HomeMy WebLinkAbout25 - Consider a Sewer Rate AdjustmentTO:
FROM
CITY OF
NEWPORT BEACH
City Council Staff Report
September 12, 2017
Agenda Item No. 25
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
George Murdoch, Municipal Operations Director - 949-644-3011,
gmurdoch@newportbeachca.gov
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst,
jrosenbaum@newportbeachca.gov
PHONE: 949-644-3057
TITLE: Conduct a Proposition 218 Public Hearing and Consider a Sewer
Rate Adjustment
ABSTRACT:
The Municipal Operations Department retained the consulting services of HF&H
Consultants, LLC ("HF&H") to conduct a sewer rate study. The study analyzes the cost
of service and makes recommendations regarding the rate and structure in compliance
with State law. The study concluded that a rate increase is recommended to ensure
adequate funds are available to continue to maintain a safe and healthy sewer
infrastructure. This item, if approved at this meeting as well as following second reading
on September 26, 2017, would amend and generally increase wastewater rates.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Conduct a Public Hearing to accept comments on the proposed sewer rates and at
the conclusion of the hearing close the 45 -day notice period;
c) Direct the City Clerk to tabulate the results of the protests received from property
owners and customers and announce the findings; and
d) Introduce Ordinance No. 2017-15, An Ordinance of the City Council of the City of
Newport Beach, California, Amending Section 14.24.065 of Title 14 of the Newport
Beach Municipal Code Pertaining to Sewer Use Charge, and pass to second reading
on September 26, 2017.
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
September 12, 2017
Page 2
FUNDING REQUIREMENTS:
There are no funding requirements to implement the sewer rate structure; however, in the
absence of a majority of protests and passing of a second reading of the ordinance
amendment, the cost of sewer service will generally increase to the sewer customers of
the City of Newport Beach.
DISCUSSION:
Background
On March 20, 2017, the City entered into an agreement with HF&H to conduct a Sewer
Rate Study that resulted in recommended adjustments in sewer rates to cover operations
and capital improvement costs as well as provide funding to meet City Council Reserve
Policy F-2. The study addressed the wastewater operations and capital expenditures and
the revenue shortfalls and predicted that the Sewer Fund reserve balances would dip
below the minimum target in FY2017-18 and become negative by FY2019-20. More
information is available at: www.newportbeachca.gov/sewerrates.
A draft of the rate study was presented to the Finance Committee on June 29, 2017.
During this meeting, Municipal Operations Department (MOD) staff presented a general
overview of the services provided by the City's Sewer Division, the cost for operating and
maintaining the sewer system, including the capital improvement component, the revenue
requirements, and discussed the Sewer Fund's reserve target policy. The .consultant,
HF&H, presented its findings and recommendations for a proposed new sewer rate
structure and new rate tables for water and sewer customers and for .sewer -only
customers, respectively. At the conclusion of the presentation, following some discussion,
the Finance Committee unanimously recommended that the Sewer Rate Study be moved
to City Council for discussion.
At the City Council Study session on July 25, 2017, MOD and HF&H presented the
findings and recommendations of the Draft Sewer Rate Study Report for proposed sewer
rates. Subsequently, during the City Council's regular agenda on the same night, the City
Council directed staff to send out (Prop 218) notices in compliance with State law. The
City mailed 22,570 notices to property owners and customers receiving sewer service
from the City of Newport Beach on July 28, 2017. Property owners and customers that
have multiple connections received only one notice applicable to all parcels of property
that are provided sewer service by the City, in an attempt to reduce duplicate mailing.
According to State law, agencies that propose increasing rates must provide a 45 -day
notice and protest period whereby property owners may submit a protest to the rates.
More about the procedure is discussed below. The 45 -day period will conclude at the end
of the public hearing on tonight's agenda, September 12, 2017.
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
September 12, 2017
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Rate Study:
In 2013, the City retained the services of HF&H to conduct a wastewater and recycled
water rate study. Staff proposed the recycled rates to City Council in July 2014, which
were adopted. In January 2016, staff proposed new wastewater rates; however, the rates
were not adopted. Instead, the City Council elected to contribute $3.5 million from the
General Fund to the Wastewater Enterprise Fund, which provided sufficient funds to
continue to operate the system and maintain reserves for a short period of time.
