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HomeMy WebLinkAbout1998-03-16 City Council (36)City of Palo Alto City Manager’s Report 4 TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT:UTILITIES DATE:MARCH 16, 1998 CMR:148:98 SUBJECT:REQUEST FOR APPROVAL OF A BUDGET AMENDMENT ORDINANCE IN THE AMOUNT OF $500,000 FOR ELECTRIC DESIGN AND CONNECTION SERVICES CAPITAL PROJECTS REPORT IN BRIEF This report requests that Council approve a Budget Amendment Ordinance (BAO) in the amount o.f$500,000 for the Electric Service, Transformers, and Meters Capital Major Project (8928). The additional funding is required to meet the continuing high demand for services and to replenish depleted stocks of transformers and switches. This BAO will result in a net reduction of Electric Utility Fund Reserves of$415,000. CMR:148:98 Page 1 of 4 RECOMMENDATION Staff recommends that the Council adopt the attached BAO in the amount of $500,000 for the Electric Service, Transformers, and Meters Capital/Pr0ject (8928). BACKGROUND The City of Palo Alto Municipal Code places budgetary contrrls on Capital Improvement Program (CIP) projects and does not allow additional appropriations to CIP projects without Council approval. The Electric Service, Transformers, and Meters Capital/Project provides funding for improvements to the system to allow the connection of the new electrical services. The improvements include the installation of new conduits, transformers, meters, cables and electrical enclosures. The City receives reimbursement of approximately 17 percent of the total electric service connection expense from customers. The Electric Fund reimbursement is smaller than received in the other Utility Funds because the Electric Utility funds expensive capital equipment, such as transformers, required to provide service. DISCUSSION The volume of new design and connection services is directly linked to the continuing new building construction and remodeling activity, and is difficult for staff to forecast accurately. During the current fiscal year, the number of service requests has, for the second consecutive fiscal year, surpassed staff’s estimate, primarily because of the booming economy and Palo Alto’s strong real estate market. Based upon the service requests received in the first 6 months of the fiscal year, the Services, Transformer, and Meters Capital/Project (8928) will run out of funding before the end of the fiscal year unless an additional appropriation is made. Customer demand is expected to remain strong for the remainder of the fiscal year. Consequently, in order to continue to meet customer demand for electric service, an additional appropriation of $500,000 is needed before the end of the fiscal year. The strong demand over the last two years for electrical services has depleted the utilities’ stocks of large elecffical transformers. Stocks of these transformers must be maintained in the yard because material lead time for transformers can be as long as 6 months. These transformers represent a large capital expense since the price range is between $4,000 and $25,000 each. Anticipated orders for transformers this year will exceed $500,000. Since the beginning of this fiscal year, the Electric Utility has installed 27 transformers.larger than 100 KVA. In comparison, during the entire 1996/97 fiscal year, only 33 transformers CMR: 148:98 Page 2 of 4 greater than 1 O0 KVA were installed. The demand for these large transformers is expected to continue at a higher rate when compared to previous years, due to renovation and replacement of buildings in the Stanford Business Park. In addition, the Electric Utility continues to experience increasing requests for customer connections. Current projections indicate that there will be a 10 percent increase in job requests from last year. The increased new business activity increases costs associated with substructure and electrical installation. The current funding for the project is $1,838,332. Through December 31, 1997, $1,576,392 has either been spent or encumbered, with $261,940 in remaining funds.. The requested $500,000 will increase the funding in the Services, Transformers, Meters Major Project to $2,338,332. The expenditures in 1996/97 for this project were approximately $2,100,000. This is an estimated expenditure amount because the project was divided into two projects in 1997/98. (This split was done to separate system improvement funding from the customer work.) The estimated expenditure in 1997/98 of $2,338,332 is approximately an 11 percent increase over last years expenditure. RESOURCE IMPACT A BAO in the amount of $500,000 is requested, to come from the Electric Utility Fund Rate Stabilization Reserve. The $500,000 increase requested will be partially offset by $85,000 in revenues from customer connection payments. The BAO will result in a net reduction in the Electric Utility Fund Rate Stabilization Reserve of $415,000. POLICY IMPLICATIONS This report does not represent any change to existing City policies. ENVIRONMENTAL REVIEW Categorically exempt from California Environmental Quality Act (CEQA), pursuant to sections 15302 and 15303 of the CEQA guidelines.. CMR:148:98 Page 3 of 4 ATTACHMENTS Budget Amendment Ordinance PREPARED BY: Tomm Marshall, Engineering Manger Electric DEPARTMENT HEAD: CITY MANAGER APPROVAL: CMR: 148:98 Page 4 of 4 ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 1997-98 FOR ADDITIONAL FUNDING IN THE AMOUNT OF $500,000 FOR THE ELECTRIC SERVICE, TRANSFORMERS, AND METERS CAPITAL IMPROVEMENT PROJECT WHEREAS, pursuant to the provisions of section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 23, 1997 did adopt a budget for fiscal year 1997-98; and WHEREAS, Capital Improvement Project 8928 was created to provide electric service, transformers and meters to electric customers; and WHEREAS, the City of Palo Alto has experienced a substantial,~ increase in the number of customers requesting electrical service due to increased business activity; and WHEREAS, the stock.of large electrical transformers is being depleted faster than expected and needs to be replenished;-and WHEREAS, there is insufficient funding in this capital - Improvement Program Project to support this level of activity for the remainder of the fiscal year and the appropriation for the project needs to be increased; and WHEREAS, charges billed to.customers will provide approximately $85,000 in revenue to offset the additional Cost; and WHEREAS, City Council authorization is needed to amend the 1997-98 budget as hereinafter set forth. NOW, THEREFORE, the Council of the City of Palo Alto does ~ORDAIN as follows: SECTION I. The sum of Five Hundred Thousand Dollars ($500,000) is hereby appropriated to Capital Improvement Project Number 8928, Electric Service~ Transformers, and Meters, and the Electric Rate Stabilization Reserve is correspondingly reduced. SECTION 2. Revenue from billable work in Capital Improvement Project Number 8928 is increased by the sum of Eighty Five Thousand Dollars ($85,000), and the Electric Rate Stabilization Reserve is correspondingly increased. SECTION 3.The transactions authorized by Sections 1 and 2 will reduce the Electric Rate Stabilization Reserve from $19,356,000 to $18,941,000. SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 5. This project has been determined to be categorically exempt under Sections 15302 and 15303 of the California Environmental Quality Act. SECTION 6. As provided in section 2~04.350 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST:APPROVED: City Clerk Mayor APPROVED AS TO FORM:City Manager Senior Asst. City Attorney Acting Director, Administrative Services Department Director of Utilities