600
63.1% of customers
see reduced or no
change to bills
100%
April 18, 2012 Page 7 of 10
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Proposed Rate Adjustments due to Increased Revenue Requirements
In order to collect required revenues for wastewater services, a 5% uniform rate increase is
proposed for all rate classes. Staff reviewed customer usage data and found no need for a cost
of service adjustment to rates since the completion of the 2011 cost of service study.
Therefore, the proposed 5% revenue increase effective July 1, 2012 is applied equally to all
customer classes. Table 5 presents current rates and proposed rates after t he required
adjustments due to 5% uniform revenue increase and adjustment to the billing basis for
commercial customers on Section C.3 of Rate Schedule S-2.
Table 5: Proposed Rate Adjustments
Rate
Schedule
Customer
Class
Current Rates Proposed Rates
Monthly
Charge(1)
($/month)
Quantity
Charge
($/ccf)
Monthly
Charge(1)
($/month)
Quantity
Charge
($/ccf)
S-1 Residential 27.91 N/A 29.31 N/A
S-2 (was S2.C.3) Commercial 27.91 4.75 29.31 5.65(2)
S-6 (was S2.C.1) Restaurant 27.91 8.31 29.31 8.73
S-7 (was S2.C.2) Industrial
Dischargers(3)
27.91 2.48 29.31 2.60
(1) Monthly charges indicated under S-1 are fixed monthly charges, and those under S-2 are minimum
monthly charges. Minimum monthly charges apply if water usage is less than 6 ccf per month.
(2) Includes change to winter water use billing basis.
(3) Currently there are no customers in this class.
April 18, 2012 Page 8 of 10
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Customer Bill Impact from Proposed Rates
Table 6 below shows the impact of the proposed rate increase on customer bills.
Table 6: Impact of Rate Increase on Customer Bills
Customer
Current
Bill
Proposed
Bill
Proposed
Increase
Proposed
Increase (%)
Residential Customers $27.91 $ 29.31 $1.40 5%
Restaurants (using 57 ccf/month) $ 473.67 $ 497.61 $23.94 5%
Commercial Customers (not restaurants
and industrial dischargers):
Small water user
(using less than 6 ccf/month) $ 27.91 $ 29.31 $1.40 5%
Median water user
(using 10 ccf/mo year-round) $ 47.50 $ 56.50 $9.00 19%
Median water user (using 8 ccf/mo in
winter, 12 ccf/mo in summer) currently
billed on monthly water use basis $ 47.50 $ 45.20 -$2.30 -5%
Large water user (using 1600 ccf/mo in
winter, 3200 ccf/mo in summer)
currently billed on monthly use basis $ 10,450 $ 9,040 -$1,410 -13%
Large water user (using 1600 ccf/mo in
winter, 3200 ccf/mo in summer)
currently billed on winter basis $ 7,600 $ 9,040 $1,440 19%
Comparison of Palo Alto Water Rates and Surrounding Cities
For several years, Palo Alto's retail wastewater collection rates have generally been on par with
surrounding areas. Table 7 below, which compares monthly wastewater collection bills using
rates as of January 1, 2012 for Mountain View, Redwood City, Santa Clara and Menlo Park,
indicates that the average residential customer in surrounding cities pays approximately 42
percent more than the average Palo Alto residential customer. At this time, the certainty or
magnitude of other jurisdictions’ upcoming rate changes is not known. It should be noted that
Palo Alto’s proposed residential rate increase to $29.31 would continue to be lowe r than the
average benchmark level.
