HomeMy WebLinkAbout2000-04-25 City Council (4)TO:
ATTENTION:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
PUBLIC WORKS
DATE:APRIL 25, 2000 CMR:222:00
SUBJECT:APPROVAL OF RATE STRUCTURE AND RATES TO FINANCE
STORM DRAIN OPERATIONS AND THE NEXT PHASE OF
STORM DRAINAGE CAPITAL IMPROVEMENTS
REPORT IN BRIEF
A Storm Drainage Master Plan (Plan) was presented to Council in 1994. This Plan was
under review when California voters approved Proposition 218 in November 1996.
Proposition 218 raised a number of questions and procedural issues regarding the ability of
the City to raise storm drainage fees. In addition, valuable information gathered during
recent storm events, as well as questions from the Finance Committee (Committee) about the
scope, cost, and effectiveness of recommended improvements, prompted staff to re-examine
the scope of the recommended storm drainage program.
The recommended improvements are targeted to address those areas that experience chronic,
moderate to severe flooding problems. Capital work is primarily intended to expand the
capacity of storm drainage pipes and to add pump stations where gravity drainage systems
have proved inadequate. Areas with the greatest needs included the northeastern Palo Alto
watershed and the Matadero Pump Station Watershed. Costs for improvements in these areas
are estimated at $20 million and $9 million respectively. In,-addition, an augmented
maintenance program~ fu.nding for San Francisquito Creek work, and support for the Joint
Powers Authority (JPA) effort is recommended.
A ne~v six-tiered rate structure is being proposed for residential properties to conform with
Proposition 218 guidelines better than the existing single flat-rate structure. The fee structure
for multi-family, commercial, and industrial properties, which is based on the amount of
CMR:222:00 Page 1 of 15
impermeable area on a parcel, will remain in place. In addition, a consultant and staff have
developed educational brochures that will explain the proposed rate structure, the reasons for
a fee increase, and the approval process that must be followed under Proposition 218.
The Storm Drainage Fund is in very poor financial condition. Storm drainage revenues are
inadequate to support the existing maintenance program, much less a badly needed capital
and augmented maintenance program. Without an increase in fees, current operations will
need to be curtailed or the General Fund will need to provide increasing and substantial
subsidies. In FY 1999-00, the City’s General Fund is estimated to subsidize the Storm Drain
Fund by $459,000. At current rates, this subsidy is expected to grow to $717,000 in FY
2000-01. Continuing these subsidies will severely impact the ability of the General Fund to
support new and, over time, current services.
To maintain current Storm Drainage Fund activities, initiate an augmented citywide
maintenance program, fund a program to address San Francisquito Creek issues, and
complete critical infrastructure work over the next 30 years, staff recommends an increase
in monthly residential rates from $4.25 to $9.00. It has been six years since the last rate
increase. To simply maintain the FY 2000-01 level of.service, with no capital work or
augmented maintenance, residential rates would need to be adjusted upward to $6.10.
RECOMMENDATION
Staff recommends that the Finance Committee and the City Council:
Approve staff’s recommendation to pursue an expanded Storm Drainage Program that
includes the following elements:
a)an augmented maintenance, repair, and rehabilitation program, estimated at
$480,000 annually;
b)
c)
funding for San Francisquito Creek liaison work, studies, and minor repairs
over the next ten years until a regional flood and erosion control solution can
be found for the Creek. Annual funding is estimated at $285,000;
an annual capital budget funded on a pay-as-you-go basis such that all critical
and moderate Storm Drainage Master Plan priorities, totaling $48 million,
would be completed in approximately 30 years. Critical priorities are those
that would address chronic, moderate to severe street and intersection ponding
problems. Moderate priorities are those that would address periodic, moderate
street ponding problems.
