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HomeMy WebLinkAbout6 - Water Utility Rate IncreaseCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 6 November 24, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Utilities Department George Murdoch, Utilities Director 949 - 644 -3011 or gmurdoch @newportbeachca.gov SUBJECT: Water Utility Rate Increase and Ordinance Amendment ISSUE Should the City Council approve a water utility rate increase and amend the City of Newport Beach Municipal Code Chapter 14.12 "Water Rates and Charges" Section 14.12.020 "Water Rates Established "? RECOMMENDATION 1. Affirm the tabulated results of the water rate increase protest count from property and non - property owning customers and; 2. Introduce Ordinance No. 2009 -_ amending the City of Newport Beach Municipal Code Chapter 14.12 "Water Rates and Charges" Section 14.12.020 "Water Rates Established" and pass to second reading on December 8, 2009. DISCUSSION: Background: At the July 28, 2009 meeting the City Council adopted Resolution 2009 -58 which established a uniform set of procedures applicable to Proposition 218 in connection with water and wastewater rate - setting proceedings pursuant to Article XIIID of the California Constitution. To comply with the established procedures concerning the proposed water rate increases presented to Council on September 8, 2009, the Utilities Department mailed 31,963 notices to property and non - property owning customers on September 25, 2009. At the November 10, 2009 meeting the City Council conducted a public hearing to conclude the 45 -day written notice period regarding the proposed water rate increase. Under the Proposition 218 requirements, the rates cannot be increased if a majority of the property owning customers submits a valid written protest to the City Clerk by the close of the 45 -day notice period. If the total number of protests is less than half of the number of properties served by the City, then the Clerk may advise the City Council of the absence of a majority protest without determining the validity of all protests. Additionally, notices were sent to non - property owning customers and City Council may consider their protests; however they will not be counted as part of the requirement. Proposition 218 Notice Results There are approximately 26,400 property owning customers served by the City of Newport Beach. The City Clerk reports sixty (60) property owning customers have submitted protests and fifteen (15) non - property owning customers have submitted protests. This falls short of the majority of protests required by Proposition 218 to restrict the Council from raising the water rates. Amendment to the Municipal Code The results indicate that there are an insufficient number of protests, therefore staff recommends the Amendment to the City of Newport Beach Municipal Code Chapter 14.12 'Water Rates and Charges" specifically Section 14.12.020 'Water Rates Established." Attachment A is a redlined version of the amendments showing the existing code. Attachment B is a final version of the code for approval and signature. If the Ordinance Amendment is introduced at the November 24, 2009 meeting, staff recommends a second reading be held at the December 8, 2009 meeting. The effective date of the water rate increase would be January 7, 2010. Environmental Review: Staff recommends the City Council finds the Proposition 218 results and Code amendment is not subject to the California Environmental Quality Act ( "CEQA' pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Prepared and Submitted by: M dock, Utilities Director Attachments: Attachment A — Redlined version of the amended ordinance Attachment B — Final version of the amended ordinance FIN ar_Tyatl,lakq rr_1 AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" The City Council of the City of Newport Beach ordains as follows: Section 1: Section 14.12.020 of the Newport Beach Municipal code is hereby amended to read as follows: 14.12.020 Water Rates Established. The following rates, fees and charges are established and shall be charged and collected in accordance with the provisions of this chapter: A There shall be charged and collected a monthly fixed water service charge from each customer for each meter. The fixed water service charge recaptures the City's costs to operate and maintain the water system, including required capital infrastructure improvements. Fixed water service charges shall be effective January 15t of each year and charged according to the following schedule: Fixed Water Service Charges Water Meter Size FY2010 FY2011 FY2012 FY2013 FY2014 518" or 3/4" 8.27 $13.09 15.11 16.63 17.27 1" 112.78 21.82 25.19 JZ7.72 $28.79 11/2" $27.55 $43.64 $50.38 $55.43 $57.58 2" $44.08 $69.82 $80.61 $88.69 $92.12 3" $82.65 $130.91 $151.14 $166.30 $172.73 4" $137.75 $218.18 $251.90 $277.16 $287.88 6" $275.50 $436.37 $503.81 $554.32 $575.76 8.1 440.80 $698.19 $806.09 $886.91 $921.22 10" 792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 12" $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 For each living unit in excess of one per water meter, per month 1.00 For each hotel or motel unit and each hospital or convalescent home bedroom in 0.50 excess of one per water meter, per month Commodity Charge ie r:�ssr_ir�an�ss en�rr_rrr_�a_rrsr..r_*rse rs�n_�: ------ ---- --:- -- FY2012 FY2013 •� •• Commodity Charge B The commodity charge for water supplied to consumers throuah a meter. other than pursuant to a written contract approved by the City Council, shall be effective January 15t of each year. The commodity charge primarily recovers the cost of purchased water by the Citv for its customers and shall be charaed according to the followinq schedule Commodity Charges (cost per hundred cubic feet or 748 gallons) FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge 2.20 2.46 2.73 ja .96 3.08 r �t�: �rmrsr_ r. �r. �rt7r_ rsa�y�►_ �7�r7�rtzr .�[.f�sr_ra■irs�7rszrrri �, _ _ .._ ._ .._. _. ___• _ .............. ■ ■ SECTION 2: If any section, subsection, sentence, clause or phase of this ordinance is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The City Council hereby declares that it would have passed this ordinance, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption. SECTION 4: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the day of 2009, and adopted on the day of , 2009, by the following vote, to wit: AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" ATTACHMENT B Ordinance No. 2009- AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" The City Council of the City of Newport Beach ordains as follows: Section 1: Section 14.12.020 of the Newport Beach Municipal code is hereby amended to read as follows: 14.12.020 Water Rates Established. The following rates, fees and charges are established and shall be charged and collected in accordance with the provisions of this chapter: A There shall be charged and collected a monthly fixed water service charge from each customer for each meter. The fixed water service charge recaptures the City's costs to operate and maintain the water system, including required capital infrastructure improvements. Fixed water service charges shall be effective January 1St of each year and charged according to the following schedule: Fixed Water Service Charges Water Meter Size FY2010 FY2011 FY2012 FY2013 FY2014 518" or 3/4" $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" $13.78 $21.82 $25.19 $27.72 $28.79 11/2" $27.55 $43.64 $50.38 $55.43 $57.58 2" $44.08 $69.82 $80.61 $88.69 $92.12 3" $82.65 $130.91 $151.14 $166.30 $172.73 4" $137.75 $218.18 $251.90 $277.16 $287.88 6" $275.50 $436.37 $503.81 $554.32 $575.76 8" $440.80 $698.19 $806.09 $886.91 $921.22 10" $792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 12" $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 For each living unit in excess of one per water meter, per month $1.00 For each hotel or motel unit and each hospital or convalescent home bedroom in excess of one per water meter, per month $0.50 B The commodity charge for water supplied to consumers through a meter, other than pursuant to a written contract approved by the City Council, shall be effective January 1" of each year. The commodity charge primarily recovers the cost of purchased water by the City for its customers and shall be charged according to the following schedule: Commodity Charges (cost per hundred cubic feet or 748 gallons) FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.20 $2.46 $2.73 $2.96 $3.08 SECTION 2: If any section, subsection, sentence, clause or phase of this ordinance is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The City Council hereby declares that it would have passed this ordinance, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption. SECTION 4: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the — day of , 2009, and adopted on the _ day of . 2009, by the following vote, to wit: AYES, COUNCILMEMBERS NOES, COUNCILMEMBERS ABSENT COUNCILMEMBERS MAYOR ATTEST: CITY CLERK APPROVED AS TO FORM: OFFICE OF THE CITY ATTORNEY by: MptM WUQHAW ASSISTANT CITY ATTORNEY CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 15 November 10, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Utilities Department George Murdoch, Utilities Director 949 - 644 -3011 or gmurdoch @newportbeachca.gov SUBJECT: Water Utility Rate Increase ISSUE In accordance with City policy in Resolution No. 2009 -58, (Proposition 218 Procedures), the City Council shall conduct a public hearing at the conclusion of the 45 -day notice period regarding proposed water rate increases presented to Council at the September 8, 2009 meeting. RECOMMENDATION 1. Conduct a public hearing to accept comments on the proposed water rate increase and at the conclusion of the hearing close the 45 -day Proposition 218 written protest period; 2. Direct staff to prepare a report for November 24, 2009 to announce the results of the Proposition 218 procedure as tabulated by the City Clerk; 3. Introduce Ordinance No. 2009 -_ on November 24, 2009 amending Chapter 14.12 Water Rate and Charges of the Newport Beach Municipal Code, and pass to second reading on December 8, 2009. DISCUSSION: Background: At the September 8, 2009 meeting, staff presented a report which discussed the Water Enterprise Fund financial condition based on a comprehensive August 2009 Water Utility Financial Plan completed for the City by Red Oak Consulting. The financial study determined that existing water rates do not provide enough revenue to operate the water system to provide a safe and reliable water supply to the City's customers. The City has not raised its water rates since 2005. Since then the City has seen a 29% increase in the average unit cost of purchased water from the Municipal Water Water Utility Rate Increase November 10, 2009 Page 2 District of Orange County (MWDOC) and a 37% increase in the average unit cost of purchased water from the Orange County Water District (OCWD). In addition, significant capital expenditures are required to maintain the water delivery system and funding is necessary to keep a satisfactory contingency emergency reserve. Based on Council direction at the September 8, 2009 meeting, staff sent rate increase notices as required by Proposition 218 to City property owners and non - property owning customers (Attachment A). The notice includes the proposed water rates as it was recommended at the September 8, 2009 meeting. This report summarizes the status of the Proposition 218 notice procedures which will close upon conclusion of the public hearing and outlines the next steps should the rate increase be passed in the absence of a majority written protest. Proposition 218 Notice and Procedures At the July 28, 2009 meeting the City Council adopted Resolution 09 -58 which established a uniform set of procedures applicable to Proposition 218 in connection with water and wastewater rate - setting proceedings pursuant to Article XIIID of the California Constitution. To comply with the established procedures concerning the proposed water rate increases, on September 25, 2009 the Utilities Department mailed 31,963 notices to property owners and non - property owning customers of the City. According to the Proposition 218 procedures a 45 -day notice period is required. The 45 -day notice period will conclude at the end of the public hearing on November 10, 2009. To date the Utilities Department has received about 40 calls in regards to the water rate notice. A majority of the callers wanted additional information on the need for the water rate increase. Most of the callers were satisfied with the information that was provided. At the conclusion of the public hearing on November 10, 2009, the City Clerk shall complete the tabulation of all written protests received, including those received during the public hearing and shall report the results to the City Council upon completion. If review of the written protests demonstrates the number received is manifestly less than one -half of the parcels served by the City with respect to the water rate fee, then the Clerk may advise the City Council of the absence of a majority protest without determining the validity of all protests. It is recommended that staff return to Council at the November 24, 2009 meeting to announce the tabulation results of the City Clerk. If there is an absence of a majority written protest, staff will recommend the introduction of an Ordinance amending Chapter 14.12 Water Rate and Charges of the Newport Beach Municipal Code, and pass to second reading on December 8, 2009. Should the new water rates be approved they would be effective January 8, 2009. Water Utility Rate Increase November 10, 2009 Page 3 Environmental Review: Staff recommends the City Council finds that the public hearing regarding Proposition 218 procedures is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Prepared and Submitted by: George Murdoch, Utilities Director Attachments: Attachment A — Proposition 218 Notice FIN ar_Tyatl,lakq rr_1 AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" The City Council of the City of Newport Beach ordains as follows: Section 1: Section 14.12.020 of the Newport Beach Municipal code is hereby amended to read as follows: 14.12.020 Water Rates Established. The following rates, fees and charges are established and shall be charged and collected in accordance with the provisions of this chapter: A There shall be charged and collected a monthly fixed water service charge from each customer for each meter. The fixed water service charge recaptures the City's costs to operate and maintain the water system, including required capital infrastructure improvements. Fixed water service charges shall be effective January 15t of each year and charged according to the following schedule: Fixed Water Service Charges Water Meter Size FY2010 FY2011 FY2012 FY2013 FY2014 518" or 3/4" 8.27 $13.09 15.11 16.63 17.27 1" 112.78 21.82 25.19 JZ7.72 $28.79 11/2" $27.55 $43.64 $50.38 $55.43 $57.58 2" $44.08 $69.82 $80.61 $88.69 $92.12 3" $82.65 $130.91 $151.14 $166.30 $172.73 4" $137.75 $218.18 $251.90 $277.16 $287.88 6" $275.50 $436.37 $503.81 $554.32 $575.76 8.1 440.80 $698.19 $806.09 $886.91 $921.22 10" 792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 12" $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 For each living unit in excess of one per water meter, per month 1.00 For each hotel or motel unit and each hospital or convalescent home bedroom in 0.50 excess of one per water meter, per month Commodity Charge ie r:�ssr_ir�an�ss en�rr_rrr_�a_rrsr..r_*rse rs�n_�: ------ ---- --:- -- FY2012 FY2013 •� •• Commodity Charge B The commodity charge for water supplied to consumers throuah a meter. other than pursuant to a written contract approved by the City Council, shall be effective January 15t of each year. The commodity charge primarily recovers the cost of purchased water by the Citv for its customers and shall be charaed according to the followinq schedule Commodity Charges (cost per hundred cubic feet or 748 gallons) FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge 2.20 2.46 2.73 ja .96 3.08 r �t�: �rmrsr_ r. �r. �rt7r_ rsa�y�►_ �7�r7�rtzr .�[.f�sr_ra■irs�7rszrrri �, _ _ .._ ._ .._. _. ___• _ .............. ■ ■ SECTION 2: If any section, subsection, sentence, clause or phase of this ordinance is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The City Council hereby declares that it would have passed this ordinance, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption. SECTION 4: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the day of 2009, and adopted on the day of , 2009, by the following vote, to wit: AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" ATTACHMENT B Ordinance No. 2009- AN ORDINANCE OF THE CITY OF NEWPORT BEACH CALIFORNIA AMENDING CHAPTER 14.12 "WATER RATES AND CHARGES" SECTION 14.12.020 "WATER RATES ESTABLISHED" The City Council of the City of Newport Beach ordains as follows: Section 1: Section 14.12.020 of the Newport Beach Municipal code is hereby amended to read as follows: 14.12.020 Water Rates Established. The following rates, fees and charges are established and shall be charged and collected in accordance with the provisions of this chapter: A There shall be charged and collected a monthly fixed water service charge from each customer for each meter. The fixed water service charge recaptures the City's costs to operate and maintain the water system, including required capital infrastructure improvements. Fixed water service charges shall be effective January 1St of each year and charged according to the following schedule: Fixed Water Service Charges Water Meter Size FY2010 FY2011 FY2012 FY2013 FY2014 518" or 3/4" $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" $13.78 $21.82 $25.19 $27.72 $28.79 11/2" $27.55 $43.64 $50.38 $55.43 $57.58 2" $44.08 $69.82 $80.61 $88.69 $92.12 3" $82.65 $130.91 $151.14 $166.30 $172.73 4" $137.75 $218.18 $251.90 $277.16 $287.88 6" $275.50 $436.37 $503.81 $554.32 $575.76 8" $440.80 $698.19 $806.09 $886.91 $921.22 10" $792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 12" $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 For each living unit in excess of one per water meter, per month $1.00 For each hotel or motel unit and each hospital or convalescent home bedroom in excess of one per water meter, per month $0.50 B The commodity charge for water supplied to consumers through a meter, other than pursuant to a written contract approved by the City Council, shall be effective January 1" of each year. The commodity charge primarily recovers the cost of purchased water by the City for its customers and shall be charged according to the following schedule: Commodity Charges (cost per hundred cubic feet or 748 gallons) FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.20 $2.46 $2.73 $2.96 SECTION 2: If any section, subsection, sentence, clause or phase of this ordinance is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The City Council hereby declares that it would have passed this ordinance, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption. SECTION 4: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the — day of , 2009, and adopted on the _ day of , 2009, by the following vote, to wit: AYES, COUNCILMEMBERS NOES, COUNCILMEMBERS ABSENT COUNCILMEMBERS MAYOR ATTEST: CITY CLERK APPROVED AS TO FORM: OFFICE OF THE CITY ATTORNEY by: MYNETTE BEAUCHAMP ASSISTANT CITY ATTORNEY CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 15 November 10, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Utilities Department George Murdoch, Utilities Director 949 - 644 -3011 or gmurdoch @newportbeachca.gov SUBJECT: Water Utility Rate Increase ISSUE In accordance with City policy in Resolution No. 2009 -58, (Proposition 218 Procedures), the City Council shall conduct a public hearing at the conclusion of the 45 -day notice period regarding proposed water rate increases presented to Council at the September 8, 2009 meeting. RECOMMENDATION 1. Conduct a public hearing to accept comments on the proposed water rate increase and at the conclusion of the hearing close the 45 -day Proposition 218 written protest period; 2. Direct staff to prepare a report for November 24, 2009 to announce the results of the Proposition 218 procedure as tabulated by the City Clerk; 3. Introduce Ordinance No. 2009 - on November 24, 2009 amending Chapter 14.12 Water Rate and Charges of the Newport Beach Municipal Code, and pass to second reading on December 8, 2009. DISCUSSION: Background: At the September 8, 2009 meeting, staff presented a report which discussed the Water Enterprise Fund financial condition based on a comprehensive August 2009 Water Utility Financial Plan completed for the City by Red Oak Consulting. The financial study determined that existing water rates do not provide enough revenue to operate the water system to provide a safe and reliable water supply to the City's customers. The City has not raised its water rates since 2005. Since then the City has seen a 29% increase in the average unit cost of purchased water from the Municipal Water Water Utility Rate Increase November 10, 2009 Page 2 District of Orange County (MWDOC) and a 37% increase in the average unit cost of purchased water from the Orange County Water District (OCWD). In addition, significant capital expenditures are required to maintain the water delivery system and funding is necessary to keep a satisfactory contingency emergency reserve. Based on Council direction at the September 8, 2009 meeting, staff sent rate increase notices as required by Proposition 218 to City property owners and non - property owning customers (Attachment A). The notice includes the proposed water rates as it was recommended at the September 8, 2009 meeting. This report summarizes the status of the Proposition 218 notice procedures which will close upon conclusion of the public hearing and outlines the next steps should the rate increase be passed in the absence of a majority written protest. Proposition 218 Notice and Procedures At the July 28, 2009 meeting the City Council adopted Resolution 09 -58 which established a uniform set of procedures applicable to Proposition 218 in connection with water and wastewater rate - setting proceedings pursuant to Article XIIID of the California Constitution. To comply with the established procedures concerning the proposed water rate increases, on September 25, 2009 the Utilities Department mailed 31,963 notices to property owners and non - property owning customers of the City. According to the Proposition 218 procedures a 45 -day notice period is required. The 45 -day notice period will conclude at the end of the public hearing on November 10, 2009. To date the Utilities Department has received about 40 calls in regards to the water rate notice. A majority of the callers wanted additional information on the need for the water rate increase. Most of the callers were satisfied with the information that was provided. At the conclusion of the public hearing on November 10, 2009, the City Clerk shall complete the tabulation of all written protests received, including those received during the public hearing and shall report the results to the City Council upon completion. If review of the written protests demonstrates the number received is manifestly less than one -half of the parcels served by the City with respect to the water rate fee, then the Clerk may advise the City Council of the absence of a majority protest without determining the validity of all protests. It is recommended that staff return to Council at the November 24, 2009 meeting to announce the tabulation results of the City Clerk. If there is an absence of a majority written protest, staff will recommend the introduction of an Ordinance amending Chapter 14.12 Water Rate and Charges of the Newport Beach Municipal Code, and pass to second reading on December 8, 2009. Should the new water rates be approved they would be effective January 8, 2009. Water Utility Rate Increase November 10, 2009 Page 3 Environmental Review: Staff recommends the City Council finds that the public hearing regarding Proposition 218 procedures is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Prepared and Submitted by: Geor Mu doch, Utilities Director Attachments: Attachment A — Proposition 218 Notice t �wi 6q� City of Newport Beach r P.O. Box 1768 Newport Beach, CA 92658 -8915 City of Newport Beach Information and Notice of Public Hearing And Protest Procedure Proposed Water Rate Charges TO: Doe, John & Jane 12345 Main Street Newport Beach, CA 94590 Attachment A - - - - - -- - - - -- - -- - - - - -- - -- -- - - - - -- -- - - - - - -- ------- - - - - -- -- ---- - - - - -- - - -- - -- - - - -- --- - - - - -- ---- - - - - -- - -- - - - - -- -- - - -- - -- ----- - - - - -- ----- - - - - -- EXTRA SPACE Notice of Public Hearing and Protest Procedure NOTICE IS HEREBY GIVEN that on Tuesday, November 10, 2009, at 7:OOPM, a public hearing will be conducted in the City Council Chambers (Building A) at 3300 Newport Boulevard, Newport Beach. This will be a Public Hearing before the City Council to allow public testimony and discussion of the proposed water rate increases described below. The City Council will take written and oral comments, and will consider all written protests against the proposed charges, determine if a majority protest exists, and consider resolutions to adopt the water rate charges. Written protests must be filed with the City of Newport Beach City Clerk. Written protests may be hand delivered or mailed to the City Clerk at 3300 Newport Boulevard, Newport Beach, California 92663. To be valid, written protests must state opposition to the proposed water rate increase, identify the Parcel (by assessor's parcel number or street address), and include the original signature of the record water service customer or parcel owner, A written protest may be submitted up to the conclusion of the public testimony at the public hearing. About Proposition 218 In November 1996, California voters approved Proposition 218. As a result, California agencies must comply with its requirements in setting utility rates. One provision requires that a noticed public hearing on utility rates be held and that rates not be increased if a majority of affected utility customers protest the increased rates in writing. Frequently Asked Questions Q. What does my water bill pay for? A. Your water bill covers the following categories costs and services: Annual operation and maintenance of the water system. Including well and pump station operations, water treatment and testing, and water system employee salaries. • City water purchase costs. The City purchases water from the Municipal Water District of Orange County and from the Orange County Water District. Capital improvement projects to repair and replace facilities and equipment to improve the water system safety, efficiency and reliability. No additional debt for this purpose is proposed and all improvements will be paid for with rate revenue. Q. Why do the rates need to be raised? A. Newport Beach is not immune to the increasing cost and scarcity of water over the past several years. Operating expenses, including chemical and electrical costs, have increased by an average of 6% over the last four years. In the last year alone, the cost of imported water increased by 20% on September 1st and will increase by another 22% on January 1, 2011. In addition, capital expenditures are required to maintain the water delivery system. The City has not raised its Water Rates since 2005. The existing rates do not provide enough revenue to meet the expenses necessary to operate the water system to provide a safe and reliable water supply to City customers for the next 5 years. Q. How is my water bill calculated? A. A customer's water bill (which is a component of the municipal services statement sent to City water customer's periodically) is calculated by the sum of a fixed service charge, which is based on the customer's meter size, and the water usage fee, which is calculated based on the amount of water used by the customer. See rate tables below. The rate structure in the table below is designed to spread the costs of providing water system among the system's users fairly and equitably. The costs associated with City's water system are made up of expenses associated with operating and maintaining the system, capital costs associated with rehabilitating and expanding the system, and commodity charges associated with acquiring water supplies. The City's rate structure is designed to encourage conservation by including a portion of operations and maintenance costs in the commodity charge, even though many of these expenses may not be directly dependent on water usage. Thereby, a greater proportion of a customer's bill reflects water usage, which encourages conservation because a customer can reduce his or her bill by using less water. This proposed blend of the costs between variable and fixed revenues (70% fixed / 30% variable) ensures revenue stability while also encouraging conservation. The following is a breakdown of each component: I. Water Usage Fee (Variable): Shown on the bill as "Water Usage HCF ", this charge is geared primarily towards recovering the costs associated with City water purchases, treatment, and distribution costs. In the proposed rate, 70% of the total revenue will come from this charge. This charge is based on the amount of water used and is calculated by multiplying the number of hundred cubic feet units (HCF) of water used by the unit rate per HCF. 2. Water Service Charge (Fixed): This charge is designed to recover (a) the costs of reading, maintaining, and replacing the meters and (b) the costs of capital improvements. The revenues derived from the capital component are to be used for repairs and improvements to the water system identified in the water master plan. In the proposed rate, 30% of the total revenue will come from this charge. The charge is based on the customer's water meter size. Most single - family residential properties have a 518 -inch or 314 -inch meter. Proposed Water Rates Current & Proposed Water Usage Fee (cost per HCF) Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.08 $2.20 $2.46 $2.73 $2.96 $3.08 Current & Proposed Water Service Charge Combined Fixed Charges Current FY2009 1 FY2010 2 FY2011 3 FY2012 4 FY2013 5 FY2014 518" or 314" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" $5.50 $13.78 $21.82 $25.19 $27.72 $28.79 1112" $7.00 $27.55 $43.64 $50.38 $55.43 $57.58 2" $9.50 $44.08 $69.82 $80.61 $88.69 $92.12 3" $18.00 $82.65 $130.91 $151.14 $166.30 $172.73 4" $25.50 $137.75 $218.18 $251.90 $277.16 $287.88 6" $38.50 $275.50 $436.37 $503.81 $554.32 $575.76 8" $45.00 $440.80 $698.19 $806.09 $886.91 $921.22 10" $45.00 $792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 12" $45.00 $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 Need More Information? If you have questions, please call George Murdoch, Utilities Director at the following number: (949) 644 - 30111287778.1 CK"J`'L ";-' -' A -7-1-::- 1: �- Oct CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 25 September 8, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Utilities Department George Murdoch, Utilities Director 949- 718 -3401 or gmurdoch@newportbeachca.gov SUBJECT: Water Utility Financial Plan and Water Rate Increase ISSUE Should the City Council approve the Water Utility Financial Plan and direct staff to begin the Proposition 218 rate increase notification process with the rates proposed in the financial plan? RECOMMENDATION 1. Approve the Water Utility Financial Plan; 2. Set public hearing on water rate increase for November 10, 2009; and 3. Direct staff to send rate increase notices as required by Proposition 218 with the rates proposed in the Financial Plan. DISCUSSION: Background: The increasing cost and scarcity of water has been in the news more and more over the past several years and the City has not been immune to the effects of this situation, The City has not raised its water rates since 2005. Since then the City has seen a 29% increase in the average unit cost of purchased water from the Municipal Water District of Orange County (MWDOC) and a 37% increase in the average unit cost of purchased water from the Orange County Water District (OCWD). In order to provide a plan to ensure the adequate funding of the Water Enterprise Fund, the City retained the services of Red Oak Consulting to complete a five -year Financial Plan and a Water Rate Study (Attachment A). This staff report briefly summarizes their findings. A representative of Red Oak will be present at the Council Meeting to present their analysis and recommendations, as well as to answer questions. Water Rate Increase September 8, 2009 Page 2 Current Financial Outlook Based on the City's increasing operations and maintenance (O &M) expenditures, capital financing needs, and proposed reserve requirements, current water revenues are insufficient. Under the current rate structure, the Water Fund will be unable to maintain a positive cash balance by fiscal year 2010 -11. By 2013 -14, the fund deficit is projected to grow to nearly $30 million. Financial Plan: As the basis for the rate study, Department staff and Red Oak developed a five -year financial plan (FY 2010 - 2014). This plan includes an estimate of the Department's annual projected operating expenses, a funding plan for the updated Water Master Plan (on the September 8 study session agenda) and recommended Reserve Policy revisions for City Council consideration. Projected Operating Expenses The Financial Plan revealed that anticipated operating expenses will increase from $16.7 million in 2009 to $24.1 million by 2014, an increase of approximately 45 %, as illustrated in the following table: Projected Operations & Maintenance Expenditures (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water- MWDOC $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 Purchased Water- OCWD $3,857 $3,922 $3,947 $4,081 $4,232 $4,351 Utilities $1,325 $1,322 $1,440 $1,549 $1,692 $1,851 Salaries & Benefits $4,152 $4,319 $4,491 $4,671 $4,858 $5,052 Equipment Maintenance & Replacement $423 $444 $467 $490 $514 $540 Other O &M $3,579 $3,856 $4,159 $4,491 $4,853 $5,250 Total $ 16,690 $18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 Capital Improvement Plan (C1P) Funding The City has developed a 30 -year capital improvement plan as part of the 2009 Water Master Plan. The contemplated CIP totals approximately $168 million, which includes a project cost escalation assumption of 4% per annum. Due to the long -term funding demands of an improvement plan of this magnitude, the financing plan contemplates a capital charge (assessed by meter size) as the primary source of revenue for the capital plan. Effective July 1, 2009 the City created a subsidiary Water Capital Fund to more fully segregate the resources dedicated to water capital improvements separate and apart from Water Division operating activities. Water Rate Increase September 8, 2009 Page 3 Reserve Policy Recommendations To insulate the Water Fund from financial volatility, City staff and Red Oak recommend the City maintain an Operating Stabilization Reserve equivalent to 180 days of its operating budget, or 50 %. This reserve level also provides a buffer period of 24 months at a 25% loss rate. Funds collected in excess of the operations stabilization reserve target would be available to offset future rate adjustments while extended reserve shortfalls would be recovered from future rate increases. Although it is difficult to determine an appropriate level for a Capital Contingency reserve without conducting an expensive and extensive criticality assessment of system facilities which are particularly at risk to catastrophic failure, Red Oak has evaluated a contingency reserve level contemplated by staff that parallels the annual contribution requirement necessary to fund the Water Master Plan. Red Oak concurs that this amount should provide a sufficient reserve against unanticipated replacements or repairs. By fiscal year 2013 -14, the target contingency reserve will be approximately $4 million. In total, the reserve policy recommendations change reserve levels from 60% of operations to approximately 65% of operations. Finance Committee Review: This information was presented to the City's Finance Committee on March 20h and April 24th of 2009. The Committee directed staff and Red Oak to adjust the Financial Plan and rate increase structure to accommodate three issues: 1) minimize "rate shock" to customers with a rate increase, 2) investigate financing the CIP using cash (pay -as- you -go) or optional debt issuance (General fund loan), and 3) fully fund reserves by 2014. As directed by the Finance Committee, staff and Red Oak investigated two scenarios in an attempt to reduce rate shock and compare debt issuance or cash financing. Scenario one was to borrow funds from the General Fund or issue debt in the amount to equal at least two years of CIP funding. Scenario two was to use cash financing or a pay -as- you -go method. Although adding funds to the reserves in scenario one initially did bring the rates down for the first year, by 2014 the rates would actually be higher due to the additional interest cost burden (example below). Additionally, due to potential State budget actions, the General Fund loan option seems less plausible than when originally contemplated in April of 2009. Staff recommends scenario two be selected. The rates proposed in this report meet the Finance Committee's goals and fully fund the reserves by 2014. Example: Scenario one — Commodity rate FY2010 $2.18 /HCF by FY 2014 $3.22 Scenario two — Commodity rate FY2010 $2.20 /HCF by FY 2014 $3.08 Water Rate Increase September 8, 2009 Page 4 Rate Increase: There are three elements to the water rates: 1) the commodity or "variable" charge, 2) the meter or "fixed" charge, and 3) the capital charge. The rate study looked at each of these charges and determined jointly at what level they should be set, and how they should be structured, in order to fairly and equitably recover the cost of providing water to our customers. As directed by the Finance Committee, the rate study also includes means of mitigating "rate shock" to customers. The commodity charge is geared primarily towards recovering the cost of the water itself; this charge currently generates about 90% of the. water enterprise's revenue. The rate study revealed that not only does this charge need to increase from the current rate of $2.08 per hundred cubic feet (HCF or 748 gallons), but the percentage of revenue generated by this charge needs to decrease from 90% to 70% of total revenue. This means that the commodity charge would increase to $2.20 immediately, and then, so as to avoid "rate shock ", continue to increase each year until it reaches $3.08 in 2014 as follows: Current & Proposed Commodity Charges (cost per HCF) Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.08 $2.20 $2.46 $2.73 $2.96 $3.08 The fixed charge was designed to recapture the costs of reading, maintaining and replacing the various sizes of meters. Presently the remaining 10% of the revenue received doesn't cover these costs, a situation that is partially due to the basis upon which the charges are allocated. As a result of the rate study, staff is recommending a significant restructuring of the fixed charge structure. This new structure would shift an additional 20% of the revenue requirements onto the fixed charge. After a slight decrease in 2010 in order to mitigate "rate shock ", customers would see an increase in the fixed charge. The majority of customers (those with %" meters) would see an increase of less than $1.50 per month due to this charge. However, customers with meters sized 2" and above would see larger increases to their fixed charges — in most cases the charges would be tripled. Staff is also proposing the establishment of a capital charge that would also be assessed based upon the size of the customer's meter. The capital charge funds the repair, replacement and/or construction of expensive facilities such as pipelines, reservoirs and wells. Again, for the large diameter meter customer, these increases will be substantial; however, the average customer will realize a $7.00 -$8.00 a month increase. Water Rate Increase September 8, 2009 Page 5 Below is the summary table of the combined fixed rates proposed: Combined Fixed C' 578" or 314" 1" 1 1/2" 2" 3" 4" 6" 8" 10" 12" Current & Proposed Combined Fixed Charges Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 $4.50 $8.27 $13.09 $15.11 $16.63 $17.27 $5.50 $13.78 $21.82 $25.19 $27.72 $28.79 $7.00 $27.55 $43.64 $50.38 $55.43 $57.58 49.50 $44.08 $69.82 $80.61 $88.69 $92.12 $18.00 $82.65 $130.91 $151.14 $166.30 $172.73 $25.50 $137.75 $218.18 $251.90 $277.16 $287.88 $38.50 $275.50 $436.37 $503.81 $554.32 $575.76 $45.00 $440.80 $698.19 $806.09 $886.91 $921.22 $45.00 $792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 $45.00 $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 It is important to note that under this proposal, 67% of our customers will realize an increase in their monthly bill of less than $10; however there will be significant increases for the remaining 33 %. Proposition 218 Requirements Proposition 218 amended the California Constitution, Articles XIIIC and XIIID, to require property owner notification of proposed increases in property related fees and give property owners the right to protest. Attachment B is a draft Proposition 218 Notice that would be sent to all property owners and non - property owning customers of the City. The notice provides background information, advises customers of the proposed water rates described in this report, notifies customers of the public hearing, and describes the protest procedure. Environmental Review: Staff recommends the City Council finds that approving the financial plan is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Funding Availability: Funding for the Proposition 218 Notice will come from the water enterprise fund. Water Rate Increase September 8, 2009 Page 6 Prepared and Submitted by: neorgvNurd6ch, Utilities Director Attachments: Attachment A — Draft Water Utility Financial Plan Attachment B — Draft Proposition 218 Notice City of Newport Beach, CA 949 W 16th Street • Newport Beach, CA 92663 Water Utility Financial Plan August 2009 Report Prepared By: REBDAK • •' CONSULTING w omsiox ar w•�co�x wax¢ 888 W 6th Street Third Floor 5317004 Los Angeles, CA 90017 (213) 326 -1600 Contents Executive Summary ....... Table of Contents ............. ............................... ES -1 1. Introduction ...................................................................... ............................1 -1 1.1. Scope........................... ................................................................................................. 1 -1 1.2. Background .......... ............................... ................................... ............................... .1 -1 2. Financial Plan ............................................................... ............................... 2 -1 2.1. Funds ......................................................................................... ............................... 2 -1 2.2. Revenue Requirement .................................................. ............................... ..............2 -1 2.2.1. Operations & Maintenance ........................ ............................... ..............2 -1 2.2.1.1. Purchased Water Costs ..................... ............................... ..............2 -2 2.2.1.2. Utilities ..................................................................... ............................2 -3 2.2.1.3. Other O &M ........................................................... ............................... 2 -3 2.2.1.4. Projected Operations & Maintenance Expenditures ...........................2 -3 2.2.2. Capital Improvement Program Financing ......................... .............................2-4 2.2.2.1. Historical Capital Improvement Program Financing ............................ 2.4 2.2.2.2. Water Master Plan ................................................ ............................... 2-4 2.2.2.3. Future Capital Improvement Program Financing . ............................... 2 -5 2.2.2.4. Historical and Future Debt Service Payments ..... ............................... 2 -5 2.3. Reserve Requirements ...................................................................... ............................2 -6 2.3.1. Operating Stabilization Reserve (Operating Fund) ........... ............................2 -6 2.3.2. Contingency Reserve (Capital Fund) ............................. ............................... 2 -7 2.4. Five -Year Financial Plan ............................................................... ..................- ............ 2 -7 2.4.1. Current Financial Outlook .................................................. ............................2 -7 2.4.2. Proposed Five -Year Financial Plan ................................ ............................... 2 -8 3. Current Water Rates ........................................................ ............................3 -1 3.1. Monthly Service Charge ............................................ ............................... . .............. 3 -1 3.2. Commodity Charge ......................... .............................................................................. 3 -1 4. Fixed ! Variable Revenue ................................................ ............................4 -1 4.1. Current Fixed /Variable Rate Revenue ......................................... ............................... 4 -1 4.2. California Urban Water Conservation Council Best Management Practice 11 .............4 -1 4.3. Proposed Fixed / Variable Revenue .............................................. ............................... 4 -1 5. Monthly Service Charge Meter Equivalency 5.1. Current Meter Equivalency Schedule ................... 5.2. Proposed Meter Equivalency Schedule ............... 6. Proposed Water Rates 7. Bill Comparisons & Impacts....... t REE DAK City of Newport Beach, CA CONSULTING Water utility Financial Plan ......... .. 5317004 5 -1 ......................... ............................... 5 -1 ........................................................ 5 -1 `c°' 6 -1 7 -1 Table of Contents List of Tables Table 2 -1: Historical Operations & Maintenance Expenditures (in thousands) ....... Table 2 -2: Historical Average Unit Cost of Purchased Water per AF ...................... Table 2 -3: Projected Average Unit Cost of Purchased Water per AF ...................... Table 2-4: Projected Operations & Maintenance Expenditures (in thousands)......., Table 2 -5: Historical Capital Improvement Program Financing (in thousands) ....... Table 2.6: 30 -Year Capital Improvement Program (in thousands ) ........................... Table 2 -7: Capital Improvement Program Financing (in thousands ) ........................ Table 2 -8: Debt Service Payments (in thousands) .................... ............................... Table 2 -9: Projected Debt Service Payments (in thousands) .... ............................... Table 2 -10: Operating Fund Five -Year Financial Plan (in thousands) ..................... Table 2 -11: Capital Fund Five -Year Financial Plan (in thousands ) .......................... Table 2 -12: Combined Water Fund Five -Year Financial Plan (in thousands).......... Table 3 -1: Current Monthly Service Charge by Meter Size ....... ............................... Table 4 -1: Current (FY2009) Fixed / Variable Rate Revenue ($ in thousands) ....... Table 4 -2: Proposed Fixed /Variable Revenue ($ in thousands ) ............................. Table 5 -1: Current Monthly Service Charge & Meter Equivalency Schedule........... Table 5 -2: Current & Proposed Meter Equivalency Schedules . ............................... Table 6 -1: Current & Proposed Commodity Charges ................ ............................... Table 6 -2: Current & Proposed Monthly Service Charges ........ ............................... Table 6 -3: Proposed Capital Charges ..................................._.. ............................... Table 64: Current & Proposed Combined Fixed Charges ........ ............................... List of Figures ............. 2 -2 ............. 2 -2 ......... 2 -3 ............. 24 ............. 2-4 ............. 2 -5 ............. 2 -5 ............. 2-6 ............. 2-6 ............. 2 -9 - .......2 -10 ..........2 -11 ............. 3-1 ............ 4 -1 ............ 4 -2 ............ 5 -1 ............ . 5 -2 ............ 6 -1 ------------ 6 -1 ......6 -2 . 6 -2 Figure 2 -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) .................. 2-8 Figure 2 -2: Five -Year Financial Plan (in thousands) ....................................... ...........................2 -12 Figure 5 -1: Meter Equivalency Schedule Regional Comparison ( FY2009) ... ............................... 5 -2 Figure 7 -1: FY2010 Single Family Residential Customer Monthly Bill Impact ............................. 7 -1 Figure 7 -2: Monthly Regional Bill Comparison - 18 HCF ............................... ............................... 7 -2 REj3DAK City of Newport Beach, CA CONSULTING water utility Financial Plan ii ...., >. o, ....o.. .,.... 5317004 Acronyms Used in the Report AF Acre Feet AWWA American Water Works Association BMP Best Management Practice BPP Basin Pumping Percentage CUWCC California Urban Water Conservation Council CIP Capital Improvement Program ENR Engineering News Record FY Fiscal Year HCF Hundred Cubic Feet MET Metropolitan Water District of Southern California MWDOC Municipal Water District of Orange County OCWD Orange County Water District O &M Operations & Maintenance : RE[1DAK City of Newport Beach, CA ••' CONSULTING Water Utility Financial Plan .... ...... 5317004 Executive Summary Executive Summary Scope The City of Newport Beach Utilities Division (the City) retained Red Oak Consulting to conduct a water rate study (the Study). This study includes the development of a five- year financial plan, cost -of- service analysis, and development of a conservation rate structure. For purposes of expediting the adoption of new rates, the Study has been divided into two phases: 1. The development of the financial plan, the allocation of fixed and variable revenue, and the proportioning of the monthly service charge by meter size; and 2. The redesign of the commodity charge from a uniform rate to a conservation rate structure. This report documents the first phase of the Study, including the methodology used to develop the financial plan, the policy decisions reached, the proposed water rates, and the customer bill impacts. A separate report will be prepared for the second phase of the study upon its completion. Financial Plan In order to maintain the financial viability of the City water system, Red Oak, with the assistance of City staff, prepared a financial plan for the five -year period from fiscal year ending (FY) 2010 through FY2014. This financial plan includes the development of the City's annual revenue requirement, a financing plan for its capital improvement program (CIP), and review and recommendations for the City's reserve policies. Red Oak used its proprietary electronic financial planning model, eForecast, to determine the appropriate amount of revenue necessary for the City to meet all of the above requirements. Funds The City currently maintains a single fund for its water operations, capital improvement financing, and reserves. Based on direction from the City's staff, Red Oak created a separate fund for capital- related expenditures, which is referred to as the `Capital Fund.' The financial planning model isolates this fund from the City's Operating Fund in order to evaluate the financial viability of each fund separately. The City, with the assistance of RE@DAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan [ES-1] . e,... •. I-- 5317004 Executive Summary Red Oak, has developed target reserve levels for each fund, which will be explained in detail below. Revenue Requirement The City's revenue requirement is the total amount of revenue it must collect in order to meet its operations and maintenance (O &M) expenditures, debt service payments, and cash - financed capital expenditures. This revenue is collected through water rates and does not include revenue from incidental fees, charges, or other non - operating revenue. The City's O &M expenditures are accounted for in the Operating Fund while debt service payments and cash - financed capital are accounted for in the Capital Fund. Operations & Maintenance The City's operations & maintenance expenditures have steadily increased over the past four years, since its most -recent rate increase in FY2005. Table ES -1 presents the City's historical O &M expenditures for FY2005 through FY2008. Table ES -1: Historical Operations & Maintenance Expenditures (in thousands) Description FY2005 FY2006 FY2007 FY2008 Purchased Water - MWDOC $ 3,350 $ 3,800 $ 3,350 $ 3,400 Purchased Water- OCWD 2,929 2,880 3,280 3,280 Utilities 1,094 922 872 922 Salaries & Benefits 3,302 3,712 3,827 3,799 Equipment Maintenance & Replacement 345 341 348 417 Other O &M 3,013 3,453 3,444 3,593 Total $14,033 $15,108 $15,121 $15,411 The City has seen a 29% increase in the average unit cost of purchased water from the Municipal Water District of Orange County (MWDOC) and a 37% increase in the average unit cost of purchased water from the Orange County Water District (OCWD) since 2005. O &M expenditures apart from purchased water and utilities include salaries and benefits, equipment maintenance and replacement, and other O &M. Other O &M includes the general fund service charge, minor capital expenditures, chemicals, and other supplies. Table ES -2 presents the projected O &M expenditures for the City for the current fiscal year and the financial plan period FY2010 through FY2014. REBDAK. city of Newport Beach, CA CONSULTING Water Utility Financial Plan ES -2 •. •' .o..,.,e. ,....�,,.. w, 5317004 Executive Table: ES -2: Projected Operations & Maintenance Expenditures (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water - MWDOC $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 Purchased Water- OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Utilities 1,325 1,322 1,440 1,549 1,692 1,851 Salaries & Benefits 4,152 4,319 4,491 4,671 4,858 5,052 Equipment Maintenance & Replacement 423 444 467 490 514 540 Other O&M 3,579 3,856 4,159 4,491 4,853 5,250 Total $16,690 $ 18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 The City's O &M expenditures are projected to increase by over $7 million, or 45 %, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These costs, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. Capital Improvement Program Financing Since FY2005, the City has cash - financed all of its capital improvement needs. The City has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. This CIP totals approximately $167.6 million in escalated dollars at 4% per annum. The City will continue to finance its CIP on a pay -as- you -go basis during the financial plan period. Table ES -3 presents the financing plan for the City's CIP for the current fiscal year and the financial plan period FY2010 through FY2014. Future capital financing will be accounted for in the City's Capital Fund. An additional monthly capital charge will be assessed by meter size. This capital charge will be the primary source of revenue for the Capital Fund and be used to pay for cash - financed capital and debt service. Table ES -3: Capital Improvement Program Financing (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Projects $ 1,600 $ 3,210 $ 1,830 $ 3,542 $ 2,700 $ 1,033 Cash - Financed Capital Projects 1,600 3,210 1,830 3,542 2,700 1,033 Debt- Financed Capital Projects - - - - - Total Capital Projects Funded $ 1,600 $ 3,210 $1,830 $ 3,542 $ 2,700 $1,033 Table ES -4 presents the two remaining debt service payments for the 1999 Refunding of Water Revenue Bonds for the financial plan period FY2010 through FY2014. . •.; REFDAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan -^ [ES-3] .......... 5317004 `.�../ Executive Sum Table ES-4: Projected Debt Service Payments (in thousands) Current 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Debt Service $ 1,618 $ 130 Reserve Requirements The following reserves are commonly maintained by utilities, and are recommended by Red Oak —at a minimum —to insulate the City from financial volatility. Operating Stabilization Reserve (Operating Fund) The City does not currently maintain an operating stabilization reserve. Red Oak recommends that the City maintain a reserve equivalent to 180 days of its operating budget, or 50 %. This reserve level also provides a buffer period of 24 months at a 25% loss rate. Funds collected in excess of the operations stabilization reserve target would be available to offset future rate adjustments while extended reserve shortfalls would be recovered from future rate increases. Contingency Reserve (Capital Fund) The City currently maintains a contingency reserve equivalent to 35% of its annual budget, which is based on a historical approximation of capital replacement needs in the event of a catastrophe. In order to determine the appropriate level of emergency capital replacement reserves, the City should conduct a criticality assessment of its system facilities. This assessment involves quantifying the probability of its facilities being impaired, the level of impairment, and the cost of replacement should a catastrophe occur. Red Oak recommends that the City conduct such an assessment; however, if resources are limited, the City may wish to set its contingency reserve level based on an alternative method. Based on direction from the City's staff, Red Oak has evaluated a contingency reserve that parallels the annual revenue anticipated to be recovered through the proposed capital charge. Red Oak believes this amount may provide a sufficient reserve against unanticipated replacements or repairs. By FY2014, the target contingency reserve will be approximately $4 million. Current Financial Outlook Based on the City's increasing O &M expenditures, capital financing needs, and proposed reserve requirements, current revenue are insufficient. Figure ES -1 presents the current fiscal year and the five -year financial outlook for FY2010 through 2014 with no rate revenue increases. Under current rate revenue, the City will be unable to maintain a positive balance in the combined Operating Fund and Capital Fund by FY2011. REMAK City of Newport Beach, CA •• • �' CONSULTING water Utility Financial Pla<.. n ES-0 • • .. • ..,..,,......,....... 5317004 Executive Summary Figure ES -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) $30.000 120.000 110,000 10 -110,000 420.BW 430.00D 440.000 2009 2010 2wi 2012 2013 2014 ^'A ssas�CashFa`gedcapkal Erhtlng DeN 3arvlce —PUrchasedVM* -03M a a—PurthasetlNbter -MWDOG s�OperaUnp E.panANrcs — - �Rr�enuro — I —T.Md Reserves —t EnAng Balance Proposed Five -Year Financial Plan Red Oak, with the assistance of the City's staff, has developed a five -year financial plan for the period FY2010 through FY2014. Based on the direction of the City's Finance Committee, this financial plan has been developed such that rate shock to customers is minimal, capital projects are financed only through cash, and reserves are met by FY2014. Figure ES -2 presents the Combined Water Fund's five -year financial plan. The City is anticipating an annual deficiency of approximately $2.6 million for the current fiscal year. The proposed financial plan eliminates this annual deficiency by FY2011. Reserves are drawn down in FY2009 and FY2010 in order to minimize the rate shock associated with the necessary rate revenue increases. • . ; REDDA K City of Newport Beach, CA CONSULTING water Utility Financial Plan ESS ...,,........o.. -... . 5317004 535.0:0 530.0:0 525.000 520.000 S15,oro S10.000 $5.000 $0 Executive Summary Figure ES -2: Five -Year Financial Plan (in thousands) 2G09 ®Cash.FundwdCaptlal —Op.re n9EVpnndM . –r- i 2010 2011 2012 2013 2014 Etk$n9Dahl Svnica Purchased Watat -OCvVD Pmchasad Wat« -MW000 �F Ra•Mnuec ��� TWQA Racetvae Endngaalance Current Fixed / Variable Rate Revenue The City currently collects approximately 90% of its rate revenue through its commodity charge and the remaining 10% through its monthly service charge. Table ES -5 presents the current composition of the City's rate revenue. A high proportion of variable revenue is potentially favorable in terms of affordability and conservation as customers that use less water are rewarded with lower bills. A high proportion of variable revenue, however, is less favorable in terms of revenue stability as less revenue is secure when water use is volatile. Table ES -5: Current (FY2009) Fixed I Rate Variable Revenue Rate Revenue Source FY2009 Percent Share Commodity Charge Monthly Service Charge $14,938 90% 1,640 10% Total Rate Revenue $ 16,578 Proposed Fixed /Variable Revenue The City is currently exceeding the requirements of California Urban Water Conservation Council's (CUWCC) Best Management Practice (BMP) 1 l by 20 %. BMP 11 states that RE ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES-6 . ,...e. o....�......... 5317004 Executive Summary in order for water rates to qualify as `conservation rates,' variable revenue must be at least 70% of total rate revenue. Red Oak recommends that in order to reduce revenue instability generated by the City's disproportionate share of variable revenue, the City should gradually reduce the commodity charge's share of total rate revenue to slightly more than 70% by FY2014.1 Table ES -6 presents the proposed blend of fixed and variable rate revenue for the financial plan period FY2010 through FY2014. The proposed blends of fixed and variable revenue will help the City maintain revenue stability while still meeting the requirements of California CUWCC's BMP 11. Further, by increasing the proportion of revenue that is collected through fixed charges, the City can reduce its reliance on revenue collected through more aggressive conservation -based rates that it is planning to adopt in the future. Table ES -6: Proposed Fixed I Variable Revenue ($ in thousands) Rate Revenue Total Rate Revenue Fixed Revenue Share Variable Revenue Share Fixed Revenue - Monthly Service Charge Variable Revenue - Commodity Charge Projected Water Sales (Million HCF) Current FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 $ 16,578 $ 19,479 $ 23,723 $ 26,569 $ 28,916 10% 21 % 27% 28% 28% 90% 79% 73% 72% 72% $ 1,640 $ 4,084 $ 6,469 $ 7,469 $ 8,218 $ 14,938 $ 15,394 $ 17,253 $ 19,100 $ 20,698 7.182 Variable Rate ($ /HCF) $ 2.08 Note: Projected Water Sates assumes 6% water loss rate. 7,002 7,002 7,002 7,002 $2.20 $2.46 $2.73 $2.96 $ 30,130 28% 72% $ 8,536 $ 21,594 7,002 $ 3.08 Variable revenue projections rely on the City's projected sales of approximately 7 million HCF for FY2010 through FY2014. Projected sales, however, will be revised to account for a conservation rate structure, during the second phase of the Study. Adjustments to these projections will vary according to how aggressive the conservation rate structure is. Proposed Meter Equivalency Schedule The current meter equivalency schedule for the City's monthly service charge does not adequately reflect the relative costs of reading, maintaining, and replacing different meter sizes. Further, the current schedule does not account for the relative flow capacities of different meter sizes, which often serves as a basis for the relative amounts of meter - based charges. Red Oak recommends using the American Water Works Association's (AW WA) estimate of meter flow capacity from the M6 manual as the basis for the City's meter equivalency schedule. These flow estimates indicate the relative amounts of water To meet the requirements of BMP 11, the City should closely monitor its revenue to ensure that fixed charges do not exceed 30 percent of its revenue. This is important since the effects of conservation will reduce volume - related charges. As the City implements tiered water rates, it may consider requesting and exemption from the requirements of KE ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES -7 ...... . 5317 004 Executive Summary that can flow through each meter size, expressed in gallons per minute. These relative capacities serve as an empirical basis for allocating costs among different meter sizes and provide a more defensible rationale for the determination of relative meter charges. California's Proposition 218 and Government Code §54999 both require proportionality in the determination of water rates, which the proposed meter equivalency schedule helps to address. Table ES -7 presents the current and proposed meter equivalency schedules. Table ES -7: Current & Proposed Meter Equivalency Schedules Meter Size Number of Meters Meter Equivalency Ratio Current Proposed 314" 17,445 1.00 1.00 1" 6,762 1.22 1.67 1112" 495 1.56 3.33 2" 1,373 2.11 5.33 3" 48 4.00 10.00 4" 80 5.67 16.67 6" 28 8.56 33.33 8" 14 10.00 53.33 10" 0 10.00 95.87 12" 0 10.00 154.20 Proposed Rates In order to implement the proposed financial plan, the City should adjust its current monthly service charge and commodity charge to the rates presented below for the financial plan period FY2010 through FY2014. These rates will allow the City to meet the revenue targets presented in the five -year financial plan, which will cover its rising expenditures for purchased water and other O &M items, capital improvement financing needs, and proposed reserve requirements. These rates will also meet the proposed transition to a composition of rate revenue in which fixed charges account for slightly less than 30% of total rate revenue, allowing for more revenue stability. Tables ES -8 through ES -11 present the proposed rates for the financial plan period FY2010 through FY2014. Note that.these rates are anticipated to be implemented on January 1 of each year. Table ES-8: Current & Proposed Commodity Charges Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 RE13DAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan F��] . --i.. o .............. 5317004 Executive Summary Table ES -9: Current & Proposed Monthly Service Charges Table ES -11: Current & Proposed Combined Fixed Charges Current 1 2 3 4 5 Monthly Service Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 1.18 $ 5.76 $ 7.53 $ 8.78 $ 9.15 1" 5.50 1.97 9.60 12.55 14.63 15.24 11/2" 7.00 3.94 19.20 25.09 29.26 30.49 2" 9.50 6.31 30.72 40.14 46.81 48.78 3" 18.00 11.83 57.61 7527 87.77 91.46 4" 25.50 19.71 96.01 125.45 146.28 152.43 6" 38.50 39.42 192.02 250.91 292.57 304.85 8" 45.00 63.07 307.23 401.45 468.10 487.76 10" 45.00 113.36 552.25 721.60 841.42 876.75 12" 45.00 182.34 888.28 1,160.69 1,353.41 1,410.24 Table ES -10: Proposed Capital Charges Current 1 2 3 4 5 Capital Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" - $7.08 $7.33 $7.59 $7.85 $8.13 1" - 11.80 12.22 12.65 13.09 13.55 11/2" - 23.61 24.43 25.29 26.18 27.09 2" - 37.77 39.10 40.46 41.88 43.35 3" - 70.83 73.30 75.87 78.53 81.27 4" - 118.04 122.17 126.45 130.88 135.46 6" - 236.09 244.35 252.90 261.75 270.91 8" - 377.74 390.96 404.64 418.80 433.46 10" - 678.98 702.75 727.34 752.80 779.15 12" - 1,092.13 1,130.35 1,169.92 1,210.86 1,253.24 Table ES -11: Current & Proposed Combined Fixed Charges Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" $ 4.50 $ 8.27 $ 13.09 $15.11 $ 16.63 $ 17.27 1" 5.50 13.78 21.82 25.19 27.72 28.79 11/2' 7.00 27.55 43.64 50.38 55.43 57.58 2" 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 921.22 10" 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 RE®AlC CONSULTING City of Newport Beach. CA Water Utility Financial Plan [ES-9] '.. •' . a...e... ...<o........ 5317004 Executive Summary Customer Bill Impact Figure $S -3 presents the single— family residential monthly bill impact distribution for FY2010 rates. This bill distribution is based on the City's calendar year 2007 consumption history. The blue columns indicate the percentage of single - family residential monthly bills that will increase by the corresponding amount on the horizontal axis, assuming consumption is similar to calendar year 2007. The red line indicates the cumulative percentage of monthly bills at each amount of change in bill. For example, the figure shows that 67% of monthly bills will increase by no more than $10. It also shows that approximately 15% of monthly bills will increase by between $4 and $5. Note that over 90% of monthly bills will increase by no more than $15. Figure ES-3: FY2010 Single - Family Residential Customer Monthly Bill Impact 16% IDO-A 14% 12% 10% m 4 N a e% O C u 6% 6 4% 2%%. 