Table 7: Monthly Residential Wastewater Collection Bill Comparison
(rates in effect as of January 1, 2012)
Wastewater Palo
Alto
Mountain
View
Redwood
City
Santa
Clara
Menlo
Park
Average
Benchmark
Residential $27.91 $22.99 $53.10 $24.54 $57.50 $39.53
Difference from CPAU -17.6% 90.3% -12.1% 106.0% 41.6%
April 18, 2012 Page 9 of 10
(ID # 2679)
Proposition 218 Water Rate Increase Procedure
In addition to setting forth substantive requirements that certain types of utility rates, or
“property-related fees”, be cost of service-based, Proposition 218 set forth procedural
requirements that public agencies must follow in order to enact or increase a property -related
fee. Since Proposition 218 applies to the wastewater rate increases described here, the City
must provide written notice by mail to water customers subject to the proposed fees, followed
by a public hearing held not less than 45 days after notice is mailed. The notice must include
the amount of the fee, the basis upon which the fee was calculated, the reason for the fee, and
the date, time and location of the public hearing. If a majority of customers submit written
protests against the proposed fees, the City may not impose the fee. The notices are expected
to be mailed out on May 1 with the public hearing currently scheduled for June 18, 2012.
Commission Review and Recommendations
On March 27, 2012, the UAC considered the staff proposal to increase Wastewater Collection
Fund revenues by 5% effective July 1, 2012. With no discussion, the UAC voted unanimously
(6-0) to recommend the staff recommendation that Council:
1. Increase overall retail wastewater collection rates and annual revenues for Wastewater
Collection Utility by 5.0 percent, or $715,000, effective July 1, 2012;
2. Effect a change to utilize winter-based water usage rates for commercial customers
under Rate Schedule S-2 Section C.3; and
3. Amend Wastewater Collection Utility Rate Schedules S-1 and S-2, and add new
Wastewater Collection Utility Rate Schedules S-6 and S-7, as attached.
The excerpted draft notes from the UAC’s March 27, 2012 meeting are provided as Attachment
D.
Resource Impact
Approval of this rate proposal will result in a retail sales revenue increase of 5%, or $715,000
per year, to the Wastewater Collection Fund beginning on July 1, 2012.
Environmental Review
The restructuring of wastewater rates to meet operating expenses and financial reserve needs
is not subject to the California Environmental Quality Act (CEQA), pursuant to Califor nia Public
Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec.
15273(a) (1-4) (modification of rates for the purpose of meeting operating expenses,
purchasing supplies, equipment or materials, meeting financial reserve needs and requirements
and obtaining funds for capital projects necessary to maintain service within existing service
areas).
Attachments:
Attachment A: Draft Resolution for Wastewater Rates Effective July 1, 2012 (PDF)
April 18, 2012 Page 10 of 10
(ID # 2679)
Attachment B: Financial Projections for the Wastewater Collection Fund (FY 2013 – FY
2017) (PDF)
Attachment C: Utility Rate Schedules S-1, S-2, S-6. and S-7 (PDF)
Attachment D: Excerpted Minutes of the March 7 UAC Meeting (PDF)
3-6-12 FIN Wastewater Excerpt (PDF)
Prepared By: Ipek Connolly, Sr. Resource Planner
Department Head: Valerie Fong, Director
City Manager Approval: ____________________________________
James Keene, City Manager
*NOT YET APPROVED*
120409 dm 6051704
ATTACHMENT _
Resolution No. _________
Resolution of the Council of the City of Palo Alto Adopting a Wastewater
Collection Rate Increase, Amending Utility Rate Schedules S-1 and S-2 and
Adopting New Utility Rate Schedules S-6 and S-7
WHEREAS, 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; and
WHEREAS, pursuant to Article XIIID Sec. 6 of the California Constitution, on June _,
2012, the City of Palo Alto held a public hearing to consider all protests against the proposed
wastewater collection rate amendments; and
WHEREAS, the total number of written protests presented by the close of the public
hearing was less than fifty percent (50%) of the total number of customers and property owners
subject to the proposed wastewater collection rate amendments;
NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE as
follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule S-1 (Domestic Wastewater Collection and Disposal) is hereby amended to read in
accordance with sheet S-1-1, attached and incorporated. Utility Rate Schedule S-1, as amended,
shall become effective July 1, 2012.
SECTION 2. 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
in accordance with sheets S-2-1 and S-2-2, attached and incorporated. Utility Rate Schedule S-2,
as amended, shall become effective July 1, 2012.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, new
Utility Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby added to
read in accordance with sheet S-6-1, attached and incorporated. Utility Rate Schedule S-6 shall
become effective July 1, 2012.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, new
Utility Rate Schedule S-7 (Commercial Wastewater Collection and Disposal – Special
Discharge) is hereby added to read in accordance with sheets S-7-1 and S-7-2, attached and
incorporated. Utility Rate Schedule S-7 shall become effective July 1, 2012.