Direct staff to begin the process for increasing the Storm Drainage fee to fund the
recommended Program. Staft~s recommendation would require approval of a fee
CMR:222:00 Page 2 of 15
increase from the current monthly residential rate of $4.25 per Equivalent Residential
Unit (ERU) to $9.00 in years 2001 and 2002, $10 in year 2003, and an increase of no
more than the rate of inflation thereafter. The process for increasing this fee includes
a noticed protest hearing and a property owner election.
BACKGROUND
Over the past five years, staff has met with the Finance Committee (Committee) to answer
questions on recommended Storm Drainage Programimprovements, to present a summary
of community input on these recommendations, and to outline a scope of work that would
meet the City’s most critical storm drain needs. During this time, Proposition 218 was
passed by the voters of California. This constitutional amendment has added new
complexities to local government’s ability to impose or increase property-related fees, and
has significantly delayed staff’s request for an increase in the Storm Drainage fee.
In 1994, staff presented to the Committee a summary Of storm drain infrastructure
improvements recommended in the Storm Drain Master Plan and Storm Drain Condition
Assessment studies. Recommended work consisted of a $60 million (in 1994 dollars), 30-
year program to replace or repair damaged drainage system components and to increase
system capacity by constructing new storm drain pipelines. Staff also presented a number
of funding options, including debt financing, pay-as-you-go, and a combination of the two
methods. After reviewing the recommendations, the Committee directed staff to:
1.Divide the proposed storm drain projects into three categories, prioritized as follows:
system repair and ongoing programs;
construction of new or improved drainage facilities in areas which are
substandard compared with the rest of the City; and
remaining projects to upgrade drainage capacity.
Proceed with Category A and B projects using a combination of Storm Drainage fee
revenue and bonds.
o Hold the Category projects in Committee while staff conducted an extensive outreach
effort to determine public interest in pursuing the storm drain augmentation program.
In Fall 1995, a consultant assisted staff in conducting a public outreach campaign to gauge
the level of public interest in storm drain improvements. An informational brochure
outlining improvements and their costs was distributed to the community. Staff then hosted
a series of ten community meetings. At each meeting, staff offered a detailed presentation
of the history and rationale for the proposed storm drain improvement program and a
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proposed financing strategy. During the meetings, there was considerable opportunity for
questions and comments from residents and businesses.
Although the neighborhood meetings produced lively discussion, there was no consensus on
the merits of funding Category C projects. Residents of areas where ponding of storm water
runoff is a chronic problem due to drainage deficiencies expressed the strongest support for
improvements. Concerns were expressed by other residents about the fairness of a citywide
fee paying for area-specifiC improvements; the wisdom of incurring substantial long-term
debt to finance the improvements; and the financial impact on ratepayers.
Progress toward implementing storm drainage improvements was interrupted by the passage
of Proposition 218 in November 1996. The passage of the proposition resulted in a
comprehensive constitutional amendment that affected property-related fees, assessments,
and taxes. After an analysis of the law’s content, the City Attorney’s Office determined that
the City’s Storm Drainage fee is a property-related fee regulated by Proposition 218. The
proposition outlines specific, detailed conditions and procedures that must be followed in
order to impose or increase such fees. Achieving compliance with these requirements has
delayed staff’s progress towards development of a new fee proposal for Council
consideration.
In March 1999, staff returned to the Committee with more information on the condition of
the storm drainage system, the proposed improvements, and the estimated funding required
for those improvements (CMR: 147:99). Staff reported that,as a result of the wet winters of
1995, 1997 and 1998, it had numerous opportunities to measure the adequacy of the drainage
system during severe storm conditions. Valuable information gathered during storm events
through on-site observations by City staff, tracking and analysis of residents’ reports of
ponding conditions, and pump station operational data led to several important conclusions:
Actual storm events confirmed the Master Plan’s finding that components of the storm
drain system lack adequate drainage capacity. Drainage problems occurred both in
areas with minimal d~ainage facilities and in areas with undersized facilities. Many
storms smaller than the 10-year storm event (recommended as the design standard for
improvements) resulted in ponding on streets and intersections and caused minor
structure flooding in several parts of the City.