0% 00% 60% 70% 67% of mondity bills will inaeasaby nolnaetlian 60% 510 s0Y 40% 30% 20% II�I�IIe■..._ -- --- -._� 0% o% .o ��unammnm �mm N N VVl N T N N tlV1 N N' N N N N N N N N N N N mange Inmomhry Bin u C e 6 i U RE ®AK City of Newport Beach. CA CONSULTING Water Utility Financial Plan ES -10 ' • _ . • , I ... 1. 5317004 Section 1 Introduction 1. Introduction 1.1. Scope The City of Newport Beach Utilities Division (the City) retained Red Oak Consulting to conduct a water rate study (the Study). This study includes the development of a five- year financial plan, cost -of- service analysis, and development of a conservation rate structure. For purposes of expediting the adoption of new rates, the Study has been divided into two phases: L The development of the financial plan, the allocation of fixed and variable revenue, and the proportioning of the monthly service charge by meter size; and 2. The redesign of the commodity charge from a uniform rate to a conservation rate structure. This report documents the first phase of the Study, including the methodology used to develop the financial plan, the policy decisions reached, the proposed water rates, and the customer bill impacts. A separate report will be prepared for the second phase of the study upon its completion. 1.2. Background The City of Newport Beach Utilities Division currently serves a population of over 86,000 within a service area of approximately fifty square miles. It is located on the Pacific coast of California, in Orange County, and surrounded by Huntington Beach and Costa Mesa to the north, Laguna Beach to the South, and Irvine to the east. The City currently has over 26,300 active connections and delivers over 18,000 acre feet (AF) of water per year on average. The City owns and operates three reservoirs: Big Canyon Reservoir (600 AF), Spyglass Hill Reservoir (45 AF), and 16'h Street Reservoir (9.2 AF). REIIDAK City of Newport Reach. CA "•• CONSULTING Water utility Financial Plan 1 -1 ..,.,.......... ... 5317004 Section 2 Financial Plan 2. Financial Plan In order to maintain the financial viability of the City's water system, Red Oak, with the assistance of the City's staff, has prepared a financial plan for the five -year period from fiscal year ending (FY) 2010 through FY2014. This financial plan includes the development of the City's annual revenue requirement, a financing plan for its capital improvement program (CIP), and review and recommendations for the City's reserve policies. Red Oak used its proprietary electronic financial planning model, eForecast, to determine the appropriate amount of revenue necessary for the City to meet all of the above requirements. 2.1. Funds The City currently maintains a single fund for its water operations, capital improvement financing, and reserves. Based on direction from the City's staff, Red Oak has created a separate fund for capital- related expenditures, which will be referred to as the `Capital Fund.' The financial planning model isolates this fund from the City's Operating Fund in order to evaluate the financial viability of each fund separately. The City, with the assistance of Red Oak, has developed target reserve levels for each fund, which will be explained in detail below. 2.2. Revenue Requirement The City's revenue requirement is the total amount of revenue it must collect in order to meet its operations and maintenance (O &M) expenditures, debt service payments, and cash - financed capital expenditures. This revenue is collected through water rates and does not include revenue from incidental fees, charges, or other non- operating revenue. The City's O &M expenditures are accounted for in the Operating Fund while debt service payments and cash - financed capital are accounted for in the Capital Fund. 2.2.1. Operations & Maintenance The City's operations & maintenance expenditures have steadily increased over the past four years, since its most - recent rate increase in FY2005. Table 2 -1 presents the City's historical O &M expenditures for FY2005 through FY2008: RE ®AK City of Newport Beach, CA • CONSULTING Water Utility Financial Plan 2 -1 • .. • .., >. >........>........ 5317004 Section 2 Financial Plan Table 2 -1: Historical Operations & Maintenance Expenditures (in thousands) Description. FY2005 FY2006 FY2007 FY2008 Purchased Water - MWDOC $ 3,350 $ 3,800 $ 3,350 $ 3,400 Purchased Water -OCWD 2,929 2,880 3,280 3,280 Utilities 1,094 922 872 922 Salaries & Benefits 3,302 3,712 3,827 3,799 Equipment Maintenance & Replacement 345 341 348 417 Other O &M 3,013 3,453 3,444 3,593 Total $14,033 $15,108 $ 15,121 $15,411 2.2.1.1. Purchased Water Costs The largest components of the City's O &M expenditures are its purchased water costs and associated O &M, which are encompassed by the `Other O &M' category in Table 2 -1. The City currently obtains its water from two major sources: the Municipal Water District of Orange County ( MWDOC), which imports its water from the State Water Project and the Colorado River Aqueduct through the Metropolitan Water District of Southern California (MET), and the Orange County Water District (OCWD), which manages the Orange County groundwater basin. Variations in purchased water costs occur year -to -year based on the City's basin pumping percentage (BPP), which is the percentage of the City's annual demand that can be pumped from the basin; weather conditions; and to a lesser extent, the economy and growth. Table 2 -2 presents the average unit cost of purchased water per AF by the City's two major sources for FY2005 through FY2008. Note that the average cost per AF is the total amount of charges paid to each agency, divided by the amount of water purchased. The total amount of annual charges for MWDOC includes the cost of treated water, the capacity charge, the readiness -to -serve charge, and the meter charge. The total amount of annual charges for OCWD includes the cost of the replenishment assessment and annexation fee. Table 2 -2: Historical Average Unit Cost of Purchased Water per AF Description FY2005 FY2006- FY2007 FY2008 Purchased Water - MWDOC ($ /AF) $ 492 $ 514 $ 616 $ 597 Purchased Water- OCWD ($ /AF) 233 255 344 279 The City has seen a 29% increase in the average cost of purchased water from MWDOC and a 37% increase in the average cost of purchased water from OCWD since 2005. Based on information obtained from MWDOC and OCWD, Red Oak projects the following average unit costs of purchased water per AF in Table 2 -3. These projected unit costs are based on a projected purchased water amount of 17,100 AF per year. REBQAK City of Newport Beach, CA CONSULTING Water Utifity Financial Plan 2 -2 ......... ar ...call .�..�. 5317004 Section 2 Financial Plan Table 2-3: Projected Average Unit Cost of Purchased Water per AF Current Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water— MWDOC ($ /AF) $ 633 $ 759 $ 922 $ 966 $1,014 $ 1,065 Purchased Water —CCWD ($ /AF) 319 361 364 382 397 408 Note that the projected unit cost of purchased . water from MWDOC increases by over 65% and the projected unit cost of purchased water from OCWD increases by over 25% from FY2009 through FY2014. Rising MWDOC costs can partially be attributed to the State of California's third consecutive year of drought and diminished supplies from the Bay Delta as part of efforts to protect endangered species. Purchased water costs from OCWD vary year -to -year based on the City's BPP, which is a function of the Orange County Groundwater Basin's rate of recharge. The unit costs also fluctuate due to the proportions of total water purchased from each of the City's two sources. 2.2.1.2. Utilities Utilities costs include electricity costs and telecommunications costs. The majority of these costs depend on the total amount of water pumped from the Orange County groundwater basin and have therefore been projected based on the projected amount of water that will be pumped. 2.2.1.3. Other O &M O &M expenditures apart from purchased water and utilities include salaries and benefits, equipment maintenance and replacement, and other O &M. Other 0 &M includes the general fund service charge, minor capital expenditures, chemicals, and other supplies. Based on the historical changes in costs for these items and discussion with City staff, Red Oak estimates the following annual escalation factors for these O &M expenditures: • Salaries & Benefits — 4% • Equipment Maintenance & Replacement — 5% • Other O &M • General Fund Service Charge — 4% • Minor Capital Expense — 0% • Chemicals & Supplies— 11% 2.2.1.4. Projected Operations & Maintenance Expenditures Table 2 -4 presents the projected O &M expenditures for the City for the current fiscal year and the financial plan period FY2010 through FY2014. REIIDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -3 . ,...e. e...,�e,..,..,. 5317004 Section 2 Financial Plan Table 24: Projected Operations & Maintenance Expenditures (in thousands) Description Current FY2009 1 FY2010 2 FY2011 3 FY2012 4 FY2013 5 FY2014 Purchased Water - MWDOC $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 Purchased Water- OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Utilities 1,325 1,322 1,440 1,549 1,692 1,851 Salaries & Benefits 4,152 4,319 4,491 4,671 4,858 5,052 Equipment Maintenance & Replacement 423 444 467 490 514 540 Other O &M 3,579 3,856 4,159 4,491 4,853 5,250 Total $ 16,690 $18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 The City's O &M expenditures are projected to increase by over $7 million, or 45 %, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These casts, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. 2.2.2. Capital Improvement Program Financing 2.2.2.1. Historical Capital Improvement Program Financing Since FY2005, the City has cash - financed all of its capital improvement needs. Table 2 -5 presents a summary of capital improvement financing from FY2005 through FY2008. Table 2 -5: Historical Capital Improvement Program Financing (in thousands) Description FY2005 FY2006 FY2007 FY2008 Capital Projects $ 8,634 $ 7,794 $ 4,924 $ 5,363 Cash - Financed Capital Projects 8,634 7,794 4,924 5,363 Debt - Financed Capital Projects - - - - Total Capital Projects Funded $ 8,634 $ 7,794 $ 4,924 $ 5,363 2.2.2.2. Water Master Plan The City has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. Table 2 -6 presents the 30 -year CIP for the City as indicated in the 2009 Water Master Plan. The CIP is presented in annually escalated dollars to account for rising construction costs. Red Oak believes that the escalation rate of 4 %, used by the City to develop its CIP is reasonable and consistent with Engineering New Record (ENR) construction cost index. Note the average annual capital expenditure for the 30 -year CIP is approximately $5.6 million compared with $2.5 million for the five -year financial plan period FY2010 through FY2014. RE ®AK city of Newport Beach, CA • CONSULTING Water Utility Financial Plan 2 4 �.............. 5317004 Section 2 Financial Plan Table 2-6: 30 -Year Capital Improvement Program (in thousands) Year Capital Expenditure Year Capital Expenditure FY2009 $ 1,600 FY2024 $ 5,279 FY2010 3,210 FY2025 7,905 FY2011 1,830 FY2026 7,090 FY2012 3,542 FY2027 10,534 FY2013 2,700 FY2028 1,643 FY2014 1,033 FY2029 12,458 FY2015 3,610 FY2030 7,694 FY2016 8,408 FY2031 5,518 FY2017 4,890 FY2032 7,255 FY2018 5,382 FY2033 - FY2019 5,597 FY2034 4,315 FY2020 5,821 FY2035 - 7,645 FY2021 4,933 FY2036 7,950 FY2022 4,975 FY2037 8,268 FY2023 7,584 FY2038 8,599 15 -Year Total $ 65,115 30 -Year Total $167,268 Note: Project costs are escalated at a rate of 4% annually 2.2.2.3. Future Capital Improvement Program Financing The City will continue to finance its CIP on a pay -as- you -go basis during the financial plan period. Table 2 -7 presents the financing plan for the City's CIP for the current fiscal year and the financial plan period FY2010 through FY2014. Future capital financing will be accounted for in the City's Capital Fund. An additional monthly capital charge will be assessed by meter.size. This capital charge will be the primary source of revenue for the Capital Fund and be used to pay for cash - financed capital and debt service. Table 2 -7: Capital Improvement Program Financing (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Projects $ 1,600 $ 3,210 $1,830 $ 3,542 $ 2,700 $ 1,033 Cash - Financed Capital Projects 1,600 3,210 1,830 3,542 2,700 1,033 Debt - Financed Capital Projects - - - - - Total Capital Projects Funded $1,600 $ 3,210 $ 1,830 $ 3,542 $ 2,700 $1,033 2.2.2.4. Historical and Future Debt Service Payments Table 2 -8 presents the City's debt service payments from FY2005 through FY2008. These payments are among the six final payments for the 1999 Refunding of Water Revenue Bonds. REQDAK City of Newport beach, CA CONSULTING Water Utility Financial Plan 25 ..,.,..... .., 5317004 Section 2 Financial Plan Table 2-8: Debt Service Payments (in thousands) Description FY2005 FY2006 FY2007 FY2008 Debt Service $ 1,653 $ 1,650 $ 1,649 $ 1,619 Table 2 -9 presents the two remaining debt service payments for the 1999 Refunding. Table 2 -9: Projected Debt Service Payments (in thousands) Current Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Debt Service $1,618 $ 130 - - - - 2.3. Reserve Requirements Reserve requirements are funds set aside for precautionary purposes such as for revenue stabilization, rate stabilization, or emergency capital replacement. These funds are typically required to maintain a predetermined balance or an amount based on annual operating results. The City currently maintains two reserves and a minimum capital contribution, referred to as the `designated reserve': • System Reserve– 35% of annual budget • Stabilization Reserve – 25% of annual budget • Designated Reserve –10% of annual budget The following reserves are commonly maintained by utilities, and are recommended by Red Oak —at a minimum —to insulate the City from financial volatility. 2.3.1. Operating Stabilization Reserve (Operating Fund) An operating stabilization reserve is established primarily to maintain adequate levels of cash between the time expenses are incurred and revenue are received. It may also be used to insulate a utility from volatility in some operating expenditures such as for energy, and provide time for the utility to adjust rates. Utilities that bill monthly typically maintain a reserve equivalent to 45 to 90 days of operating expenditures, while utilities that bill bimonthly typically maintain a reserve equivalent to 90 to 180 days of operating expenditures. Seasonality is also a factor in determining the appropriate reserve level; utilities that have strong seasonal influences to their demand typically maintain larger reserves. The City does not currently maintain an operating stabilization reserve. Red Oak recommends that the City maintain a reserve equivalent to 180 days of its operating budget, or 50 %. This reserve level also provides a buffer period of 24 months at a 25% loss rate. Funds collected in excess of the operations stabilization reserve target would be available to offset future rate adjustments while extended reserve shortfalls would be recovered from future rate increases. RE ®AK city of Newport Beach, CA CONSULTING Water utility Financial Plan 2 -6 ... . ,,.. .... ............. 5317004 Section 2 Financial Plan 2.3.2. Contingency Reserve (Capital Fund) A contingency reserve is established to fund the replacement or repair of system facilities in the event that these facilities are impaired due to a catastrophe. The reserve may also be used to insulate against early and/or unanticipated capital replacement costs. The City currently maintains a contingency reserve equivalent to 35% of its annual budget, which is based on a historical approximation of capital replacement needs in the event of a catastrophe. In order to determine the appropriate level of emergency capital replacement reserves, the City should conduct a criticality assessment of its system facilities. This assessment involves quantifying the probability of its facilities being impaired, the level of impairment, and the cost of replacement should a catastrophe occur. Red Oak recommends that the City conduct such an assessment; however, if resources are limited, the City may wish to set its contingency reserve level based on an alternative method. Based on direction from the City's staff, Red Oak has evaluated a contingency reserve that parallels the annual revenue anticipated to be recovered through the proposed capital charge. Red Oak believes this amount may provide a sufficient reserve against unanticipated replacements or repairs. By FY2014, the target contingency reserve will be approximately $4 million. 2.4. Five -Year Financial Plan 2.4.1. Current Financial Outlook Based on the City's increasing O &M expenditures, capital financing needs, and proposed reserve requirements, current revenue are insufficient. Figure 2 -1 presents the current fiscal year and the five -year financial outlook for FY2010 through FY2014 with no rate revenue increases. Each column is broken into individual annual expenditures, indicated by a different color (see legend). The red line represents annual revenue, the black line represents ending balances, and the orange line represents target reserves. Under current rate revenue, the City will be unable to maintain a positive balance in the combined Operating Fund and Capital Fund by FY2011. RE ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -7 . ,...... , ......... 5317004 Section 2 Financial Plan Figure 2 -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) $30.000 120.000 $10.000 $0 410,000 -E20p00 - $30.000 -f40.000 2009 2010 2W11 2012 2013 2014 r� 'E —C.5MFuiWedCapital Eckdng Debt S_wice �PerchoadWatsr -OCM eeee mhpsed VVt -MWDOO �Operating Erpendtures y— P,r+enues — ►— Tergdaesenes —t Endm913^1ence 2.4.2. Proposed Five -Year Financial Plan Red Oak, with the assistance of the City's staff, has developed a five -year financial plan for the period FY2010 through FY2014. Based on the direction of the City's Finance Committee, this financial plan has been developed such that rate shock to customers is minimal, capital projects are financed only by cash, and reserves are tnct by FY2014. Table 2 -10 presents the five -year financial plan for the City's Operating Fund. RE ®AK City of Newport Beach, CA • CONSULTING Water Utility Financial Plan F2 8 .. ,...1., ......... 5317004 Section 2 Financial Plan Table 2 -10: Operating Fund Five -Year Financial Plan (in thousands) Current 1 2 3 4 5 Operating Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge Revenue $ 14,938 $ 15,394 $ 17,253 $ 19,100 $ 20,698 $ 21,594 Monthly Service Charge Revenue 1,640 584 2,847 3,720 4,337 4,519 Miscellaneous Revenue 439 439 439 439 439 439 Interest Income 291 117 120 143 239 377 Total Revenue 17,309 16,535 20,660 23,403 25,714 26,930 Operations & Maintenance 9,480 9,941 10,557 11,201 11,917 12,693 Purchased Water- MWDOC 3,354 4,931 5,991 6,440 6,762 7,100 Purchased Water -OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Total O &M 16,690 18,794 20,494 21,722 22,911 24,144 Capital Contribution (3,300) - - - - - Annual Surplus / (Deficiency) (2,682) (2,258) 166 1,681 2,803 2,785 Beginning Balance 9,665 6,983 4,725 4,891 6,572 9,374 Ending Balance $ 6,963 $ 4,725 $ 4,891 $ 6,572 $ 9,374 $ 12,160 Target Reserves $ 8,345 $ 9,397 $ 10,247 $ 10,861 $ 11,456 $ 12,072 Note that cash - financed capital and debt service are accounted for in the Capital Fund. The removal of these items has a corresponding decrease in the rate revenue required and accounted for in the Operating Fund, as seen in FY2010. Total rate revenue for the combined Operating Fund and Capital Fund, however, increases year -to -year to meet increasing O &M expenditures, capital improvement financing needs, and the proposed reserve requirements. The City's proposed Operating Stabilization reserve is met by FY2014. Table 2 -11 presents the five -year financial plan for the City's Capital Fund. REQDAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -9 ...... ., ....... ... .,, 5317004 0 F Section 2 Financial Plan Table 2 -11: Capital Fund Five -Year Financial Plan (in thousands) Current 1 2 3 4 5 Capital Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Charge Revenue - $ 3,500 $ 3,623 $ 3,749 $ 3,881 $ 4,016 Capital Contribution 3,300 - - - Interest Income 1 3 29 55 89 181 Total Revenue 3,301 3,503 3,651 3,804 3,969 4,198 Cash - Funded Capital 1,600 3,210 1,830 3,542 2,700 1,033 Existing Debt Service 1,618 130 - - - - New Debt Service - - Total Debt Service 1,618 130 - Annual Surplus /(Deficiency) 84 163 1,821 262 1,269 3,165 Beginning Balance - 84 247 2,069 2,331 3,601 Ending Balance $ 84 $ 247 $ 2,069 $ 2,331 $ 3,601 $ 6,765 Target Reserves $ 4,000 $ 3,500 $ 3,623 $ 3,749 $ 3,881 $ 4,016 Rate Revenue generated by the proposed Capital Charge is accounted for in the Capital Fund. This source of revenue, which begins in FY2010, is collected to recover the costs of cash - financed capital projects and debt service for the 1999 Refunding of Water Revenue Bonds. The target contingency reserve, which is met by FY2014, is based on the anticipated annual capital charge revenue, which will be approximately $4 million in FY2014. Table 2 -12 presents the five -year financial plan for the City's combined water fund. REBDAK City of Newport Beach, CA - ' CONSULTING Water Utility Financial Plan 2 -10 .......o. o . ... ......... 5317004 �/ Section 2 Financial Plan Table 2 -12: Combined Water Fund Five -Year Financial Plan (in thousands) The City anticipates an annual deficiency of approximately $2.6 million for the current fiscal year. The proposed financial plan eliminates this annual deficiency by FY2011. Reserves are drawn down in FY2009 and FY2010 in order to minimize the rate shock associated with the necessary rate revenue increases. Figure 2 -2 presents a graphical representation of the Combined Water Fund's five -year financial plan. Each column is separated into individual annual expenditures, indicated by a different color (see legend). The red line represents annual revenue, the black line represents ending balances, and the orange line represents target reserves. Note that target reserves are not met until FY2014. Rate revenue is gradually increased throughout the five -year financial plan such that `rate shock' to customers is reduced. : RE ®AK City of Newport Beach, CA • CONSULTING Water Utility Financial Plan 2 -11 . ,� .1- e ............. 5317004 Current 1 2 3 4 5 Combined Water Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Rate Revenue $ 16,578 $ 19,479 $ 23,723 $ 26,569 $ 28,916 $ 30,130 Miscellaneous Revenue 439 439 439 439 439 439 Interest Income 293 120 149 198 328 558 Total Revenue 17,310 20,039 24,311 27,207 29,683 31,127 Operations & Maintenance 9,480 9,941 10,557 11,201 11,917 12,693 Purchased Water - MWDOC 3,354 4,931 5,991 6,440 6,762 .7,100 Purchased Water- OCWD - 3,857 3,922 3,947 4,081 4,232 4,351 Total O&M 16,690 16,794 20,494 21,722 22,911 24,144 Cash - Funded Capital 1,600 3,210 1,830 3,542 2,700 1,033 Existing Debt Service 1,618 130 - - New Debt Service - - - - - - Total Debt Service 1,618 130 0 0 0 0 Total Expenditures 19,908 22,133 22,324 25,264 25,611 25,177 Annual Surplus / (Deficiency) (2,598) (2,095) 1,987 1,943 4,072 5,950 Beginning Balance 9,665 7,067 4,973 6,960 8,903 12,975 Ending Balance $ 7,067 $ 4,973 $ 6,960 $ 8,903 $12,975 $18,925 Target Reserves $ 12,345 $12,897 $ 13,870 $ 14,610 $ 15,336 $ 16,088 The City anticipates an annual deficiency of approximately $2.6 million for the current fiscal year. The proposed financial plan eliminates this annual deficiency by FY2011. Reserves are drawn down in FY2009 and FY2010 in order to minimize the rate shock associated with the necessary rate revenue increases. Figure 2 -2 presents a graphical representation of the Combined Water Fund's five -year financial plan. Each column is separated into individual annual expenditures, indicated by a different color (see legend). The red line represents annual revenue, the black line represents ending balances, and the orange line represents target reserves. Note that target reserves are not met until FY2014. Rate revenue is gradually increased throughout the five -year financial plan such that `rate shock' to customers is reduced. : RE ®AK City of Newport Beach, CA • CONSULTING Water Utility Financial Plan 2 -11 . ,� .1- e ............. 5317004 505.000 $30,000 525.000 520.070 S150A S1o,0o0 $5,070 $0 Figure 2 -2: Five -Year Financial Plan (in thousands) Section 2 Financial Plan 2009 2010 2011 2012 2013 2016 —Cash .0 edCapM - &kMp DebtSenkc Ptacha: Wata -0%VD NrdlasMVkter -MW000 .0pemtn9EKp dwrce �Rvmuaa — +•— TafgHReurves Endin9Bahnce RE ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan [2 -121 ...... ............. 5317604 Section 3 Current Water Rates 3. Current Water Rates As part of the first phase of the Study, Red Oak reviewed the City's current water rates. These rates must be adjusted in order to follow Red Oak's proposed financial plan as they are currently insufficient to meet the City's rising O &M expenditures, capital improvement needs, and the proposed reserve requirements. 3.1. Monthly Service Charge Table 3 -1 presents the current monthly service charge for water accounts by meter size. Table 3 -1: Current Monthly Service Charge by Meter Size Meter Size Monthly Service Charge 314" $ 4.50 1" 5.50 1 112" 7.00 2" 9.50 3" 18.00 4" 25.50 8" 38.50 a" 45.00 10" 45.00 12" 45.00 3.2. Commodity Charge The current commodity charge is $2.08 per HCF. The City's commodity charge is a uniform rate and does not vary by meter size, customer class, or season. RE ®AK City of Newport Beach, CA CONSULTING water Utility Financial Plan 3 -1 '...� .,..,. o...,<........ 5317004 Section 4 Fixed / Variable Revenue 4. Fixed / Variable Revenue 4.1. Current Fixed / Variable Rate Revenue The City currently collects approximately 90% of its rate revenue through its commodity charge and the remaining 10% through its monthly service charge. Table 4 -1 presents the current composition of the City's rate revenue. A high proportion of variable revenue is potentially favorable in terms of affordability and conservation as customers that use less water are rewarded with lower bills. A high proportion of variable revenue, however, is less favorable in terms of revenue stability as less revenue is secure when water use is volatile. Table 4 -1: Current (FY2009) Fixed f Variable Rate Revenue ($ in thousands) Rate Revenue Source FY2009 Percent Shan: Commodity Charge $14,938 90% Monthly Service Charge 1,640 10% Total Rate Revenue $16,578 4.2. California Urban Water Conservation Council Best Management Practice 11 The California Urban Water Conservation Council (CUWCC) has developed fourteen best management practices (BMPs) to reduce long -term urban water demand in California. Implementation of these BMPs can aid water agencies in receiving regional and/or state grants, in addition to reducing long -term demand. CUWCC's BMP 11 concerns retail water service rates. It states that in order for water rates to qualify as `conservation rates,' variable rate revenue must be at least 70% of total rate revenue. BMP 11 clarifies that uniform rates, seasonal rates, tiered rates, and allocation -based rates are all types of rates that can be used to meet its requirements. 4.3. Proposed Fixed / Variable Revenue The City is currently exceeding the requirements of CUWCC's BMP I 1 by 20 %. Red Oak recommends that in order to reduce revenue instability generated by the City's disproportionate share of variable revenue, the City should gradually reduce the commodity charge's share of total rate revenue to slightly more than 70% by FY2014. t To meet the requirements of BMP 11, the City should closely monitor its revenue to ensure that fixed charges do not exceed 30 percent of its revenue. This is important since the effects of conservation will reduce volume - related : REQDAK City of Newport Beach, CA ' CONSULTING Water Utility Financial Plan 4 -1 ' • .. ...................�..�. 5317004 Section 4 Fixed / Variable Revenue Table 4 -2 presents the proposed blend of fixed and variable rate revenue for the financial plan period FY2010 through FY2014. The proposed blends of fixed and variable revenue will help the city maintain revenue stability while still meeting the requirements of BMP 11. Further, by increasing the proportion of revenue that is collected through fixed charges, the City can reduce its reliance on revenue collected through more aggressive conservation -based rates that it is planning to adopt in the future. Table 4 -2: Proposed Fixed f Variable Revenue ($ in thousands) Rats Revenue Current FY2009 1 FY2010 2 FY2011 3 FY2012 4 FY2013 5 FY2014 Total Rate Revenue $ 16,578 $ 19,479 $ 23,723 $ 26,569 $ 28,916 $ 30,130 Fixed Revenue Share 10 °/U 21% 2r /a 28% 28% 28% Variable Revenue Share 90% 79% 73% 72% 72% 72% Fixed Revenue - Monthly Service Charge $1,640 $ 4,084 $ 6,469 $ 7,469 $ 8,218 $ 8,536 Variable Revenue - Commodity Charge $ 14,938 $15,394 $ 17,253 $ 19,100 $ 20,698 $ 21,594 Projected Water Sales (Million HCF) 7,182 7,002 7,002 7,002 7,002 7,002 Variable Rate ($1HCF) $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 Note: Projected Water Safes assumes 61Y. waterless rate Note that the total rate revenue in the. above table matches the rate revenue presented in Table 2 -12. Variable revenue projections rely on the City's projected sales of approximately 7 million HCF for FY2010 through FY2014. Projected sales, however, will be revised to account for a conservation rate structure, during the second phase of the Study. Adjustments to these projections will vary according to how aggressive the conservation rate structure is. charges. As the City implements tiered water rates, it may consider requesting and exemption from the requirements of BMP 11. •�,� ; RH DAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan 4 -2 ,...,.e...,.... 5317004 Section 5 Monthly Service Charge Meter Equivalency 5. Monthly Service Charge Meter Equivalency 5.1. Current Meter Equivalency Schedule Table 5 -1 presents the current monthly service charge and the corresponding meter equivalency ratio for each meter size. Table 5 -1: Current Monthly Service Charge & Meter Equivalency Schedule Meter Size Monthly Service Charge Meter Equivalency Ratio 314" $ 4.50 1.00 V 5.50 1.22 1 112" 7.00 1.56 2" 9.50 2.11 3" 18.00 4.00 4" 25.50 5.67 61, 38.50 8.56 8" 45.00 10.00 W.. 45.00 10.00 12" 45.00 10.00 5.2. Proposed Meter Equivalency Schedule The current meter equivalency schedule for the City's monthly service charge does not adequately reflect the relative costs of reading, maintaining, and replacing different meter sizes. Further, the current schedule does not account for the relative flow capacities of different meter sizes, which often serves as a basis for the relative amounts of meter - based charges. Red Oak recommends using the American Water Works Association's (AWWA) estimate of meter flow capacity from the M6 manual as the basis for the City's meter equivalency schedule. These flow estimates indicate the relative amounts of water that can flow through: each meter size, expressed in gallons per minute. These relative capacities serve as an empirical basis for allocating costs among different meter sizes and provide a more defensible rationale for the determination of relative meter charges. California's Proposition 218 and Government Code §54999 both require proportionality in the determination of water rates, which the proposed meter equivalency schedule helps to address. Table 5 -2 presents. the current and proposed meter equivalency schedules. �• • ; RE@DA K City of Newport Beach, CA • CONSULTING Water Utility Financial Plan 5 -1 5317004 •.. Section 5 Monthly Service Charge Meter Equivalency Table 5 -2: Current & Proposed Meter Equivalency Schedules Meter Size Number of Meters Meter Equivalency Ratio Current Proposed 314" 17,445 1.00 1.00 1" 6,762 1.22 1.67 11/2" 495 1.56 3.33 2" 1,373 2.11 5.33 3" 48 4.00 10.00 4" 80 5.67 16.67 6" 28 8.56 33.33 8" 14 10.00 53.33 10" 0 10.00 95.87 12" 0 10.00 154.20 Figure 5 -1 presents the current and proposed meter equivalency schedules in comparison to other utilities within the region. Note that the current meter equivalency schedule for the City is conservative in its escalation compared to other water agencies in the region, with the exception of the City of Anaheim. 140 120 100 80 60 Figure 5 -1: Meter Equivalency Schedule Regional Comparison (FY2009) 40 2D B —A NewpW Beach Newpcd Beach A.4em Irvine Ranch Laguna Beach (Qmem) (Proposed) .3J4' .1' .111T .Y •3' •4' .T .6 RE ®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 53171H14 Huntinglm M"a Beach cm cidaw Carden Grove � Section 6 Proposed Water Rates 6. Proposed Water Rates In order to implement the proposed financial plan, the City should adjust its current monthly service charge and commodity charge to the rates presented below for the financial plan period FY2010 through FY2014. These rates will allow the City to meet the revenue targets presented in the five -year financial plan, which will cover its rising expenditures for purchased water and other O &M items, capital improvement financing needs, and proposed reserve requirements. These rates will also meet the proposed transition to a composition of rate revenue in which fixed charges account for slightly less than 30% of total rate revenue, allowing for more revenue stability. Tables 6 -1 through 6 -4 present the proposed rates for the financial plan period FY2010 through FY2014. Note that these rates are anticipated to be implemented on January 1 of each year. Table 6 -1: Current & Proposed Commodity Charges Current FY2009 1 2 3 4 FY2010 FY2011 FY2012 FY2013 5 FY2014 Commodity Charge 2.08 2.20 2.46 2.73 2.96 3.08 Table 6 -2: Current ,& Proposed Monthly Service Charges Current 1 2 3 4 5 Monthly Service Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" $ 4.50 $ 1.18 $ 5.76 $ 7.53 $ 8.78 $ 9.15 V 5.50 1.97 9.60 12.55 14.63 15.24 1112" 7.00 3.94 19.20 25.09 29.26 30.49 2" 9.50 6.31 30.72 40.14 46.81 48.78 3" 18.00 11.83 57.61 75.27 87.77 91.46 4" 25.50 19.71 96.01 125.45 146.28 152.43 6" 38.50 39.42 192.02 250.91 292.57 304.85 8" 45.00 63.07 307.23 401.45 468.10 487.76 10" 45.00 113.36 55225 721.60 841.42 876.75 12" 45.00 182.34 888.28 1,160.69 1,353.41 1,410.24 REIIDAK City of Newport Beach, CA CONSULTING Water Mlity Financial Plan 641 . >,.,• >. o ............. 