SECTION 5. The Council finds that the revenue derived from the authorized adoption
enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the
Charter of the City of Palo Alto.
ß
*NOT YET APPROVED*
120409 dm 6051704
SECTION 6. The Council finds that a restructuring of 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)(1) and (3).
After reviewing the wastewater rate staff reports presented to the Utilities Advisory Commission,
the Finance Committee and 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:
___________________________ ___________________________
Sr. Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
($000's)
Adopted Actual Adopted Projected
2011 2011 2012 2012 2013 2014 2015 2016 2017
1 0.0%0.0%0.0%0.0%5.0%9.0%9.0%8.0%3.0%
2 WASTEWATER REVENUE
3 REVENUE:14,371 14,304 14,371 14,304 14,304 15,020 16,371 17,845 19,272
4 RATE ADJUSTMENT 0 0 0 0 715 1,352 1,473 1,428 578
5 PRORATION IMPACT 0 0 0 0 (30)(56)(61)(59)(24)
6 TOTAL ADJUSTED REVENUE 14,371 14,304 14,371 14,304 14,990 16,315 17,783 19,213 19,826
7 DISCOUNTS/UNCOLLECT.(15)(11)0 0 0 0 0 0 0
8 INTEREST 445 454 480 480 414 364 332 325 336
9 CONNECTION AND CAPACITY FEES 730 1,081 740 740 750 761 771 794 817
10 OTHER / TRANSFERS IN 393 300 278 278 278 278 278 278 278
11 FROM RESERVES:
12 RATE STABILIZATION 988 876 1,289 0 1,869 1,225 521 0 0
13 COMMITMENTS & REPPROPRIATIONS 0 0 0 1,862 0 0 0 0 0
14 TOTAL FINANCIAL RESOURCES 16,912 17,005 17,158 17,663 18,300 18,942 19,685 20,609 21,257
15 OPERATING EXPENSES
16 TREATMENT 7,499 7,414 7,954 7,954 8,556 8,984 9,433 9,905 10,400
17 CUSTOMER DESIGN & CONN. (CIP)330 830 340 340 350 361 372 383 394
18 SYSTEM IMPROVEMENT (CIP)3,800 3,800 3,934 3,934 4,054 4,155 4,333 4,410 4,596
19 CUSTOMER SERVICES 269 281 266 286 292 298 304 310 316
20 OPERATIONS 2,709 2,422 2,818 2,818 3,141 3,204 3,268 3,334 3,400
21 ALLOCATED CHARGES:1,494 1,613 1,522 1,522 1,581 1,613 1,645 1,678 1,711
22 TOTAL MAJOR ACTIVITIES 16,101 16,360 16,834 16,854 17,975 18,615 19,355 20,019 20,818
23 DEBT SERVICE 129 129 129 129 129 129 129 129 129
24 TRANSFERS:
25 OPERATING TRANSFERS OUT 567 401 88 88 88 88 88 88 88
26 RENT 115 115 106 106 108 110 113 115 117
27 TOTAL OPERATING EXPENSES 16,912 17,005 17,158 17,178 18,300 18,942 19,685 20,351 21,152
28 RESERVE ADDITIONS:
29 PLANT REPLACEMENT 0 0 0 0 0 0 0 0 0
30 RATE STABILIZATION 0 0 0 486 0 0 0 258 105
31 TOTAL RESERVE ADDITIONS:0 0 0 486 0 0 0 258 105
32 TOTAL REVENUE REQUIREMENT 16,912 17,005 17,158 17,663 18,300 18,942 19,685 20,609 21,257
33 RESERVES BALANCES
34 PLANT REPLACEMENT 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
35 RATE STABILIZATION 5,784 5,896 4,078 6,382 4,513 3,288 2,767 3,024 3,129
36 TOTAL RESERVES BALANCES 6,784 6,896 5,078 7,382 5,513 4,287 3,766 4,024 4,129
37
38 COMMITMENTS & REAPPROPRIATIONS 10,250
39 RATE STABILIZATION RESERVE GUIDELINES
40
41 Short Term Risk Assessment Value 1,815 1,815 1,879 1,879 1,958 2,105 2,275 2,431 2,513
43 Long Term Rate Stabilization Guidelines
44 RSR Minimum 2,156 2,156 2,156 2,156 2,253 2,456 2,677 2,891 2,978
45 RSR Maximum 4,311 4,311 4,311 4,311 4,506 4,911 5,353 5,782 5,955
2011 2011 2012 2012 2013 2014 2015 2016 2017
Fiscal Year
% CHANGE IN RETAIL RATE
WASTEWATER COLLECTION
E
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P
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N
S
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S
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V
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FINANCIAL PROJECTIONS