There is a correlation between areas of the City experiencing the most frequent drainage
problems and areas assigned the highest priority for drainage improvements in the
Master Plan. These areas have relatively fiat, low-lying terrain that drains slowly and
is below the high water levels in the creeks during heavy storms. Streets draining to
creeks by gravity, without the advantage of a pump station, are particularly vulnerable
to ponding.
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Storm events prompted staff to re-examine the appropriateness of some of the specific
recommendations in the Master Plan. In particular, during preparation of the Master
Plan, staff purposely attempted to avoid the need .for additional storm water pump
stations because of their relatively high cost and maintenance requirements. Storm
observation data, however, showed that the worst drainage problems in the City occur
on gravity systems that are unable to drain when the creeks reach high levels.
Construction of new pump stations is expected to be a superior alternative to the
installation of larger pipelines.in these areas.
Several areas of the City with the most severe drainage deficiencies were not completely
addressed in the Master Plan. These areas have inadequate or nonexistent local drainage
facilities. These drainage deficiencies were evident during the February 1998 storm
where many areas outside the San Francisquito Creek floodplain experienced flooding
caused by storm drainage backups. Staff concluded that the allowance factored into the
Master Plan cost estimates was not sufficient to correct local drainage deficiencies and
consequently developed a supplemental estimate to cover those costs.
Additional modifications to existing pump stations are required to optimize their
performance. As a result of prior projects to upgrade pump stations and their monitoring
and remote telemetry systems, a wealth of information has been gathered on their
performance during winter storms over the past several years. Staff has identified further
modifications to improve pump station performance, safety, reliability, and efficiency.
A supplemental estimate to cover the costs of station upgrades has been developed.
Based on these conclusions, staff recommended a three-pronged approach to augment the
existing Storm Drainage Program. Each of these Program elemen.ts is discussed briefly below
(for more information see CMR: 147:99):
Operations and Maintenance Augmentation ($480,000)
When the Storm Drainage Fund was created in 1989, maintenance staffing was set at a
minimum level to keep initial user fees low and to allow an evaluation of actual staffing
needs. With the exception of a temporary staffing decrease due to budget constraints and
the addition of an Instrumentation Electrician in 1998, staffing levels have held fairly
constant since 1989.
With the critical need for operational improvements, staff recommended a $480,000
annual increase to the storm drainage budget for:
¯One additional field crew member ($60,000).
¯One administrative person to manage data for Storm Drainage billing and field
maintenance activities ($60,000). This position would update billing records to
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reflect changes in impervious area, make billing adjustments, respond to customer
billing inquiries, and collect, input, and manage storm drain maintenance data.
$60,000 annually for future condition assessments of the storm drainage system to
be conducted approximately every ten years. This assessment includes inspection
and evaluation of individual manholes, catch basins, and pipelines as well as a listing
of needed repairs and replacements.
$100,000 annually to replace or upgrade water pump station equipment as needed.
The City has six pump stations and two additional stations are recommended for
construction.
$200,000 for an annual curb and gutter repair program. Funding has been reduced
in recent years as the Fund’s financial condition deteriorated. Thi~ would restore
funding to its previous level.
2.San Francisquito Creek Liaison Work and Local Improvements ($285,000)
San Francisquito Creek is the largest remaining flood threat in Palo Alto. The February
1998 flood displayed the magnitude of damage this creek can cause. While the Santa
Clara Valley Water District and the San Mateo County Flood Control District have
primary flood control responsibility for this creek, a flood control project will require a
cooperative effort. A Joint Powers Authority (JPA) to oversee such a project has been
formed.
Although the exact nature of long-term creek flood control improvements are unknown
at this time, staff estimates the following needs over the next ten years until a more
permanent regional flood control solution is reached:
¯$85,000 annually for ten years for a dedicated creek liaison staff person.
$200,000 annually for ten years for activities such as engineering studies,
environmental assessment, right-of-way acquisition, public outreach, erosion control
work, or local improvements related to the regional flood control project.
