CITY OF LOMITA CITY COUNCIL REPORT

Transcription

1 Item No. CITY OF LOMITA CITY COUNCIL REPORT TO: City Council August 20, 2012 FROM: SUBJECT: Gary Y. Sugano, Assistant City Manager Water Fund Salary Allocation Study RECOMMENDATION Staff recommends that the City Council: 1) Accept any public testimony; 2) Reduce water fund salary allocations by $72,990; 3) Redirect the $72,990 from the water operating fund to the water capital fund; 4) Approve adjustments to the FY budget as follows: a) Utilize $40,000 from the unallocated general fund carryover from FY b) Use $15,000 (of the $40,000 allocated from the city hall copier replacement fund) c) Use $17,990 from projected salary savings from Acct # (Parks and Recreation Regular Salaries). 5) Maintain the current low-income senior discount program and implement a public outreach to inform that segment of the population that may qualify. 6) Direct staff to complete a comprehensive water fund salary allocation study every three years; or sooner if conditions warrant, to ensure that water fund salary allocations reflect current operations. BACKGROUND Since the early 1990s, the City has operated and maintained the City s water system including all distribution lines and related appurtenances and water facilities including the Cypress Water Production Facility and the Appian Way Pumping Plant and Pressure Reducing Station. The existing distribution system facilities include approximately 41 miles of pipeline with approximately 70% of those pipelines constructed between the years of 1928 and The City currently purchases all of its domestic water supply from the Metropolitan Municipal Water District (MWD) via West Basin Municipal Water District (WB). The MWD water supply is fed from the State Water Project (SWP) and the Colorado River and is fully treated at the MWD s Weymouth Treatment Plant. 2 1 Water Master Plan, 2004 Prepared by Harris and Associates, page 16 2 Ibid.

2 For many years the water system has operated as an enterprise fund. In short, this means that water operations and water capital improvements are financed primarily through user charges. There is more to operating a water system than just the cost to purchase and/or pump water itself. Water Enterprise Fund The City s Water System is considered an enterprise fund. An enterprise fund is used to account for operations that are financed and operated in a manner where the intent of the City is that the costs of providing goods or services to the general public be financed or recovered through user charges. A description of the water operating and water capital funds are summarized below. The Water Operating Fund - used to account for the operation of the City s water utility system. Revenues are generated from user fees, which are adjusted periodically to meet the costs of administration, operation and maintenance to the system. The Water Capital Fund - used to account for capital improvements to the city s water system. This includes improvements at water facilities including the Cypress Water Production Facility and ongoing water main and waterline replacement projects. Prior Direction from City Council On June 18, 2012, during the budget adoption hearing the City Council gave direction to staff (and the incoming City Manager) to prepare a comprehensive analysis of water fund salary allocations to determine if any adjustments need to be made to reflect current conditions. Summary of Typical Departments within a Water District or Water Enterprise Within the City s water enterprise there are currently four departments that have some positions whose salaries/benefits are fully or partially paid from the water fund. They include General Administration, Administrative Services, Community Development and Public Works. By being able to utilize existing personnel (and only needing to charge a % of their salary to the water fund) to manage the operations of the water enterprise, the City is able to realize significant cost savings versus a typical stand-alone water district. A stand-alone water district would need to hire employees dedicated to managing different aspects of water operations (see attached study for additional information). Typical departments and job responsibilities are summarized below: General Manager/City Manager The General Manager or City Manager is responsible for all day-to-day operations of the water district or water enterprise. This department may also have other administrative staff including administrative analysts and public and governmental affairs personnel. Administrative Services Responsible for personnel, finance, accounting services, budget planning, purchasing, accounts payable, customer service and information technology. 2

