INFRASTRUCTURE & FRANCHISE

Transcription

1 CITY COUNCIL COMMITTEE Special Meeting INFRASTRUCTURE & FRANCHISE ROLL CALL PUBLIC COMMENT PERIOD Laura Hoffmeister, Chair Dan Helix, Committee Member 5:30 p.m., Wednesday, April 3, 2013 City Manager s Conference Room 1950 Parkside Drive, Concord - A G E N D A - 1. CONSIDERATION Of Sanitary Sewer Rate Adjustments. Report by Jon Crawford. 2. ADJOURNMENT In accordance with the Americans with Disabilities Act and California Law, it is the policy of the City of Concord to offer its public programs, services and meetings in a manner that is readily accessible to everyone, including those with disabilities. If you are disabled and require a copy of a public hearing notice, or an agenda and/or agenda packet in an appropriate alternative format; or if you require other accommodation, please contact the ADA Coordinator at (925) , at least five days in advance of the meeting. Advance notification within this guideline will enable the City to make reasonable arrangements to ensure accessibility. Distribution: City Council Valerie Barone, Interim City Manager Kay Winer, Interim Assistant City Manager Mark Coon, City Attorney Victoria Walker, Community & Economic Development Director Jon Crawford, Interim City Engineer Administrative Services

2 AGENDA ITEM NO. REPORT TO COUNCIL COMMITTEE ON INFRASTRUCTURE &FRANCHISE TO THE HONORABLE COMMITTEE MEMBERS: DATE: April 3, 2013 SUBJECT: CONSIDERATION OF SANITARY SEWER RATE ADJUSTMENTS Report in Brief The City of Concord s Sewer Enterprise Fund is facing revenue shortfalls beginning with the year-end Fiscal Year These shortfalls are the result of (1) increased costs imposed by the Central Contra Costa Sanitary District which exceed previously budgeted amounts, (2) on-going and increasing costs to address a backlog of capital maintenance and replacement of aged infrastructure, and (3) the decision to defer increases to the sanitary sewer rates in Fiscal Year Based on this information, the Infrastructure and Franchise Committee directed staff to prepare for a two year sewer rate increase at a level not to exceed $39 per year per single family residence. Staff recommends that the Infrastructure and Franchise Committee review the benefits and impacts of the proposed rate increase to the City s Sanitary Sewer Enterprise Fund and direct staff to bring forward a two-year rate increase proposal for consideration by the City Council. It is further recommended that the Committee direct staff to publish and mail the public notice required by State Proposition 218 when implementing such an increase. This notice will be sent to all users, including those users outside of the City in the City of Clayton, the County and the City of Walnut Creek that are connected to the City s system. Background At its February 27, 2013 meeting, the Infrastructure and Franchise Committee (Committee) acknowledged a need to increase sewer rates to offset rate increases from Central Contra Costa Sanitary District (CCCSD) for treatment of the City s sewage and to continue to address infrastructure repair and maintenance costs of the City s sewer lines. After considering the impacts of several alterative rate increase levels described in the staff report, the Committee members agreed that the maximum rate increase should not exceed $39 per year and that this increase could occur for a minimum of two years. The Committee noted that a rate increase of $39 per year will still result in negative impact to the City s Enterprise Fund. Staff was directed to provide the Committee with additional information on the extent of the impacts to the sewer program that would occur. This report provides that information. Discussion The information furnished at the Committee s last meeting was based upon a study of a range of sanitary sewer rate increase levels with a goal to a) provide balance between revenues and expenditures; b) maintain a 10% contingency reserve in the Sewer Enterprise Fund; and c) generate adequate funding for