3.Capital Improvements ($48 million)
With five years of winter season experience since the Master Plan’s publication, staff has
accumulated substantial information on the relationship between the storm drainage system and
local flooding. Observations and data have caused staff to revise prior recommendations and
propose $48 million in capital improvements to be funded and constructed over 30 years, as
described below:
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Priority Group 1:CRITICAL PRIORITY, $24 million:
a)Complete rehabilitation of existing infrastructure that has
deteriorated, as identified in the 1993 Condition Assessment.
b)Fund minimum set of infrastructure enhancements for chronic,
.moderate to.severe street.ponding problems.
Priority Group 2: MODERATE PRIORITY, $24 million:
Fund a set of infrastructure enhancements to address periodic, moderate
street ponding problems.
Funding these priorities would require an increase of 0.5 to 1.0 engineering staff person for a
period of 30 years to handle all critical and moderate priority capital work.
During the Committee’s review of staff’s recommendations, questions were raised regarding
the extent and severity of existing deficiencies throughout the City and the expected
effectiveness of the proposed program. To address these concerns, staff returned with a report
(CMR:227:99) in May 1999 that summarized the most severe deficiencies and provided
information that corroborated the need for improvements. This information was presented so
the Committee could better assess proposed program benefits to the community and fee levels
necessary for recommended improvements.
Citing specific areas of the City with the most severe problems, staff detailed and prioritized
specific improvements that generally fell into two major categories: construction of
replacement, parallel and diversion pipelines to increase the capacity of the storm drain
network; and pump station improvements, including capacity upgrades to existing pump
stations, construction of new pump stations, and the connection of existing storm drains to pump
stations to improve the storm drain system performance.
While a comprehensive description of the improvements can be found in CMR:227:99, several
examples are informative. The northeastern Palo Alto watershed, where some of the most
severe and chronic flooding problems occur, has storm drains that are undersized and subject
to backup when there is a high water level in San Francisquito Creek. Installation of new pump
stations and diversion pipelines are required to ameliorate flooding conditions in this
neighborhood. The estimated costs for work in this watershed are $20 million.
A second critical area is the Matadero Creek watershed. Much of the land in this area,
particularly the eastern portion near Highway 101, is lower than the creek water level during
storms. Problems include undersized pipes, the inadequate capacity of an existing pump station,
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and the need to connect several new areas to the pump station. Staff has estimated the costs to
upgrade the pump station, add new pipelines and replace old, undersized pipes at approximately
$9 million.
After presenting this additional information, the Committee gave staff direction to prepare a
financing plan and to determine necessary steps for voter approval of a rate increase. With the
rate increase requirements introduced by Proposition 218, staff proceeded to hire a consultant
with the necessary expertise.in interpreting and meeting thoserequirements and in developing
appropriate educational brochures for the community (CMRs:317:99 and 409:99).
DISCUSSION
The last increase in the Storm Drainage fee was adopted by Council in FY 1994-1995, when
the monthly fee was raised to $4.25 per Equivalent Residential Unit (ERU). The rate was
increased at that time in order to pay for capital improvements financed through the sale of
bonds. The majority of work covered by the 1995 bond issuance has been completed. The
work included storm drain pump station improvements, storm drain system
replacement/rehabilitation, curb and gutter replacement, and the Barron Park storm drain
improvements. While this capital work has resulted in substantial improvements to the drainage
system, a significant amount of additional work is needed. Revenues under the current fee
structure are inadequate to support current operations and any additional capital improvements.
During the past year, staff from the Administrative Services and Public Works Departments and
the City Manager’s, City Attorney’s and City Clerk’s offices have been working with a
consultant (Harris and Associates) to develop a storm drain rate structure, rate recommendation,
and voting procedures that conform to the requirements of Proposition 218. A basic knowledge
of these requirements is critical to understanding the proposed rate methodology and the
election process.
