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Home My WebLink About2003-05-15 City Council (3)BUDGET y Ma ager’ Rep r TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES ATTENTION: FINANCE COMMITTEE DATE: SUBJECT: MAY 15, 2003 ADOPTION OF WASTEWATER EFFECT A INCREASE CMR: 269:03 A RESOLUTION AMENDING VARIOUS COLLECTION RATE SCHEDULES TO WASTEWATER COLLECTION RATE RECOMMENDATION Staff and the Utilities Advisory Commission (UAC) recommend that the City Council adopt the attached resolution to increase wastewater rates approximately $1.7 million, to be effective July 1, 2003. DISCUSSION A review of the FY 03-04 proposed budget for the Wastewater Collection Fund indicates that current revenues are insufficient to meet the Utility’s financial obligations. Over the past few years, funds from the Rate Stabilization Reserve (RSR) have been used to help fund the cost of the capital improvement pro~am (CIP), cover treatment costs, and stabilize rates. Consequently, the RSR balance is below the minimum guidelines approved by Council. Given that a 25 percent wastewater collection rate increase was in-tplemented July 2002 and many customers are experiencing financial challenges during this recession, staff has limited the proposed increase to 15 percent in 2003-04. Despite the proposed 15 percent rate increase, the RSR will remain below the minimum guideline level through FY 04-05. During the FY04-05 budget process, staff wil! evaluate the need to propose a rate increase if the RSR has not risen above the mininmm guideline level. When the economy rebounds from the cunent recession, wastewater collection revenues are expected to pick up, which may negate the need to raise rates. The proposed 15 percent system wide revenue increase has been allocated appropriately between customer classes. A higher percentage increase has been applied to non- residential customers to cover the sales revenue shortfall related to reduced water usage from this customer class. CMR:269:03 Page 1 of 2 BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The UAC reviewed and approved this recommendation at the May 7, 2003 meeting. RESOURCE IMPACT Approval of this proposed rate increase will approximately $1.7 million for FY 03-04. raise the Water Fund sales revenues by POLICY IMPLICATIONS This proposed rate increase would satisfy the Strategic Plan objective of providing superior financial performance 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 Quality Act. Therefore, no environmental assessment is required. ATTACHMENTS A: Wastewater Rate Schedules S-land S-2 B:UAC Report "Adoption of a Resolution Amending Various Wastewater Collection Rate Schedules to Effect a Wastewater Collection Rate Increase" PREPARED BY: DEPARTMENT HEAD: CITY MANAGER APPROVAL: Lucie Hirmina Utilities Rates Manager Directo~ of Utilities ~ EM~H~--RRISON Assistant City Manager CMR:269:03 Page 2 of 2 DOMESTIC WASTEWATER COLLECTION AND DISPOSAL UTILITY RATE SCHEDULE S-! A. APPLICABILITY: No This schedule applies to each occupied domestic dwelling unit. TERRITORY: Co Within the incorporated limits of the City of Palo Alto and on land owned or leased by the City. RATES: Per Month Each domestic dwelling unit ..................................................................................................$19.25 SPECIAL NOTES: An occupied domestic dwelling is designated as any house, cottage, flat, duplex unit, oi apartment unit having kitchen, bath, and sleeping facilities and to which utilities services are being rendered. Any dwelling unit being individually served by a water, gas, or electric meter will be considered as continuously occupied. For two or more occupied dwelling units served by one water meter, the monthly wastewater charge will be calculated by multiplying the cun-ent wastewater rate by the number of dwelling units. Each developed separate lot shall have a separate service lateral to a sanitary, main or manhole. CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No.S-l-1 dated 7-%02 UTILITIES Effective 7-1-2003 Sheet No.S-l-1 COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL UTILITY RA_TE SCHEDULE S-2 No Co APPLICABILITY: This schedule appties to all establishments other than domestic dwelling units. TERRITORY: Within the incorporated limits of the City of Palo Alto and on land owned or leased by the City. RATES: 1.Restaurants (A) Minirnum charge per connection per month ..................................................$19.25 (B)Quantity Rates: Based on metered water, per 100 cubic feet ..................................................$8.10 2.Any establishment dischar~in~ sewaae in excess of 25,000 ~atlons or quality equivalent of sewage.per day as determined by metered water usaae and sampling. (A) Collection System Operation, Maintenance, and Infiltration Inflow: $2,751.00 per million gallons ($2.06 per 100 cubic feet of metered water). (B)Advanced Waste Treatment Operations and Maintenance Charge: $1,506.50 per million gallons ($1.13 per 100 cubic feet of metered water). (C)$204.25 per 1000 pounds of COD (D)$ 451.50 per 1000 pounds of SS (E)$ 3,440.00 per 1000pounds of NH3 (F)- $14,781.25 per 1000pounds oftoxics* *Toxics include sum of chromium, copper, cyanide, lead, nickel, silver, and zinc. CITY OF PALO ALTO UTILITIES Issued by the City, Council Supersedes Sheet No. S-2-1 dated 7-1-02 CITY OF PALO ALTO UTILITIES Effective 7-1-2003 Sheet No. S-2-1 COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL All Other Establishments UTILITY RATE SCHEDULE S-2 (Continued) Do (A)Minimum Charge per connection per month .................................................$19.25 Quantity Rates: Based on metered water per 100 cubic feet ...................................................$ 4.17 SPECIAL NOTES: Upon application from establishments maintaining extensive irrigated landscaping, the monthly charge will be based upon the average water usage for the months of January, February and March. If a water meter is identified as exclusively serving irrigation landscaping, such meter will be exempted from sewer charge calculations. Sewage metering facilities may be required, in which case service will be governed by temps of a special agreement. Charges for large discharges (25,000 gallons per day or greater) will be determined on the basis of sampling as outlined in Utilities Rule and Regulation 23C. 