Due to the long-term structural deficit, staff again retained the services of HF&H to revise
the wastewater rate study. This was necessary to comply with Proposition 218
requirements as too much time had passed between the previous study and the date of
implementation of new rates.
The updated Sewer Rate Study (Attachment A) looks at a ten-year financial projection
and proposes a five-year incremental rate increase. Multi-year increases reduce the rate
shock of implementing a one-year adjustment.
In summary, the new study concludes the following:
The estimated revenue for the FY 2017-18 budget is $2,571,186. Operations and
replacement expenditures are estimated to be $4,592,976. Estimated FY 2016-17 Year -
End Fund Balance Reserve levels are $2,756,470 and are being used to fund the shortfall
between estimated revenues and expenditures.
Current sewer revenues do not provide adequate funding for operations. Without the City
Council's action to contribute $3.5 million from the General Fund to the Sewer Fund
during FY 2016-17, the fund reserve would have been in the negative at the start of FY
2017-18. Table 1 illustrates the reserve target, reserves with and without an increase
based on the updated Sewer Rate Study.
Table 1 Wastewater Enterprise Fund Balances
Vcar Fnrl Pi inrl Rninnnac - Pi incl 711 /(lncrn inncl
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
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In regards to CIP, historically, the City has invested approximately $500,000 annually. In
FY 2017-18 this was increased to $750,000. In order to meet the 30 -year Master Plan
estimates, it is proposed to increase the annual investment to $1,000,000 and continue
to increase the annual investment by three percent per year. It should be noted that
Master Plans are typically reviewed every five years and estimates could change.
Proposed Rates:
The recommended structure of the rates remains fairly unchanged, and includes a fixed
and a variable rate. Currently the City's sewer rates include a fixed fee, a sewer use
charge, and two additional surcharges ($2.00/month for each additional dwelling unit and
$10.00/month for customers with two-inch or larger water meters). The proposed rate
structure eliminates the two surcharges, and adds the costs to the monthly fixed charge.
The current and proposed rate structure includes a component that uses water use to set
the variable rate. Since the City does not serve water to some sewer customers, it is not
possible to establish a rate based on their water use. The study concludes that an
average water use by meter size could be established and used to set rates for the City's
sewer -only customers..
The proposed sewer rates for customers that receive water and sewer service from the
City of Newport Beach include:
• Fixed charge - a monthly sewer service charge based on size of water meter.
(Table 2)
• Sewer Use charge - a monthly consumption charge based on each customer's
actual metered water use. (Table 2 Bottom)
Table 2: Monthly Sewer Service Fixed Charge (City Water and Sewer Customers):
Newport Beach Water and Sewer Customers
Monthly Sewer Service Charge
Meter Size
Current
1/1/2018
1/1/2019
1/1/2020
1/1/2021
1/1/2022
5/8"
$
4.50
$
6.46
$
7.07
$
7.74
$
8.39
$
8.55
3/4"
$
4.50
$
6.46
$
7.07
$
7.74
$
8.39
$
8.55
1 "
$
4.50
$
6.46
$
7.07
$
7.74
$
8.39
$
8.55
1.5"
$
4.50
$
7.11
$
7.78
$
8.51
$
9.23
$
9.41
2"
$
14.50
$
9.70
$
10.61
$
11.61
$
12.58
$
12.83
3"
$
14.50
$
10.99
$
12.02
$
13.15
$
14.26
$
14.54
4"
$
14.50
$
12.93
$
14.14
$
15.47
$
16.77
$
17.11
6"
$
14.50
$
14.55
$
15.91
$
17.41
$
18.87
$
19.25
8"
$
14.50
$
16.16
$
17.68
$
19.34
$
20.97
$
21.39
10"
$
14.50
$
20.69
$
22.63
$
24.76
$
26.84
$