5317004 - Section 6 Proposed Water Rates Table 6 -3: Proposed Capital Charges RERDAK City of Newport Beach, CA CONSULTING Water Ulilily Financial Plan 6 -2 .....,.., 5317004 Current 1 2 3 4 5 Capital Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" - $7.08 $7.33 $7.59 $7.85 $8.13 1•' - 11.80 12.22 12.65 13.09 13.55 11/2" - 23.61 24.43 2529 26.18 27.09 2" - 37.77 39.10 40.46 41.88 43.35 3" - 70.83 73.30 75.87 78.53 81.27 4" - 118.04 122.17 126.45 130.88 135.46 6" - 236.09 244.35 252.90 261.75 270.91 8" - 377.74 390.96 404.64 418.80 433.46 10•1 - 678.98 702.75 727.34 752.80 779.15 12" 1,09213 1,130.35 1,169.92 1,210.86 1,253.24 Table 6-4: Current & Proposed Combined Fixed Charges Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" $4 .50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" 5.50 13.78 21.82 25.19 27.72 28.79 11/2' 7.00 27.55 43.64 50.38 55.43 57.58 2•• 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 92122 101, 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 RERDAK City of Newport Beach, CA CONSULTING Water Ulilily Financial Plan 6 -2 .....,.., 5317004 Section 7 Bill Comparisons & Impacts 7. Bill Comparisons & Impacts Figure 7 -1 presents the single family residential monthly bill impact distribution for FY2010 rates. This bill distribution is based on the City's calendar year 2007 consumption history. The blue columns indicate the percentage of single family residential monthly bills that will increase by the corresponding amount on the horizontal axis, assuming consumption is similar to calendar year 2007. The red line indicates the cumulative percentage of monthly bills at each amount of change in bill. For example, the figure shows that 67% of monthly bills will increase by no more than $10. It also shows that approximately I S% of monthly bills will increase by between $4 and $5. Note that over 90% of monthly bills will increase by no more than $15. Figure 7 -1: FY2010 Single Family Residential Customer Monthly Bill Impact 1646 1 - 100% 14% `12% 1G°b W m 3 15- ax O L V 4 °m 2 °.b 0% 67% of monthly bills will increase by no more em $10 w0.-Nq NY NO FO,WOe- '!1 "O'wW0 Nt"Y���VVVVOtiNWOrN mAN��6W0V N N g q q N N q w w q q w w N N q K w M N N w q p w q L4 N N N w w w w N M H N Change In monitdy 6111 90% 80% 70% m 60% `o a Z s0% Y 6 40% F� 3 u 3W, 20% 10% Figure 7 -2 presents the current monthly bill for %" meters that consume 18 HCF per month, compared with the bill under the proposed rates for FY2010, and the bills at other agencies within the region. Note that it is anticipated that several, if not all of the regional agencies presented below, will likely increase their rates in FY2010 to address rising purchased water costs. KE ®AK City of Newport Beach, CA CONSULTING water Utility Financial Plan 7 1 .— ..... o..... °....w,. 5317004 Section 7 Bill Comparisons & Impacts Figure 7 -2: Monthly Regional Bill Comparison -18 HCF S76 565.97 560 S50 $47.64 941.94 $40 $3676 E31.8 536 $36.93 $61.07 (45.35 NevryMBeach Ne t;WBeach Anaheim Irene Randy Laguna Beach Huntington Mesa Garpm Grove (Gtatent) (Propoead! Beach Conwll0atee t Fwed tlladable )��AK City of Newport Beach, CA CONSULTING water utility Financial Plan •' • . ..........,,........,. 5317004 EMMI City of Newport Beach f P.O. Box 1768 r Newport Beach, CA 92658 -8915 °glnMi`e City of Newport Beach Information and Notice of Public Hearing And Protest Procedure Proposed Water Rate Charges TO: Doe, John & Jane 12345 Main Street Newport Beach, CA 94590 Attachment B - --------- - - - - -- - - - - -- - -- --- - - - - -- - -- - - - -- - ----- - - - - -- -------------- - - - - -- ----------- - - - - -- - -- - -- - -- - - - -- - -- - -- --- - - - - -- - -- - -- - - - - -- ------ - - - - -- EXTRA SPACE Notice of Public Hearing and Protest Procedure NOTICE IS HEREBY GIVEN that on Tuesday, November 10, 2009, at 7:0013M, a public hearing will be conducted in the City Council Chambers (Building A) at 3300 Newport Boulevard, Newport Beach. This will be a Public Hearing before the City Council to allow public testimony and discussion of the proposed water rate increases described below. The City Council will take written and oral comments, and will consider all written protests against the proposed charges, determine if a majority protest exists, and consider resolutions to adopt the water rate charges. Written protests must be filed with the City of Newport Beach City Clerk. Written protests may be hand delivered or mailed to the City Clerk at 3300 Newport Boulevard, Newport Beach, California 92663. To be valid, written protests must state opposition to the proposed water rate increase, identify the Parcel (by assessor's parcel number or street address), and include the original signature of the record water service customer or parcel owner. A written protest may be submitted up to the conclusion of the public testimony at the public hearing. About Proposition 218 In November 1996, California voters approved Proposition 218. As a result, California agencies must comply with its requirements in setting utility rates. One provision requires that a noticed public hearing on utility rates be held and that rates not be increased if a majority of affected utility customers protest the increased rates in writing. Frequently Asked Questions Q. What does my water bill pay for? A. Your water bill covers the following categories costs and services: Annual operation and maintenance of the water system. Including well and pump station operations, water treatment and testing, and water system employee salaries. City water purchase costs. The City purchases water from the Municipal Water District of Orange County and from the Orange County Water District. Capital improvement projects to repair and replace facilities and equipment to improve the water system safety, efficiency and reliability. No additional debt for this purpose is proposed and all improvements will be paid for with rate revenue. Q. Why do the rates need to be raised? A. Newport Beach is not immune to the increasing cost and scarcity of water over the past several years. Operating expenses, including chemical and electrical costs, have increased by an average of 6% over the last four years. In the last year alone, the cost of imported water increased by 20% on September 1st and will increase by another 22% on January 1, 2011. In addition, capital expenditures are required to maintain the water delivery system. The City has not raised its Water Rates since 2005. The existing rates do not provide enough revenue to meet the expenses necessary to operate the water system to provide a safe and reliable water supply to City customers for the next 5 years. Q. How is my water bill calculated? A. A customer's water bill (which is a component of the municipal services statement sent to City water customer's periodically) is calculated by the sum of a fixed service charge, which is based on the customer's meter size, and the water usage fee, which is calculated based on the amount of water used by the customer. See rate tables below. The rate structure in the table below is designed to spread the costs of providing water system among the system's users fairly and equitably. The costs associated with City's water system are made up of expenses associated with operating and maintaining the system, capital costs associated with rehabilitating and expanding the system, and commodity charges associated with acquiring water supplies. The City's rate structure is designed to encourage conservation by including a portion of operations and maintenance costs in the commodity charge, even though many of these expenses may not be directly dependent on water usage. Thereby, a greater proportion of a customer's bill reflects water usage, which encourages conservation because a customer can reduce his or her bill by using less water. This proposed blend of the costs between variable and fixed revenues (70% fixed / 30% variable) ensures revenue stability while also encouraging conservation. The following is a breakdown of each component: 1. Water Usage Fee (Variable): Shown on the bill as "Water Usage HCF ", this charge is geared primarily towards recovering the costs associated with City water purchases, treatment, and distribution costs. In the proposed rate, 70% of the total revenue will come from this charge. This charge is based on the amount of water used and is calculated by multiplying the number of hundred cubic feet units (HCF) of water used by the unit rate per HCF. 2. Water Service Charge (Fixed): This charge is designed to recover (a) the costs of reading, maintaining, and replacing the meters and (b) the costs of capital improvements. The revenues derived from the capital component are to be used for repairs and improvements to the water system identified in the water master plan. In the proposed rate, 30% of the total revenue will come from this charge. The charge is based on the customer's water meter size. Most single - family residential properties have a 5/8 -inch or 3/4 -inch meter. Proposed Water Rates Current & Proposed Water Usage Fee (cost per HCF) Current 1 2 3 4 5 FY2DD9 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.08 $2.20 $2.46 $2.73 $2.96 $3.08 Combined Fixed C 5/8" or 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" 10" 12" Current & Proposed Water Service Charge Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 $4.50 $8.27 $13.09 $15.11 $16.63 $17.27 $5.50 $13.78 $21.82 $25.19 $27.72 $28.79 $7.00 $27.55 $43.64 $50.38 $55.43 $57.58 49.50 $44.08 $69.82 $80.61 $88.69 $92.12 $18.00 $82.65 $130.91 $151.14 $166.30 $172.73 $25.50 $137.75 $218.18 $251.90 $277.16 $287.88 $38.50 $275.50 $436.37 $503.81 $554.32 $575.76 $45.00 $440.80 $698.19 $806.09 $886.91 $921.22 $45.00 $792.34 $1,254.99 $1,448.95 $1,594.22 $1,655.90 $45.00 $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 Need More Information? If you have questions, please call George Murdoch, Utilities Director at the following number: (949)644- 30111287778.1 City of Newport Beach Water Utility Financial Plan September 8, 2009 Pathways to Lasting Solutions Why do we need to increase rates? ":. Last rate increase was in 2005 Operating expenses have increased on average by ~6% annually for the last 4 years ■ Chemicals and electricity are a major driver s 2009 through 2014 CIP totals $13.9 million 2 Pathways to tasting Solutions Why do we need to increase rates? == : Purchased water costs are rising rapidly ■ Imported Water (MWDOC) • Average unit cost of imported water has risen 29% since last rate increase • 20% MET rate increase 9/09, 22% 1/11 ■ Groundwater (OCWD) • Average unit cost of groundwater has risen 38% since last rate increase ■ Basin Pumping Percentage to be reduced • City will have to rely on more expensive imported water 3 Pathways to Lasting Solutions Projected Purchased Water Average Unit Costs MWDOC ($ /AF) $ 633 $ 759 $ 922" . $ 965 $ 1,014:1 $ 1;065 OCWD ($ /AF) 319 361 364 382 397 408 Weighted Average 59% AF = Acre Feet; 325,850 gallons El Pathways to Lasting Solutions Projected Operating Expenditures Purchased Water - MWDOC Purchased Water - OCWD Utilities Salaries & Benefits Equipment Maintenance & Replacement Other O &M Total Percent Change $ in thousands 5 FY2009 FY2010 FY2011 FY2012 FY2613 IFY2014 $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 3,857 3,922 3,947 4,081 4;232 4,351. 1,325 1,322 1,440 1,549 1,692 1,851 4,152 4,319 4;491. 4,671 4,858 5,052 423 444 467 490 514 540 3,579 3;856 41159 4,491 4,853 5,250 $ 16,690 $ 18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 6% -5% Pathways to Lasting Solutions Current Financial Outlook $30,.000 $20.000 $10.000 $0 2009 - $10,000 - $20.000 - $30,000 - $40.000 s Cash - Funded Capital M_ Operating Expenditures $ in thousands 2010 "Ali 2012 2013 2014 .y `may Existing Debt Service t Revenues ($27.9 million) asp Purchased Water. OCWD Purchased Water -MWDOC .. — Target Reserves —! Ending Balance 6 Pathways to Lasting Solutions Current. Financial Outlook *r $2.6 million loss anticipated for FY2009 Reserves will be exhausted by end of FY2011 a CIP not adequately funded 7 Pathways to Lasting Solutions Financial Planning Objectives Directed by Finance Committee to: ■Draw down reserves to minimize "rate shock" ■ Meet reserves by FY2014 ■Increase fixed charge revenue to improve revenue stability Ensure CIP is adequately funded ■Establish dedicated capital charge 8 Pathways to Lasting Solutions Proposed Financial Plan $35.000 $30,000 $25.000 $20,000 $5,000 $0 $ in thousands 1s on; pj,,g� 2009 2010 2011 maswee Cash-Funded Capital Exisfing Debt Service � Operating Expenditures 18.9 million 2012 2013 2014 Purchased Water- OCVVD Purchased Water. MVVDOC Target Reserves —A— EndingBalance 9 Pathways to Lasting Solutions Proposed Financial Plan * Loss is eliminated by FY2011 Target reserves are met by FY2014 on CIP adequately funded beyond 5- year financial plan 10 Pathways to Lasting Solutions Proposed Rates FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 $ 16.63 $ 17.27 V. 5.50 13.78 21.82 Monthly Meter Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 V. 5.50 13.78 21.82 25.19 27.72 28.79 1 1/2" 7.00 27.55 43.64 50.38 55.43 57.58 2" 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 921.22 10" 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 Effective January 1 of each year 11 Pathways to Lasting Solutions Single Family Bill Impact 16% 14% 12% 10% m 4 N N H 8% 0 `C U d 6% 4% 2% o% 100% 12 Pathways to Lasting Solutions T m 0 a m m d V 90% 80% 70% 67% of monthly bills will increase by no more than 60% $10 50% 40% 30% 20% % 0% --------- h W W O N M N N N N N m O N O O N M O N O� O O N N N N N N N N lh M (") f'1 Cl C'! Cl ['1 CJ �'1 C O !A M (A f9 q M fA f9 fA lA N.M W Vf W N A f9 fA fA (9 W f9 fR f9 IR fR W W tlf f9 $"' Change in Monthly Bill 12 Pathways to Lasting Solutions T m 0 a m m d V Regional Water Bill Comparison $70 $65.97 $01.07 $60 13 Pathways to Lasting Solutions Questions &Answers September 8, 2009 Pathways to Lasting Solutions • • • Attachment A City of Newport Beach, CA 949 W 16th Street • Newport Beach, CA 92663 Water Utility Financial Plan August 2009 Report Prepared By: ' RE ®A K CONSULTING • A OIVILION 01 MALLOL. IIIINIL 888 W 6th Street Third Floor Los Angeles, CA 90017 5317004 (213) 326 -1600 Table of Contents Contents • ExecutiveSummary ...................................................... ............................... ES -1 1. Introduction ...................................................................... ............................1 -1 1.1. Scope ............................................................................................. ............................... 1 -1 1.2. Background ....................................................................................... ............................1 -1 2. Financial Plan .................................................................. ............................2 -1 2.1. Funds ............................................................................................. ............................... 2 -1 2.2. Revenue Requirement ...................................................................... ............................2 -1 2.2.1. Operations & Maintenance ................................................ ............................2 -1 2.2.1.1. Purchased Water Costs .......................................... ............................2 -2 2.2.1.2. Utilities ..................................................................... ............................2 -3 2.2.1.3. Other O &M ........................................................... ............................... 2 -3 2.2.1.4. Projected Operations & Maintenance Expenditures ...........................2 -3 2.2.2. Capital Improvement Program Financing .......................... ............................2 -4 2.2.2.1. Historical Capital Improvement Program Financing ...........................2 -4 2.2.2.2. Water Master Plan .................................................. ............................2 -4 2.2.2.3. Future Capital Improvement Program Financing .... ............................2 -5 2.2.2.4. Historical and Future Debt Service Payments ........ ............................2 -5 2.3. Reserve Requirements .................................................................. ............................... 2.3.1. Operating Stabilization Reserve (Operating Fund) ........... ............................2 2 -6 -6 2.3.2. Contingency Reserve (Capital Fund) ................................ ............................2 -7 2.4. Five -Year Financial Plan ................................................................... ............................2 -7 2.4.1. Current Financial Outlook .................................................. ............................2 -7 2.4.2. Proposed Five -Year Financial Plan ................................... ............................2 -8 3. Current Water Rates ........................................................ ............................3 -1 3.1. Monthly Service Charge ................................................................. ............................... 3 -1 3.2. Commodity Charge.. ..................................................................................................... 3 -1 4. Fixed / Variable Revenue ................................................ ............................4 -1 4.1. Current Fixed/ Variable Rate Revenue ............................................ ............................4 -1 4.2. California Urban Water Conservation Council Best Management Practice 11 .............4 -1 4.3. Proposed Fixed / Variable Revenue .............................................. ............................... 4 -1 5. Monthly Service Charge Meter Equivalency ................. ............................5 -1 5.1. Current Meter Equivalency Schedule ............................................... ............................5 -1 5.2. Proposed Meter Equivalency Schedule ............................................ ............................5 -1 6. Proposed Water Rates .................................................... ............................6-1 7. Bill Comparisons & Impacts ........................................... ............................7 -1 . ; REBDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan O •..• ..�.,,�............,.... 5317004 Table of Contents • List of Tables Table 2 -1: Historical Operations & Maintenance Expenditures (in thousands) ............................2 -2 Table 2 -2: Historical Average Unit Cost of Purchased Water per AF ............ ............................... 2 -2 Table 2 -3: Projected Average Unit Cost of Purchased Water per AF ........... ............................... 2 -3 Table 2 -4: Projected Operations & Maintenance Expenditures (in thousands) ............................2 -4 Table 2 -5: Historical Capital Improvement Program Financing (in thousands) ............................2 -4 Table 2 -6: 30 -Year Capital Improvement Program (in thousands) ................... ............................2 -5 Table 2.7: Capital Improvement Program Financing (in thousands) ................ ............................2 -5 Table 2 -8: Debt Service Payments (in thousands) ........................................... ............................2 -6 Table 2 -9: Projected Debt Service Payments (in thousands) ........................... ............................2 -6 Table 2 -10: Operating Fund Five -Year Financial Plan (in thousands) ............. ............................2 -9 Table 2.11: Capital Fund Five -Year Financial Plan (in thousands) ................. ...........................2 -10 Table 2.12: Combined Water Fund Five -Year Financial Plan (in thousands) . ...........................2 -11 Table 3 -1: Current Monthly Service Charge by Meter Size ........................... ............................... 3-1 Table 4.1: Current (FY2009) Fixed / Variable Rate Revenue ($ in thousands) ........................... 4 -1 Table 4.2: Proposed Fixed / Variable Revenue ($ in thousands) .................. ............................... 4 -2 Table 5.1: Current Monthly Service Charge & Meter Equivalency Schedule ............................... 5 -1 Table 5.2: Current & Proposed Meter Equivalency Schedules ........................ ............................5 -2 Table 6 -1: Current & Proposed Commodity Charges .................................... ............................... 6 -1 Table 6 -2: Current & Proposed Monthly Service Charges ............................ ............................... 6 -1 Table 63: Proposed Capital Charges ........................................................... ............................... 6 -2 Table 6 -4: Current & Proposed Combined Fixed Charges ............................ ............................... 6 -2 List of Figures • Figure 2 -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) .................. 2 -8 Figure 2 -2: Five -Year Financial Plan (in thousands) ................................................ .................. 2 -12 Figure 5 -1: Meter Equivalency Schedule Regional Comparison ( FY2009) ...... ............................5 -2 Figure 7 -1: FY2010 Single Family Residential Customer Monthly Bill Impact . ............................7 -1 Figure 7 -2: Monthly Regional Bill Comparison - 18 HCF .................................. ............................7 -2 • R ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan Ij ... 5317004 Acronyms Acronyms Used in the AF Acre Feet AWWA American Water Works Association BMP Best Management Practice BPP Basin Pumping Percentage CUWCC California Urban Water Conservation Council CIP Capital Improvement Program ENR Engineering News Record FY Fiscal Year HCF Hundred Cubic Feet MET Metropolitan Water District of Southern California MWDOC Municipal Water District of Orange County OCWD Orange County Water District O &M Operations & Maintenance REIDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan Eiii • .. • . ,.. ................... 5317004 • • • Executive Summary Executive Summary Scope The City of Newport Beach Utilities Division (the City) retained Red Oak Consulting to conduct a water rate study (the Study). This study includes the development of a five - year financial plan, cost -of- service analysis, and development of a conservation rate structure. For purposes of expediting the adoption of new rates, the Study has been divided into two phases: 1. The development of the financial plan, the allocation of fixed and variable revenue, and the proportioning of the monthly service charge by meter size; and 2. The redesign of the commodity charge from a uniform rate to a conservation rate structure. This report documents the first phase of the Study, including the methodology used to develop the financial plan, the policy decisions reached, the proposed water rates, and the • customer bill impacts. A separate report will be prepared for the second phase of the study upon its completion. • Financial Plan In order to maintain the financial viability of the City water system, Red Oak, with the assistance of City staff, prepared a financial plan for the five -year period from fiscal year ending (FY) 2010 through FY2014. This financial plan includes the development of the City's annual revenue requirement, a financing plan for its capital improvement program (CEP), and review and recommendations for the City's reserve policies. Red Oak used its proprietary electronic financial planning model, eForecast, to determine the appropriate amount of revenue necessary for the City to meet all of the above requirements. Funds The City currently maintains a single fund for its water operations, capital improvement financing, and reserves. Based on direction from the City's staff, Red Oak created a separate fund for capital- related expenditures, which is referred to as the 'Capital Fund.' The financial planning model isolates this fund from the City's Operating Fund in order to evaluate the financial viability of each fund separately. The City, with the assistance of . ; REMA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan E :l ........................ 5317004 Executive Summary Red Oak, has developed target reserve levels for each fund, which will be explained in • detail below. Revenue Requirement The City's revenue requirement is the total amount of revenue it must collect in order to meet its operations and maintenance (O &M) expenditures, debt service payments, and cash - financed capital expenditures. This revenue is collected through water rates and does not include revenue from incidental fees, charges, or other non - operating revenue. The City's O &M expenditures are accounted for in the Operating Fund while debt service payments and cash-financed capital are accounted for in the Capital Fund. Operations & Maintenance The City's operations & maintenance expenditures have steadily increased over the past four years, since its most - recent rate increase in FY2005. Table ES -1 presents the City's historical O &M expenditures for FY2005 through FY2008. Table ES-1: Historical Operations & Maintenance Expenditures (in thousands) Description FY2005 FY2006 FY2007 FY2008 Purchased Water - MW DOC $ 3,350 $ 3,800 $ 3,350 $ 3,400 Purchased Water -OCWD 2,929 2,880 3,280 3,280 Utilities 1,094 922 872 922 Salaries & Benefits 3,302 3,712 3,827 3,799 Equipment Maintenance & Replacement 345 341 348 417 Other O &M 3,013 3,453 3,444 3,593 Total $14,033 $15,108 $15,121 $15,411 The City has seen a 29% increase in the average unit cost of purchased water from the Municipal Water District of Orange County (MWDOC) and a 37% increase in the average unit cost of purchased water from the Orange County Water District (OCWD) since 2005. O &M expenditures apart from purchased water and utilities include salaries and benefits, equipment maintenance and replacement, and other O &M. Other O&M includes the general fund service charge, minor capital expenditures, chemicals, and other supplies. Table ES -2 presents the projected O &M expenditures for the City for the current fiscal year and the financial plan period FY2010 through FY2014. •; RE13DA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES-2 ....,.....1.. a ... ...... 5317004 u • The City's O &M expenditures are projected to increase by over $7 million, or 45%, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These costs, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. Capital Improvement Program Financing Since FY2005, the City has cash - financed all of its capital improvement needs. The City • has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. This CIP totals approximately $167.6 million in escalated dollars at 4% per annum. • The City will continue to finance its CIP on a pay -as- you -go basis during the financial plan period. Table ES -3 presents the financing plan for the City's CIP for the current fiscal year and the financial plan period FY2010 through FY2014. Future capital financing will be accounted for in the City's Capital Fund. An additional monthly capital charge will he assessed by meter size. This capital charge will be the primary source of revenue for the Capital Fund and be used to pay for cash - financed capital and debt service. Table ES-3: Capital Improvement Program Financing (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Projects $1,600 $ 3,210 $ 1,830 $ 3,542 $ 2,700 $ 1,033 Cash - Financed Capital Projects 1,600 3,210 11830 3,542 2,700 1,033 Debt - Financed Capital Projects - - - - - - Total Capital Projects Funded $1,600 $ 3,210 $1,830 $ 3,542 $ 2,700 $1,033 Table ES-4 presents the two remaining debt service payments for the 1999 Refunding of Water Revenue Bonds for the financial plan period FY2010 through FY2014. • .' REIDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan [ES-3] • ..• ..,.,.�.......<. <..,. 5317004 -..... Executive Summary • Table: ES-2: Projected Operations & Maintenance Expenditures (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water- MWDOC $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 Purchased Water - OCW D 3,857 3,922 3,947 4,081 4,232 4,351 Utilities 1,325 1,322 1,440 1,549 1,692 1,851 Salaries & Benefits 4,152 4,319 4,491 4,671 4,858 5,052 Equipment Maintenance & Replacement 423 444 467 490 514 540 Other O &M 3,579 3,856 4,159 4,491 4,653 5,250 Total $ 16,690 $18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 The City's O &M expenditures are projected to increase by over $7 million, or 45%, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These costs, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. Capital Improvement Program Financing Since FY2005, the City has cash - financed all of its capital improvement needs. The City • has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. This CIP totals approximately $167.6 million in escalated dollars at 4% per annum. • The City will continue to finance its CIP on a pay -as- you -go basis during the financial plan period. Table ES -3 presents the financing plan for the City's CIP for the current fiscal year and the financial plan period FY2010 through FY2014. Future capital financing will be accounted for in the City's Capital Fund. An additional monthly capital charge will he assessed by meter size. This capital charge will be the primary source of revenue for the Capital Fund and be used to pay for cash - financed capital and debt service. Table ES-3: Capital Improvement Program Financing (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Projects $1,600 $ 3,210 $ 1,830 $ 3,542 $ 2,700 $ 1,033 Cash - Financed Capital Projects 1,600 3,210 11830 3,542 2,700 1,033 Debt - Financed Capital Projects - - - - - - Total Capital Projects Funded $1,600 $ 3,210 $1,830 $ 3,542 $ 2,700 $1,033 Table ES-4 presents the two remaining debt service payments for the 1999 Refunding of Water Revenue Bonds for the financial plan period FY2010 through FY2014. • .' REIDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan [ES-3] • ..• ..,.,.�.......<. <..,. 5317004 -..... Executive Su Table ES -4: Projected Debt Service Payments (in thousands) • Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Debt Service $ 1,618 $ 130 Reserve Requirements The following reserves are commonly maintained by utilities, and are recommended by Red Oak —at a minimum —to insulate the City from financial volatility. Operating Stabilization Reserve (Operating Fund) The City does not currently maintain an operating stabilization reserve. Red Oak recommends that the City maintain a reserve equivalent to 180 days of its operating budget, or 50 %. This reserve level also provides a buffer period of 24 months at a 25% loss rate. Funds collected in excess of the operations stabilization reserve target would be available to offset future rate adjustments while extended reserve shortfalls would be recovered from future rate increases. Contingency Reserve (Capital Fund) The City currently maintains a contingency reserve equivalent to 35% of its annual budget, which is based on a historical approximation of capital replacement needs in the event of a catastrophe. In order to determine the appropriate level of emergency capital • replacement reserves, the City should conduct a criticality assessment of its system facilities. This assessment involves quantifying the probability of its facilities being impaired, the level of impairment, and the cost of replacement should a catastrophe occur. Red Oak recommends that the City conduct such an assessment; however, if resources are limited, the City may wish to set its contingency reserve level based on an alternative method. Based on direction from the City's staff, Red Oak has evaluated a contingency reserve that parallels the annual revenue anticipated to be recovered through the proposed capital charge. Red Oak believes this amount may provide a sufficient reserve against unanticipated replacements or repairs. By FY2014, the target contingency reserve will be approximately $4 million. Current Financial Outlook Based on the City's increasing O &M expenditures, capital financing needs, and proposed reserve requirements, current revenue are insufficient. Figure ES -1 presents the current fiscal year and the five -year financial outlook for FY2010 through 2014 with no rate revenue increases. Under current rate revenue, the City will be unable to maintain a positive balance in the combined Operating Fund and Capital Fund by FY2011. • • �.; R ®AK City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES-4 '..•' 5317004 1] • Ll Executive Su Figure ES -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) sa0.)-C s2oaw s10a00 $o - st0.000 -s2o.oc0 530.000 - 540 .)CT. 2049 '',? _ 2012 2013 2014 A. � IL � y ..�G.e CundeEC.Ift E.13• ,NWZ5 1.e PwchooedWma OCWD .....•Purcha • W -MWDOC O.,.tng E:pena ,a, Ending9•I•nw Proposed Five -Year Financial Plan Red Oak, with the assistance of the City's staff, has developed a five -year financial plan for the period FY2010 through FY2014. Based on the direction of the City's Finance Committee, this financial plan has been developed such that rate shock to customers is minimal, capital projects are financed only through cash, and reserves are met by FY2014. Figure ES -2 presents the Combined Water Fund's five -year financial plan. The City is anticipating an annual deficiency of approximately $2.6 million for the current fiscal year. The proposed financial plan eliminates this annual deficiency by FY2011. Reserves are drawn down in FY2009 and FY2010 in order to minimize the rate shock associated with the necessary rate revenue increases. • •' R DAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan 5317004 �Pii ®I Executive Su Figure ES -2: Five -Year Financial Plan (in thousands) $35.000 *Y Aoo $25000 $20.000 $15.000 $1,000 ?'