3 Water Operations (Public Works) Responsible for planning, design, construction, operation and evaluation of water distribution, collection and treatment facilities systems. Field personnel is responsible for operation and maintenance of water facilities, monitoring water quality, maintenance and repair of components of the water distribution system, meter reading and installation and repair of water meters. Engineering staff is also tasked with maintaining GIS mapping to ensure that all water system components are accounted for. Summary of Previously Approved Adjustments to Water Salary and Water Expenditures Prior to this direction, as part of the FY budget adoption process and the recently completed water rate study, staff had recommended and the City Council approved salary and water expense adjustments which resulted in total water expenditure reductions of approximately $160,000. The amendments are summarized below: Elimination of the rent-lease line item for the Public Works Yard and Water Office resulting in a reduction of $112,800. Water fund salary and benefit allocation reductions for three positions, Public Works Director, Associate Engineer and Human Resources Officer resulting in a reduction of $44,957. ANALYSIS Study Methodology The following methodology was utilized to determine recommended water fund salary allocations: Each city employee whose salary is paid either partially or fully from the water fund was asked to fill out a worksheet template with their job duties (for both non-water and waterrelated activities), % of time spent on each task and the # of hours per month on average for those tasks. After the employee completed the worksheet, each department head/supervisor conducted interviews with those employees in order to provide guidance in finalizing the document. The completed documents were provided to the Assistant City Manager who compiled the information which formed the basis for the staff recommended adjustments. Recommended Water Fund Salary Allocations There are currently 26 full-time positions funded by the water fund. Only 3 of those positions are 100% funded by the water fund. The breakdown of funding levels by position (current and recommended) is as follows: Current (FY 12-13) Recommended (FY 12-13) Water Fund % Range Number of Positions Water Fund % Range Number of Positions 100% 3 100% 3 80% - 95% 1 80% - 95% 1 65% - 75% 4 65% - 75% 4 50% 4 50% 0 20% - 45% 9 20% - 45% 10 9% - 19% 6 3% - 19% 9 3

4 Based on the completed study, the table below summarizes recommended adjustments to the water salary allocations: Adopted FY Recommended Modifications Water Water # Position Title Salary Fund % Amount Fund % Amount Difference City Councilmembers $ 23, % $ 2, % $ 2,340 $ - 1 City Manager $ 160, % $ 56, % $ 40,000 $ 16,000 2 Assistant City Clerk $ 81, % $ 16, % $ 10,643 $ 5,731 3 Administrative Clerk III $ 49, % $ 9, % $ 4,978 $ 4,978 4 Administrative Clerk II $ 46, % $ 9, % $ 6,967 $ 2,322 5 Administrative Services Director $ 129, % $ 64, % $ 54,410 $ 10,364 6 Accounting Supervisor $ 85, % $ 42, % $ 38,352 $ 4,261 7 Finance Supervisor $ 85, % $ 21, % $ 16,193 $ 5,114 8 Human Resources Officer $ 74, % $ 26, % $ 26,102 $ - 9 Junior Accountant $ 61, % $ 30, % $ 18,540 $ 12, Senior Account Clerk $ 55, % $ 11, % $ 7,775 $ 3, Account Clerk $ 49, % $ 49, % $ 47,291 $ 2, Account Clerk $ 49, % $ 19, % $ 12,445 $ 7, Assistant City Manager $ 145, % $ 36, % $ 36,433 $ - 14 Spec Proj Coord/IT Manager $ 100, % $ 10, % $ 20,140 $ (10,070) 15 Principal Planner $ 92, % $ % $ 9,233 $ (9,233) 16 Sr. Neigh Pres Officer $ 74, % $ 7, % $ 2,237 $ 5, Neigh Pres Officer/Planning Tech $ 56, % $ 5, % $ 5,649 $ - Com Dev - P/T Salaries $ 2, % $ % $ - $ Public Works Director $ 129, % $ 97, % $ 97,161 $ - 19 Associate Engineer $ 79, % $ 51, % $ 52,605 $ (797) 20 Field Operations Manager $ 85, % $ 63, % $ 63,068 $ - 21 Field Svs. Lead - Street & Trees $ 57, % $ 5, % $ 13,110 $ (7,980) 22 Field Services Lead - Water $ 51, % $ 51, % $ 51,090 $ - 23 Equipment Operator $ 53, % $ 26, % $ 18,344 $ 8, Sr. Maintenance Worker $ 49, % $ 4, % $ 4,978 $ - 25 Administrative Clerk II $ 45, % $ 36, % $ 30,770 $ 5, Maintenance Worker - Water $ 44, % $ 29, % $ 44,701 $ (15,645) 27 Maintenance Worker - Water $ 44, % $ 44, % $ 44,701 $ - PW - P/T Salaries $ 28, % $ 21, % $ 19,880 $ 1,120 PW - Overtime Salaries $ 110, % $ 60, % $ 60,500 $ - Totals (excluding benefits) - $ 2,204,424 $ 912,772 $ 860,636 $ 52,136 Totals (including benefits) - $1,277,880 $1,204,890 $ 72,990 4