(FY 2013 - FY 2017)
City of Palo Alto
Wastewater Collection
߬¬¿½¸³»²¬Þ
RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-20121
Supersedes Sheet No S-1-1 dated 7-1-20092011 Sheet No S-1-1
A. APPLICABILITY:
This schedule applies to each occupied residential dwelling unit.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides wastewater service.
C. RATES:
Per Month
Each domestic dwelling unit ..................................................................................................
$27.9129.31
D. SPECIAL NOTES:
1. Any dwelling unit being individually served by a water, gas, or electric meter will be
considered as continuously occupied.
2. For two or more occupied dwelling units served by one water meter, the monthly wastewater
charge will be calculated by multiplying the current wastewater rate by the number of
dwelling units.
3. Each developed separate lot shall have a separate service lateral to a sanitary main or
manhole.
{End}
• •••••• •• ••
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-20112
Supersedes Sheet No S-2-1 dated 7-1-20092011 Sheet No S-2-1
A. APPLICABILITY:
This schedule applies to all all commercial establishments other than those served under Utility Rate
Schedule S-1 (Domestic Wastewater Collection and Disposal), residential dwelling units and those
served under Utility Rate Schedules S-6 (Restaurant Wastewater Collection and Disposal) or Rate
Schedule S-7 (Commercial Establishments Wastewater Disposal – SpecialIndustrial Discharger).
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides wastewater services.
C. RATES:
1.Restaurants
(A)Minimum charge per connection per month ..................................................$27.91
(B)Quantity Rates:
Based on metered water, per 100 cubic feet ..................................................$8.31
2.Any establishment requiring special discharge monitoring as defined in Rule and Regulation
23, Section D.
(A)Collection System Operation, Maintenance, and Infiltration Inflow:
$1,978.61 per million gallons ($1.48 per 100 cubic feet of metered water).
(B)Advanced Waste Treatment Operations and Maintenance Charge:
$1,336.90 per million gallons ($1.00 per 100 cubic feet of metered water).
(C)$247.56 per 1000 pounds of COD1
(D)$596.62 per 1000 pounds of SS2
(E)$3,983.85 per 1000 pounds of NH3 3
1 COD stands for Chemical Oxygen Demand
2 SS stands for Suspended Solids
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-20112
Supersedes Sheet No S-2-2 dated 7-1-20092011 Sheet No S-2-2
(F)$14,781.25 per 1000 pounds of toxics4
3.All Other Establishments
(A1).Minimum Charge per connection per month .............................................................$27.919.31
(B2.)Quantity Rates, per 1:
Based on metered water per 100 cubic feet (See Section D.1)...........................................$4.755.65
D. SPECIAL NOTES:
1.Upon application from establishments maintaining extensive irrigated landscapingT, the
monthly charge for the quantity rate set forth in Section C.2 of this rate schedule will be
based upon the average water usage for the months of January, February and March,and
applied in July..If a water meter is identified as exclusively serving irrigation landscaping,
such meter will be exempted from sewer wastewater charge calculations.
2.The City of Palo Alto Utilities Department may require Sewage wastewater metering
facilities may be required, in which case service will be governed by terms of a special
agreement between the City and the Customer.