. 000 50 2009 201) 2a1/ �Caah =unded Capual EeIRnq Debt Sanka aaaaa� pp.wng Ex PendN- �Pe+enuec 2012 i lj – 2013 2014 —PUrelneadWrtr -OCWD —Purchawd Wear -MWOOC — • —T.,qw R"awas —� En0119B619n. Current Fixed / Variable Rate Revenue The City currently collects approximately 90% of its rate revenue through its commodity charge and the remaining 10% through its monthly service charge. Table ES -5 presents the current composition of the City's rate revenue. A high proportion of variable revenue is potentially favorable in terms of affordability and conservation as customers that use less water are rewarded with lower bills. A high proportion of variable revenue, however, is less favorable in terms of revenue stability as less revenue is secure when water use is volatile. Table ES -5: Current (FY2009) Fixed / Rate Variable Revenue Rate Revenue Source FY2009 Percent Share Commodity Charge Monthly Service Charge $ 14,938 90% 1,640 10% Total Rate Revenue $ 16,578 • 0 Proposed Fixed /Variable Revenue The City is currently exceeding the requirements of California Urban Water Conservation Council's (CUWCC) Best Management Practice (BMP) 11 by 20 %. BMP 11 states that • RE ®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES66 . _•• ..••.. 5317004 Executive Summary . in order for water rates to qualify as `conservation rates,' variable revenue must be at least 70% of total rate revenue. Red Oak recommends that in order to reduce revenue instability generated by the City's disproportionate share of variable revenue, the City should gradually reduce the commodity charge's share of total rate revenue to slightly more than 70% by FY2014.1 Table ES -6 presents the proposed blend of fixed and variable rate revenue for the financial plan period FY2010 through FY2014. The proposed blends of fixed and variable revenue will help the City maintain revenue stability while still meeting the requirements of California CUWCC's BMP 11. Further, by increasing the proportion of revenue that is collected through fixed charges, the City can reduce its reliance on revenue collected through more aggressive conservation -based rates that it is planning to adopt in the future. Table ES-6: Proposed Fixed / Variable Revenue ($ in thousands) Current 1 2 3 4 5 Rate Revenue FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 E Total Rate Revenue Fixed Revenue Share Variable Revenue Share Fixed Revenue - Monthly Service Charge Variable Revenue - Commodity Charge Projected Water Sales (Million HCF) $ 16,578 10% 90% $ 19,479 $ 23,723 $ 26,569 $ 28,916 $ 30,130 21% 79% $ 1,640 $ 4,084 $ 14,938 $ 15,394 27% 28% 73% 72% $ 6,469 $ 7,469 26% 28% 72% 72% $ 8,218 $ 8,536 $ 17,253 $19,100 $ 20,698 $ 21,594 7,182 7,002 7,002 7,002 7,002 7,002 Variable Rate ($/HCF) $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 Note: Projected Water Sales assumes 6% water loss rate. Variable revenue projections rely on the City's projected sales of approximately 7 million HCF for FY2010 through FY2014. Projected sales, however, will be revised to account for a conservation rate structure, during the second phase of the Study. Adjustments to these projections will vary according to how aggressive the conservation rate structure is. Proposed Meter Equivalency Schedule The current meter equivalency schedule for the City's monthly service charge does not adequately reflect the relative costs of reading, maintaining, and replacing different meter sizes. Further, the current schedule does not account for the relative flow capacities of different meter sizes, which often serves as a basis for the relative amounts of meter - based charges. Red Oak recommends using the American Water Works Association's (AWWA) estimate of meter flow capacity from the M6 manual as the basis for the City's meter equivalency schedule. These flow estimates indicate the relative amounts of water To meet the requirements of BMP 11, the City should closely monitor its revenue to ensure that fixed charges do not exceed 30 percent of its revenue. This is important since the effects of conservation will reduce volume - related • charges. As the City implements tiered water rates, it may consider requesting and exemption from the requirements of BMP 11. R ®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan ES-7 ,...... 5317004 Executive Summary that can flow through each meter size, expressed in gallons per minute. These relative • capacities serve as an empirical basis for allocating costs among different meter sizes and provide a more defensible rationale for the determination of relative meter charges. California's Proposition 218 and Government Code §54999 both require proportionality in the determination of water rates, which the proposed meter equivalency schedule helps to address. Table ES -7 presents the current and proposed meter equivalency schedules. Table ES -7: Current & Proposed Meter Equivalency Schedules Meter Equivalency Ratio Meter Size Number of Current Proposed Meters 3/4" 17,445 1.00 1.00 1" 6,762 1.22 1.67 11/2" 495 1.56 3.33 2" 1,373 2.11 5.33 3" 48 4.00 10.00 4" 80 5.67 16.67 6" 28 8.56 33.33 8" 14 10.00 53.33 10" 0 10.00 95.87 12" 0 10.00 154.20 • Proposed Rates In order to implement the proposed financial plan, the City should adjust its current monthly service charge and commodity charge to the rates presented below for the financial plan period FY2010 through FY2014. These rates will allow the City to meet the revenue targets presented in the five -year financial plan, which will cover its rising expenditures for purchased water and other O &M items, capital improvement financing needs, and proposed reserve requirements. These rates will also meet the proposed transition to a composition of rate revenue in which fixed charges account for slightly less than 30% of total rate revenue, allowing for more revenue stability. Tables ES -8 through ES -11 present the proposed rates for the financial plan period FY2010 through FY2014. Note that these rates are anticipated to be implemented on January 1 of each year. Table ES-8: Current & Proposed Commodity Charges Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 • REMA K City of Newport Beach, CA CONSULTING water Utility Financial Plan ES -8 5317004 Executive Summary • Table ES -9: Current & Proposed Monthly Service Charges Current 1 2 3 4 5 Monthly Service Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 1.18 $ 5.76 $ 7.53 $ 8.78 $ 9.15 11. 5.50 1.97 9.60 12.55 14.63 15.24 11/2" 7.00 3.94 19.20 25.09 29.26 30.49 2" 9.50 6.31 30.72 40.14 46.81 48.78 3" 18.00 11.83 57.61 75.27 87.77 91.46 4" 25.50 19.71 96.01 125.45 146.28 152.43 V. 38.50 39.42 192.02 250.91 292.57 304.85 8" 45.00 63.07 307.23 401.45 468.10 487.76 10" 45.00 113.36 552.25 721.60 841.42 876.75 12" 45.00 182.34 888.28 1,160.69 1,353.41 1,410.24 Table ES -10: Proposed Capital Charges Current 1 2 3 4 5 Capital Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 7.08 $ 7.33 $ 7.59 $ 7.85 $ 8.13 1 " 11.80 12.22 12.65 13.09 13.55 11/2" 23.61 24.43 25.29 26.18 27.09 • 2" 37.77 39.10 40.46 41.88 43.35 3" i 70.83 73.30 75.87 78.53 81.27 4" 118.04 122.17 126.45 130.88 135.46 6" 236.09 244.35 252.90 261.75 270.91 8" - 377.74 390.96 404.64 418.80 433.46 10" - 678.98 702.75 727.34 752.80 779.15 12" 1,092.13 1,130.35 1,169.92 1,210.86 1,253.24 Table ES -11: Current & Proposed Combined Fixed Charges Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 314" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1 " 5.50 13.78 21.82 25.19 27.72 28.79 1112" 7.00 27.55 43.64 50.38 55.43 57.58 2" 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 921.22 10" 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 • R MA K CONSULTING City of Newport Beach, CA Water Utility Financial Plan � ES-9 ' .. . ,,.,,,,. "....<,...,..,. 5317004 Executive Customer Bill Impact Figure ES -3 presents the single — family residential monthly bill impact distribution for FY2010 rates. This bill distribution is based on the City's calendar year 2007 consumption history. The blue columns indicate the percentage of single- family residential monthly bills that will increase by the corresponding amount on the horizontal axis, assuming consumption is similar to calendar year 2007. The red line indicates the cumulative percentage of monthly bills at each amount of change in bill. For example, the figure shows that 67% of monthly bills will increase by no more than $10. It also shows that approximately 15% of monthly bills will increase by between $4 and $5. Note that over 90% of monthly bills will increase by no more than $15. Figure ES -3: FY2010 Single - Family Residential Customer Monthly Bill Impact 16% _ - - - _ _ _ - = 100% 14% 12% 10% c a E A -% b 4 i 6% 4% 2% 0% O fV P Y N O h N< N N N N N N N N N 1 ?0% 80% 70% 67% of nwntllly bills will increase by w more Dian 60% S10 '0% 40 -A 30% 20% 1 0 Ml 1 N O A 9 P O M O N A m (qy O N {y.1 N ro 0 O V 1 N P N N N P N N 'Jl N N N N A N P Nr N NV N N 51 2 VI N N 4 (^'1 N N 2 change in Mordity Bill m e q m 6 u �.; RERDA K City of Newport Beach, CA CONSULTING water Utility Financial Plan O ES-10 .. �. �. �...1.... ... ...... 5317004 E 1] • Section 1 Introduction • 1. Introduction 1.1. Scope The City of Newport Beach Utilities Division (the City) retained Red Oak Consulting to conduct a water rate study (the Study). This study includes the development of a five - year financial plan, cost -of- service analysis, and development of a conservation rate structure. For purposes of expediting the adoption of new rates, the Study has been divided into two phases: 1. The development of the financial plan, the allocation of fixed and variable revenue, and the proportioning of the monthly service charge by meter size; and 2. The redesign of the commodity charge from a uniform rate to a conservation rate structure. This report documents the first phase of the Study, including the methodology used to develop the financial plan, the policy decisions reached, the proposed water rates, and the • customer bill impacts. A separate report will be prepared for the second phase of the study upon its completion. • 1.2. Background The City of Newport Beach Utilities Division currently serves a population of over 86,000 within a service area of approximately fifty square miles. It is located on the Pacific coast of California, in Orange County, and surrounded by Huntington Beach and Costa Mesa to the north, Laguna Beach to the South, and Irvine to the east. The City currently has over 26,300 active connections and delivers over 18,000 acre feet (AF) of water per year on average. The City owns and operates three reservoirs: Big Canyon Reservoir (600 AF), Spyglass Hill Reservoir (4.5 AF), and 16'h Street Reservoir (9.2 AF). •,• RE®AK City of Newport Beach, CA % CONSULTING Water Utility Financial Plan 1 -1 ..,.,.•. ,..... ... ...... 5317D04 Section 2 Financial Plan • 2. Financial Plan In order to maintain the financial viability of the City's water system, Red Oak, with the assistance of the City's staff, has prepared a financial plan for the five -year period from fiscal year ending (FY) 2010 through FY2014. This financial plan includes the development of the City's annual revenue requirement, a financing plan for its capital improvement program (CIP), and review and recommendations for the City's reserve policies. Red Oak used its proprietary electronic financial planning model, eForecast, to determine the appropriate amount of revenue necessary for the City to meet all of the above requirements. 2.1. Funds The City currently maintains a single fund for its water operations, capital improvement financing, and reserves. Based on direction from the City's staff, Red Oak has created a separate fund for capital- related expenditures, which will be referred to as the 'Capital Fund.' The financial planning model isolates this fund from the City's Operating Fund in order to evaluate the financial viability of each fund separately. The City, with the assistance of Red Oak, has developed target reserve levels for each fund, which will be explained in detail below. 2.2. Revenue Requirement The City's revenue requirement is the total amount of revenue it must collect in order to meet its operations and maintenance (O &M) expenditures, debt service payments, and cash - financed capital expenditures. This revenue is collected through water rates and does not include revenue from incidental fees, charges, or other non - operating revenue. The City's O &M expenditures are accounted for in the Operating Fund while debt service payments and cash - financed capital are accounted for in the Capital Fund. 2.2.1. Operations & Maintenance The City's operations & maintenance expenditures have steadily increased over the past four years, since its most- recent rate increase in FY2005. Table 2 -1 presents the City's historical O &M expenditures for FY2005 through FY2008. • • RE ®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -1 • . ..,.,...... ..,.....,... 5317004 2.2.1.1. Purchased Water Costs The largest components of the City's O &M expenditures are its purchased water costs and associated O &M, which are encompassed by the `Other O &M' category in Table 2 -1. The City currently obtains its water from two major sources: the Municipal Water District of Orange County ( MWDOC), which imports its water from the State Water Project and the Colorado River Aqueduct through the Metropolitan Water District of Southern California (MET), and the Orange County Water District (OCWD), which manages the Orange County groundwater basin. Variations in purchased water costs occur year -to -year based on the City's basin pumping percentage (BPP), which is the percentage of the City's annual demand that can be pumped from the basin; weather • conditions; and to a lesser extent, the economy and growth. Table 2 -2 presents the average unit cost of purchased water per AF by the City's two major sources for FY2005 through FY2008. Note that the average cost per AF is the total amount of charges paid to each agency, divided by the amount of water purchased. The total amount of annual charges for MWDOC includes the cost of treated water, the capacity charge, the readiness -to -serve charge, and the meter charge. The total amount of annual charges for OCWD includes the cost of the replenishment assessment and annexation fee. Table 2 -2: Historical Average Unit Cost of Purchased Water per AF Description FY2005 FY2006 FY2007 FY2008 Purchased Water — MWDOC ($/AF) $ 492 $ 514 $ 616 $ 597 Purchased Water — OCWD ($ /AF) 233 255 344 279 • The City has seen a 29% increase in the average cost of purchased water from MWDOC and a 37% increase in the average cost of purchased water from OCWD since 2005. Based on information obtained from MWDOC and OCWD, Red Oak projects the following average unit costs of purchased water per AF in Table 2 -3. These projected unit costs are based on a projected purchased water amount of 17,100 AF per year. REBDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan F2--2] •.••.. 5317004 Section 2 Financial Plan • Table 2 -1: Historical Operations & Maintenance Expenditures (in thousands) Description FY2005 FY2006 FY2007 FY2008 Purchased Water - MWDOC $ 3,350 $ 3,800 $ 3,350 $ 3,400 Purchased Water -OCWD 2,929 2,880 3,280 3,280 Utilities 1,094 922 872 922 Salaries & Benefits 3,302 3,712 3,827 3,799 Equipment Maintenance & Replacement 345 341 348 417 Other O &M 3,013 3,453 3,444 3,593 Total $ 14,033 $ 15,108 $ 15,121 $ 15,411 2.2.1.1. Purchased Water Costs The largest components of the City's O &M expenditures are its purchased water costs and associated O &M, which are encompassed by the `Other O &M' category in Table 2 -1. The City currently obtains its water from two major sources: the Municipal Water District of Orange County ( MWDOC), which imports its water from the State Water Project and the Colorado River Aqueduct through the Metropolitan Water District of Southern California (MET), and the Orange County Water District (OCWD), which manages the Orange County groundwater basin. Variations in purchased water costs occur year -to -year based on the City's basin pumping percentage (BPP), which is the percentage of the City's annual demand that can be pumped from the basin; weather • conditions; and to a lesser extent, the economy and growth. Table 2 -2 presents the average unit cost of purchased water per AF by the City's two major sources for FY2005 through FY2008. Note that the average cost per AF is the total amount of charges paid to each agency, divided by the amount of water purchased. The total amount of annual charges for MWDOC includes the cost of treated water, the capacity charge, the readiness -to -serve charge, and the meter charge. The total amount of annual charges for OCWD includes the cost of the replenishment assessment and annexation fee. Table 2 -2: Historical Average Unit Cost of Purchased Water per AF Description FY2005 FY2006 FY2007 FY2008 Purchased Water — MWDOC ($/AF) $ 492 $ 514 $ 616 $ 597 Purchased Water — OCWD ($ /AF) 233 255 344 279 • The City has seen a 29% increase in the average cost of purchased water from MWDOC and a 37% increase in the average cost of purchased water from OCWD since 2005. Based on information obtained from MWDOC and OCWD, Red Oak projects the following average unit costs of purchased water per AF in Table 2 -3. These projected unit costs are based on a projected purchased water amount of 17,100 AF per year. REBDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan F2--2] •.••.. 5317004 Section 2 Financial Plan Table 2 -3: Projected Average Unit Cost of Purchased Water per AF Note that the projected unit cost of purchased water from MWDOC increases by over 65% and the projected unit cost of purchased water from OCWD increases by over 25% from FY2009 through FY2014. Rising MWDOC costs can partially be attributed to the State of California's third consecutive year of drought and diminished supplies from the Bay Delta as part of efforts to protect endangered species. Purchased water costs from OCWD vary year -to -year based on the City's BPP, which is a function of the Orange County Groundwater Basin's rate of recharge. The unit costs also fluctuate due to the proportions of total water purchased from each of the City's two sources. 2.2.1.2. Utilities Utilities costs include electricity costs and telecommunications costs. The majority of these costs depend on the total amount of water pumped from the Orange County groundwater basin and have therefore been projected based on the projected amount of water that will be pumped. 2.2.1.3. Other O &M O &M expenditures apart from purchased water and utilities include salaries and benefits, equipment maintenance and replacement, and other O &M. Other O &M includes the general fund service charge, mirror capital expenditures, chemicals, and other supplies. Based on the historical changes in costs for these items and discussion with City staff, Red Oak estimates the following annual escalation factors for these O&M expenditures: • Salaries & Benefits — 4% • Equipment Maintenance & Replacement — 5% • Other O &M • General Fund Service Charge — 4% • Minor Capital Expense — 0% • Chemicals & Supplies — 11% 2.2.1.4. Projected Operations & Maintenance Expenditures Table 2-4 presents the projected O &M expenditures for the City for the current fiscal year and the financial plan period FY2010 through FY2014. ::• RE®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -3 .................,..,, 5317004 • r1 LJ \J Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water - MWDOC ($ /AF) $ 633 $ 759 $ 922 $ 966 $ 1,014 $ 1,065 Purchased Water- OCWD($ /AF) 319 361 364 382 397 408 Note that the projected unit cost of purchased water from MWDOC increases by over 65% and the projected unit cost of purchased water from OCWD increases by over 25% from FY2009 through FY2014. Rising MWDOC costs can partially be attributed to the State of California's third consecutive year of drought and diminished supplies from the Bay Delta as part of efforts to protect endangered species. Purchased water costs from OCWD vary year -to -year based on the City's BPP, which is a function of the Orange County Groundwater Basin's rate of recharge. The unit costs also fluctuate due to the proportions of total water purchased from each of the City's two sources. 2.2.1.2. Utilities Utilities costs include electricity costs and telecommunications costs. The majority of these costs depend on the total amount of water pumped from the Orange County groundwater basin and have therefore been projected based on the projected amount of water that will be pumped. 2.2.1.3. Other O &M O &M expenditures apart from purchased water and utilities include salaries and benefits, equipment maintenance and replacement, and other O &M. Other O &M includes the general fund service charge, mirror capital expenditures, chemicals, and other supplies. Based on the historical changes in costs for these items and discussion with City staff, Red Oak estimates the following annual escalation factors for these O&M expenditures: • Salaries & Benefits — 4% • Equipment Maintenance & Replacement — 5% • Other O &M • General Fund Service Charge — 4% • Minor Capital Expense — 0% • Chemicals & Supplies — 11% 2.2.1.4. Projected Operations & Maintenance Expenditures Table 2-4 presents the projected O &M expenditures for the City for the current fiscal year and the financial plan period FY2010 through FY2014. ::• RE®A K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -3 .................,..,, 5317004 • r1 LJ \J The City's O &M expenditures are projected to increase by over $7 million, or 45 %, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These costs, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. 2.2.2. Capital Improvement Program Financing 2.2.2.1. Historical Capital Improvement Program Financing • Since FY2005, the City has cash - financed all of its capital improvement needs. Table 2 -5 presents a summary of capital improvement financing from FY2005 through FY2008. Table 2 -5: Historical Capital Improvement Program Financing (in thousands) Description FY2005 FY2006 FY2007 FY2008 Capital Projects $ 8,634 $ 7,794 $ 4,924 $ 5,363 Cash - Financed Capital Projects 8,634 7,794 4,924 5,363 Debt - Financed Capital Projects - - - - Total Capital Projects Funded $ 8,634 $ 7,794 $ 4,924 $ 5,363 E 2.2.2.2. Water Master Plan The City has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. Table 2 -6 presents the 30 -year CIP for the City as indicated in the 2009 Water Master Plan. The CIP is presented in annually escalated dollars to account for rising construction costs. Red Oak believes that the escalation rate of 4% used by the City to develop its CIP is reasonable and consistent with Engineering New Record (ENR) construction cost index. Note the average annual capital expenditure for the 30 -year CIP is approximately $5.6 million compared with $2.5 million for the five -year financial plan period FY2010 through FY2014. ,•� R)r ®ill'` City of Newport Beach, CA CONSULTING Water Utility Financial Plan 72-4] ..,. ..... ..... ...... 5317004 Section 2 Financial Plan • Table 2-4: Projected Operations & Maintenance Expenditures (in thousands) Current 1 2 3 4 5 Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Purchased Water - MW DOC $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 $ 7,100 Purchased Water -OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Utilities 1,325 1,322 1,440 1,549 1,692 1,851 Salaries & Benefits 4,152 4,319 4,491 4,671 4,858 5,052 Equipment Maintenance & Replacement 423 444 467 490 514 540 Other O&M 3,579 3,856 4,159 4,491 4,853 5,250 Total $16,690 $18,794 $ 20,494 $ 21,722 $ 22,911 $ 24,144 The City's O &M expenditures are projected to increase by over $7 million, or 45 %, from FY2009 to FY2014. Purchased water costs alone account for 57% of this increase. Purchased water costs are projected to increase by $3.7 million from MWDOC and $0.5 million from OCWD from FY2009 through FY2014. These costs, combined with Other O &M, which is partially determined by the total amount of water purchased, account for nearly 80% of the total increase. 2.2.2. Capital Improvement Program Financing 2.2.2.1. Historical Capital Improvement Program Financing • Since FY2005, the City has cash - financed all of its capital improvement needs. Table 2 -5 presents a summary of capital improvement financing from FY2005 through FY2008. Table 2 -5: Historical Capital Improvement Program Financing (in thousands) Description FY2005 FY2006 FY2007 FY2008 Capital Projects $ 8,634 $ 7,794 $ 4,924 $ 5,363 Cash - Financed Capital Projects 8,634 7,794 4,924 5,363 Debt - Financed Capital Projects - - - - Total Capital Projects Funded $ 8,634 $ 7,794 $ 4,924 $ 5,363 E 2.2.2.2. Water Master Plan The City has developed a 30 -year capital improvement program as part of its 2009 Water Master Plan. Table 2 -6 presents the 30 -year CIP for the City as indicated in the 2009 Water Master Plan. The CIP is presented in annually escalated dollars to account for rising construction costs. Red Oak believes that the escalation rate of 4% used by the City to develop its CIP is reasonable and consistent with Engineering New Record (ENR) construction cost index. Note the average annual capital expenditure for the 30 -year CIP is approximately $5.6 million compared with $2.5 million for the five -year financial plan period FY2010 through FY2014. ,•� R)r ®ill'` City of Newport Beach, CA CONSULTING Water Utility Financial Plan 72-4] ..,. ..... ..... ...... 5317004 Section 2 Current FY2009 Financial Plan 2 FY2011 Table 2 -6: 30 -Year Capital Improvement Program (in thousands) • Year Capital Year Capital Capital Projects Expenditure Expenditure $ 3,210 FY2009 $ 1,600 FY2024 $ 5,279 $ 3,542 FY2010 3,210 FY2025 7,905 $ 1,033 FY2011 1,830 FY2026 7,090 1,600 FY2012 3,542 FY2027 10,534 1,830 FY2013 2,700 FY2028 1,643 2,700 FY2014 1,033 FY2029 12,458 Debt - Financed Capital Projects FY2015 3,610 FY2030 7,694 - FY2016 8,408 FY2031 5,518 - FY2017 4,890 FY2032 7,255 - FY2018 5,382 FY2033 $1,600 FY2019 5,597 FY2034 4,315 $1,830 FY2020 5,821 FY2035 7,645 $ 2,700 FY2021 4,933 FY2036 7,950 FY2022 4,975 FY2037 8,268 FY2023 7,584 FY2038 8,599 15 -Year Total $ 65,115 30 -Year Total $167,268 Note: Project costs are escalated at a rate of 4% annually 2.2.2.3. Future Capital Improvement Program Financing • The City will continue to finance its CIP on a pay -as- you -go basis during the financial plan period. Table 2 -7 presents the financing plan for the City's CIP for the current fiscal year and the financial plan period FY2010 through FY2014. Future capital financing will be accounted for in the City's Capital Fund. An additional monthly capital charge will be assessed by meter size. This capital charge will be the primary source of revenue for the Capital Fund and be used to pay for cash - financed capital and debt service. Table 2 -7: Capital Improvement Program Financing (in thousands) Description Current FY2009 1 FY2010 2 FY2011 3 FY2012 4 FY2013 5 FY2014 Capital Projects $ 1,600 $ 3,210 $ 1,830 $ 3,542 $ 2,700 $ 1,033 Cash - Financed Capital Projects 1,600 3,210 1,830 3,542 2,700 1,033 Debt - Financed Capital Projects - - - - - - Total Capital Projects Funded $1,600 S3,210 $1,830 $ 3,542 $ 2,700 $1,033 2.2.2.4. Historical and Future Debt Service Payments Table 2 -8 presents the City's debt service payments from FY2005 through FY2008. These payments are among the six final payments for the 1999 Refunding of Water Revenue Bonds. E • •.' RE®AIC City of Newport Beach, CA CONSULTING water Utility Financial Plan 2-5 ..• 5317004 O Section 2 Financial Plan • Table 2 -8: Debt Service Payments (in thousands) Description FY2005 FY2006 FY2007 FY2008 Debt Service $ 1,653 $ 1,650 $ 1,649 $ 1,619 Table 2 -9 presents the two remaining debt service payments for the 1999 Refunding. Table 2 -9: Projected Debt Service Payments (in thousands) Current Description FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Debt Service $ 1,618 $ 130 - - - 2.3. Reserve Requirements Reserve requirements are funds set aside for precautionary purposes such as for revenue stabilization, rate stabilization, or emergency capital replacement. These funds are typically required to maintain a predetermined balance or an amount based on annual operating results. The City currently maintains two reserves and a minimum capital contribution, referred to as the `designated reserve': • System Reserve – 35% of annual budget • Stabilization Reserve – 25% of annual budget • • Designated Reserve– 10% of annual budget The following reserves are commonly maintained by utilities, and are recommended by Red Oak —at a minimum —to insulate the City from financial volatility. 2.3.1. Operating Stabilization Reserve (Operating Fund) An operating stabilization reserve is established primarily to maintain adequate levels of cash between the time expenses are incurred and revenue are received. It may also be used to insulate a utility from volatility in some operating expenditures such as for energy, and provide time for the utility to adjust rates. Utilities that bill monthly typically maintain a reserve equivalent to 45 to 90 days of operating expenditures, while utilities that bill bimonthly typically maintain a reserve equivalent to 90 to 180 days of operating expenditures. Seasonality is also a factor in determining the appropriate reserve level; utilities that have strong seasonal influences to their demand typically maintain larger reserves. The City does not currently maintain an operating stabilization reserve. Red Oak recommends that the City maintain a reserve equivalent to 180 days of its operating budget, or 50 %. This reserve level also provides a buffer period of 24 months at a 25% loss rate. Funds collected in excess of the operations stabilization reserve target would be available to offset future rate adjustments while extended reserve shortfalls would be • recovered from future rate increases. • .' RMA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan F27-6 • . ........................ 53170114 Section 2 Financial Plan 2.3.2. Contingency Reserve (Capital Fund) • A contingency reserve is established to fund the replacement or repair of system facilities in the event that these facilities are impaired due to a catastrophe. The reserve may also be used to insulate against early and/or unanticipated capital replacement costs. The City currently maintains a contingency reserve equivalent to 35% of its annual budget, which is based on a historical approximation of capital replacement needs in the event of a catastrophe. In order to determine the appropriate level of emergency capital replacement reserves, the City should conduct a criticality assessment of its system facilities. This assessment involves quantifying the probability of its facilities being impaired, the level of impairment, and the cost of replacement should a catastrophe occur. Red Oak recommends that the City conduct such an assessment; however, if resources are limited, the City may wish to set its contingency reserve level based on an alternative method. Based on direction from the City's staff, Red Oak has evaluated a contingency reserve that parallels the annual revenue anticipated to be recovered through the proposed capital charge. Red Oak believes this amount may provide a sufficient reserve against unanticipated replacements or repairs. By FY2014, the target contingency reserve will be approximately $4 million. 2.4. Five -Year Financial Plan 2.4.1. Current Financial Outlook Based on the City's increasing O &M expenditures, capital financing needs, and proposed reserve requirements, current revenue are insufficient. Figure 2 -1 presents the current fiscal year and the five -year financial outlook for FY2010 through FY2014 with no rate revenue increases. Each column is broken into individual annual expenditures, indicated by a different color (see legend). The red line represents annual revenue, the black line represents ending balances, and the orange line represents target reserves. Under current rate revenue, the City will be unable to maintain a positive balance in the combined Operating Fund and Capital Fund by FY2011. • .' RE ®A K City of Newport Beach, CA ,- CONSULTING Water Utility Financial Plan 2 -7 • .. .... ..... .I ............1 5317004 • • • • • Section 2 Financial Plan Figure 2 -1: Five -Year Financial Outlook with No Revenue Increases (in thousands) 530.000 S20,000 510.0.0 $0 - 510,000 - S20A00 - 530,000 540.000 2i {5 2010 gym" _gin_ 2019 2014 ` IL . cllh- FUn]a: Pur- hII3tlVplal OCAM PurehaWMt*,_WVDoc �Jpmetng L:�sneYN =a— Fevenuea -•-`ayetFnervee —t EOtliny Beinee 2.4.2. Proposed Five -Year Financial Plan Red Oak, with the assistance of the City's staff, has developed a five -year financial plan for the period FY2010 through FY2014. Based on the direction of the City's Finance Committee, this financial plan has been developed such that rate shock to customers is minimal, capital projects are financed only by cash, and reserves are met by FY2014. Table 2 -10 presents the five -year financial plan for the City's Operating Fund. �.' RE®AK City of Newport Beach, CA CONSULTING water Utility Financial Plan ....... ........,.., 5317004 Section 2 Financial Plan Table 2 -10: Operating Fund Five -Year Financial Plan (in thousands) Operations & Maintenance Current 1 2 3 4 5 Operating Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge Revenue $ 14,938 $ 15,394 $ 17,253 $ 19,100 $ 20,698 $ 21,594 Monthly Service Charge Revenue 1,640 584 2,847 3,720 4,337 4,519 Miscellaneous Revenue 439 439 439 439 439 439 Interest Income 291 117 120 143 239 377 Total Revenue 17,309 16,535 20,660 23,403 25,714 26,930 Operations & Maintenance 9,480 9,941 10,557 11,201 11,917 12,693 Purchased Water -MWDOG 3,354 4,931 5,991 6,440 6,762 7,100 Purchased Water - OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Total O&M 16,690 18,794 20,494 21,722 22,911 24,144 Capital Contribution (3,300) Annual Surplus / (Deficiency) (2,682) (2,258) 166 1,681 2,803 2,785 Beginning Balance 9,665 6,983 4,725 4,891 6,572 9,374 Ending Balance $ 6,983 $ 4,725 S4,891 $ 6,572 $ 9,374 $12,160 Target Reserves $ 8,345 $ 9,397 $ 10,247 $ 10,861 $ 11,456 $ 12,072 Note that cash- financed capital and debt service are accounted for in the Capital Fund. The removal of these items has a corresponding decrease in the rate revenue required and accounted for in the Operating Fund, as seen in FY2010. Total rate revenue for the combined Operating Fund and Capital Fund, however, increases year -to -year to meet increasing O &M expenditures, capital improvement financing needs, and the proposed reserve requirements. The City's proposed Operating Stabilization reserve is met by FY2014. Table 2 -11 presents the five -year financial plan for the City's Capital Fund. •'� .' R EDDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -9 ,..,.,..., ............. 