3 SANITARY SEWER RATES April 3, 2013 Page 2 capital projects to maintain and replace the sanitary sewer infrastructure. An increase of $39 per year does not fully achieve compliance with these goals. Attachment A is a scenario reflecting the proposed $39 annual increase and was developed by staff to maximize the available funds and still provide the same levels of daily maintenance to the Sewer District s customers. However, this scenario requires the use of contingency reserve funds in seven out of the next ten years and also delays replacement and major infrastructure repair projects, some for up to 5 years. Attachment B describes the Impacts to the Capital Program as summarized below: 10-year capital improvement program reduced from $27.6M to $9.9M, primarily delaying replacement of aging sections of the system. Completion of the evaluation (condition assessment) of the entire City s collection system delayed for 5 years. Lateral sewer line replacement program reduced by over $6M the program will continue to include new laterals in all mainline replacement projects. Cowell Road/BART Area sewer replacement project delayed 3-4 years and separated into multiple projects. Limited spot repair funding will be available should emergencies arise in this area. Downtown Priority 3 sewer replacement project delayed 4-5 years and separated into multiple projects. Limited spot repair funding will be available should emergencies arise in this area. Attachments D1 and D2 shows the Priority 3 projects, as well as the currently funded Priority 1 and 2 projects. A capital reserve of approximately $1.3M can be maintained to cover any emergency projects that surface during these deferral periods with proper management of the funds. Projects currently under construction, which include Phase 1 and most of Phase 2 of the Downtown and the Monty Gardens Replacement Projects, respectively, will not be impacted by these project deferrals. Timing of Rate Increase Determination. The rate increase process must comply with the requirements of Proposition 218, and it should begin as soon as possible. Proposition 218 requires that the City notify by mail all property owners subject to a potential increase in the annual sewer service charge. The sewer service charge increase is not subject to a balloting process, but comes under the traditional assessment district proceedings, which allow for a majority protest process. Notices of a proposed sewer rate increase must be mailed to all users of the sewer system not later than April 19, This includes property owners in Concord, Clayton, and a portion of Contra Costa County. The notices will advise of a City Council public hearing date on June 4, 2013 and also the method of written protest that must be received by the City Clerk prior to the close of the public hearing. Fiscal Impact The fiscal impact of enacting a $39 per year increase from a base rate $324 to $363 in FY and $402 in FY would allow the Sewer Enterprise Fund to provide needed daily maintenance to the system but will require utilizing the Contingency Reserves by year three (FY15-16) for a total of seven out of the next ten years. Additionally, the Capital Program will be impacted through delaying of project starts and reducing the amount of replacement projects that can be funded. The impact of these delays is indeterminable at this time as a complete evaluation and condition assessment of the collection

4 SANITARY SEWER RATES April 3, 2013 Page 3 system has yet to be completed, and the assessment itself would also be delayed by five years. The greatest concern is that the final assessment of the system will show many areas requiring replacement, with no funding available for repairs. However, it should be noted that the proposed rate increase of $39 per year is under consideration for a two year period, and additional increases could be selected in subsequent years to address these concerns. Attachment E provides a comparison of the City of Concord s sewer rates against other agencies in the Bay Area. While the figures are based upon current year (FY12-13) rates, the rate charged by the City of Concord ranks in the bottom 15% of all the agencies. Even with the proposed $39 per year increase, the City remains in the lowest 20% of these agencies and remains less than CCCSD s rates prior to their anticipated increase. Given that the continuing trend among most other agencies, such as CCCSD, has been significant annual rate increases, it is likely that even with a rate increase of $39 in FY 14-15, the City of Concord s rates will remain among bottom 15-20% in the Bay Area. Public Contact The Clayton City Manager and posting of the City Council Committee Agenda. Recommendation for Action Staff recommends that the Infrastructure and Franchise Committee review the proposed benefits and impacts to the City s Sanitary Sewer Enterprise Fund and direct staff to bring forward to the City Council for approval a $39.00 per year rate increase for FY13-14 and FY It is further recommended the Committee direct staff to publish the Proposition 218 notice required when implementing such an increase. Valerie Barone Interim City Manager valerie.barone@cityofconcord.org Prepared by: Jon Crawford Interim City Engineer jon.crawford@cityofconcord.org Reviewed by: Victoria Walker Community & Economic Development Director victoria.walker@cityofconcord.org Attachment A 10-Year Funding Projection with Proposed $39 Increase Attachment B CIP Project Timing Changes Attachment C February 27, 2013 I & F Committee Report. Attachment D-1 Downtown Area Sewer Phasing Map Attachment D-2 Downtown Area Sewer Phasing Map (Priority 3 areas highlighted) Attachment E Sewer Service Charge Comparison