Proposition 218 Requirements
Given the legal determination that Storm Drainage fees are property-related fees, the following
key elements of Proposition 218 regulate proposed fee increases:
¯Revenues derived from the fee shall not exceed the funds required to provide the service.
¯Fees must reflect the proportional cost of delivering storm drain service to a property and
cannot be used for general governmental purposes.
A written notice must be mailed to each property owner of record showing the amount of
the proposed fee, method of fee calculation, rationale for the fee, and a time and place for
a public hearing.
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A public hearing must be held not less than 45 days after the notice mailing, and all protests
at the hearing shall be considered. If written protests are received from a majority of
property owners at the hearing, the proposed fee increase cannot be levied.
¯A mail ballot election by property owners must be conducted not less than 45 days after the
public hearing in which a majority vote is required to approve the fee increase.
These requirements place a.rsignificant burden on the-City .to develop an appropriate rate
structure, identify property owners affected by the proposed fee increase, and conduct a mail
ballot election.
Current and Proposed Storm Drainage Fee Rate Structure,
Under the current Storm Drainage fee rate structure, all developed parcels in the City are billed
$4.25 per Equivalent Residential Unit (ERU) per month. An ERU consists of 2,500 square feet
of impermeable area. All single-family and duplex residential units, regardless of their parcel
size, are billed 1.0 ERU. Multi-family residential, commercial, and industrial properties are
billed according to the measured amount of impermeable area on the parcel. Staff and the
consultant believe that the current rate structure for non-single-family residential properties is
compliant with Proposition 218. The fiat rate structure for all single-family and duplex
residential properties, however, required further analysis based on Proposition 218 guidelines.
Since the Proposition requires that a fee "not exceed the proportional cost of the service
attributable to the parcel," a rate structure more closely aligned with the amount of impervious
area on a parcel appeared more appropriate.
A study based on a five percent sampling of residential properties was conducted to test the
accuracy of the 1.0 ERU per parcel assumption. The consultant’s study identified impervious
areas ranging from 1,000 to 5,000 square feet per parcel. The study concluded that, based on
the wide diversity of impervious areas on the sample parcels, a tiered rate structure based on
parcel size would be more equitable. Analysis of the sample data showed a relationship
between the size of a parcel and the amount of impervious area on the property. Based on this
information, parcels have been grouped into six categories, each of which would be charged a
different fee. The range of parcel sizes and proposed billing amounts (ERU) for each category
are as follows:
CMR:222:00
Page 9 of 15
Parcel Size (sq.
Proposed Current
ERU ERU
1,000-3,999 0.6 1.0
4,000-5,999 0.8 1.0
6,000-10,999 1.0 1.0
11,000-12,999 1.2 1.0
13,000-17,999 1.4 1.0
18,000+1.6 1.0
This tiered rate system will more closely approximate the actual impervious areas for the
residential parcels and satisfy the "proportional to use" requirements set forth in Proposition
218. For a comparison of the current residential fees with the proposed fees see Attachment A.
Financial Condition and Requirements of the Storm Drainage Fund
Without .a rate increase since FY 1994-95, the Storm Drainage Fund currently is in poor
financial condition due to cost of living increases for salary expenses, debt service payments,
and other expenses. Whereas staff originally planned to receive Council approval for rate
increases every two to three years to meet ongoing revenue needs, the passage of Proposition
218 has postponed any rate increases subsequent to FY 1994-95.
For FY 1999-00, Storm Drainage Fund revenues and interest income will be insufficient to
cover operating expenses, resulting in the need for a $459,000 loan from the General Fund.
Without a rate increase in FY 2000-01, the annual deficit is anticipated to grow to $717,000 out
of a proposed budget of $2.8 million. These budget deficits have major consequences for the
Storm Drainage Fund and for the City’s General Fund.