5317004 • u • • Annual Surplus / (Deficiency) 84 163 1,821 262 1,269 Section 2 Beginning Balance - 84 247 2.069 2,331 Financial Plan • Table 2 -11: Capital Fund Five -Year Financial Plan (in thousands) $ 2,069 Current 1 2 3 4 5 Capital Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Capital Charge Revenue $ 3,500 $ 3,623 $ 3,749 $ 3,881 $ 4,016 Capital Contribution 3,300 - - - Interest Income 1 3 29 55 89 181 Total Revenue 3,301 3,503 3,651 3,804 3,969 4,198 Cash - Funded Capital 1,600 3,210 1,830 3,542 2,700 1,033 Existing Debt Service 1,618 130 - - - - New Debt Service - - - - - - Total Debt Service 1,618 130 • Annual Surplus / (Deficiency) 84 163 1,821 262 1,269 3,165 Beginning Balance - 84 247 2.069 2,331 3,601 Ending Balance $ 84 $ 247 $ 2,069 $ 2,331 S3,601 $ 6,765 Target Reserves $ 4,000 $ 3,500 $ 3,623 $ 3,749 $ 3,881 $ 4,016 Rate Revenue generated by the proposed Capital Charge is accounted for in the Capital Fund. This source of revenue, which begins in FY2010, is collected to recover the costs of cash - financed capital projects and debt service for the 1999 Refunding of Water Revenue Bonds. The target contingency reserve, which is met by FY2014, is based on the anticipated annual capital charge revenue, which will be approximately $4 million in FY2014. Table 2 -12 presents the five -year financial plan for the City's combined water fund. ,•.; R QAK City of Newport Beach, CA CONSULTING 'Hater Utility Financial Plan • 5317004 2 -10 Section 2 Financial Plan Table 2 -12: Combined Water Fund Five -Year Financial Plan (in thousands) Current 1 2 3 4 Combined Water Fund FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Rate Revenue $ 16,578 $ 19,479 $ 23,723 $ 26,569 $ 28,916 $ 30,130 Miscellaneous Revenue 439 439 439 439 439 439 Interest Income 293 120 149 198 328 558 Total Revenue 17,310 20,039 24,311 27,207 29,683 31,127 Operations & Maintenance 9,480 9,941 10,557 11,201 11,917 12,693 Purchased Water - MWDOC 3,354 4,931 5,991 6,440 6,762 7,100 Purchased Water - OCWD 3,857 3,922 3,947 4,081 4,232 4,351 Total O&M 16,690 18,794 20,494 21,722 22,911 24,144 Cash - Funded Capital 1,600 3,210 1,830 3,542 2,700 1,033 Existing Debt Service 1,618 130 - - - - New Debt Service - - - - - Total Debt Service 1,618 130 0 0 0 0 Total Expenditures 19,908 22,133 22,324 25,264 25,611 25,177 Annual Surplus / (Deficiency) (2,598) (2,095) 1,987 1,943 4,072 5,950 • Beginning Balance 9,665 7,067 4,973 6,960 8,903 12,975 Ending Balance $ 7,067 $ 4,973 $ 6,960 $ 8,903 $12,975 $18,925 Target Reserves $ 12,345 $ 12,897 $ 13,870 $ 14,610 $ 15,336 $ 16,088 The City anticipates an annual deficiency of approximately $2.6 million for the current fiscal year. The proposed financial plan eliminates this annual deficiency by FY2011. Reserves are drawn down in FY2009 and FY2010 in order to minimize the rate shock associated with the necessary rate revenue increases. Figure 2 -2 presents a graphical representation of the Combined Water Fund's five -year financial plan. Each column is separated into individual annual expenditures, indicated by a different color (see legend). The red line represents annual revenue, the black line represents ending balances, and the orange line represents target reserves. Note that target reserves are not met until FY2014. Rate revenue is gradually increased throughout the five -year financial plan such that 'rate shock' to customers is reduced. • RMAK City of Newport Beach, CA CONSULTING Water Utility Financial Plan 2 -11 5317004 • • Figure 2 -2: Five -Year Financial Plan (in thousands) $35.000 $30.000 325.000 $20000 -� 315.000 $10000 $5.000 so 2009 ]aa FundWophol agar• JP*,.09 E.Pendbrm Section 2 Financial Plan 201) 2_11 ExlAn9 )ept:er: ke Rvsnuea REIIDAK City of Newport Beach, CA • CONSULTING water Utility Financial Plan 5317004 2012 2013 2014 Purahaaa9V*tx -OCAL �Purdmsei Waler -Mw00C — —Targe Raoarvaa —a- Enamp BPbrPs 2 -12 Section 3 Current Water Rates 3. Current Water Rates As part of the first phase of the Study, Red Oak reviewed the City's current water rates. These rates must be adjusted in order to follow Red Oak's proposed financial plan as they are currently insufficient to meet the City's rising O &M expenditures, capital improvement needs, and the proposed reserve requirements. 3.1. Monthly Service Charge Table 3 -1 presents the current monthly service charge for water accounts by meter size. Table 3-1: Current Monthly Service Charge by Meter Size Meter Size Monthly Service Charge 3/4" $ 4.50 1" 5.50 1 1/2" 7.00 2" 9.50 3" 18.00 4" 25.50 6" 38.50 8" 45.00 10" 45.00 12" 45.00 3.2. Commodity Charge The current commodity charge is $2.08 per HCF. The City's commodity charge is a uniform rate and does not vary by meter size, customer class, or season. ' •: R ®Ali City of Newport Beach, CA CONSULTING Water Utility Financial Plan 3-1 ..................... 5317004 ._ • • E Section 4 Fixed / Variable Revenue • 4. Fixed / Variable Revenue 4.1. Current Fixed / Variable Rate Revenue The City currently collects approximately 90% of its rate revenue through its commodity charge and the remaining 10% through its monthly service charge. Table 4 -1 presents the current composition of the City's rate revenue. A high proportion of variable revenue is potentially favorable in terms of affordability and conservation as customers that use less water are rewarded with lower bills. A high proportion of variable revenue, however, is less favorable in terms of revenue stability as less revenue is secure when water use is volatile. Table 4 -1: Current (FY2009) Fixed / Variable Rate Revenue ($ in thousands) Rate Revenue Source FY2009 Percent Share Commodity Charge $ 14,938 90% Monthly Service Charge 1,640 10% Total Rate Revenue $ 16,578 4.2. California Urban Water Conservation Council Best Management Practice 11 The California Urban Water Conservation Council (CUWCC) has developed fourteen best management practices (BMPs) to reduce long -term urban water demand in California. Implementation of these BMPs can aid water agencies in receiving regional and/or state grants, in addition to reducing long -term demand. CUWCC's BMP 11 concerns retail water service rates. It states that in order for water rates to qualify as 'conservation rates,' variable rate revenue must be at least 70% of total rate revenue. BMP 11 clarifies that uniform rates, seasonal rates, tiered rates, and allocation -based rates are all types of rates that can be used to meet its requirements. 4.3. Proposed Fixed / Variable Revenue The City is currently exceeding the requirements of CUWCC's BMP 11 by 20 %. Red Oak recommends that in order to reduce revenue instability generated by the City's disproportionate share of variable revenue, the City should gradually reduce the commodity charge's share of total rate revenue to slightly more than 70% by FY2014.1 . I To meet the requirements of BMP 11, the City should closely monitor its revenue to ensure that fixed charges do not exceed 30 percent of its revenue. This is important since the effects of conservation will reduce volume - related ,'� P- REIIDA K City of Newport Beach, CA CONSULTING Water utility Financial Plan 4 -1 > ... ............. 5317004 Section 4 Fixed / Variable Revenue Table 4 -2 presents the proposed blend of fixed and variable rate revenue for the financial plan period FY2010 through FY2014. The proposed blends of fixed and variable revenue will help the city maintain revenue stability while still meeting the requirements of BMP 11. Further, by increasing the proportion of revenue that is collected through fixed charges, the City can reduce its reliance on revenue collected through more aggressive conservation -based rates that it is planning to adopt in the future. Table 4 -2: Proposed Fixed / Variable Revenue ($ in thousands) Current 1 2 3 4 5 Rate Revenue FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Total Rate Revenue $ 16,578 $ 19,479 $ 23,723 $ 26,569 $ 28,916 $ 30,130 Fixed Revenue Share 10% 21% 27% 28% 28% 28% Variable Revenue Share 90% 79% 73% 72% 72% 72% Fixed Revenue - Monthly Service Charge $ 1,640 $ 4,084 $ 6,469 $ 7,469 $ 8,218 $ 8,536 Variable Revenue - Commodity Charge $ 14,938 $ 15,394 $ 17,253 $ 19,100 $ 20,698 $ 21,594 Projected Water Sales (Million HCF) 7,182 7,002 7,002 7,002 7,002 7,002 Variable Rate ($ /HCF) $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 Note: Projected Water Sales assumes 6% water loss rate. Note that the total rate revenue in the above table matches the rate revenue presented in Table 2 -12. Variable revenue projections rely on the City's projected sales of approximately 7 million HCF for FY2010 through FY2014. Projected sales, however, will be revised to account for a conservation rate structure, during the second phase of the Study. Adjustments to these projections will vary according to how aggressive the conservation rate structure is. charges. As the City implements tiered water rates, it may consider requesting and exemption from the requirements of BMP 11. ,••� It ®AK City of Newport Beach, CA • • • CONSULTING Water Ublity Financial Plan 4-2 ' • . •' ..,.,,,................. 5317004 • • J Section 5 Monthly Service Charge Meter Equivalency • 5. Monthly Service Charge Meter Equivalency • 5.1. Current Meter Equivalency Schedule Table 5 -1 presents the current monthly service charge and the corresponding meter equivalency ratio for each meter size. Table 5 -1: Current Monthly Service Charge & Meter Equivalency Schedule Meter Size Monthly Service Charge Meter Equivalency Ratio 314" $ 4.50 1.00 1 " 5.50 1.22 11/2" 7.00 1.56 2" 9.50 2.11 3" 18.00 4.00 V 25.50 5.67 6" 38.50 8.56 8.. 45.00 10.00 10" 45.00 10.00 12" 45.00 1 0.00 5.2. Proposed Meter Equivalency Schedule The current meter equivalency schedule for the City's monthly service charge does not adequately reflect the relative costs of reading, maintaining, and replacing different meter sizes. Further, the current schedule does not account for the relative flow capacities of different meter sizes, which often serves as a basis for the relative amounts of meter - based charges. Red Oak recommends using the American Water Works Association's (AWWA) estimate of meter flow capacity from the M6 manual as the basis for the City's meter equivalency schedule. These flow estimates indicate the relative amounts of water that can flow through each meter size, expressed in gallons per minute. These relative capacities serve as an empirical basis for allocating costs among different meter sizes and provide a more defensible rationale for the determination of relative meter charges. California's Proposition 218 and Government Code §54999 both require proportionality in the determination of water rates, which the proposed meter equivalency schedule helps to address. Table 5 -2 presents the current and proposed meter equivalency schedules. '•,• RMAK City of Newport Beach, CA CONSULTING Water utility Financial Plan 5-1 5317004 Figure 5 -1 presents the current and proposed meter equivalency schedules in comparison to other utilities within the region. Note that the current meter equivalency schedule for the City is conservative in its escalation compared to other water agencies in the region, with the exception of the City of Anaheim. Figure 5 -1: Meter Equivalency Schedule Regional Comparison (FY2009) ,4c uo 100 80 60 40 20 sIDC 0 Newport Reach Newport Beech Anaheim icurrent) (Proposed) "a Ranch Laguna Beach Hun ingtm Beads •314" a1' a11r2' •2• 03' 64' 6" .8' Mesa Garden Grove Cmsdidated i FMA K City of Newport Beach, CA 4 CONSULTING Water Utility Financial Plan 5-2 '•. •' 5317004 • is Section 5 Monthly Service Charge Meter Equivalency Table 5 -2: Current & Proposed Meter Equivalency Schedules . Meter Equivalency Ratio Meter Size Number of Current Proposed Meters 3/4" 17,445 1.00 1.00 1" 6,762 1.22 1.67 11/2" 495 1.56 3.33 2" 1,373 2.11 5.33 3" 48 4.00 10.00 4" 80 5.67 16.67 6" 28 8.56 33.33 a" 14 10.00 53.33 10" 0 10.00 95.87 12" 0 10.00 154.20 Figure 5 -1 presents the current and proposed meter equivalency schedules in comparison to other utilities within the region. Note that the current meter equivalency schedule for the City is conservative in its escalation compared to other water agencies in the region, with the exception of the City of Anaheim. Figure 5 -1: Meter Equivalency Schedule Regional Comparison (FY2009) ,4c uo 100 80 60 40 20 sIDC 0 Newport Reach Newport Beech Anaheim icurrent) (Proposed) "a Ranch Laguna Beach Hun ingtm Beads •314" a1' a11r2' •2• 03' 64' 6" .8' Mesa Garden Grove Cmsdidated i FMA K City of Newport Beach, CA 4 CONSULTING Water Utility Financial Plan 5-2 '•. •' 5317004 • is • Section 6 Proposed Water Rates 6. Proposed Water Rates In order to implement the proposed financial plan, the City should adjust its current monthly service charge and commodity charge to the rates presented below for the financial plan period FY2010 through FY2014. These rates will allow the City to meet the revenue targets presented in the five -year financial plan, which will cover its rising expenditures for purchased water and other O &M items, capital improvement financing needs, and proposed reserve requirements. These rates will also meet the proposed transition to a composition of rate revenue in which fixed charges account for slightly less than 30% of total rate revenue, allowing for more revenue stability. Tables 6 -1 through 6 -4 present the proposed rates for the financial plan period FY2010 through FY2014. Note that these rates are anticipated to be implemented on January 1 of each year. L I �.' RMAK City of Newport Beach, CA CONSULTING Water Utility Rnancial Plan 5317004 6 1 ..,.,................. Table 6 -1: Current & Proposed Commodity Charges Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge 2.08 2.20 2.46 2.73 2.96 3.08 • Table 6-2: Current & Proposed Monthly Service Charges Current 1 2 3 4 5 Monthly Service Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 1.18 $ 5.76 $ 7.53 $ 8.78 $ 9.15 1 " 5.50 1.97 9.60 12.55 14.63 15.24 11/2" 7.00 3.94 19.20 25.09 29.26 30.49 2" 9.50 6.31 30.72 40.14 46.81 48.78 3" 18.00 11.83 57.61 75.27 87.77 91.46 4" 25.50 19.71 96.01 125.45 146.28 152.43 6" 38.50 39.42 192.02 250.91 292.57 304.85 8.. 45.00 63.07 307.23 401.45 468.10 487.76 10° 45.00 113.36 552.25 721.60 841.42 876.75 12" 45.00 182.34 888.28 1,160.69 1,353.41 1,410.24 L I �.' RMAK City of Newport Beach, CA CONSULTING Water Utility Rnancial Plan 5317004 6 1 ..,.,................. Section 6 Proposed Water Rates Table 6-3: Proposed Capital Charges Current 1 2 3 4 5 Capital Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 7.08 $ 7.33 $ 7.59 $ 7.85 $ 8.13 ill - 11.80 12.22 12.65 13.09 13.55 11/2" 23.61 24.43 25.29 26.18 27.09 2" 37.77 39.10 40.46 41.88 43.35 3" - 70.83 73.30 75.87 78.53 81.27 4" - 118.04 122.17 126.45 130.88 135.46 6" - 236.09 244.35 252.90 261.75 270.91 8" - 377.74 390.96 404.64 418.80 433.46 10" - 678.98 702.75 727.34 752.80 779.15 12" 1,092.13 1,130.35 1,169.92 1,210.86 1,253.24 Table 6-4: Current & Proposed Combined Fixed Charges • •.' R ®%K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 6 -2 5317004 • E Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" 5.50 13.78 21.82 25.19 27.72 28.79 11/2" 7.00 27.55 43.64 50.38 55.43 57.58 2" 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 921.22 10" 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 • •.' R ®%K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 6 -2 5317004 • E Section 7 Bill Comparisons & Impacts • 7. Bill Comparisons & Impacts • • Figure 7 -1 presents the single family residential monthly bill impact distribution for FY2010 rates. This bill distribution is based on the City's calendar year 2007 consumption history. The blue columns indicate the percentage of single family residential monthly bills that will increase by the corresponding amount on the horizontal axis, assuming consumption is similar to calendar year 2007. The red line indicates the cumulative percentage of monthly bills at each amount of change in bill. For example, the figure shows that 67% of monthly bills will increase by no more than $10. It also shows that approximately 15% of monthly bills will increase by between $4 and $5. Note that over 90% of monthly bills will increase by no more than $15. Figure 7 -1: FY2010 Single Family Residential Customer Monthly Bill Impact 16% 100% N 3 m 'c m e' 4 9 U Figure 7 -2 presents the current monthly bill for 3/4" meters that consume 18 HCF per month, compared with the bill under the proposed rates for FY2010, and the bills at other agencies within the region. Note that it is anticipated that several, if not all of the regional agencies presented below, will likely increase their rates in FY2010 to address rising purchased water costs. •'• ; RE ®,q K City of Newport Beach, CA • CONSULTING water Utility Financial Plan F7-1 so% 14% 80% 12% 70% 10% 67" of monlhl' tills vnl mcreasebv no mope flan 60% � S'0 N 7 t sew w'w y 40% y e96 30% 4% 20% IIIII 0% • - - - - - - _ - ......I 0% o —n nxnArorne —nn +m m2 me nwenX AR n,oAm -AAA NMNN N NNMNNNNNNNNNNNM NMN MNNNNN� NN M..NMNNP ChwW inYoMlly Yll N 3 m 'c m e' 4 9 U Figure 7 -2 presents the current monthly bill for 3/4" meters that consume 18 HCF per month, compared with the bill under the proposed rates for FY2010, and the bills at other agencies within the region. Note that it is anticipated that several, if not all of the regional agencies presented below, will likely increase their rates in FY2010 to address rising purchased water costs. •'• ; RE ®,q K City of Newport Beach, CA • CONSULTING water Utility Financial Plan F7-1 =7: $60 $58 $41.94 $4C $3C $2C Section 7 Bill Comparisons & Impacts Figure 7 -2: Monthly Regional Bill Comparison - 18 HCF $95.97 $47.84 $31.82 536.76 $38.93 $61.97 $4535 Nl pM Bench rlewpM Benrh Anahe,m Irvmne Rnnph Laguna Peuh Hunbngten Ales. Gerden:ro 'curenu (Pmposedl Beach Conaclldated -Fixed -Variable • • ; REEDA K City of Newport Beach, CA CONSULTING Water Utility Financial Plan 77-2] ••• •••• 5317004 • I • I •1 esCity of Newport Beach P.O. Box 1768 Newport Beach, CA 92658-8915 City of Newport Beach Information and Notice of Public Hearing And Protest Procedure Proposed Water Rate Charges TO: Doe, John & Jane 12345 Main Street Newport Beach, CA 94590 E Attachment B ---------------------------------------------------- ------------------------------------------------------------------------------------------- EXTRA SPACE - ---------------------------------------------- ------ --------------------------------------------------- -------------------------------------- Notice of Public Hearing and Protest Procedure NOTICE IS HEREBY GIVEN that on Tuesday, November 10, 2009, at 7:OOPM, a public hearing will be conducted in the City Council Chambers (Building A) at 3300 Newport Boulevard, Newport Beach. This will be a Public Hearing before the City Council to allow public testimony and discussion of the proposed water rate increases described below. The City Council will take written and oral comments, and will consider all written protests against the proposed charges, determine if a majority protest exists, and consider resolutions to adopt the water rate charges. Written protests must be filed with the City of Newport Beach City Clerk. Written protests may be hand delivered or mailed to the City Clerk at 3300 Newport Boulevard, Newport Beach, Califomia 92663. To be valid, written protests must state opposition to the proposed water rate increase, identify the Parcel (by assessor's parcel number or street address), and include the original signature of the record water service customer or parcel owner. A written protest may be submitted up to the conclusion of the public testimony at the public hearing. About Proposition 218 In November 1996, Califomia voters approved Proposition 218. As a result, Califomia agencies must comply with its requirements in setting utility rates. One provision requires that a noticed public hearing on utility rates be held and that rates not be increased if a majority of affected utility customers protest the increased rates in writing. Wquently Asked Questions Q. What does my water bill pay for? A. Your water bill covers the following categories costs and services: Annual operation and maintenance of the water system. Including well and pump station operations, water treatment and testing, and water system employee salaries. • City water purchase costs. The City purchases water from the Municipal Water District of Orange County and from the Orange County Water District. Capital improvement projects to repair and replace facilities and equipment to improve the water system safety, efficiency and reliability. No additional debt for this purpose is proposed and all improvements will be paid for with rate revenue. Q. Why do the rates need to be raised? A. Newport Beach is not immune to the increasing cost and scarcity of water over the past several years. Operating expenses, including chemical and electrical costs, have increased by an average of 6% over the last four years. In the last year alone, the cost of imported water increased by 20% on September 1st and will increase by another 22% on January 1, 2011. In addition, capital expenditures are required to maintain the water delivery system. The City has not raised its Water Rates since 2005. The existing rates do not provide enough revenue to meet the expenses necessary to operate the water system to • provide a safe and reliable water supply to City customers for the next 5 years. Q. How is my water bill calculated? A. A customer's water bill (which is a component of the municipal services statement sent to City water customer's periodically) is calculated by the sum of a fixed service charge, which is based on the customer's meter size, and the water usage fee, which is calculated based on the amount of water. used by the customer. See rate tables below. The rate structure in the table below is designed to spread the costs of providing water system amo, the system's users fairly and equitably. The costs associated with City's water system are made up IN, expenses associated with operating and maintaining the system, capital costs associated with rehabilitating and expanding the system, and commodity charges associated with acquiring water supplies. The City's rate structure is designed to encourage conservation by including a portion of operations and maintenance costs in the commodity charge, even though many of these expenses may not be directly dependent on water usage. Thereby, a greater proportion of a customer's bill reflects water usage, which encourages conservation because a customer can reduce his or her bill by using less water. This proposed blend of the costs between variable and fixed revenues (70% fixed 130% variable) ensures revenue stability while also encouraging conservation. The following is a breakdown of each component: 1. Water Usage Fee (Variable): Shown on the bill as 'Water Usage HCF ", this charge is geared primarily towards recovering the costs associated with City water purchases, treatment, and distribution costs. In the proposed rate, 70% of the total revenue will come from this charge. This charge is based on the amount of water used and is calculated by multiplying the number of hundred cubic feet units (HCF) of water used by the unit rate per HCF. 2. Water Service Charge (Fixed): This charge is designed to recover (a) the costs of reading, maintaining, and replacing the meters and (b) the costs of capital improvements. The revenues derived from the capital component are to be used for repairs and improvements to the water system identified in the water master plan. In the proposed rate, 3046 of the total revenue will come from this charge. The charge is based on the customers water meter size. Most single - family residential properties have a 5/8 -inch or 3/4 -inch meter. • Proposed Water Rates Current & Proposed Water Usage Fee (cost per HCF) Need More Information? If you have questions, please call George Murdoch, Utilities Director at the following number: (949)644 - 30111287778.1 • Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.08 $2.20 $2.46 $273 $2.96 $3.08 Current & Proposed Water Service Charge Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 518° or 314" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $ 17.27 1" $5.50 $13.78 $21.82 $25.19 $27.72 $28.79 1 112" $7.00 $27.55 $43.64 $50.38 $55.43 $57.58 2" 49.50 $44.08 $69.82 $80.61 $88.69 $92.12 3" $18.00 $82.65 $130.91 $151.14 $166.30 $172.73 4" $25.50 $137.75 $218.18 $251.90 $277.16 $287.88 6" $38.50 $ 275.50 $436.37 $503.81 $554.32 $575.76 8" $45.00 $440.80 $698.19 $806.09 $886.91 $92122 10" $45.00 $792.34 $1,254.98 $1,448.95 $1,594.22 $1,655.90 12" $45.00 $1,274.47 $2,018.64 $2,330.61 $2,564.27 $2,663.48 Need More Information? If you have questions, please call George Murdoch, Utilities Director at the following number: (949)644 - 30111287778.1 • • • 0 City of Newport Beach Water Utility Financial Plan September 8, 2009 Pathways to Lasting Solutions 2 Why do we need to increase rates? 1. Last rate increase was in 2005 4s. Operating expenses have increased on average by ~6% annually for the last 4 years ■ Chemicals and electricity are a major driver " 2009 through 2014 CIP totals $13.9 million Pathways to Lasting Solutions Mp. 11 0 Why do we need to increase rates? 4. Purchased water costs are rising rapidly ■ Imported Water (MWDOC) • Average unit cost of imported water has risen 29% since last rate increase • 20% MET rate increase 9/09, 22% 1/11 ■ Groundwater (OCWD) • Average unit cost of groundwater has risen 38% since last rate increase ■ Basin Pumping Percentage to be reduced • City will have to rely on more expensive imported water 3 Pathways to Lasting Solutions Projected Purchased Water Average Unit Costs MWDOC ($/AF) OCWD ($ /AF) 319 361 364 382 397 408 Weighi, Average 41,E ,_. ,:.1Q' I. 62 .61� 633 669. OCWD 28% 111h�ttl1r�Fa$��. AF = Acre Feet; 325,850 gallons 4 • Pathways to Lasting Solutions • 0 0 Projected Operating Expenditures E Purchased Water - MWDOC Purchased .Water -OCWD Utilities Salaries & Benefits Equipment Maintenance & Replacement Other O &M Total Percent Change $ in thousands 5 F Y-20.09 FY Qf0 FY2091 FY Dh2 FY2013 $ 3,354 $ 4,931 $ 5,991 $ 6,440 $ 6,762 3,857 .3,922 31947 4,081 4,232 1,325 1,322 1,440 1,549 1,692 4,319 4,491 , 4167.1 4,858 423 444 467 490 514 3;529 3,$56 419 4,x'91: 4.;$53 $ 16,690 $18,794 $ 20,494 $ 21,722 $ 22,911 Pathways to Lasting Solutions FY-9014, $ 7,100 4,351. 1,851 .5,052 -MOI 5,250 $ 24,144 5% I Current Financial Outlook $30.000 520.D00 5, 0.000 50 2009 410.000 420.000 .530.000 - 540.000 Cash•fund.dCaptU siamoss Ope+etlng Expenditures $ in thousands 2010 ` ` „ 2012 2013 2014 _y _ _ `may E.tsdng D.btSsNIa t R.v.nua ($27.9 million) COMMON PurchesedWater• OCWD rear purchased Water• MWDOC —e — Target Res.nes —..- Ending B.t.nce I MF . . ,Pathways to CI 0 0 Current. Financial Outlook $2.6 million loss anticipated for FY2009 Reserves will be exhausted by end of FY201- 1 CIP not adequately funded 7 Pathways to Lasting Solutions Financial Planning Objectives me Directed by Finance Committee to: ■Draw down reserves to minimize "rate shock" ■Meet reserves by FY2014 ■Increase fixed charge revenue to improve revenue stability Ensure CIP is adequately funded ■Establish dedicated capital charge 8 •Pathways to Lasting Solutions C� 0 0 Proposed Financial Plan 535,000 $30,000 s2s.000 520,000 — $15.000 510.000 $5,000 so $ in thousands 9 98.9 million 2009 2010 2011 2012 2013 2014 Cash- Funded Capbal Eklsdnp Dablsarvka r ra PurChasad Watlr -OCVJD arses PurChatad VVatsr -MV=C ��0Paratlny ExP4ndturas — 41--Ravanuoa Target Rnuves —A- Ending B4unoa Pathways to Lasting Solutions 10 Proposed Financial Plan • Loss is eliminated by FY2011 • Target reserves are met by FY2014 • CIP adequately funded beyond 5- year financial plan 0 0 Pathways to Lasting Solutions • Proposed Rates • 0 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $ 2.08 $ 2.20 $ 2.46 $ 2.73 $ 2.96 $ 3.08 Monthly Meter Charge FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 3/4" $ 4.50 $ 8.27 $ 13.09 $ 15.11 $ 16.63 $17.27 1" 5.50 13.78 21.82 25.19 27.72 28.79 11/2" 7.00 27.55 43.64 50.38 55.43 57.58 2" 9.50 44.08 69.82 80.61 88.69 92.12 3" 18.00 82.65 130.91 151.14 166.30 172.73 4" 25.50 137.75 218.18 251.90 277.16 287.88 6" 38.50 275.50 436.37 503.81 554.32 575.76 8" 45.00 440.80 698.19 806.09 886.91 921.22 10" 45.00 792.34 1,254.99 1,448.95 1,594.22 1,655.90 12" 45.00 1,274.47 2,018.64 2,330.61 2,564.27 2,663.48 Effective January 4 of each year 11 Pathways to Lasting Solutions J N 0 1 m N O N m rn tQ L C O 3 fn Percent of Taal SFR Bills so s1 S2 $3 s+ S5 tB $7 $8 $9 210 211 212 213 $14 •� 215 $16 0 217 ao>_ 0 219 3 $20 3 g $21 g o'o aC 222 ■ 7 o v 223 ■ $24 ■ o m f 225 ■ 228 s _ $27 t $28 r $29 t S30 S31 S32 $ 33 S34 235 238 $37 t $38 $39 $40 t More O Q b` N W A (n O1 V WS CSp de iR ti; 29 at 3e A CumLiAaliw Percentageof Bills m 8 cn ra mn ■ ■ri ■ rra tfi �A f �2 (D z io Pr z 10 OI 0 • • Questions &Answers September 8, 2009 MP Pathways to . . 19 0 The City of Newport Beach receives its water from two primary wtrI771VE D 1. Groundwater from the four City owned wells in Fountain I C 2. Import water supplied by the Metropolitan Water DistricH� I ff , rcy ��dg�lrough the Municipal Water District of Orange County (MWDOC) ! Currently 62% of the City's water supply is from our groundwater sm�ceds�.while the remaining 38% is purchased from MWDOC. The percentage of water from our groWdwateFesource is based on water available in the underground water basin managed by the Orang%ouhty Weter'Dks dct (OCWD). Facing a third year of below average rainfall, the basin levels continue to ddrop. The amount of water we pump from the basin has been reduced this year by 7 %, following a reduction of 5% from the previous year. MET has experienced water supply issues not only from the lack of rainfall but by a court ordered pumping restriction from the Sacramento -San Joaquin Delta in an effort to protect endangered species. Prior to the cutbacks from the Delta, MET received nearly half of its water from Northern California through the California Aqueduct and the remainder from the Colorado River through the Colorado River Aqueduct. As a result of these cutbacks and lack of rainfall, MET has imposed water allocations (set at 15% reduction) for the first time to all agencies it serves in Southern California. These allot ns took effect July 1, 2009. Should the City not meet these reductions, MET will charge approximate' nreen times the standard rate for water. / How is my water bill calculated? � , 16 .55 -t,, A customer's water bill is ap component of the nicipal se A ement t tq City a customers. Each bill will have two components: �f� Water Service Charge (Fixed): This char4sors/bas>sd i single - family residential properties have a 3/4, r 1 inch the costs of reading, maintaining, and replac a wat a capital component. The capital compon s to b; water system identified in the Water Master P p. 2. Water Usage Fee (Variable): This charge is sed on the by multiplying the number of hundred cubic units WC One HCF is equal to 748 gallons. This ge is r associated with City water purchases, treat nt, an istril In an effort to promote water conservation, the water conservation rate structure as a structure Most designed to amount of water used and is calculated t r use it er HCF. tow r cos s ution costs. onservation Council defines a i' um %70%- af•� total revenue from water usage fees. The idea behind the structure is tjaMs bus ome 's usage increases, so does the cost; thus incentivizing and encouraging conservation. Approximately 70% of the proposed total r e e collected from the water bill comes from the Water Usage Fee and 30% of tole) revenue comes fr�m1he Water Service Charge. The following table displays y s for ,pac compgflent u it th 1 f m1 he How can I find out how the rate change affect m J(�// 1 A. Start by looking at your Municipal Services Statement (a sample h een provided). You'll see a notation like "W ater meter ur home or business is %" meter. Next, ok at the "Current and Proposed W er Rates" c a on this n a %" met , the rate will go from $9.00 for ea 01 d to Us' g the same sample provided, if you used a me 18 H of w t our tot far at r (" ATER USE HCgF "), would up from $37 $ fo twl�io nl�!/ m nthl meter charge will o u more than t{{����p �aaaa care un r the ¢o os r t s. ��II If ou still have questions about how your bill might d, call ore the ity using the n mber or a ress at the end of this notice. 