5 Attachment A - Incorporates Proposed $39 per Year Rate increase in FY's and and Recommends Changes to the District's CIP Program Sewer Enterprise Ten Year Projection Page 1 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $39 Fee Inc $ Fund Balance 7/01 $ 13,695,624 $ 4,753,984 $ 2,666,645 $ 2,308,365 $ 2,240,584 $ 899,422 $ 2,218,653 $ 4,139,977 $ 69,955 $ 1,770,519 $ 1,108,455 Revenues Sewer Service Fees $ 19,289,593 $ 21,498,943 $ 23,708,293 $ 25,917,643 $ 28,126,993 $ 30,336,343 $ 32,545,693 $ 34,755,043 $ 36,964,393 $ 39,173,743 $ 43,592,443 Sewer Connection Fees 400, , , , , , , , , , ,000 Interest 311, , , , , , , , , , ,000 Loan Repayment , , , , ,000 50, Total Revenues $ 20,000,593 $ 22,172,943 $ 24,458,293 $ 26,781,643 $ 29,046,993 $ 31,510,343 $ 33,760,693 $ 35,958,043 $ 38,202,393 $ 40,448,743 $ 44,668,443 Operating Expenditures City of Concord Costs: Maintenance & Operations $ 4,337,066 $ 4,541,637 $ 4,682,337 $ 4,796,320 $ 4,935,096 $ 5,080,557 $ 5,218,063 $ 5,360,426 $ 5,495,612 $ 5,649,507 $ 5,819,000 Sanitary Sewer Repairs 255, , , , , , , , , , ,000 Subtotal City of Concord Costs 4,592,604 4,811,112 4,959,709 5,098,609 5,237,385 5,460,970 5,603,150 5,757,426 5,904,522 6,070,684 6,253,000 City of Concord Debt Service Rehab Bond Payment-Priority 1 836, , , , , , , , , , ,761 Bond Paymnt-Gravity Connectio In Lieu of Pumping To CCCSD 847, , , , , , , , , , ,592 Subtotal City of Concord Debt Service 1,684,581 1,681,774 1,681,732 1,684,690 1,681,878 1,687,461 1,686,012 1,686,520 1,689,868 1,691,353 1,691,353 CCCSD Costs: CCCSD- Household Hazardous Waste 650, , , , , , , , , , ,000 CCCSD Capital Projects 30% Reimbursement 4,109,797 3,638,813 3,563,946 3,054,566 5,466,855 4,528,638 5,396,295 12,081,720 10,957,352 12,068,382 12,430,000 CCCSD - Treatment Plant Operations 11,661,541 12,393,352 13,170,847 15,300,511 15,719,657 16,109,692 17,526,930 18,092,108 16,655,787 19,951,359 20,550,000 Subtotal CCCSD Costs 16,422,048 16,702,396 17,425,131 19,066,125 21,918,892 21,392,681 23,700,207 30,974,119 28,437,439 32,868,770 33,854,000 Tota Operating Expenditures $ 22,699,233 $ 23,195,282 $ 24,066,572 $ 25,849,424 $ 28,838,155 $ 28,541,112 $ 30,989,369 $ 38,418,065 $ 36,031,829 $ 40,630,807 $ 41,798,353 Net Income(Loss) $ (2,698,640) $ (1,022,339) $ 391,721 $ 932,219 $ 208,838 $ 2,969,231 $ 2,771,324 $ (2,460,022) $ 2,170,564 $ (182,064) $ 2,870,090 10% Contingency Reserves $ 2,076,000 $ 2,124,000 $ 2,211,000 $ 2,386,000 $ 2,685,000 $ 2,647,000 $ 2,892,000 $ 3,633,000 $ 3,393,000 $ 3,852,000 $ 3,967,000 Capital Projects: City Projects $ 6,243,000 $ 1,065,000 $ 750,000 $ 1,000,000 $ 1,550,000 $ 1,650,000 $ 850,000 $ 1,610,000 $ 470,000 $ 480,000 $ 490,000 Total Capital Projects $ 6,243,000 $ 1,065,000 $ 750,000 $ 1,000,000 $ 1,550,000 $ 1,650,000 $ 850,000 $ 1,610,000 $ 470,000 $ 480,000 $ 490,000 Other Financing Sources (Uses) Transfers In $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Transfers Out Total Other Financing Sources (Uses) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Fund Balance 6/30 $ 2,677,984 $ 542,645 $ 97,365 $ (145,416) $ (1,785,578) $ (428,347) $ 1,247,977 $ (3,563,045) $ (1,622,481) $ (2,743,545) $ (478,455) Notes: City contracts with CCCSD for sewer treatment. The Agreement pays the proportional share for operations and capital projects at the Plant which is typically 30% of CCCSD's expenditures. Meets all standards contained in the Budget and Fiscal Policy adopted by Council. This policy can be found on page 36. Revenues: Sewer service fees include fee increases the first 10 years Proposed rate increases required to provide for sewer main rehabilitation & new customer connections. Expenditures: Includes project costs as proposed in the CIP budget. Salaries and benefits have been budgeted per current labor agreements and assuming a full staffing level. Employee benefits expenses for medical insurance and retirement reflect recent higher than CPI increases and post retirement health assumes 30-Year amortization of accrued liability. CIP costs include 1% capital contribution to a capital facility replacement project. Non-labor operating expenditures for FY 2010 and the remainder of the 20-Year planning period, depending on the category, include increases between 2% and 3% for inflation. Operating expenditures include internal service fund charges for vehicles, information technology, buildings, workers' compensation and risk liability. Bond repayment per debt service schedules including fiscal charges. CCCSD operations & capital project payments based on CCCSD's ten year assumptions, including GASB No. 45 adjustment, with a CPI applied to Fiscal Year 2021 through Fiscal Year 2030: 3% Facility and 4.9% Operations.