If rates are not increased in FY 2000-01, the recommended capital improvement program Would
need to be deferred and the proposed operations and maintenance program enhancements cannot
be implemented. Moreover, current maintenance levels will have to be reduced to match Storm
Drainage Fund revenue. An unappealing alternative would be to subsidize the Storm Drainage
Fund with General Fund revenues on an ongoing basis. Such a subsidy may well require a
reduction in current General Fund services. At a minimum, General Fund resources that would
otherwise be used for existing and new programs such as the General Fund infrastructure
program, shuttle service, traffic calming, development of a park at the former Palo Alto Medical
Foundation site, and other new infrastructure projects will be severely impacted. A rate increase
is necessary to forestall decreased storm drain service or excessive General Fund’ subsidies.
Staff recommends an expanded Storm Drainage Program that meets currently identified needs.
In order to fund this Program, the Storm Drainage fee would need to be increased from the
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current monthly residential rate of $4.25 per Equivalent Residential Unit (ERU) to $9.00 in
years 2000-01 and 2001-02, $10 in year 2002-03, and an increase of no more than the rate of
inflation thereafter. Under this rate structure, Priority 1 and 2 capital improvement projects
totaling $48 million (outlined in the Background section) can be completed over the next 30
years. Annual funding for these projects will be ramped up over time as revenue increases,
moving the City closer toward the goal of coping with 10-year storm events.
In addition, the fee increase allows for a $.48million citywide augmented maintenance program
and a $.29 million program to address San Francisquito Creek (also outlined in the Background
section). While the majority of these augmented operations and maintenance programs will be
implemented immediately, the annual banking of funds for pump station equipment replacement
and for future condition assessments would be deferred for the first two years. In staff’s
original plan, funds were to be set aside each year to eventually replace expensive pump
equipment and to conduct a systems condition assessment study. To moderate the amount of
the required fee increase, staff recommends that the collection of these funds be delayed for
several years. Most importantly, the fee increase will allow the City to maintain its current level
of storm drain services.
While staff is cognizant that raising the monthly fee from $4.25 to $9.00 per ERU is a
significant increase, it is important to place this proposal in perspective. If an increase is
approved in F¥ 2000-01, it will have been six years since the last fee change. Had the local
Consumer Price Index been applied to the fee since FY 1994-95, the fee would have risen to
$5.00 beginning in FY 2000-01. The proposed FY 2000-01 budget, which is basically a status
quo budget that contains no augmented maintenance and no capital improvement funding,
requires a rate increase to $6.10 to break even. Thus, a significant portion of the proposed rate
increase is needed solely to keep current maintenance efforts in place. The additional increment
of $2.90 per month, resulting in the recommended $9.00 fee, is for the augmented capital and
maintenance program outlined above.
Staff has researched storm drainage fees in other communities to serve as a basis of comparison
for the proposed rate increase. In a nationwide survey of storm drainage fees conducted by a
major consulting firm in 1998, monthly residential fees ranged from $0.24 to $11.31. Inflating
these fees to the year 2000-01 would result in a range of $.26 to $12.36. The scope of services
funded by these monthly storm drainage fees varied widely from jurisdiction to jurisdiction.
Palo Alto’s fee would be considered a relatively broad-based fee, covering capital
improvements, maintenance, and water quality protection costs. On this basis, the recommended
fee, while falling toward the high end of the spectrum, does not appear unreasonable
considering the broad scope of the City’s enhanced storm drain program.
In order to fund the augmented maintenance and San Francisquito Creek programs and to
sustain the Storm Drainage Program in future years, staff recommends that the monthly fee be
raised to $10.00 per ERU in F¥ 2002-03, with annual increases of no more than the rate of
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inflation thereafter. Proposition 218 permits inclusion of a cost index and/or schedule of year-
to-year fee increases as long as the proposed fee schedule is described in the official notice and
ballot submitted to property owners for approval. This allows the City and ratepayers to avoid
subsequent rate approval processes and incorporates a reasonable rate of increase into the fee
structure. It should be noted that the City would not be required to increase the fee to the
maximum approved adjusted amount each year. This provides the City with flexibility to match
revenues to expected expenditures and to moderate Fund reserve levels in case they become too
high. The recommended.inflation index for. calculating fee increases is the San Francisco Price
Index for Urban Wage Earners and Clerical Staff. Attachment B shows the projected fees for
future years based on the recommended program.