3.Charges for large discharges will be determined on the basis of sampling as outlined in
Utilities Rule and Regulation 23. 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.
43.Dischargers of Unmetered Contaminated Groundwater
Quantity rates for collection and treatment of the contaminated groundwater will be based on
the rates as defined under Section C(3)of this rate schedule. Discharge permits are issued by
the Environmental Compliance Manager at the Water Quality Control Plant, 2501
Embarcadero Way, Palo Alto.
5.Industrial Waste Discharge Fee
The following fees, as defined in section 16.09.010 of the Palo Alto Municipal Code,will be
3 NH3 stands for Ammonia
4 Toxics include sum of chromium, copper, cyanide, lead, nickel, silver, and zinc
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-20112
Supersedes Sheet No S-2-3 dated 7-1-20092011 Sheet No S-2-3
required for the issuance of an Industrial Discharge Permit, including any Exceptional Waste
Permits (This fee may beFees in subsections (A), (B) and (C),below may be reduced to $250
for a one-time batch discharge permit).:
(A)Small, non-categorical facilities $425
(B)Non-categorical/small categorical with only minor pollutant concerns
$1,250
(C)Categorical or Significant Industrial Users with ability to impact the RWQCP
$2,100
{End}
RESTAURANT WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-6
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-2012
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:
1. Minimum charge per connection per month .........................................................$29.3127.91
2. Quantity Rates, per 100 cubic feet of monthly metered water usage ........................$8.738.31
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}
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
– INDUSTRIAL DISCHARGER
UTILITY RATE SCHEDULE S-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-2012
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 and Regulation 23,
Section D.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides wastewater services.
C. RATES:
1. Collection System Operation, Maintenance, and Infiltration Inflow:
$2,077.541,978.61 per million gallons ($1.5548 per 100 cubic feet of metered water).
2. Advanced Waste Treatment Operations and Maintenance Charge:
$1,403.741,336.90 per million gallons ($1.0500 per 100 cubic feet of metered water).
3. $ 247.56 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)
4. $ 596.62 per 1000 lbs of SS (Suspended Solids)
5. $ 3,983.85 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 and Regulation 23, Section D. 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 and Regulation 23, Section D.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}
Excerpted Draft Minutes of the March 27,2012 UAC Meeting
NEW BUSINESS
ITEM 2:ACTION:Wastewater Collection Utility Proposed Rate Adjustments Effective July 1,
2012
Having read the written report,the commissioners were ready to vote on the item without
discussion.
ACTION:
Commissioner Cook made a motion,seconded by Commissioner Waldfogel,to support staff?s
recommendation to recommend that the City Council:
1.Increase overall retail wastewater collection rates and annual revenues for Wastewater
Collection Utility by 5.0 percent,or $715,000,effective July 1,2012;
2.Effect a change to utilize winter based water usage rates for commercial customers
under Rate Schedule S 2 Section C.3;and,
3.Amend Wastewater Collection Utility Rate Schedules S 1 and S 2,and add new
Wastewater Collection Utility Rate Schedules S 6 and S 7,as attached.
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FILENAME 1
FINANCE COMMITTEE
Excerpt
Special Meeting
March 6, 2012
Wastewater Collection Fund Financial Projections
Chair Shepherd indicated Staff would return with its official response and rates and for
the Finance Committee (FC) to make decisions.
Council Member Burt asked for a brief summary of the drivers for the cost increases.
Ipek Connolly, Senior Resource Planner, presented a chart indicating the main cost
categories for the Wastewater Collection Fund. She noted approximately 50 percent of
costs were treatment, 25 percent for Capital Improvement Projects (CIP), and 25
percent for operations. She reported the projections were based on the information
provided by the treatment plant in terms of anticipated cost increases. She stated that
translated to a 5 percent cost increase per year over the next five years, which was the
primary driver. She indicated CIP was less than 3 percent growth for standard
inflation, and Staff built in 2 percent overall for operations costs. She said there were
no major cost increases; therefore, it was almost entirely driven by inflation and cost
increases.
Council Member Burt asked why there was that much inflationary cost increase.