6 Attachment B - CIP Project Timing Changes Legend 100,000 = Proposed with $39 increase in FY's & ,000 = FY 12/13 Adopted CIP Sewer Enterprise Capital Improvement Plan - Impact of CCCSD Rate Increases Project Name Prior Year yr Totals PJ 2185 Downtown Sewer 4,200,000 3,800, , , PJ 2187 Sewer Main Extension 1,000, PJ Condition Assessment 275, , , , , , , , , , , , , , , ,000 PJ 2209 Sewer Capital Facility Replacement 530, , , , , , , , , , ,000 2,900, ,000 1,000,000 1,500,000 1,545,000 1,591,350 1,639,091 1,688,264 1,738,912 1,791,079 1,844,811 15,303,507 PJ 2227 Cowell Road/ Bart Area Spot Repairs 300, Willow Pass Road Trunk Sewer Upgrade 500, Monte Gardens Sewer Replacement 900, Citywide Lateral Replacement 400, , , , , , , , , ,000 1,350, , , , , , , , , , ,000 7,600,000 Cowell Road/Bart Area Sewer Replacement 0 250, , ,000 1,900,000 1,900,000 1,900,000 Downtown Priority 3 Projects , ,000 1,250,000 2,000,000 2,000,000 2,000,000 Yearly Totals 6,305,000 6,243,000 1,065, ,000 1,000,000 1,550,000 1,650, ,000 1,610, , , ,000 9,915,000 3,465,000 4,000,000 2,500,000 2,545,000 2,391,350 2,439,091 2,488,264 2,538,912 2,591,079 2,644,811 27,603,507