Staff’s recommended financing plan does not contain debt financing for future capital
improvements. The City recently refinanced the Storm Drainage Fund’s 1990 bonds (saving
approximately $100,000 per year). Combined with the outstanding 1995 bonds, the Fund is
committed to annual debt service payments of $.95 million per year through 2024. Given this
existing commitment and considering the additional interest and issuance costs a bond financing
requires, staff does not recommend assuming additional debt for future capital improvements
and has prepared a pay-as-you-go financing plan.
Staff believes that the level of community awareness of the need for storm drainage
improvements has heightened as a result of recent wet winters and especially since the February
1998 flood. This change in awareness provides an opportunity and a challenge for the City.
Heightened support for drainage improvements improves the chances for voter approval of a
Storm Drainage fee increase. On the other hand, staff must be sensitive to the public’s
expectations by accurately describing the scope of the proposed storm drain improvements.
Proposed storm drain improvements are not sufficient to prevent the type of flooding that
occurred in February 1998. ~his event can only be averted through a comprehensive, regional
flood control project for San Francisquito Creek that goes beyond the scope of the proposed
drainage improvements outlined in this report. Nevertheless, the proposed fee increase will
result in an improved storm drainage system that will address the most severe and chronic
problem areas.
Noticing and Election Process
As a consequence of Proposition 218, the fee approval process is significantly more complicated
than in the past. As noted, the City must distribute notices to all property owners notifying them
of the proposed fee increase, the methodology used to determine the fee, and the specific
amount they will be charged if the fee increase is approved. It is important to note that the
Proposition specifies that only property owners, who may or may not be ratepayers, can
participate in the fee approval process. Owners of undeveloped parcels, who are not billed for
storm drainage, will not participate in the process. Formal procedures that will govern the
public hearing and mail ballot process are being prepared by the City Attorney’s Office and will
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be overseen by the City Clerk. The final procedures governing the noticing and election will
be presented to Council on May 22.
To inform property owners about the specific capital improvehaents and other Storm Drain
Program enhancements the proposed fee increase will cover, an outreach consultant and staff
are preparing educational brochures to be distributed with the official notices and will conduct
a series of community meetings. Information on the proposed fee increase and improvements
will also be~mailed in a utility bill prior.to ballot mailing. These public, outreach materials are
for informational purposes only and will not advocate for the proposed fee. The projected
schedule for the noticing and balloting process can be found under "Timeline" below.
ALTERNATIVES TO STAFF RECOMMENDATION
To avoid a more substantial rate increase while implementing the most critical parts of the
augmented maintenance and capital improvement program described above, staff has
recommended, an initial fee increase to the $9.00 level. Alternatives for the Committee to
consider are: 1) do not implement an augmented Storm Drainage Program as outlined above and
maintain the current level of service with no capital improvements with a $6.10 fee; or 2)
accelerate implementation of capital improvements by raising the fee to $10.00.
Maintain Current Operations and Do Not Augment the Storm Drainage Program: Increase
Monthly Fee to $6.10 per ERU
As discussed above, to maintain current storm drainage operations in FY 2000-01, a rate
increase to $6.10 would be needed. This fee, along with a cost of living increase each year,
should be sufficient to continue current service levels and allow the Storm Drainage Fund
to remain fiscally sound. The advantage of this alternative is that it would have less impact
on ratepayers and have a greater likelihood of being approved by property owners.
This alternative is not recommended because it would result in no Priority 1 or Priority 2
capital improvements to the Storm Drainage system and would not provide any funding for
augmented maintenance or programs related to San Francisquito Creek. There is
considerable evidence that serious ponding problems occur chronically throughout many
parts of the City. Staff strongly believes that upgrading the storm drainage system to
accommodate a 10-year storm event is a reasonable and valuable goal for the community.