3v ff,4,0"1 .2`' . e: 00 �/)01, r Pao osed Water Rate Increase Notice of Public Hearing and Protest Procedure NOTICE IS HEREBY GIVEN that on Tuesday, November 10, 2009, at 7:00 p.m., a public hearing will be conducted in the City Council Chambers (Building A) at 3300 Newport Boulevard, Newport Beach, CA 92663. This will be a public hearing before the Newport Beach City Council to allow public testimony and discussion of the proposed water rate increases described within this notice. The City Council will take written and oral comments that evening. They will also consider all written protests against the proposed charges, determine if a majority protest exists, and consider resolutions to adopt the water rate charges. How to File a Written Protest Written protests must be filed with the City of Newport Beach City Clerk. Written protests may be hand delivered or mailed to the City Clerk at 3300 Newport Boulevard, Newport Beach, California 92663. To be valid, written protests must state opposition to the proposed water rate increase, identify the parcel (by assessor's parcel number or street address), and include the original signature of the water service customer or property owner. Written protests may be submitted up to the conclusion of the public testimony at the public hearing on November 10, 2009. About Proposition 218 In November 1996, California voters approved Proposition 218. As a result, California agencies must comply with its requirements when setting utility rates. One provision requires that a noticed public hearing on utility rates be held and that rates not be increased if a majority of affected property owners protest the increased rates in writing. Frequently Asked Questions Q. What does my water bill pay for? A. Your Newport Beach water bill covers the following categories costs and services: • The annual operation and maintenance of the water system, including well and pump station operations, water treatment and testing, and water division employee salaries. • The cost the City incurs to purchase imported and groundwater. The City purchases imported water from the Municipal Water District of Orange County and groundwater from the Orange County Water District. • The repair and replacement of pipes, pump stations, facilities and equipment to improve the water system safety, efficiency and reliability. No debt for this purpose is proposed and all improvements will be "paid as we go" with rate revenue. Q. Why do the rates need to be raised? A. Newport Beach is not immune to the increases in delivery costs and the scarcity of water seen throughout California over the past several years. Operating expenses, particularly chemical and electrical costs, have increased by an average of 6% over the last four years. This year the cost of imported water increased by 20% on September 1, 2009 and will increase by another 22% on January 1, 2011. In addition, capital expenditures are required to maintain the water delivery system. The City has not raised its water rates since 2005. The existing rates do not provide enough revenue to meet the expenses necessary to operate the water system to provide a safe and reliable water supply to City customers for the next five years. The need to balance the revenues with the purchase water costs, operations, maintenance, and capital improvement expenditures is a necessity. In addition, reserve levels have fallen below Council policy levels. It is the goal to establish full reserve levels by the year 2014. (, /1,I/o� RECEIVED 3bo� zm9 ��� 10 �� 9: 19 C.=F ]E OF THE tY CLER �,�QF " e 47te Altet-iu,01� A4714 9 Riw �iG� �iD Gtr .itcE Vitt `L�Gea �?�fr�raiL��ix" !3p/Gc4�D �iyto C� Covenant Group 2, LLC RECEIVED 20 NOV 10 PM 2: 09 C'fiwE OF TF'-= CITY CLERK CITY C"' ' "''.FORT BEACH November 3, 2009 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 Re: Protest of Proposed Water Rate Increases 1724 E. Oceanfront Ave. 1735 E. Ocean Blvd. 2156 E. Ocean Blvd. Dear City Clerk: As property owners, we hereby protest the proposed water rate increases by the City of Newport Beach for the above referenced property locations. Our position is that the City government must be fiscally responsible for managing its costs in other areas and not rely on rate increases that place a burden on property owners. We sincerely hope that the City Council will avoid these types of increases now and in the future. Thank you. Since a} , ep -E. horn Man Bing Member 2860 Michelle Drive, 2nd Floor, Irvine, CA 92606 Tel: (714) 508 -3600 Fax: (714) 368 -2060 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA. 92663 November 10, 2009 RECEIVED 2w 110V 10 P3 4* 30 OFFICE OF T C, ilY CLEW CITY CF _ .= ?.T PRAH This letter is to protest the proposed monthly water service charge increase. My name and address is as follows: Eugene S. Rhodes, 3900 Park Green Drive, Corona del Mar, CA. 92625. It's obvious that there is necessity for an increase, but your proposed increase is ridiculous, particularly considering the difficult financial times that we are currently in. I also see this increase as another way to chase businesses out of Newport Beach. Sincerely, Eugene S. Rhodes j0;3-oq o v � iv 7c-LA Lt6 �1�,r/ iI -J()- / /-� 10-07 N 8 � �= o m mn C =r w O EVENED iU I l � Io j �� f 4, zt)t�-�o � -w RECEIVED CAROL KEILIN 2f9 OCT 20 PM 9:4& P. O. BOX 7082 PORT BEACH, CA 92658 OFFICE OF (949)760 -8582 THE CITY CLERK CITY C. t`,_,!PORT BEACH City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 Re: Proposed Water Rate Increase - Protest 2042 Vista Cajon Parcel 440- 352 -08 DearSirs: RECEIVED 70 OCT I' PM 9. 57 OFFICE OF THE CITY CLERK CITY OF 1d_;. M E=ACH This letter is written in protest to the proposed water rate increases due to be discussed at the public hearing on November 10, 2009. 1 would expect and would be comfortable with a moderate increase, but those outlined in the notice I received seem to me to be extremely high and abusive. In the example given in the notice, the Illustration of current usage was a sample usage of 18 HCF, yielding a 2 month total charge of $46.44. Under the proposed water rates, the same usage in 2 years would yield a 2 month charge of $70.46, a 51.7% INCREASE of $24. And in the 5th year, the same 18 HCF usage would cost $89.98 -- $43.54 and 93.7% ABOVE and ALMOST DOUBLING current charges. Perhaps the City Council will reconsider the dollars involved and mitigate the damage with a reasonable increase. I certainly hope that you will give this serious thought. Your truly, Carolyn B. Kellln 2042 Vista Cajon Newport Beach, CA 92660 fe-5 j off, 0 w F5 U III Ir m b 4 Ewi t- CD 0 8 N (341�e� y -; leo� eote�� eel- .T_ w _ m U� �L OCT 3 2009 214 Via Dijon Newport Beach parcel number 423 - 155 -04 Dear Sir: RECEIVED 2919 OCT -8 AM 9- 06 OFFICE OF THE CITY CLERK CRY OF NBIRORT BEACH I am writing to protest per Proposition 218 the very substantial increase in water rates as many of the property owners are already facing significant hardship. William) t> e RECEIVED (t� Brian H. Ouj a$ pM g: 06 P.O. BOX 54, Newport Beach, CA 92662 -0054 Email brian.oci sbc loW Tel to -8 8- Fax II 3 3 3571 ®rO , �B�CH October 6, 2009 City Council Members And City Clerk City of Newport Beach 33oo Newport Blvd. Newport Beach, CA 92663 RE: Proposed Water Rate Increase Dear Council Members and City Clerk: This is to OBJECT to the proposed water rate increased proposed in your recent notice. The rates are ill- timed, misguided, and excessive. I own two residential properties in the City; 1107 Balboa Ave, 92662, and 1222 E. Balboa Blvd, 92661 (this, formerly billed to Alice Ouzounian, recently deceased). The current recession demands more prudent approaches to all city services and especially relief of water rates to homeowners, not more burden. There appears to be a mounting practice to place city wide increases on the backs and wallets of property owners, especially homeowners, which is unfair and not reasonable. Visitors to our city are great in numbers and should be shouldering the burden via other means of levy. Additionally, the rate of increase is large and accelerated as the schedule of years to come indicate. We residents continually conserve and attempt to maintain our homes for a "water tight" condition and low use, year after year. We are asked to keep cutting back and conserving yet years past we have done so without rate relief consideration when the State is flush with water. Consider the year recently of 38" of rain for a season; nowhere was a return of lower fees considered. Considering the great financial position that our city is in due to prudent financial operations, it is highly recommended that this proposed rate increase be rescinded, especially for residential property owners. r Sinc f� � Brian H. Our ounian 10/06/2009 City of Newport Beach City Clerk 3300 Newport Boulevard Newport Beach, CA 92663 RECEIVED 2M9 OCT -8 AM 9� 06 OFFICE OF THE Ci T Y CLERK CITY OF N! 11PORT BEX H We, Kurt Kawohl and Inge Kawohl, residents of 2111 Yacht Wanderer, Newport Beach, CA 92660, hereby state our opposition to the proposed water rate increase. - .fc_____--- 4 _ - - - - - -- Kurt Kawohl •'J UIGZ- -- ---X Inge Kawohl Acct. #4503360 -04 2111 Yacht Wanderer Newport beach, CA 92660 i, City of Newport Beach, City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 Opposed to the proposed water rate increase Parcel #047-032-12 Owner: Matt Smith RECEIVED 2m9 OCT -7 AN I: 49 OFrICE OF THE GR CLEW CITY (),= t ''', ?0AT GM The proposed plan is too aggressive with increases in pricing ... In 5 years, under the proposed plan the pricing for both the water service charge and water usage fee double. If they continue to double every 5 years we are headed down a slippery slope. October 5, 2009 City of Newport Beach Attn: City Clerk 3300 Newport Blvd. Newport Beach, Ca 92663 Re: 615 Bay Hill Drive Dear City Clerk, RECEIVED 20 OCT -7 AM 8- 49 OFFICE OF THE OTY CLERK CITY OF BEACH I understand that The City of Newport Beach is considering raising the water rates and I am writing to protest this decision. As a homeowner in Newport Beach, in these economic times it is hard enough to pay my mortgage, let alone an increase in my water rates. And, the increase you are proposing would almost double my rate in 2010 and then continue for the next 5 years. How do you know what your expenses are going to be in 3, 4 or 5 years? This is not the way to run a business or government, you need to reconsider your decision. Sincerely, Marcia Rosenberg 615 Bay Hill Drive Newport Beach, Ca. 92660 City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 Attention: City Clerk RECEIVED 2109 OCT -7 AM 8� 49 C; FILE OF Fir � Re: Protest To Proposed Water 8 _ i, _ i . N218). October 3, 2009 This letter is being submitted in opposition to the proposed water rate increase, which indicates nearly a 50% increase over the next five years. Please notify me if you require any additional information in regards to this protest. Sincerely Wd E. 312 Lugonia St. Newport Beach, CA 92663 949 645 5356 a ar �L� r C� �1tW°�Rr City of Newport Beach P.O. Box 1768 c „o, •� Newport Beach, CA 92658 -8915 W P- I v -c� NPZ0922A AUTO 5 -DIGIT 92662 7000018680 01.0054.0144 18680/1 ilunull�rdinggnlhnlu�drluru�lll�l�l�ll JON J VISEL 204 APOLENA AVE BALBOA ISLAND CA 92662 -1216 RECEI�/ED pko� " f , 3* 21 t 'CE OF THE CITY CLERK CITY F';'DNPCRT BEACH City of Newport Beach Information and Notice of Public Hearing Protest Procedure of Proposed Water Rate Charges lo�q /o 9 �' RECEIVED 7L09 OCT 15 APB IO- 16 �. cc uyf7 C RCE OF CITY,C� ' . -" ,"ORT BEACH �3 TA4� 1 -v RECEIVED Zm9 OCT 15 M D 16 C =RCE OF TI; M CLERK CITY CF P:EVORT EEK, H Dear City of Newport Beach, 700 Malabar Corona Del Mar, CA ;2625 1042/2009 I am opposed to the proposed wEter rate increase. /, Sincerely, 0 Jocelyn Dougherty (Gjj w Parcel # 934 - 610 -40 2704 Hillside Drive, Newport Beach, 92660 Before doubling our water rates, try and be more creative with the citizens of Newport Beach. Water rationing would be a good way to begin. Tax the ones that are abusing the water shortage. Let the ones that are making a conscious effort at saving water be rewarded by keeping their rates at the normal level. In these times, it's simply unethical to be asking the citizens to cough up more money when money is so scarce. And many households are out of work. Let's be more user - friendly and think of ways that won't increase our rates. I, for one, am only flushing the toilet every 3rd time as long as it's yellow! I turn off the water when brushing the teeth. I sweep the driveway and patio and only rinse occasionally with the hose. I water the garden only 2x's a week. So, I should be rewarded for my effort in this situation. Patricia Knapp 1 o M T. C)�m l/1 rn U KLEIN & WILSON BUSINESS TRIAL LAWYERS A Partnership of Professional Corporations 326 Old Newport Boulevard Newport Beach, California 92663 Telephone (949) 631 -3300 Facsimile (949) 631 -3703 November 2, 2009 City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 Re: Proposed Water Rate Increase Dear Sir or Madam: RECEIVED zo NOV -A All 9: 03 OFHCc OF VAi& iIson.com GAY Cr BEAD Fi This letter is in response to the proposed water rate increase and notice of public hearing. My office is located at 326 Old Newport Boulevard, Newport Beach, California, opposes proposition 218 and the related proposed water rate increase. Klein & Wilson encourages the City Council to reject the water rate increase. Sincerely, *bf Mark B. Wilson COR09/028• October 27. 2009 City of Newport Beach City Clerk 3300 Newport Boulevard Newport Beach, CA 92663 Subject: Proposed Water Rate Increase Dear City of Newport Beach City Clerk, I protest the City's proposed water rate increase. RECEIVED 2109 OCT 29 AM 9= 13 C`FICE OF TINC CITY CLEFX CITY 0= " :" PORT REACH Based on your Sample of Rates attached to your Notice of Public Hearing and Protest Procedure, my Monthly Water Service Charge will increase by over 524% from 2009 to 2014. To say that a 524% increase is ludicrous is an understatement by anyone's statement. The City's Notice states that the City's chemical and electrical costs increased by 6% and its imported water increased by 20 %. Neither of these costs added to capital expenditures could approach a 524% rate increase. Part of the City's responsibilities is to contain all costs associated with its water delivery and not raise rates. The City cannot expect its customers to bear a 524% rate increase while every other business is reducing costs and prices to remain in business. Additionally, every other business in the City continues to be adversely affected by the recession causing them to reduce employment, renegotiate contracts to lower their expenses and incur financial losses. How can the City propose a rate increase in a recession, with over 12% unemployment and no end in sight? For all of these reasons, I protest the City's plan to increase water rates. Sincerely, Charles T Polce, Jr. 514 Y2 Narcissus Corona Del Mar, CA 92625 �.7 /4" -Z i _ ez I ,q L1,64 FROM HUGUETTE WILSON 4809 RIVER AVE., UNIT "A" NEWPORT BEACH CA., 92663 949 - 645 -9466 TO: CITY OF NEWPORT BEACH CITY CLERK 3300 NEWPORT BLVD. NEWPORT BEACH CA 92663 RE PROPOSITION 218 THIS IS A WRITTEN PROTEST TO THE PROPOSED WATER RATE INCREASE I OPPOSE THE INCREASE IN WATER RATE FOR THE ABOVE PROPERTY. I OWN THE ABOVE PROPERTY AND LIVE AT THE ABOVE ADDRESS AND I ALSO PAY THE WATER BILL FOR THIS PROPERTY. SIGNED: SINCERELY HUGUETTE WILSON HUGUETTE WILSON 10/19/2009 N 8 0 T CJ�m N m C7 A i Q �\ Z 0 co 10/19/2009 Page I of 1 From: "Huguette Wilson" <huguettewil @yahoo.com> To: "MGMT MGMT' < angie@ diversifiedrealpropertymgmt.com> Sent: Friday, October 16, 2009 6:59 PM Subject: REMATER RIVER ANGIE: THIS IS ANOTHER LETTER I WOULD LIKE TYOU TO PRINT FOR ME. THANK YOU SO VERY MUCH FOR YOUR HELP FROM HUGUETTE WILSON 4809 RIVER AVE., UNIT "A" NEWPORT BEACH CA., 92663 949 - 645 -9466 a TO: CITY OF NEWPORT BEACH CITY CLERK ��o o rn 3300 NEWPORT BLVD. °y - NEWPORT BEACH CA 926563 _ �C) RE PROPOSITION 218" o = o THIS IS A WRITTEN PROTEST TO THE PROPOSED WATER RATE INCREASE �J I OPPOSE THE INCREASE IN WATER RATE FOR THE ABOVE PROPERTY. I OWN THE ABOVE PROPERTY AND LIVE AT THE ABOVE ADDRESS AND I ALSO PAY THE WATER BILL FOR THIS PROPERTY. SIGNED: SINCERELY HUGUETTE WILSON HUGUETTE WILSON 10/19/2009 wv City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA. 92663 October 20, 2009 To: City Clerk: Re: Opposition to water rate increase RECEIVED M OCT 22 AMD08 Grr-wE OF 1� Garr CLEF CITY 0 ' _ ", BOAT F= ,;H We object to the proposed water rate increase. We are retired and this price increase will be a financial problem for us. Parcel Number: 936 - 460 -24 41 Monaco Richard Ting V-"'vv z' `�v RECEIVED CITY OF NEWPORT BEACH ATTN: CITY CLERK M NOV -G AM IO 3300 NEWPORT BLVD NEWPORT BEACH. CA 92663 C'hvt Vi THE CITY CERK AS A LONG TIME RESIDENT OF NEWPORT BMI,OPFgp , ;I WATER RATE INCREASE. OUR STATE IS BEING HIT WITH LL OO MANY W TAXES AND THIS WILL BE ONE MORE THAT THE CITIZENS DO NOT NEED. THE WATER DEPT. NEEDS TO TIGHTEN ITS BELT LIKE THE REST OF US ARE DOING. MY HOME ADDRESS IS 53 HARBOR RIDGE DRIVE IN NEWPORT BEACH 92660 JOHN J. GATES - /0 / d Y,4, CITY OF NEWPORT BEACH ATTN: CITY CLERK 3300 NEWPORT BLVD NEWPORT BEACH. CA 92663 AS A LONG TIME RESIDENT OF NEWPORT BEACH I OPPOSE THE WATER RATE INCREASE. OUR STATE IS BEING HIT WITH ALL TOO MANY NEW TAXES AND THIS WILL BE ONE MORE THAT THE CITIZENS DO NOT NEED. THE WATER DEPT. NEEDS TO TIGHTEN ITS BELT LIKE THE REST OF US ARE DOING. MY HOME ADDRESS IS 53 HARBOR RIDGE DRIVE IN NEWPORT BEACH 92660 C.S. GATES DANIEL C. LORTI RECEIVED 50 Ridgeline Drive Newport Beach, California 92660 Zm9 0 T o l 1 J 9 O$ Tel: (949) 640 -4298 Fax: (949) 706 -9890 e-mail: dilorti om Thy CiiY CLERK CITY OF Al TORT EEA(,H October 16, 2009 City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 Re: Water Bill Rate Increase; Parcel Number 936-460-60 I wish to file a protest that I am strongly against the proposed water rate increase. We are retired and have seen our retirement funds shrink over the past 18 months while utility rates continue to increase reducing my quality of life. We are already considering selling our home to use the equity for our remaining years. We can only hope that you will consider our opposition at the November Council meeting. We know we're not alone in this city with a financial problem. Sincerely, pz-40--It� Daniel Lorti November 3, 2009 The Newport Beach City Clerk 3300 Newport Boulevard Newport Beach, CA 92663 RECEIVED 20 NOV -5 AN 9: 38 THE CITY CLERK CITY CF ""'"PORT BEACH Re: Protest against proposed water rate increases As a resident of Newport Beach, CA, I hereby submit this written protest against the proposed water rate increases for which a public hearing is scheduled for November 1o, 2009. My protest is primarily against the proposed exorbitant and unprecedented 384% increase in the Monthly Water Service Charge over the next few years. The information in my possession supports the fact that these increases are based primarily on increased rates proposed by MET /MWDOC, and that those increases are due to proposed increases in expenses which are not directly related to water acquisition and delivery. M yYZ Michael G. Jacobs 647 Vista Bonita Newport Beach, CA 9266o Parcel # 440- 124 -05 To: City Clerk: City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 From: Donald J. Shergalis 1608 Dover Dr. Newport Beach, CA 92660 RECEIVED Date: Oct. 26, 2009 2019 OCT 28 AM 9. 03 OFACE OF THE CITY CLERK CRY OF ; !EEVPORT BEACH Subject: Protest of Proposed Water Rate Increase Sirs: I am a property owner and resident of the City of Newport Beach, California. I am opposed to the planned Water Rate Increase as stated in the City of Newport Beach Public Hearing Notice for November 10, 2009. I am the Property Owner and water service customer of parcel number 117- 491 -08 located at the above listed street address. Signed: >r,�t� �� G J c Donald J. Shergailis, Property O er LW /i!r /� • d ' i N i . n ME Mark B. Wilson 427 El Modena Avenue Newport Beach, CA 92663 November 2, 2009 City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 Re: Proposed Water Rate Increase Dear Sir or Madam: RECEIVED 949 - 631 -33 O�FICE CF THE CITY CLE-X CITY 0' 1'0,"OORT ffkH This letter is in response to the proposed water rate increase and notice of public hearing. I reside at 427 El Modena Avenue, Newport Beach, California, and I oppose proposition 218 and the related proposed water rate increase. I encourage the City Council to reject the water rate increase. Sincerely, Mark B. Wilson WMACox091012- JLt ciiazl Cpl-4L (.itsz Adx t u �= 4 m C?z -L�� n N nT C) rn CD p .= RECENED 2�q CCT -6 AM 9.05 1845 Port Barmouth P Newport Beach, CA( 1 October 2009 Cl� CF CkiT BF City of Newport Beach City Clerk Newport Beach City Hall 3300 Newport Boulevard Newport Beach, CA 92663 To Whom It May Concern: This letter is to register our written protest against the proposed water rate increase described on the enclosed notice. While the costs of water are undoubtedly going up and some increase is probably justified, this proposal would nearly quadruple monthly water service charges by 2014 for 5/8" or 3/4" (residential) customers, while increasing the cost per hundred cubic feet by 50% over the same period. This huge increase, in our opinion, is far more than is absolutely necessary to cover actual cost increases, and should not be adopted, especially at this time of economic hardship when members of our community are facing layoffs and having difficulty holding onto their homes and businesses. The Water Department should be asked to re-work their proposal and come up with something more reasonable. Thank you for the opportunity to express our opposition to this proposal. Sincerely, � ilvJCU- c,T�J��C1 Howard D. Mirowitz Property Owner 1845 Port Barmouth Place Newport Beach, CA 92660 n e Xf Ellen C. Mirowiitz Property Owner 1845 Port Barmouth Place Newport Beach, CA 92660 J �b SAMPLE MUNICIPAL SERVICES STATEMENT Route: 010 SERVICE PERIOD: 06/18/09 to 08/13/09 Current Reading: 796 WATER CHARGES: QTY: RA TOTAL: WATER USE HCF 18.00 52.08 $37.44 ?ndATER SERVIC .75" 0 59.00 $9.00 This is where to find vour meter size. Current and Proposed Water Rates Monthly Water Usage Fee (cost per HCF) This is how much water you used. Current 1 2 3 4 5 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Commodity Charge $2.08 $2.20 $2.46 $2.73 $2.96 $3.08 Monthly Water Service Charge Current 1 2 3 4 5 Combined Fixed Charges FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 518" or 3/4" $4.50 $8.27 $13.09 $15.11 $16.63 $17.27 1" ----------------------------------------------'------------------------------------- $5.50 $13.78 $21.82 $25.19 $27.72 --------------------- $28.79 --- - - - -- -' 11/2" $7.00 $27.55 $43.64 $50.38 $55.43 $57.58 2" $49.50 $44.08 $69.82 $80.61 $88.69 $92.12 3" $18.00 $82.65 $130.91 $151.14 $166.30 $172.73 4" $25.50 $137.75 $218.18 $251.90 $277.16 $287.88 6" $38.50 $275.50 $436.37 $503.81 $554.32 $575.76 8" $45.00 $440.80 $698.19 $806.09 $886.91 $921.22 *10" 545.00 $792.34 51,254,99 $1,448.95 $1,594.22 $1,655.90 1.12" $45.00 S'1,274.47 S2,018,64 $2;330.61 52,564.27 52,663.48 * Currently, all water meters sized 10 inch and above are owned and used by the City of Newport Beach. However, Proposition 218 requires the City to list these charges should a customer obtain this size of meter in the future. For more detailed information regarding the proposed rates or Utility Financial Plan, please visit our web site at: wv vw.newportbeachca.00v /WaterRates Need More Information? If you have questions, please call George Murdoch, Utilities Director at (949) 644 -3011 or e -mail at utilitieshelp (a)newportbeachca.gov . RECEIVED 610 Poinsettia Ave Corona Del Mar, CA92625 70 OCT —6 M 9, 06 October 1, 2009 OFFICE OF THE CITY CLERK Newport Beach City Clerk CITY OF 1,- 3vPORT BEO 3300 Newport Boulevard, Newport Beach CA 92663 Subject: Proposed Water Rate increasing the cost of Water and the Service. As I calculate the propose increase you propose increasing the service charge, 250% FY2010, 150% FY 2011, 115% FY 2012, 110% FY 2013, and 103% 2014. Additionally the cost of water would increase by approximately 150% in the five year period. Your suggested increases are way too much and completely unacceptable. Ordinary people, young families and senior citizens cannot afford Increases like this. Let me suggest some changes that would reduce or even avoid increases. (1) We are in the worst recession since the great depression. I suggest the first thing to do is re- examine your budgets and reduce your expenditures by at least 10% (2) Instead of reading water meters bi- monthly, read them quarterly. (3) Gradually change out existing water meters to electronic that can be read and billed off a computer. (4) Recycle used water. (5) Increase your efforts to encourage conservation. Think smaller. Work with less. Thank you. Sincerely, Derek M. Torley ' k6 z 10/2/09 RECEIVED 29 OCT -6 dN g 06 1, Joel Nelson, a resident living at 2116 E. Balboa Blvd., Newport Beach Ca. 92661, FORMALLY PROTEST, AND OPPOSE the propos&[FQilVr increase as referenced by the Notice of Public Hearing on this JF LQTYCLERK BEACH Joel Nesson Niall Saunders and Lavinia Chong RECEIVED 1720 Port Stirling Place, 2l9 OCT -5 Ate 10: 02 Newport Beach, California 92660 Tel: (949) 640 1390 September 28, 2009 City Clerk 3300 Newport Blvd., Newport Beach, CA, 92663 Re: Proposed water rate increase Dear Sirs, F;CE THE ;TY CLERK CITY OF r;- "FORT BEACH We wish to file a protest against the proposed water rate increases. Firstly, we feel the increases in the monthly water usage or commodity fees are excessive at 6% (first year) and over 10% for the following years. This results it a 50% increase over the 5 years and no guarantee of a price halt at that point. Secondly, the proposed monthly service charge increases are astronomical, with potential increases of 2,000% over five years. Please explore other means of encouraging water conservation and funding pipe repairs. Sincerely, Niall Saunders & Lavinia Chong RECEIVED 2M9 OCT -5 AM la 03 OFFICE OF THE CITY CLERK CITY 0- Asmw KO Ms. Leilani Brown City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA. 92663 Dear Ms. Brown, Sean Salomon 102 Columbia St. Newport Beach, CA. 92663 seansalomon @gmail.com I am writing to express my opposition to the proposed water rate increase in our city. I believe that the increases are extreme. The water expense increases cited in the notice your department sent out add up to about a 48% increase from 2005 to January of 2011. Yet, the sample services statement sent out with the notice showing the proposed rate increases shows a 400% increase in the amount that the average Newport Beach resident will be paying for water over the next six years. Why is a 400% increase in rates needed to cover a roughly 48% increase in expenses? It just doesn't add up. Rate increases may be a bit easier to stomach once I've been assured that water, and not salaries and pension for unionized water division employees, are what I am paying for. In addition, I find it offensive that the notice sent to my house was so obvious in its support of the increases. I can only hope that it was not a representation of the opinion of every voting member of the City Council. Please share this letter with them and consider it my official protest to the proposed rate increases. Thank You, c, Sean Salomon J [,rt� ID, � - 4 (REC �E(I�VED "SQ&kL'+- C�4m Qp -5 m004 I UCC OFFICE OF PA o� Cr �� N` L S Q E cm CLERK O Y OF VVPORT BEACH UAkk .� S S(� oc,�,Qd CUA etit Lee fee IVAJ �� o� o„ a a`�DO +� i� S► o� � n � 8 � Loi 5 UM S9 3 I I wau,,� - �02iS �3 WANG K 7 ✓4 DENNIS A. REPP 3419 Via Lido #262 The City of Newport Beach receives its water from two primary water sources. Newport Beach, CA 1. Groundwater from the four City owned wells in Fountain Valley 92663 -3908 2. Import water supplied by the Metropolitan Water District (MET), purchased through the Municipal Water District of Orange County (MWDOC) Currently 62% of the City's water supply is from our groundwater sources while the remaining 38% is purchased from MWDOC. The percentage of water from our groundwater source is based on water available in the underground water basin managed by the Orange County Water District (OCWD). Facing a third year of below average rainfall, the basin levels continue to drop. The amount of water we pump from the basin has been reduced this year by 7 %, following a reduction of 5% from the previous year. MET has experienced water supply issues not only from the lack of rainfall but by a court ordered pumping restriction from the Sacramento -San Joaquin Delta in an effort to protect endangered species. Prior to the cutbacks from the Delta, MET received nearly half of its water from Northern California through the California Aqueduct and the remainder from the Colorado River through the Colorado River Aqueduct. As a result of these cutbacks and lack of rainfall, MET has imposed water allocations (set at 15% reduction) for the first time to all agencies it serves in Southern California. These allocations took effect July 1, 2009. Should the City not meet these reductions, MET will charge approximately three times the standard rate for water. Q. How is my water bill calculated? A. A customer's water bill is a component of the municipal services statement sent to City water customers. Each bill will have two components: 1. Water Service Charge (Fixed): This charge is based on the customer's water meter size. Most single - family residential properties have a 3/4, or 1 inch meter. This charge is designed to recover the costs of reading, maintaining, and replacing the water meters. Additionally, this charge includes a capital component. The capital component is to be used for repairs and improvements to the water system identified in the Water Master Plan. 2. Water Usage Fee (Variable): This charge is based on the amount of water used and is calculated by multiplying the number of hundred cubic feet units (HCF) of water used by the unit rate per HCF. One HCF is equal to 748 gallons. This charge is geared primarily towards recovering the costs associated with City water purchases, treatment, and distribution costs. In an effort to promote water conservation, the California Urban Water Conservation Council defines a water conservation rate structure as a structure that collects a minimum of 70% of the total revenue from water usage fees. The idea behind the structure is that as a customer's usage increases, so does the cost; thus incentivizing and encouraging conservation. Approximately 70% of the proposed total revenue collected from the water bill comes from the Water Usage Fee and 30% of total revenue comes from the Water Service Charge. The following table displays the rates for each component until the year 2014. Q. How can I find out how the rate change affects my bill? A. Start by looking at your Municipal Services Statement (a sample has been provided). You'll see a notation like "WATER SERVICE .75 ". This means that the water meter at your home or business is a '/" meter. Next, look at the "Current and Proposed Water Rates" chart on this notice. If you have a' /4° meter, the rate will go from $9.00 for each two -month perio to $16.54 for ea h two -month period. Using the same sample provided, if you used th e HC o water, your total charge for water use ( "WATER USE HCF "), would go from $37.4 to $39.60 r the two -month period. As you can see, the monthly meter charge will go up more than th odity" charge under the proposed rates. If you still have questions about how your bill might be impacted, call or e-mail the City using the number or address at the end of this notice. /� � 0,� / f. 54 �4 — c+3 4 4 55.4 4 , September 29, 2009 City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 To: City Clerk From: Hannah and Harold Meany 601 Carnation Avenue Corona del Mar, CA 92625 We are opposed to the proposed water rate increase. The proposed combined Fixed Charges appear excessive. RECEIVED M9 OCT ®2 AN 8: 46 OFFICE OF THE CffY CLERIC CITY OF NEWPORT BEACH In the Q and A Section, the question, "why do the rates need to be raised ?" The answer Section does not include activities the water department should do rather than "sit back and raise the rates" Has the Department considered: Freezing employee salaries. I see no reference to the option of using new technologies to desalinate sea water or clean surface water. Please investigate DXV Water Technologies, 1451 Edinger Avenue, Tustin, CA, (714) 258 -8559. See the article in The Orange County Register, September, 6, 2009, Page 10 in the "Local" Section. Sincerely, Harold MMeeany� Hannah Meany J Lb V. 949.675.8835 City Clerk, City of Newport Beach, Ca. Bob McCaffrey PO Box 26 Balboa Island, CA 92662 C. 949.500.5851 I am in opposition to the proposed water rate increase. I own a property at 1410 S. Bay Front, Balboa Island. Ca. Thank you, L Robert McCaffrey RECEIVED F. 949.675.5342 2619 OCT -2 M 8+ 47 September 29, 2009 OFFICE OF CBY OF KWK KkH 4 �� September 27, 2009 City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 I am opposed to the proposed water rate increase. RECEIVED 2W9 OCT - I Am & 53 OFFICE OF CITy THE E4UPORTCLEWBEq H It is apparent that many of the water agencies, water districts and water divisions, within Orange County and the State of California, are politically empowered. It is not apparent that they have the best interests of the residents or water users as a priority. The water bureaucrats seem to be primarily motivated by individual political power and influence, along with individual personal greed and perpetual personal benefits. The City of Newport Beach should not acquiesce to the demands, the mismanagement expenses and the increased charges by the water bureaucracies. The City should represent the best interests of the residents by beginning a campaign for ethical water management, throughout the State, and to protect and remove the State's water resources from political graft and corruption. W 7� Richard Connella 2113 Miramar Dr. Balboa, CA 92661 V i -Y, Marsha & Frank Easterbrook RECEIVE pccort B s Point Lane rt Beach, CA 92660 949.718.0010 2N9 OCT e I AN O+ 55 OFFICE OF THE CI1Y CLERK CITY OF NEWPORT BEACH CITY OF NEWPORT BEACH CITY CLERK 3300 Newport Blvd. Newport Beach, CA 92663 We are residents of Newport Beach and own 2 homes in the area. 3 Cypress Point Lane, 92660 & 1505 Miramar Drive, 92661 September 29, 2009 We are very opposed to the proposed Water Bate Increase. The Municipal Services Statement sample indicates a 284% increase within the next five (5) years. This is extreme! There are other cities in Orange County who have implemented water rationing. Why has this not been done in Newport Beach? Those home/business owners who use an abundance of water should pay higher fees — not implement across the board increases for everyone. Let's be fair!!!! Also, in these difficult economic times, perhaps the city employees should have salaries reduced or work weeks curtailed to help with increased costs in water usage and service. Simply passing on water rate increases is not managing the situation; effective management of a city or a business should develop and implement plans to mitigate out of control expenses such as these. Thank you, 7 � Marsha and Frank Easterbrook 3 Cypress Point Lane Newport Beach, 92660 Dr. Alan C. Bleier 500 and 500 %2 Poinsettia Corona del Mar, Ca 92625 Dear Sirs: RECEIVED 2019 OCT -I AM 8$ 57 September 28, 2009 OFFICE OF CITY OOFF NEWEW ORT BEA(,'H As the owner of the above property and the person who pays all the bills so related, I would like to lodge my protest to the proposed water rate increases along with the majority of all the other home owners effected. In the 30 years I've owned this property I've seen the water rates steadily climbing. These increases place a financial hardship on the elderly, retired people who are effected, such as myself. If the proposed, new increases go into effect it will create a financial hardship which cannot be tolerated. In your Notice of Public Hearing you note that IF the majority of property owners protest the increased rates in writing then the rates will NOT be increased. I am placing such a protest related to my property. I'm sure the vast majority of home owners will also protest which will preclude the rate increase. Sincerely, Alan C. Bleier, Owner Proposed Water Rate Increase ra Notice of Public Hearing and Protest Procedure NOTICE IS HEREBY GIVEN that on Tuesday, November 10, 2009, at 7:00 p.m., a public hearing will be conducted in the City Council Chambers (Building A) at 3300 Newport Boulevard, Newport Beach, CA 92663. This will be a public hearing before the Newport Beach City Council to allow public testimony and discussion of the proposed water rate increases described within this notice. The City Council will take written and oral comments that evening. They will also consider all written protests against the proposed charges, determine if a majority protest exists, and consider resolutions to adopt the water rate charges. How to File a Written Protest Written protests must be filed with the City of Newport Beach City Clerk. Written protests may be hand delivered or mailed to the City Clerk at 3300 Newport Boulevard, Newport Beach, California 92663. To be valid, written protests must state opposition to the proposed water rate increase, identify the parcel (by assessor's parcel number or street address), and include the original signature of the water service customer or property owner. Written protests may be submitted up to the conclusion of the public testimony at the public hearing on November 10, 2009. About Proposition 218 In November 1996, California voters approved Proposition 218. As a result, California agencies must comply with its requirements when setting utility rates. One provision requires that a noticed public hearing on utility rates be held and that rates not be increased if a majority of affected property owners protest the increased rates in writing. Frequently Asked Questions Q. What does my water bill pay for? A. Your Newport Beach water bill covers the following categories costs and services: • The annual operation and maintenance of the water system, including well and pump station operations, water treatment and testing, and water division employee salaries. • The cost the City incurs to purchase imported and groundwater. The City purchases imported water from the Municipal Water District of Orange County and groundwater from the Orange County Water District. • The repair and replacement of pipes, pump stations, facilities and equipment to improve the water system safety, efficiency and reliability. No debt for this purpose is proposed and all improvements will be "paid as we go" with rate revenue. Q. Why do the rates need to be raised? A. Newport Beach is not immune to the increases in delivery costs and the scarcity of water seen throughout California over the past several years. Operating expenses, particularly chemical and electrical costs, have increased by an average of 6 % over the last four years. This year the cost of imported water increased by 20% on September 1, 2009 and will increase by another 22% on January 1, 2011. In addition, capital expenditures are required to maintain the water delivery system. The City has not raised its water rates since 2005. The existing rates do not provide enough revenue to meet the expenses necessary to operate the water system to provide a safe and reliable water supply to City customers for the next five years. The need to balance the revenues with the purchase water costs, operations, maintenance, and capital improvement expenditures is a necessity. In addition, reserve levels have fallen below Council policy levels. It is the goal to establish full reserve levels by the year 2014. Clif ford Q. Jordan.1I.D. Uk. RECEIVED 2M MT -I AN 8: s7 —� .. eOFFICE OF CITY CLERK CCTV lL v�� T • i CITY OF NEWPORT BEp(,'N .