7 AGENDA ITEM NO. REPORT TO COUNCIL COMMITTEE ON INFRASTRUCTURE &FRANCHISE Attachment C TO THE HONORABLE COMMITTEE MEMBERS: DATE: February 27, 2013 SUBJECT: CONSIDERATION OF SANITARY SEWER RATE ADJUSTMENTS Report in Brief The City of Concord s Sewer Enterprise Fund is facing revenue shortfalls beginning with the year-end Fiscal Year These shortfalls are the result of (1) increased costs imposed by the Central Contra Costa Sanitary District which exceed previously budgeted amounts, (2) on-going and increasing costs to address a backlog of capital maintenance and replacement of aged infrastructure, and (3) the decision to defer increases to the sanitary sewer rates in Fiscal Year Staff recommends that the Infrastructure and Franchise Committee (Committee) direct staff to study and prepare for implementation of a sanitary sewer rate increase that will a) provide balance between revenues and expenditures; b) maintain a 10% contingency reserve in the Sewer Enterprise Fund; and c) generate adequate funding for capital projects to maintain and replace the sanitary sewer infrastructure. It is further recommended that the Committee consider directing staff to study a two year increase in rates and include this within the Prop 218 notice. Background On June 7, 2011, the City Council approved an $18 sewer rate increase that adjusted the minimum annual sewer service charge for the Concord sanitary sewer users from $306 to $324. Also in June, 2011 the Central Contra Costa Sanitary District (CCCSD) approved a two-year $30 per year sewer service fee charge which adjusted the minimum annual sewer service charge for CCCSD users to $341 with an automatic adjustment to $371 effective July 1, The CCCSD rate increases are relevant because Concord s Sewer Enterprise contracts with CCCSD to provide waste water treatment of sewage at the CCCSD treatment plant. The Concord Sewer Enterprise pays a proportionate share of the maintenance, operation and capital replacement costs of the CCCSD treatment plant, based on flow volumes. The City pays CCCSD 30%-32% of both the treatment plant operations and the treatment plant capital improvements as the City s share. On March 8, 2012, the Committee supported a staff recommendation to increase sanitary sewer rates by $30 in Fiscal Year The recommended amount was selected to match the CCCSD adopted $30 rate increase effective July 1, Adoption of the rate increase was meant to avoid a rate catch-up scenario which would require a larger rate increase in following years. Staff later rescinded the recommendation to increase sewer rates in Fiscal Year because the Contra Costa Central Sanitation Capital project proposal which was the driver for the cost increase was too uncertain. Staff

8 SANITARY SEWER RATES February 27, 2013 Page 2 instead recommended researching the obligation further and addressing the rate increase in Fiscal Year After review, the Committee determined that the Sewer Enterprise Fund carried a healthy fund balance that could be drawn down for one year without significant damage to the fund. However, the Committee also recognized that rate increases would be necessary in subsequent years to address the deficit and future cost increases. Discussion The City s 20-Year Sewer Financial Plan (Plan) includes scheduled rate increases every year to fund additional anticipated requirements for operations, maintenance, and capital improvements for both Concord sewer facilities and CCCSD. The City s adopted Plan currently anticipates a $30 rate increase for each consecutive year from FY through FY Imposition of a rate increase requires a Proposition 218 notification and is subject to a majority protest, as further discussed below under Fiscal Impact. Recently, staff received the CCCSD Financial Projections that were presented to the District Board for future rate increases over the next ten years (Attachment A). In late January 2013, the CCCSD Board approved the staff recommendation to increase rates by $34 in Fiscal Year and $34 in Fiscal Year The Board is scheduled to formally adopt the 2-year increase at a Public Hearing on June 6, The main financial drivers for a CCCSD increase includes: a) capital investment in infrastructure for renewal and replacement as well as the capital and Operation & Maintenance (O&M) cost of meeting new federal and state regulatory requirements; b) real estate downturn and revenue reductions in sanitary sewer charges, interest income, property taxes, and developer permit and connection fees; c) Contra Costa County Employees Retirement Association pension cost increases due to depooling and 5-year smoothing of stock market losses from prior years; d) health care cost increases which are higher mainly due to national healthcare reform and compliance; and e) significant unfunded accrued liabilities for which payment should be incorporated in the 10-year plan. Additionally, the overall costs of operations and advancing of some capital projects added to the increase in the City s share. With the increased costs originating from CCCSD, the City s planned rate increase of $30 per service per year still leads to deficit spending, requiring use of the contingency reserves in FY or the delay in the repair and replacement of the sewer system. Subsequent years expenditures, even with further rate increases, are projected to exceed revenues, leaving significant fund deficits. Staff will be presenting the Committee various options for addressing this challenge including combining annual rate increases with adjustments in the capital program as a means of heading off these significant fund deficits. Fiscal Impact In consideration of: (1) rising charges from CCCSD; (2) the certainty of additional capital costs for complete infrastructure restoration; and (3) additional information that will be gained as more sewer condition assessment studies are completed for Concord s infrastructure, staff requests the Committee to consider four rate increase scenarios. These four scenarios span from the currently planned $30 annual