Accelerate Capital Improvements: Increase Monthly Fee to $10.00 per ERU
This alternative would enable the City to accelerate the construction of capital improvements
to correct storm drainage deficiencies. For each $1.00 increase in the fee, revenues are
increased by roughly $.5 million. Staff’s recommendation provides for a ramping up of
capital improvements over time, so that Priority 1 and 2 projects will be completed in 30
years. By raising the fee to $10.00 in FY 2000-01, the proposed capital improvements could
be completed in approximately 27 years.
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This alternative fee level is expected to be less palatable to voters than staff’s
recommendation. While staff would welcome an accelerated capital program, it is necessary
to recognize community sensitivity to this more substantial increase. Staff does not
recommend this alternative.
RESOURCE IMPACT
Failure to obtain approval of the proposed $9.00 fee will defer all future storm drain capital
improvement projects and.quickly erode currentlevels of storm drainage system services.
Without this increase, the City must either allow storm drainage service to decline or provide
substantial subsidies from the General Fund. As stated, without a fee increase, the General
Fund subsidy for FY 2000-01 is projected to equal $717,000 and will increase in future years.
The proposed $9.00 fee would raise an additional $2.4 million in revenue annually.
POLICY IMPLICATIONS
Approval of staff’s recommendations is consistent with the Comprehensive Plan: Policy N-24
states that the City should "improve storm drainage performance by constructing new system
improvements where necessary and replacing undersized or otherwise inadequate lines with
larger lines or parallel lines." Program N-36 further states that the City should "complete
improvements to the storm drainage system consistent with the priorities outlined in the City’s
1993 Storm Drainage Master Plan, provided that an appropriate funding mechanism is identified
and approved by the City Council."
TIMELINE
Following Committee approval of an augmented Storm Drainage Program and related financing
plan, staff can begin the fee approval process. Assuming a proposed rate increase is
recommended by the Committee and the Council, the following milestones and dates are
projected:
May 22
June 2
July 24
September 12
Request for Council approval of Resolution Adopting Procedures for
Protest Hearing and Election, Ordinance Allowing for Mail Ballot
Elections, Draft of Public Notice Regarding Fee Increase, and Resolution
Amending Utility Rule and Regulation No. 25. Council approves Finance
Committee recommendation for Storm Drainage Program and rates
Notices for Protest hearing are mailed
Protest hearing for proposed Storm Drainage fee increase
Storm Drainage fee election
CMR:222:00 Page 14 of 15
ENVIRONMENTAL REVIEW
Consideration of financial options does not require California Environmental Quality Act
(CEQA) review. Individual projects will be subject to environmental review as they are further
developed.
ATTACHMENTS
Attachment A: Storm Drainage Fee Rates Analysis Report
PREPARED BY:Joe Saccio, Manager, Investments and Debt
Joe Teresi, Senior Engineer
DEPARTMENT HEAD APPROVAL:
CAmP~Lnis 1Y~r2~e ’?e i~cCt2r
GLENN S. ROBERTS
Director of Public Works
CITY MANAGER APPROVAL:
EMIL’I~7 HANSON
Assistant City Manager
cc: Utilities Advisory Commission
CMR:222:00 Page 15 of 15
ATTACHMENT A
COMPARISON OF RESIDENTIAL STORM DRAIN RATES
Parcel Size (sq. ft.)
1,000 - 3,999
4,000 - 5,999
6,000- 10;999
11,000 - 12;999
13,000 - 17,999
18,000 +
Cu~entERU*Cu~entFee ProposedERU*
($/~onth)
1.0 $4.25 O.6
1.0 $4.25 0.8
1.0 $4.25 1.0
1.0 $4.25 1.2
1.0 $4.25 1.4
1.0 $4.25 1.6
Proposed Fee*~
(S/month).
$ 5.40
$ 7.20
$ 9.00
$10.80
$12.60
$14.40
ERU = Equivalent Residential Units
Based on proposed initial monthly rate of $9.00 per ERU