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Home My WebLink About2000-04-25 City CouncilCity of Palo Alto C ty Manager’s Report TO:HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM: DATE: SUBJECT: CITY MANAGER APRIL 25, 2000 RESOLUTION ADOPTING A INCREASE DEPARTMENT: UTILITIES CMR: 197:00 PROPOSED WATER RATE REPORT IN BRIEF This report requests Council approval of a water rate increase of approximately 11 percent effective July 1, 2000. This rate increase is requested to offset a projected increase in the wholesale cost of water from the San Francisco Public Utilities Commission (SFPUC) and an increase in the Water Utility’s capital improvement program. CMR: 197:00 Page 1 of 4 RECOMMENDATION Staffrecommends that the City Council adopt the attached resolution to increase Water Fund revenue approximately $1.5 million, or 11 percent, effective July 1, 2000. BACKGROUND The Water Utility’s revenue requirements consist of a number of components including the cost to purchase water, operate and maintain a reliable system, finance an appropriate capital improvement program from current operating revenues, fund prudent reserve levels and provide a transfer to the General Fund. Any change in one or more of these components as well as a change in sales level can trigger a need for a rate adjustment. Staff reviews the Water Utility’s financial situation periodically to insure that the Utility is sound financially to provide customers with reliable service. Staff suggested in its CMR:221:99 that there might be a need for a rate increase effective July 1, 2000 if the water sales level stayed at its current level. In addition to fiat sales levels, the most recent review confirmed that: The SFPUC is considering several wholesale rate increases over the next few years to provide funds needed to pay debt service on bonds to finance the SFPUC CIP projects. The SFPUC projected wholesale water rate increases for FY 2000/01 through FY 2004/05 are 3.8 percent, 8.5 percent, 16.9 percent, 11.5 percent, and 14.7 percent respectively. Expenditures for the Palo Alto Water Utility CIP are expected to increase. Recently, Carollo Engineering Inc. conducted a study of the Water Utility’s wells and the distribution system, examining its functions and its deficiencies. The result of the study identified projects with a total cost of approximately $15.7 million to be expensed over the next five years. These projects are separated into three categories: a) Improvements for normal operations and fire suppression, with a projected total cost of approximately $2.7 million. b) Emergency supply system preparation to enable the system to provide the needed water in the event of a complete shutdown of the SFPUC aqueduct. These projects are projected to cost approximately $12.3 million. c) Preparation of the distribution system for the conversion of the SFPUC treatment from chlorine to chloramine at an estimated cost of $0.7 million. The rate increase has been spread among customer classes based on a system average of 11 percent. The current residential water rate structure consists of three blocks, two of which are very close in price. In applying the proposed rate increase, the three blocks have been reduced to two rate blocks. Based on SFPUC announcements and Palo Alto’s plans to expand its own CIP program, it is apparent that there will be a series of water rate increases in the future. During FY 2000-01, staff plans to update the water cost of service computer CMR: 197:00 Page 2 of 4 model to assure that equitable rates between customer classes are maintained during this period of frequent rate adjustments. Table (1) shows the impact of the proposed rates on customer bills based on different consumption levels for the residential and non-residential classes. Table (1) Impact of Rate Increase on Customer Bills Customer Small Residential Average Residential Residential Large Residential Small Non- Resid. 5/8" Meter Medium Non-Resid. 3" Meter Large Non-Resid. 6" Meter Usage (CCFs) 7 14 20 35 9 100 1200 Proposed Monthly Bill $18.37 35.52 50.22 86.97 27.95 271.95 3120.00 Proposed Amount of Increase $1.75 3.43 4.45 7.00 2.25 25.00 300.00 Percent Increase 11% 11% 10% 9% 9% 10% 11% Comparison of Palo Alto Water Rates and Surrounding Cities: The attached charts show Palo Alto’s proposed rates compared to current water bills in Menlo Park, Redwood City, Mountain View, and Los Altos. The latter is being served by the California Water Service Company. The comparison is performed for a range of usage levels for residential and non-residential customers. In Palo Alto, the average residential customer uses approximatelyl4 units per month on an annual basis. At this level, Palo Alto residents under the proposed rates will be paying 27 percent more than customers of surrounding cities. For businesses, Palo Alto commercial water bills under proposed rates are 28 percent higher than commercial bills in neighboring cities. Other cities’ staff indicated that water rates would be increased in July. However, the magnitude of the rate increases is not yet determined. CMR:197:00 Page 3 of 4 RESOURCE IMPACT The proposed 11 percent increase for FY 2000-01 will result in additional sales revenue of approximately $1.485 million dollars. The Rate Stabilization Reserve in the Water Utility is projected to continue to be above the minimum level but below target level according to the reserve guidelines approved by Council. For the future, staff plans to evaluate other CIP