��'z'�".• fi'�.y i.%C��'�1o1.1S / /tI�K!t<�s'�S /n-�' 11775 Ss' -'�1»S / -r n 7 �S CTU GCr� I �t t 22 /Q (jlt9,,t5,a1Sg1"i stfi7�91� Ru�6 /Yl>)N/ ;771 1? ce 2yI1L CLfford R Jordan MD Inc. 0** i . 1212 Swbago Dr. Newport Beach. CA 92660 ( J V RECEIVED 2m9 SEP 30 AM 9. 50 .0 2306 Port Aberdeen Place Newport Beach, CA 92660 September 28, 2009 City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 ONCE OF THE CITY CLERK CITY OF NE' MRT BEACH 1 am writing to state my opposition to the proposed water rate increases. I am a retiree on a fixed income, and the proposed increases would create a financial hardship for me. Sincerely, tanne Burns .e�, MAREA QWzEI\/ED 1 CAMBRIA DRIVE CORONA DEL W°AKJOA 062504 OFFICE OF THE CITY CLERK �1BEACH City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 Re: Written Protest to Proposed Water Rate Increase Public Hearing on November 10, 2007 Dear Sir: I am the property owner and reside at 1 Cambria Drive in Corona Del Mar, assessor's parcel no. 461- 031 -15. I am writing to oppose the proposed water rate increase discussed in the "Proposed Water Rate Increase Notice of Public Hearing and Protest Procedure." The proposed water rate increase would result in an increase of monthly fixed charges by more than 500% by 2014. At the same time, the Notice states that "[ o]perating expenses, particularly chemical and electrical costs, have increased by an average of 6% over the last four years." Given the extremely modest increase in operating expenses during the past four years, there clearly is inadequate justification for the enormity of the fixed charge increase that the City Council proposes to impose on City residents. Moreover, the fixed charge increase when combined with the proposed commodity charge increase will place a substantial and undue burden on City residents. The resources of City residents are not unlimited. In coming years, homeowners will be faced with constantly increasing charges for all utilities and services as well as increasing homeowner's association charges due to those increases. The City Council should vote against this unnecessary and excessive proposed rate increase. Very truly yours, &A,t ._ A. Marea M. Suozzif I M Ed Van den Bossche RECEIVED 121 40th Street Newport Beach, Ca 92MNOV -2 AND 07 0 fCEOF 1N= MY CLERK CIPf Cr - 7:707 PE CH October 28, 2009 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, Ca 92663 This is to state my opposition to the proposed water rate increase. I am the owner of the property at 121 40th Street, Newport Beach, California 92663 and the water service customer at the same address. Sincerely, Ed Van den Bossche /D -a - �y J ►6 // � �e.Q- / • !<,S � ! £ /£SSE �C hl �/� �S ynia Cc7i 7-ees 19n cried/ 74 Ae,4 /20 1-4 � ��y �,� Sd6RJ .� 74 C��er�y /CS 1207Z The 46zrgz_` /rnrrie�g�e/ ow y� i� t7- ✓Y�A�C i c�i� -rr e� � _ , m�rJwT���S'' o� ���SS der- c���. a� F dE� d 0�'her- �• � G�rrl �� 7-�t°/ yfiro'� S 6%/ou, /� %JAve 112flV / dw--y s a.)he., U,;4141� =,6ss2.ve eves u/oqA.el�j 2CC:Z�-tllnq ,5 ,4-,1164 6 Gt> h In y, �e6� /�G 0 a .e �i9�S a%6 ,9L us E / 410,5 6iZ6ctE� �a // TIt2 S.*Ynr_. � s9�N.4 Zfi /dyl �-� 5 o c�i-�� cui 7�h6 ver 6u ro%ri i riy /�� o V Y4 �ewe� o�� d-e- yJmwwi�y Pro 6/ �b Ry, A-6� >Ia31O A!!0 341 �f 303010 LO :6 Wb 9— 130 6MI 03AI303 October 28, 2009 City of Newport Beach City Clerk 3300 Newport BI Newport Beach CA 92663 Dear City Clerk RECEIVED M9 Nov —2 AM 10. 06 C nCE OF THE CITY CLERK CITY OF ' ,''PORT BEACH I object to the increase in water service charge and the water usage fee. 148% increase in 5 years for the water usage fee is excessive and 383% increase in 5 years for water service charge is also excessive. Regards, John B. Patterson 1106 White Sails Way Corona del Mar CA 92625 -1543 N TR 2202 BLK LOT 35 LIN Lq� LbX�— 01 Tony and India g6w, , 7 Trafalgar NeHyor: Beach, Canfomla 92660 dW:ahynes@hotrna1.con 1949 706 9000 C 3� 0 920 63M 0 (lC b tixf JZZ U9 N ,snip y = o p Tony and India g6w, , 7 Trafalgar NeHyor: Beach, Canfomla 92660 dW:ahynes@hotrna1.con 1949 706 9000 C 3� 0 920 63M 0 (lC b tixf JZZ U9 "RECEI D AFTER AGENDA Pliil-<TED:" 6 RECEIVED Pamela L. Whitesides 3322 Via Lido 2199 NOV -4 PM 12: 06 Newport Beach, CA 92663 (949) 673 -4507 OFFICE OF THE CITY CLERK November 3, 2009 CITY OF N'E''PORT 1 E.A 9 City Council C/o City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, California 92663 Re: Opposition to Proposed Water Rate Increases Property Address 3312 -3318 Via Lido, Newport Beach Dear City Council Members We are the involuntary owners of a 3 -inch water meter and are very much opposed to the huge increase in the fixed "Water Service Charge ". (We are also charged for a 1 -inch water meter and something called a "Multi/Bl" water service on the same property.) As we understand the public notice, the City proposes to increase the charge for 3 -inch meters 458% the first year, and within five years, it proposes a 1000% increase to over $2000 per year. These exorbitant increases would make us continue to pay dearly for a 3 -inch meter and fire suppression device the City required us to install, ostensibly as fire protection for only two boat slips in front of our 4 -unit apartment building. Our small apartment building has a combined total of 4270 square feet, equivalent to the square footage in a medium -sized single family home. When we needed to rebuild the dilapidated docks in front of the building, we obtained the necessary building permits to replace the existing five small boat slips with two larger slips. We were told we would need to install a new water line for the new docks, with a "backflow" device to be located in the 3 -foot setback along the side of the building, leaving enough room to walk around it on the path. The old docks were demolished and construction on the new docks was well under way when we were suddenly told the City's Fire Department was requiring us to install, at our own expense, a 3 -inch water line and some kind of larger backflow unit. We did not know until the device was delivered that the required fire suppression device was a huge, 5' x 7' piece of red machinery with pipes almost 4 inches in diameter (see attached photos). Since we had no choice, we spent over $16,500 to trench the street, lay and connect the new 3 -inch line and meter, and purchase the fire suppression device. The size of the device would have blocked the 3 -foot walkway on the side of the building, so it had to be located in front of a tenant's master bedroom window on the only small plot of dirt where landscaping used to be. In addition to the $16,500 fire suppression system, we still had to pay $12,000 -plus to install an ordinary fire hose on the docks, which is just like the fire box and hose that we took out when we demolished the docks. The existing water to the docks and boats (for wash downs and filling water tanks) continues to be from our old water delivery system and backflow device. We do not use the water from the 3 -inch line and fire suppression system; in fact, we cannot turn it on without breaking a chain or unlocking it with a key we never received. We have not been able to find another similar device on local streets, even for multiple boat slips far larger than ours. In fact, we have never seen a fire suppression device as large as ours, even at local commercial and Lido Isle marinas with 20 -30 boats each (see attached photos of Lido Isle marina water device and a "fire hydrant" close by). We are convinced the fire suppression "overkill" imposed on our relatively small property was actually intended to also serve the surrounding properties, especially the sailing club on one side of the our property and the multiple -slip marina on the other side, neither of which has a similar device. If our assumption is wrong and the only reason the City required the huge system was because of the unique fire issues with our two slips, the current water service charge of $216 per year and the several hundred dollars yearly to test the new device's backflows might be a fair bargain. If, however, the system was imposed on us in part for the safety of our neighbors, the proposed water service increases would be grossly unfair to us, especially since we have already given our land and thousands of dollars to the common good. In either case, the proposed increases of 458% the first year to over 1000% in five years is oppressive and unfair to small property owners. In evaluating the proposed increase in water service charges, please consider that the City has imposed fire requirements on some property owners for reasons other than for the fire safety or water needs of their own property. Perhaps it would be more appropriate and fair to charge for meters based on their use, or the purpose for which they were installed (e.g., fire suppression versus supplying continuous water to the property), rather than imposing a charge based only on the property's meter size. The City's proposed 1000% increase over the next five years without regard to any circumstance other than the meter's size is unduly harsh and will pose a hardship on owners like us, as well as on our tenants. Thank you for your consideration. Very truly yours, "6� A2_J Pamela L. Whitesides Ui6J Lide ha Y! I Y s. �t ec Y v , Yom, b;eJ(t /V i *= ,. le Vim �l�D .a� v� v� • � v� �� .acv iii - 118 114 Oro •r l a tpp •IV �� ��qY (yam :N 3. Id fin• D. _�.�Q(i�.�S(ll4lU V. 949.675.8835 City Clerk, City of Newport Beach, Ca. Bob McCaffrey PO Box 26 Balboa Island, CA 92662 C. 949.500.5851 I am in opposition to the proposed water rate increase. RECEIVED F. 949.675.5342 29)9 OCT -2 AM 9 47 September 29, 2009 OFFICE OF THE CITY CLERK CITY OF N WRT BEO I own a property at 205 and 205 '/2 Coral Ave Balboa Island. Ca. Thank you, Robert McCaffrey �Z Ja7 /o 9 N--P- C -4 6& a di. CIZP iA�_ E 1,, j 4 -x,, o klo�� YI:30 6h --6 NV OE d3S 61DZ CDA13038 J 1 {9l 1 October 2009 City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach CA 92663 Dear Council Members, RECEIVED M OCT -6 AN 9: 06 OFFICE OF THE CITY CLERK CITY OF N:vVPORT BEACH I write in opposition to the new proposed water rate increases. Particularly in these down economic times and with the grandeur opulent plans for a new Taj Mahal like city hall, that is totally out of line for today's market and totally unnecessary. Those same dollars could be spent on a more modest and sufficient City Hall complex with the savings spent on a total sewer /water overhaul and maintenance program for years to come with no additional rate increases necessary. Quit trying to waste all the taxpayers' money on glitzy and show and start using it for the items for which it is intended. I have lived in this area most of my life and have been a city resident for most of 40 years and I have never seen the opulent waste of money by our council members, city planners and spenders as in the last ten years or so. Balboa improvements and especially the tree removals and replacements are among the top of the list along with the new city hall. Now, today October 1, in our local Daily Pilot, it says because of revenue loss you are looking at employee early retirement, service reductions plus other cuts to residents but nothing about stopping the opulent spending. Everyone would love to live an opulent personal life but they can't afford it. Neither can most of the taxpayers of Newport Beach. For your consideration. Sincerely, Yaer-rjoP rty Owner 2294 Channel Road Balboa CA 92661 RECEIVED M OCT 16 AM 9-- 55 Dorothy Margulies 1380 Galaxy Drive C -ICE OF Newport Beach, CA 92660 THE CITY CLEFiKPh. Or FAX (949) 642 1101 CITY OF 'it` -VC,RT B5'1J'Hdotsala@sbcslobal.net Protest Against The Proposed Water Rate Increase Dear City of Newport Beach Clerk: Please treat this letter as a formal written protest against the proposed water rate increase. I object to this increase particularly at a time of severe economic pressures. 1. There has been considerable self monitoring of water usage by citizens on Newport Beach. Self restrictions on watering lawns, eliminating lawns in favor of plants and shrubs that require less water, reducing water use in cleaning driveways. This must reduce the need to import water and hence the costs must be decreasing. 2. The University of California has reduced faculty and staff salaries by 8 %. Salaries and other expenses need to be maintained and not increased in these times. If the rate increase is to cover increased costs there needs to be some way avoid increasing costs and passing it on to consumers. 3. It's about time the City of Newport Beach, and other government related agencies take a hard look at covering costs and providing services without increasing rates and taxes. 4. Every issue is resolved by increasing taxes, including real estate taxes in Orange County. I think the increase is unnecessary and easy method for increasing revenue without consideration of the impact on citizens. Please treat this as a formal written protest against the water rate increase to be discussed on November 10, 2009. Sincerely. Dorothy Margulies October 16, 2009 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 RE: Water Rate Hearing of 11/10109 Honorable Council Members: RECEIVED 2(09 OCT 21 Ali 9: 07 OFFICE OF THE Cl T Y GaK CITY Cdr K!E'JV-PORT BEACH As a property owner in Newport Beach since 1972, 1 appreciate the water services I am able to purchase. I protest the proposed rate increase and urge the council to understand the current economy and financial pressures we are all subject to. My wife and I drive an '86 and an '89 vehicle for daily trips. I was on a bike ride the other day and met two nice water district employees working on a weekend morning, doing checking on a green belt area. They were not doing repair and had no equipment with them or in the truck they had parked. As I rode on, I came upon their new, or recent model Ford pickup truck belonging to the Water District/City. Why are employees working, perhaps only part time, on a weekend when we probably have to pay a premium for their time? Why is the District using new vehicles rather than maintaining vehicles for a longer life as I have to do? Please don't tell me that the lease is up and we need new vehicles. Why are we paying a lease premium rather than owning? In answer to your question "Why do the rates need to be raised ?" Rates do not need to be raised. Operating Expenses can be restrained to not exceed the CPI, and cuts probably could be made all over the District. Overtime doesn't have to be incurred, hiring can be abated, raises can be shelved, the reserve levels set by Council can lowered, etc. Yes, that would be uncomfortable, not business as usual. My wife and I have to do that with our personal finances, why shouldn't the District/City? I urge you to vote no and not to enact a rate increase. Please review your proposal and act in accord with my request to abandon your proposal. Thank you considering this letter, effrey Simonds 440 Aliso Newport Beach, CA City of Newport Beach City Clerk RECEIVED 10 QCT ?7 AN 9: 07 Re: Prop 218 - Proposed water rate increase Notice of public hearing and Protes Parcel numer:424- 434 -03 CFPCE OF THE CITY GUW Address: 206 Orange street, Newport beach, CA 92661 CITY OF N�1:, j yy lot 11 block 7 of Seashore Colony Tract in the city of Newport Beach, County of Orangg,%e of California as per map recorded in Book 7 Page(s) 25 of Miscellaneous Maps in the Office of the county Recorder of Orange County. To whom it may concern, My property address is 206 Orange street, Newport beach, CA 92661. I am strongly against the proposed water rate increase in the city of Newport Beach. I am a widow and have been for nearly 15 years and I raised my children by myself since they are 1 and 2. 1 have worked very hard all my life trying to make a decent living for them and myself and the proposed water rate increase will greatly jeopardize my financial situation. I therefore kindly urge that you do NOT go forth with the drastic water rate increase. Thank you for your attention in this matter. Sincerely, g Sandy Wong 2'l3 - 892 -3° 1 Z 0APIQ C 3 2-3 - 9*-' RECENED IM9 SEP 30 119 9' 50 0 --i CE U OENgl�PORR CM �H September 27, 2009 Re Proposed water rate increase Dear Sirs: 1 wish to formally oppose the proposed water rate increase for my property at 115 port Sheffield place, Newport Beach, CA. The rate increase would cause an undue hardship on my income. I respectfully request that the water rate increase be denied. �Sinnc�erely, Myriam Shapiro 0 tiL. City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92663 Dear City Clerk: RECEIVED Robert L. Muench 1801 Alta Woo ��rl _3 A� 9 48 Altadena, CA 91 �jj jj 33 OFFICE OF THE C=.TY CLERK Cfv CF 11 :, -CRT BE (�K REGARDING PROPOSED WATER RATE INCREASES HEARING OF NOVEMBER 10, 2009 As an owner of property located on Balboa Island (APN 050- 063 -10), I am writing to protest the proposed water rate increases. I understand the need to maintain infrastructure and to cover increased costs of purchased water; however, the proposed rate increases are heavily weighted toward meter charges (up 400 percent) while water use rates are only increased 50 percent. How can this encourage conservation. I look forward to a revised proposal with more information about the actual amount of money needed, its proposed uses and how water conservation can be encouraged through a revised rate structure. I cannot support the water rate increases as they are now proposed. Respectfully submitted, `Gr � —1 — Robert L. Muench Parcel Number 050- 063 -10 Robert A. LaFont, O.D. 6747 E Waterton Ave. Orange, CA 92867 City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 October 9, 2009 Re: 412 Westminster Ave., Newport Beach, CA 92663 To whom it may concern, I am sending this letter in protest of the recent proposed Water Rate charges. I feel that the increase for the monthly water service is excessive and the cost per HCF was already high in relationship to other cities in the area. I live in the city of Orange and the cost per HCF is half of Newport Beach's current cost. Your notice referenced reserve levels but failed to indicate what those levels are and how much the City of Newport Beach has in reserve at this time and what the reserve is held for or approved to be spent on. I feel this increase would be difficult for seniors or lower income families to afford. Sincerely, Robert A. LaFont V_ Robert A. LaFont, O.D. 6747 E Waterton Ave. Orange, CA 92867 U� City of Newport Beach City Clerk 3300 Newport Blvd. Newport Beach, CA 92663 October 9, 2009 Re: 400 Westminster Ave., Newport Beach, CA 92663 To whom it may concern, I am sending this letter in protest of the recent proposed Water Rate charges. I feel that the increase for the monthly water service is excessive and the cost per HCF was already high in relationship to other cities in the area. I live in the city of Orange and the cost per HCF is half of Newport Beach's current cost. Your notice referenced reserve levels but failed to indicate what those levels are and how much the City of Newport Beach has in reserve at this time and what the reserve is held for or approved to be spent on. I feel this increase would be difficult for seniors or lower income families to afford. Sincerely, Robert A. LaFont October 16, 2009 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 RE: Water Rate Hearing of 11/10/09 Honorable Council Members: RECEIVED 2119 OCT 20 PH D 01 OFFICE OF THE CITY CLERK CITY OF BEACH As a property owner in Newport Beach since 1972, 1 appreciate the water services I am able to purchase. I protest the proposed rate increase and urge the council to understand the current economy and financial pressures we are all subject to. My wife and I drive an '86 and an '89 vehicle for daily trips. I was on a bike ride the other day and met two nice water district employees working on a weekend morning, doing checking on a green belt area. They were not doing repair and had no equipment with them or in the truck they had parked. As I rode on, I came upon their new, or recent model Ford pickup truck belonging to the Water District/City. Why are employees working, perhaps only part time, on a weekend when we probably have to pay a premium for their time? Why is the District using new vehicles rather than maintaining vehicles for a longer life as I have to do? Please don't tell me that the lease is up and we need new vehicles. Why are we paying a lease premium rather than owning? In answer to your question "Why do the rates need to be raised ?" Rates do not need to be raised. Operating Expenses can be restrained to not exceed the CPI, and cuts probably could be made all over the District. Overtime doesn't have to be incurred, hiring can be abated, raises can be shelved, the reserve levels set by Council can lowered, etc. Yes, that would be uncomfortable, not business as usual. My wife and I have to do that with our personal finances, why shouldn't the District/City? I urge you to vote no and not to enact a rate increase. Please review your proposal and act in accord with my request to abandon your proposal. Thank you considering this letter, J ey Simonds 231 Opal Balboa Island, CA RECFIVED 2Gl9 OCT 21 P14 I: 0 OMMiCE OF THE Q I CLERK CITY OF NSMRT BEAT H 10 13 09 City of Newport Beach 3300 Newport Blvd... Newport Beach, California 92663 Re; 1015 E. Balboa Blvd. Unit B Municipal Services Dept. The residents are tired of the parking tickets, restriction of parking and Jet noise over our roof tops loud garbage trucks disturbing our sleep. Rough treatment from NPB departments. And other infringements on our safety This letter is to express my voice against any water rate increase. Decrease the size of the New Port Beach office staff and others to reduce the cost of water. �i4e�� RECEI\/ED 2M9 NOV 10 PM 4: 30 C TICE OF THE UY CLERK CtN 0c ` „'^JRT -E" November 10, 2009 Leilani I. Brown City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA. 92663 RE: Proposed Water rate increases Dear Ms. Brows This is to protest the amount of water rate increase the City of Newport Beach is proposing. This rate increase is the subject of a public hearing on November 10, 2009 at 7:00 PM. I understand the need for water rate increase in order to pay for increasingly expensive imported water and other operating and capital costs. However, I believe the increases should be met by a combination of a reduction in water usage coupled with a lesser rate increase, not solely a rate increase. It is my opinion that the voluntary water conservation program needs to have a higher profile and more urgent community education, and if voluntary measures do not result in the reduction of water usage needed, then mandatory water conservation measures should be implemented. Thanl5you. My property address is 131 Corsica Drive, Newport Beach, Ca. Susan E. Rhodes Mailing address: 1401 Avocado Avenue, Suite 901 Newport Beach, CA. 92660 CEIVED rdRECEIVED � v _2 AND 02 2M9 OCT -5 AM 10: 05 P.R t Of 'J lei d ,�- C3 c �n- �c c. '� �- .� � f(I Of : GTY CLERK THE ERK ` FORT BEACH J". T /BFXH !Z•<� ,tr �- en.� -r, c� err- ��.c�t�,n� - �� -�e..� proposed water P P y s monthly water Proper 1' -j )..in r s ,l 121a P o Ave- ^ � iitciwa.0 ........... .... ....�__i7 t� I_o Mlkr C-A C12 2.5 licate whether or not a commercial user such as this property has enhanced objection power, but it should. Bayside Village has 270 home sites and a large manna, Feel free to contact me to discuss the details. Sincerely, /,�I �6-tLn .� Richard Newman Assistant Vice President De Anza Corporation, Manager of Gelfand Properties, LLC, Manager of Bayside Village, LLC 2211 Pacific Beach Drive, San Diego, California 92109 Direct Line (858) 581 -4351 ITP(! AT ts October 27, 2009 City Clerk City of Newport Beach r ^ o 3300 Newport Boulevard t Newport Beach, California 92663 C���� °` Re: Objection to Proposed Water Rate Increase �r- a 3 o \ f T l APNs: 988- 132 -42, 988 - 132 -43, 988 - 132-44 _ Q To Whom It May Concern: On behalf of Newport Dunes Resort and Marina, I object to the proposed water rate increases. I calculate that the proposal would increase the property's monthly water bill by 146% between now and 2014. The recent Notice of Public Hearing and Protest Procedure did not indicate whether or not a commercial user such as this property has enhanced objection power, but it should. Newport Dunes has 400+ RV sites, a restaurant, market and a 400+ slip marina, Feel free to contact me to discuss the details. Waterfr6nt Resort Propehq A California Limited PartrA By: De Anza Corporation Its: General Partner By: Herbert M. Gelfand Chairman "Newport Dunes Marina, LLC A California Limited Liability Company By: WLB Group GP, LLC A Manager By: Warren L. Breslow Manager 1 13 1 Back Bad Drive , Newport Beach. California 92660 • 949.729.3863 • Fax 949.759.5685 Jerrilynn Kline 1957 Port Chelsea Place Newport Beach, CA 92660 (949)720 -0789 September 28, 2009 Ciy Clerk 3300 Newport Blvd. Newport Beach, CA 92663 Re: Property address: 1954 Port Albans Place, NB 92660 Dear City Clerk, RECEIVED 21119 OCT - I AM 1: 56 OFFICE OF H CITY CLERK CITY OF WEVORT BEACH I am writing to oppose the proposed water rate increase. I am the property owner of the above named property. Thank you, 1' J� Ak Yb),q JemJ. Kline City of Newport Beach City Clerk, RECEIVED October 1, 2009 2M9 OCT -6 AM 9: O6 I hereby wish to place my protest against the water rate increases. I represent commercial parcels: 048 - 112 -21 048 - 112 -221'� 048 - 112 -23 residential parc�el/: V 117- 443 -02 �,J} Thank you for your consideration. Sincceerely,� (/John Vallely 2042 Commodore Road Newport Beach, Cailf. 92660 949 645 -9790 OFFICE Of THE CITY CLERK MY OF' °:'rJAT EEACH y RECEIVED 33 `"t M9 0CT 26 Affil: is THE MY E CLERK CITY OF ', _ "?ORT 6EW,;H ueeZt4, AO-,Zz, ti -7&�e-,Le «�, -G/L' C°. fLdi7L�jC:. ,dLC� -fit. � /��l.L yGL� -S ctL�sC Axle c: l�'t -� ; �= c.��i��.� L� G �-,�1� :,. �.`.%�.�ti�� l,. .i:•�4. /��cda �-a n... � � 'VA/ �,�z, -•ant ��-�- ��- �...ti.e�_�z �%✓i /A �`" - DO,��S /.�,�,v�//�TE,� zo / ZG'GG�'� � Q i. �i. Lt" �y1 c� o u�i.L1%c_L4��/G+�t"� -• o +.G-� LJ' 64� .LQ� G�1L(/ � d �LI JLC /c:✓ jxlsfi4,17 a._6�'c' f g�Grc h L >'Z .,;z 06 DIVERSIFIED REAL PROPERTY MANAGEMENT AND BUSINESS SERVICES INC. 180 East Main Street Suite 101, Tustin, CA 92780 Ph: 714- 544 -7755 Fax 714 -544 -7771 10 -19 -09 c� City of Newport Beach City Clerk o—+ 3300 Newport Blvd. c jn�j Newport Beach, CA 92663 dE�e, N N CZ) RE: Proposition 218'� rfl S To Whom It May Concern: .. � 0 We are Diversified Real Property Management writing to you on behalf of Huguette Wilson, owner of the property located at #7 Ima Loa Court, Newport Beach, CA 92663. This is a written protest to the proposed water rate increase. Ms. Wilson highly opposes this possible increase. We appreciate your time and effort in making her opinion known to all necessary parties. incerely, Angie Nelson, Agent for Huguette Wilson, Newport Homeowner OCT -16 -20179 09:9@ =RON:THE HOME OFFICE 7328739185 7 0:2550735 P.1 J.M. (Moore RAB A35. 9101 W. Sahare Ave:, Suite 105 • Las Vegas, NV 89117 -5772 October 14, 2009 City Clerk City of Newport Beach, California 3300 Newport Blvd Newport Beach CA 92563 RE: 317 Coronado, Newport Beach Par #048- 102.15 Dear Sir or Madame, RECEIVED Tel/Fax (702) 255 -8735 • Call (702) 52a•9403 2[09 OCT 21 AN 9: 07 OFFICE OF THE CP CLERK CITY 0= F ;?,;� ^T BEACH As property owner of the above designated property I and we object to the proposed water rate increase. I comment as follows: 1, Freeze all salaries retroactive as of 111/08 or as soon as possible in the Water or Utility Department 2. Reduoe all other expenses in the department by 20% across the board. 3. Cancel all purchases as much as possible, trucks, equipment, furniture, etc, 4. Operating expenses are out of control if they have increased 24% in the last 4 years. S. Its incredible that the deparbrrent has succumbed to "imported" water costs of 20% on 911109 and another increase of 22% on 1/1111, 42% total in slightly more than 1 year. 6. Everything for everybody is "a qty^ until the money well from citizens and taxpayers runs dryl Well its dryl Thank you for allowing us to express an opinion and vote "NO" on any increase for this cost. Moore RECEIVED Ed Van den Bossche Y919 NOV -2 AM 10-- 07 121 40th Street Newport Beach, Ca 92663 OFFCE OF F'- ;,1Y CLERK Cry "CRT EEAGH October 28, 2009 City Clerk City of Newport Beach 3300 Newport Blvd. Newport Beach, Ca 92663 This is to state my opposition to the proposed water rate increase. I am the owner of the property at 206 34th Street, Newport Beach, California 92663 and the water service customer at the same address. Sincerely, oar iX � Ed Van den Bossche TERRA VISTA MANAGEMENT October 27, 2009 City Clerk City of Newport Beach 3300 Newport Boulevard Newport.Beach, California 92663 Re: Objection to Proposed Water Rate Increase APNs: 440 - 132 -60, 440 - 132 -61, 440 - 132 -62 To Whom It May Concern: RECEIVED 2M9 NDV -2 AN 0 02 OFFICE OF CITY Or t J CLERK IPO^RT BEACH On behalf of De Anza Corporation and Bayside Village, I object to the proposed water rate increases. I calculate that the proposal would increase the property's monthly water bill by 60% between now and 2014. The recent Notice of Public Hearing and Protest Procedure did not indicate whether or not a commercial user such as this property has enhanced objection power, but it should. Bayside Village has 270 home sites and a large manna, Feel free to contact me to discuss the details. Sincerely, Richard Newman Assistant Vice President De Anza Corporation, Manager of Gelfand Properties, LLC, Manager of Bayside Village, LLC 2211 Pacific Beach Drive, San Diego, California 92109 Direct Line (858) 581 -4351 a �Sa i J L-� RECEIVED ' 2109 OCT -5 AN 10: 05 OF TH CL�t G� E T BEA(k U ro era-•Y 0,joex ,-F pr,,j ' 2 (o I:nsc, -H(k- Avir -, � ^�a Dc-! �✓1„ r C.A '12L.2.S