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Home My WebLink AboutStaff Report 205-07BUDGET, ’07-’09 City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM: ATTENTION: DATE: SUBJECT: CITY MANAGER FINANCE COMMITTEE APRIL 17, 2007 STAFF RECOMMENDATION TO APPROVE DEPARTMENT: UTILITIES CMR: 205:07 A RESOLUTION ADOPTING COMMERCIAL FIBER OPTIC RATE INCREASES FOR FISCAL YEARS 2007-08 AND 2008-09 RECOMMENDATION This report recommends that the City Council adopt the attached resolution to: a)Approve a $47,000 Commercial Fiber Optic revenue increase for Fiscal Year (FY) 2007- 08, based upon the 2006 Consumer. Price Index adjustment of 3.2 percent; and, b)Approve, in concept, a Commercial Fiber Optic revenue increase of $47,400 for FY 2008-09, projecting a 2007 Consumer Price Index adjustment of 3.2 percent. BACKGROUND The Utilities Department provides commercial dark fiber optic services within the boundaries of Palo Alto. On Septelnber 18, 2006, the City Council 9pproved an incredse in Commercial Fiber Optic revenues of $324,000 (CMR 362:06). For customers having fiber optic licenses beginning prior to September 18, 2006, rates for service are published in Dark Fiber Licensing Services Rate Schedule EDF-1. Customer expenses for engineering, construction and connection to the fiber optic backbone are charged under Dark Fiber Licensing Services Rate Schedule EDF-2. Both the EDF-1 and EDF-2 rate schedules are subject to ammal adjustments by the Consumer Price Index (CPI). The City of Palo Alto’s municipal fiber accounts, those customers whose service began after Septelnber 18, 2006, or customers whose dark fiber licenses have expired, are now served under Dark Fiber Licensing Services Rate Schedule EDF-3, which is not subject to CPI increases, but adjusted during the budget process to reflect changes in operating costs, like other utility rate schedules. CMR:205:07 Page 1 of 3 DISCUSSION The Council-approved Dark Fiber Licensing Agreement (CMR 177:97), allows the fees charged under the EDF-1 and EDF-2 rate schedules to be adjusted in accordance with the CPI, which is calculated by the United States Bureau of Labor Statistics. For 2006, the CPI adjustment factor results in an increase of 3.2 percent to the EDF-1 and EDF-2 rate schedules. The previous CPI adjustment to the EDF-1 and EDF-2 rate schedules occurred in September, 2006, at which time CPI adjustments for 2004 and 2005 were implemented. This proposed increase, to be effective on July 1, 2007, will only adjust EDF-1 and EDF-2 rates. The last Colnmercial Fiber Optic rate change was implemented in October, 2006, rather than July 1, 2007, with the other Utilities rate changes. This rate change proposal brings Commercial Fiber Optic rate adjustments into the same fiscal year timeline as other Utilities rate changes. Table 1 below outlines the adjustments proposed to the EDF-1 and EDF-2 Commercial Fiber Optic rates: Rate Description TABLE 1 Current Proposed $ i Rates Rates * Difference :Difference: EDF-1 (Section C-l): Dark Fiber Backbone License Fees (FM/month) Fiber Price $272.25 $281.00 $8.75 3.2 Quantity discount 54.42 56.18 1.76 3.2 Buffer tube discount 54.42 56.18 1.76 3.2 Route length discount 70.75 73.06 73.04 3.2 Ring topology discount 21.75 22.45 0.70 3.2 Length of term discount 42.58 43.95 1.37 3.2 EDF-1 (Section C-2): Dark Fiber Lateral Connection Fees (ft/month) Drop Cable Mgmt. Fees $0.01- 3.2 $0.05 0.01-0.05 0.00 ** Custom Cable Mgnnt Fees 0.26 0.27 0.01 3.2 Fees for additional fiber 0.05 0.05 0.00 **3.2 EDF-2 (Section C-1): Advance Engineering Fees Com./had. AER rain. fee $650 $671 $21 3.2 * Calculations have been rounded to the nearest cent. ** The proposed rate matches existing rates when rounded. CMR:205:07 Page 2 of 3 RESOURCE IMPACT The additional Commercial Fiber Optic revenues resulting from the CPI increase to Dark Fiber Licensing Services Rate Schedule EDF-1 is projected to be approximately $47,000 for FY 2007- 08. As Dark Fiber Licensing Services Rate Schedule EDF-2 applies to customer-driven expansions of the City’s fiber optic network, the increase in projected revenue is unknown. Dark Fiber Licensing Services Rate Schedule EDF-3, which applies to new accounts established after September 18, 2006, is not impacted by this proposed revenue increase, and no change is recommended at this time. For budgetary purposes, it is assumed that the CPI adjustment for FY 2008-09 will again be 3.2 percent, but will be adjusted during the budget process, if necessary. POLICY IMPLICATIONS This proposed rate increase meets the Utilities Strategic Plan objective of providing superior financial perforlnance to the City and competitive rates to customers. These recommendations do not represent a change in current City policies. ENVIRONMENTAL REVIEW The adoption of the resolution does not constitute a project under the California Environmental QuaIity Act. Therefore, no environmental assessment is required. ATTACHMENTS A:Resolution B:Fiber Optic Rate Schedules EDF-1 and EDF-2 PREPARED BY: REVIEWED BY: LUCIE HIRMINA, Utilities Rates Manager TOMM MARSHALL, Assistant Director of Utilities, Resource Management TOM AUZENNE, Assistant Director of Utilities, Administrative Services DEPARTMENT HEAD: ’\ VALERIE O. FONG Direct~lities _CITY MANAGER APPROVAL: ’(..~ EMILY H’~I(IS0~-- Assistant City Manager CMR:205:07 Page 3 of 3 NOT YET APPROVED ATTACHMENT A RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING UTILITY RATE SCHEDULES EDF-1 AND EDF-2 OF THE CITY OF PALO ALTO UTILITIES RATESAND CHARGES PERTAINING TO FIBER OPTIC RATES 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 EDF-1 (Dark Fiber Licensing Services) is hereby amended to read in accordance with sheet EDF-I-1, attached hereto and incorporate herein. The foregoing Utility Rate Schedule, as amended, shall become effective July 1, 2007. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read in accordance with sheet EDF-2-1, attached hereto and incorporate herein. The foregoing Utility Rate Schedule, as amended, shall become effective July 1, 2007. SECTION 3. 