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. Discharsers of Unmetered Contaminated Groundwater Quantity rates for collection and treatment of the contaminated groundwater will be based on the same rates applicable to meter.ed usage for customers discharging less than 25,000 gallons of sewage per day. Discharge permits are issued by the Enviromnental Compliance Manager at the Water Quality Control Plant, 2501 Embarcadero Way, Palo Alto. Industrial Waste Discharge Fee A fee of $750 will be required for the issuance of an Industrial Discharge Permit, including any Exceptional Waste Permits. This fee may be reduced to $250 for a one-time batch discharge permit. [End] CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No.S-2-2 dated 7-1-02 CiTY OF #ALQ ALTO UTILITIES Effective 7-1-2003 Sheet No, S-2-2 MEMORANDUM 3E TO:UTILITIES ADVISORY COMMISSION FROM:UTILITIES DEPARTMENT DATE:MAY 7, 2003 SUBJECT:ADOPTION OF A RESOLUTION AMENDING VARIOUS WASTEWATER COLLECTION RATE SCHEDULES TO EFFECT A WASTEWATER COLLECTION RATE INCREASE RECOMMENDATION This report requests that the Utilities Advisory Commission (UAC) recommend that the City Council approve a 15 percent Wastewater Collection rate increase effective July 1, 2003. BACKGROUND The Wastewater Collection Utility’s revenue requirement consists of a number of components including the cost to operate and maintain a reliable system, pay for the capital improvement program (CIP), fund prudent reserve levels and pay Palo Alto’s share of treatment costs. Any change in one or more of these components or a change in sales revenues may trigger a need for a rate adjustment. Sales revenue collected from non-residential users is tied to water consumption. Consequently, a decline in water usage among commercial users has a corresponding adverse impact on wastewater collection revenues. In FY 02-03, the City Council approved a 25 percent rate increase for the Wastewater Collection Fund. This was necessary because of rising treatment costs, increased CIP expenditmles, and reduced revenue due to declining water consumption. Despite this rate increase, it was recognized that it would be necessary to continue to draw down on the Rate Stabilization Reserve (RSR) and that a subsequent rate increase would be required to address the RSR balance. DISCUSSION A review of the FY 03-04 proposed budget for the Wastewater Collection Fund indicates that current revenues are insufficient to meet the Utility’s financial obligations. Over the past few years, funds from the Rate Stabilization Rese~-v-e (RSR) have been used to help Page 1 of 3 fund the cost of the capital improvement pro~am (CIP), cover treatment costs, and stabilize rates. Consequently, the RSR balance is below the minimum guidelines approved by Council. Despite the proposed rate increase, the RSR will continue to be below the minimum level tl’nough FY 04-05. During the FY04-05 budget process, staff will evaluate the need to propose a rate increase if the RSR has not risen above the minimum guideline level. When the economy rebounds from the current recession, wastewater collection revenues will pick up which may negate the need to raise rates. The proposed 15 percent system wide revenue increase has been spread disproportionately bet-ween customer classes. A higher percentage increase has been applied to non-residential customers to accommodate the sales revenue shortfall related to r educed water u sage from these c ustomer c lasses. T able 1 s hows the impact of the proposed rates on customer wastewater bills. TABLE 1 Impact of Rate Increase on Customer Bills Proposed Dollar Percentage Customer Current Rate Rate Difference Increase Residential $17.50 $19.25 $1.75 10 Commercial/CCF 3.42 4.17 .75 22 Restaurants / CCF 6.44 8.10 1.66 22 Comparison of Palo Alto Wastewater Rates and Surroundin~ Cities: Palo Alto’s wastewater rates are currently 2% higher than the surrounding areas of Menlo Park, Redwood City, Mountain View, and Los Altos, primarily due to an aggressive infrastructure pro~am. Comparing the current rates of these cities with the proposed rates for Palo Alto, the residential rate differential would rise to approximately 17%. However, other cities are or will be evaluating the possibility of rate increases. For example, Los Altos estimates a residential increase between $1 to $3 per month. RESOURCE IMPACT Approval of this rate proposal will increase the Wastewater Fund sales revenues by approximately $1.7 million on a fiscal year basis. The Rate Stabilization Reserve in the Wastewater Utility is projected to be $800,000 below the minimum reserve guideline approved by the Council for FY 2003/04 and $1.1 million for FY 2004/05. Page 2 of 3 ALTERNATIVES Staff evaluated other alternative rate increases. For example, to build up the reserve sooner, a 25% rate increase was evaluated. However, there is some uncertainty with projections over the next two ?,ears as the economy will dictate the size and timing for future rate increases. For this reason, staff proposes a modest 15% in F¥ 2003/04 and will re-evaluate the need for a rate adjustment in FY 2004/05. POLICY IMPLICATIONS This rate proposal meets the following Utilities Strategic Plan objectives: to invest in utility infrastructure, to deliver reliable service and to provide superior financial service to the City and competitive rates to customers. Approval of the proposed wastewater rate increase does not represent a change to existing policies. TIMELINE The effective dates of the proposed water rates are July 1,2003. ENVIRONMENTAL REVIEW The adoption of the resolution does not constitute a project under the California Environmental Quality Act; therefore, no environmental assessment is required. ATTACHMENTS: A. Wastewater Rate Schedules S-1 and S-2 PREPARED BY: LUCIE HIRMINA Pricing Manager REVIEWED BY: DEPARTMENT HEAD: RAN~Y BALDSCHUN As.~tant Director Utilities Administrative Services Dir~ of Utilities Page 3 of 3