9 SANITARY SEWER RATES February 27, 2013 Page 3 rate increase to as high as a $50 annual rate increase for Fiscal Year (Attachments B-E). The scenarios have been developed to match CCCSD s $30 increase in FY and the proposed 2- year, $34 annual rate increases that CCCSD has scheduled to begin in FY Adoption of rate increases by the City are necessary to avoid additional future revenue shortfalls as shown in Attachments B-E. Additionally, comparisons of commercial and industrial rates that are currently charged to Concord businesses appear to be far below the rates charged in surrounding communities. This apparent disparity begins to raise questions about the equity of residential versus businesses rates. Staff has included the cost to complete a more extensive rate study (estimated at $40,000) which is reflected in the capital costs of the four rate increase options provided. Conducting this rate study will provide needed information not only about the equitability of the City s sewer rates structure, but also confirm whether Concord s agreement for service with CCCSD still accurately reflects the costs that should be assigned to the City. The rate increase process must comply with the requirements of Proposition 218, and it should begin as soon as possible. Proposition 218 requires that the City notify by mail all property owners subject to a potential increase in the annual sewer service charge. The sewer service charge increase is not subject to a balloting process, but comes under the traditional assessment district proceedings, which allow for a majority protest process. Notices of a proposed sewer rate increase must be mailed to all users of the sewer system in April This includes property owners in Concord, Clayton, and a portion of Contra Costa County. The notices will advise of a City Council public hearing date in June 2013 and also the method of written protest that must be received by the City Clerk prior to the close of the public hearing. Public Contact The Clayton City Manager and posting of the City Council Committee Agenda. Recommendation for Action Staff recommends that the Infrastructure and Franchise Committee direct staff to begin working on a sanitary sewer rate increase that will a) provide balance between revenues and expenditures; b) maintain a 10% contingency reserve in the Sewer Enterprise Fund; and c) generate adequate funding for sanitary sewer system capital projects. It is further recommended the committee consider directing staff to provide a two year increase in rates and include this within the Prop 218 notice. Valerie Barone Interim City Manager valerie.barone@cityofconcord.org Prepared by: Jon Crawford Interim City Engineer jon.crawford@cityofconcord.org Reviewed by: Victoria Walker Community & Economic Development Director victoria.walker@cityofconcord.org

10 Attachment A CCCSD Financial Projections Attachment B City of Concord $30 Rate Increase Scenario Attachment C City of Concord $33 Rate Increase Scenario Attachment D City of Concord $39 Rate Increase Scenario Attachment E City of Concord $50 Rate Increase Scenario SANITARY SEWER RATES February 27, 2013 Page 4

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13 Attachment E Sewer Service Charge Comparison (information obtained from CCCSD rate survey) Agency Sewer Service Charge* Santa Rosa $1,099 Petaluma $953 Crokett Sanitary District $859 Rodeo Sanitary District $742 Ironhouse Sanitary District $603 Oakland (EBMUD) $572 Richmond $547 Brentwood $547 Mountain View Sanitary District $518 Novato $508 Berkeley (EBMUD) $496 Benicia $496 Vallejo $495 Livermore $489 Bay Point (DDSD) $469 Napa Sanitation District $465 Pittsburgh (DDSD) $458 CCCSD (FY12-13) $444 Stege Sanitary District (EBMUD) $416 Pleasanton $412 Antioch (DDSD) $380 Concord (FY13-14) $363 Dublin San Ramon Services District $357 Fairfield $343 West County Wastewater District $324 Concord (FY12-13) $324 Union Sanitary District $304 Oro Loma Sanitary District $188 *= includes ad valorum/parcel taxes