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. SECTION 4. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney Mayor APPROVED: City Manager Director of Utilities Director of Administrative Services 070411 syn 0072855 ATTACHMEN~ B DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 Ao go C° APPLICABILITY: This rate schedule applies to customer accounts established prior to September 18, 2006, unless the customer elects to apply the EDF-3 rate to the entire customer account. This rate applies to Fiber Optic se]wices from the City Of Palo Alto Utilities (CPAU) pertaining to the City’s network (Backbone and associated connections). TERRITORY: Within the incorporated limits of the City of Palo Alto and land owned or leased by the City. FEES: 1.DARK FIBER BACKBONE LICENSE FEES: The values or ranges for each of these price components are shown below: (1) Fiber Price .........................................................................$281.00/FM/month (2) Quantity discount ...............................................................$0 to $56.18/FM!month (3) Buffer tube discount .................................................................$0 to $56.18/FM/month (4) Route length discount ..............................................................$0 to $73.04/FM/month (5) Ring topology discount ...............................................................$0 to $22.45/FM/month (6) Length of term discount...$0 to $43.95/FM/month (7) Per Project Minimum Annual Backbone License Fee .................................................$425k?aonth Project Mininmm Backbone Fees apply to any project proposal signed after September 18, 2006 in which the project colmects with the Backbone. ’i Description for Discounts: ’ Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path. Buffer tube discount: discount for numbers of fifll buffer tubes licensed on a specific path. Route length discount: based on the route length licensed on a specific project. Ring topology discount: The ring topology discount for customers contracting f0~ complete rings. Term discount: based on an array of discounts for contracts greater than one and less than ten years. 2.DARK FIBER LATERAL CONNECTION FEES: Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the Licensee shall pay an amaual Drop/Custom Cable Management Fee based on the follow per foot fees: (1) Drop Cable Management Fees (for the first 12-Fibers) .................................$0.01-$0.05/ft/month (2) Custom Cable Management Fees (for the first 12-Fibers) .............................$0.27/ft/month (3) Fees for additional Drop or Custom Cable fibers (each additional set of 12-Fibers) $0.05/ft/month (4) Per Project Minianum Drop or Custom Cable Management Fees ................... $210/month Project Minimum Drop Cable Management Fees apply to any project proposal signed after September 18, 2006. CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No.EDF-I-1 dated 9-18-2006 CITY OF PALO ALTO UTILITIES Effective 7-01-2007 Sheet No.EDF-I-1 DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 3.EARLY TERMINATION FEES: If the Licensee chooses to terminate for convenience the License Agreement or the term of any project under the License Agreement, then the Licensee shall pay the applicable termination payment as specified in this schedule or in the License Agreement, as provided below. Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the following amounts, whichever is less: Annual fee of the contract year that the Licensee chooses to terminates in full without term discounts, or Remaining fees of the project term as indicated in the License Agreement. D.SPECIAL NOTES: All fees must be paid to the City according to the specifics in the Dark Fiber License Agreement, the customer’s project proposals and all the applicable Utilities Rates, Rules, and Regulations. All fees are subject to consumer price index (CPI) adjustments, to be applied at the City’s discretion but not more fi’equently than an annual basis. CITY OF PALO ALTO UTILITIES issued by the City Council Supersedes Sheet No.EDF-1-2 dated 7-01-2004 CITY OF PALO ALTO UTILITIES Effective 9-18-2006 Sheet No.EDF-1-2 DARK FIBER SERVICE CONNECTION FEES UTILITY RATE SCHEDULE EDF-2 Ao Uo Co D° APPLICABILITY: This schedule applies to all connections, expansions, and upgrades to the City’s Dark Fiber network (Backbone). TERRITORY: All territory within the incorporated limits of the City and land owned or leased by the City. FEES: 1.ADVANCE ENGINEERING FEES: Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The fees will be credited against the estimated project cost prior to the collection of the project construction fees. (1) Commercial/Industrial AER minimum fee ..................................................................... (2) Special conditions (requiring expert assessment) ............................................................ NOTES: 1. 2. 3. ESTIMATED SERVICE CONNECTION AND RECONFIGURATION FEES $671.00 By Estimate All estimated service connection and reconfiguration fees must be paid prior to the scheduling of any construction or reconnections to the City’s Dark Fiber network. By Estimate By Estimate (1) Service connection (Interconnection) fee ...................................................... (2) l~econfiguration l~’ees .................................................................................... Labor rates are subject tO change as stated in the Utility Rate Schedule C-1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to the property line in compliance with City of Palo Alto Utilities Rules and Regulation~s and contract agreements. The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to provide timely continuous service. All fees are subject to consumer price index (CPI) adjustments, to be applied at the City’s discretion: but not more frequently than an annual basis. {Enal CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes sheet No. EDF-2-1 dated 9-18-2006 CITY OF PALO ALTO UTILITIES Effective 7-01-2007 Sheet No.EDF-2-1