financing alternatives, such as bond financing, in order to level the cost of the capital improvements over the life of the debt and reduce rate impacts. POLICY IMPLICATIONS Approval of this proposed rate increase does not represent a change to existing policies. ENVIRONMENTAL REVIEW Adoption of the resolution to increase water rates does not constitute a project under the California Environmental Quality Act PREPARED BY:Lucie Hirmina, Manager, Utilities Rates Randy Baldschun, Assistant Director DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: ztor of Utilities 7 CMR: 197:00 Page 4 of 4 I ! !I 0 0 0 0 0 0 0 0 0 0o.o o,o o o.o o.o000000000 0 (s$) Sll!8 lep, uep!se~l o~ d ~ n~c [] E 00 E 00 0 0 0 0 0 0 0 0oo.o o.o.o o. RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING UTILITY RATE SCHEDULES W-I AND W-4 OF THE CITY OF PALO ALTO UTILITIES RATES AND CHARGES PERTAINING TO GENERAL WATER SERVICE The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION i. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Schedules W-I (General Residential Water Service) and W-4 (General Non-Residential Water Service) of the Palo Alto Utilities Rates and Charges are hereby amended to read in accordance with Sheets W-I-I and W-4-1, respectively, attached hereto and incorporated herein by reference. The foregoing Utility Rate Schedules, as amended, shall become effective on July i, 2000. SECTION 2. The Council finds that the revenue derived from the authorized adjustments of the several general water service rates shall be used only for the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 3. 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:..APPROVED: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney Mayor City Manager Director of Utilities Director of Administrative Services 00330 syn 0071837 GENERAL RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-1 A. APPLICABILITY: This schedule applies to all residential single family water service. B. TERRITORY: Inside and outside the incorporated limits of the City of Palo Alto and land owned or leased by the City. C. RATES: Service Charge: Per Meter Per Month For ¯ For For For For For For For For For 5/8-inch meter ........................................................................$5.00 3/4 inch meter ..........................................................................5.00 1 inch meter .............................................................................5.63 1 1/2 inch meter .......................................................................6.50 2-inch meter .............................................................................8.50 3-inch meter ...........................................................................16.95 4-inch meter ...........................................................................24.30 6-inch meter ...........................................................................60.00 8-inch meter ...........................................................................93.50 lO-inch meter .........................................................................99.99 Commodity Rate: (To be added Service Charge and applicable to all pressure zones.) Per Meter Per Meter Per Hundred Cubic Peet All Pressure Zones First Over 7 Ccf ............................................................................$1.91 7 Ccf ..............................................................................2.45 Temporary unmetered service to residential subdivision developers, per connection ..........................................$6.00 Issued by the City Council Supersedes Sheet No. W-1-~ dated 7-1-99 CITY OF PALO ALTO UTILITIES Effective 7-1-00 Sheet No. W-1 GENERAL NON-RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-4 APPLICABILITY: This schedule applies to non-residential water service in the City of Palo Alto and its distribution area. This schedule is also applicable to multi-family residential customers served thr.ough a master meter. B. TERRITORY: Inside the incorporated limits of the City of Palo Alto, on land owned or leased by the City, and any other land serviced by the Palo Alto Water Utility. RATES: Service Charge Per Meter Per Month For For For For 1 For For For For For For 5/8-inch meter .......................................................................$5.00 3/4-inch meter .........................................................................5.00 1-inch meter ..........................................................................5.63 1/2 inch meter ............................................; .....................’. .....6.50 2 inch meter ..........................................................................8.50 3-inch meter ........................................................................16.95 4-inch meter ..................................................................¯ ......24.30 6-inch meter ........................................................................60.00 8-inch meter ........................................................................93.50 1 O-inch meter .......................................................................99.99 Commodity Rates: (to be added to Service Charge) Per Meter Per Month Per Hundred Cubic Feet All Pressure Zones Per Ccf ....................................................................................$2.50 Issued by the City Council Supersedes Sheet No. W-4-2 dated 7-1-99 CITY OF PALO ALTO UTILITIES Effective 7-1-00 Sheet No. W-4-1