Ms. Connolly reported this was based on the prior five years of treatment plant costs,
which on average had increased about 5 percent. She stated they also were
undertaking some capital work. She indicated this was Wastewater Collection Utility
Services' CIP; the other one was treatment costs and part of that was their own CIP
projects. She explained one of the drivers was their own investments, and two
additional drivers of their costs were electricity and chemicals.
Council Member Burt stated electric was stable.
Valerie Fong, Utilities Director, thought the rate was stable, but did not know if their
usage was stable.
FILENAME 2
Phil Bobel, Watershed Protection Manager, reported the electric part was not going to
increase dramatically from this point forward. He stated most of the costs at the
treatment plant were CIP. He noted sewage treatment was not separated from the
collections system CIP. H explained the long-range facility plan would include
rebuilding the sewage treatment plant, which was well over 40 years old, over the next
25 years.
Council Member Burt asked if the biggest proportion of the bluish-purple section of
increase was a result of the plant having passed its useful life.
Mr. Bobel indicated there would be more bond funding in the future and major
expenses beyond 2017.
Vice Mayor Scharff noted the current CIP increases were for band-aid repairs, and
asked if the repairs would have to be repeated in the future.
Mr. Bobel answered no. He explained Staff was being judicious about expenditures and
band-aid repairs would not be rendered useless.
Vice Mayor Scharff asked if the FC should consider bond financing now.
Mr. Bobel thought he should discuss bond funding with Mr. Perez.
Lalo Perez, Director Administrative Services, indicated the projects needed to be
identified and a partner (INAUDIBLE).
Council Member Price asked for the meaning of the risk assessment number mentioned
on page 3 of the Staff Report and in Table 2, with regard to budgeted and actual.
Ms. Connolly indicated reserve guidelines were shown with the gray line. She reported
Staff managed the Fund to be within the minimum and maximum in the long term. For
the short term, she noted the guidelines required Staff to review short-term risks. She
explained that was done by reviewing the one-year revenue change between budgeted
amounts and collected amounts in the case of the Wastewater Collection Fund, which
was one number considered. She stated a second number was 15 percent of the CIP
expenditures. She indicated those two numbers were taken every year to determine
the short-term status; and this number was not significant for the Wastewater
Collection Fund because revenues and CIP plans were stable and followed the minimum
requirements. She noted reserve amounts were higher than required by the maximum
guideline, because these guidelines were lowered in 2009. She stated there had not
been a rate adjustment for wastewater collection for the last two years and all costs
FILENAME 3
had not been collected because of the cushion in the reserves. She explained the City
was utilizing the excess in the reserves and not raising rates in order to decrease the
reserves to target levels. She said rates would increase in 2013 by only 5 percent,
even though the revenue versus cost difference required more. She indicated future
rates would have to be brought in line with annual expenditures.
Joe Saccio, Assistant Director Administrative Services, explained the City was
subsidizing the costs through the reserve in order to decrease the reserve level to a
point between minimum and maximum levels. He stated at some point revenue would
have to be increased to cover costs and not use the reserve.
Ms. Fong noted there was a long-term and short-term risk assessment. She explained
the short-term risk assessment was relevant when a volatile commodity was being
purchased. She noted wastewater was not a volatile commodity; therefore, the short-
term risk assessment was not that relevant in this particular utility. She indicated Staff
used the same assessments for all utilities for points of comparison.
Chair Shepherd asked if Staff had decided to fill the two new positions noted on page 2
of 5.
Ms. Connolly answered it was proposed, not decided. She stated management would
decide whether to proceed with that.
Ms. Fong stated Staff had to make its case to the City Manager first, and included it in
the interest of full disclosure.
Chair Shepherd noted the positions were a business analyst and a inspector.
Vice Mayor Scharff asked why Staff needed those positions.
Ms. Fong indicated regulations had changed, and both positions would focus on
regulations for gas and wastewater utilities.
Chair Shepherd inquired whether the two positions would be shared, as $400,000 was
quite a bit.
Ms. Connolly stated $400,000 included a study assessment as well as Staff positions.