5 The total recommended water fund salary reduction is $52,136, including benefits the total reduction would be approximately $72,990. Current Low-Income Senior Discount Program On July 16, 2012, the Council directed staff to bring back information regarding the senior discount program relative to water rates as part of this item. Eligible customers receive a $10 discount on their bi-monthly water bill. To qualify, the applicant must be a minimum of 62 years of age with maximum annual gross income that is based on household size and ranges from $28,600 for a household size of 1 or 2 to $40,500 for a household size of 4. The fiscal impact to the City for each 100 qualified customers would be $6,000 annually. Staff conducted a survey of some surrounding cities and found that five cities (Long Beach, Torrance, City of LA, Gardena and Inglewood) provided a 5% low income-based discount on the Utility Users Tax. Based on this, staff believes that the City s current program provides a fair discount to qualifying seniors and recommends that the City conduct a public outreach to inform that segment of the population that may qualify. Memo re: Payback of Water Funds from Michael Colantuono, Esq. (to City of San Juan Capistrano) As additional information, staff has attached a copy of a memo dated August 30, 2011 from Michael Colantuono, Esq. to Karen Brust, City Manager of San Juan Capistrano. Ms. Brust asked Mr. Colantuono whether Proposition 218 requires the City to reverse its June 2010 water rate increase as a consequence of not selling debt to finance water system improvements as assumed in the adopted water rates. Mr. Colantuono concludes as follows: Proposition 218 does not require that the City s water rates be reduced (or refunds be made) because the City s water system costs are different than what the City projected during its 2010 water rate proceedings. No rate-maker ever can foretell the future with complete accuracy and the law does not require such clairvoyance. Rather estimates must be reasonable when made, rate proceeds must be spent to deliver services and any surplus (or deficit) in utility operations must be to the credit (or detriment) of ratepayers. Ratepayers pay for a service, not for any particular subset of the costs to provide it. The City is faced with a similar situation whether there is a legal requirement to repay ratepayers based on amended water expenditures. The conclusion is that Prop 218 would not require that refunds be made to ratepayers. Since the ratepayers pay for a service (i.e., water service with operating and capital costs) and as long as the City is able to demonstrate that the surplus of water funds would still be spent for water-related activities it is acceptable to reallocate the surplus of water funds to other water utility activities. Therefore staff is recommending that this surplus of water funds to be collected (approximately $72,990) be utilized for water capital projects as justified in the following paragraph. Where should Water Fund Savings be allocated? The salary savings from the water operating fund should be re-allocated to the water capital fund. The 2004 Water Master Plan identified over $14 million in needed water capital system upgrades 5

6 (in 2004 dollars excluding possible water capital needs at the Cypress Water Production Facility). The newly adopted water rates would take in approximately $3 million in water capital funds over the next five years and there is currently $3.5 million in unallocated water capital monies in the water capital fund. The combination of these two figures is still significantly short of being able to address all of the water capital needs throughout the City. FISCAL IMPACT The impact of the recommended $72,990 adjustment to salaries would transfer those costs to the general fund. The following is recommended: 1) Approve adjustments to the FY budget as follows: a. Utilize $40,000 from the unallocated general fund carryover from FY b. Use $15,000 (of the $40,000 allocated from the city hall copier replacement fund) c. Use $17,990 from projected salary savings from Acct # (Parks and Recreation Regular Salaries). Low-Income Senior Discount Program The fiscal impact to the City for each 100 qualified customers would be $6,000 annually. The City currently has less than 10 persons enrolled in this program. ALTERNATIVES 1) Approve staff recommendations. 2) Take no action. 3) Provide staff alternative direction. Recommended by: Approved by: GARY Y. SUGANO ASSISTANT CITY MANAGER MICHAEL ROCK CITY MANAGER Attachments Water Fund Salary Allocation Study August 2012 Memo dated August 30, 2011 from Michael Coluntuono, Esq. to City of San Juan Capistrano 6