27.37
12"
$
14.50
$
25.86
$
28.29
$
30.95
$
33.55
$
34.22
Sewer Use Charge
HCF
Current
1/1/2018
1/1/2019
1/1/2020
1/1/2021
1/1/2022
$
0.35
$
0.38
$
0.42
$
0.46
$
0.50
$
0.54
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
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The proposed sewer rate for customers that receive sewer service only from the City of
Newport Beach include:
Sewer Use Charge - a monthly charge that combines a charge based on water meter
size and a consumption charge based on average use for that meter size. (Table 3)
Table 3: Monthly Sewer Charge - Sewer Customers Only
(These fees include both the monthly sewer service fixed charge and the estimated monthly use per meter size)
Newport Beach Sewer Customers Only
Monthly Sewer Service - No Water Charge
Meter
Size
Monthly Flow
(HCF)
Current Current
Service Charge Flow Charge
Current
Monthly Bill
Meter Size
Current
Proposed
Monthly Bill
1/1/2018
1/1/2019
1/1/2020
3.0
1/1/2021
$1.03
1/1/2022
$6.46
5/8"
$
6.25
$
9.90
$ 10.83
$
11.85
$
12.84
$
13.10
3/4"
$
6.25
$
9.90
$ 10.83
$
11.85
$
12.84
$
13.10
1 "
$
6.25
$
11.59
$ 12.68
$
13.87
$
15.04
$
15.34
1.5"
$
6.25
$
34.87
$ 38.15
$
41.73
$
45.24
$
46.14
2"
$
6.25
$
35.92
$ 39.30
$
42.99
$
46.60
$
47.54
3"
$
6.25
$
92.27
$ 100.94
$
110.43
$
119.70
$
122.10
4"
$
6.25
$
163.41
$ 178.78
$
195.58
$
212.01
$
216.25
6"
$
6.25
$
287.97
$ 315.04
$
344.65
$
373.60
$
381.07
8"
$
6.25
$
289.58
$ 316.80
$
346.58
$
375.70
$
383.21
10"
$
6.25
$
294.11
$ 321.75
$
352.00
$
381.57
$
389.20
Table 4 illustrates the impacts of the proposed rates for a Single Family Residential home
that has a 5/8", 3/4, or 1" meter at different monthly flow rates (low, average and high).
The table also illustrates commercial impacts of varying meter size and average flow
rates. As an example: an average Single Family home with a one -inch meter using about
12 HCF per month, will see an increase of $2.35 per month.
Table 4: Proposed Rates Impact on Current Monthly Sewer Bills
Customer Type
(Low, Avg, High Flow)
Meter
Size
Monthly Flow
(HCF)
Current Current
Service Charge Flow Charge
Current
Monthly Bill
Proposed
Service Charge
Proposed
I Flow Charge
Proposed
Monthly Bill
Monthly Bill
Change
Single FamilyResidential (low flow)
5/8" -1"
3.0
$4.50
$1.03
$5.53
$6.46
$1.13
$7.60
$2.06
Single Family Residential (avg flow)
5/8" -1"
11.8
$4.50
$4.13
$8.63
$6.46
$4.52
$10.99
$2.35
Single Family Residential (high flow) 5/8" -1"
23.6
$4.50
$8.27
$12.77
$6.46
$9.05
$15.51
$2.74
Sewer -only (no additional DUs)
3/4"
9.0
$6.25
$0.00
$6.25
$6.46
$3.44
$9.90
$3.65
Commercial
1.5"
29.7
$4.50
$10.40
$14.90
$7.11
$11.38
$18.49
$3.59
Commercial
2"
118.9
$14.50
$41.61
$56.11
$9.70
$45.52
$55.21
($0.89)
Commercial
3"
1 237.7
1 $14.50 1
$83.21
$97.71
$10,991
$91.03 1
$102.02
$4.31
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
September 12, 2017
Page 6
Proposition 218 Procedures
Under the Proposition 218 requirements, the rates cannot be increased if a majority of
the property -owners submits valid written protests to the City Clerk by the close of the
45 -day notice and protest period. At the conclusion of the public hearing 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. The Clerk may
advise the City Council of the absence of a majority protest without determining the
validity of all protests. Notices were also sent to non -property owning customers and
City Council may consider their protests; however, they will not be counted as part of
the requirement. At this point, if a majority of property -owners does not submit a valid
written protest, City Council could vote to adopt the new rates and structure.
Introduction of the Ordinance Changes
The existing rates are identified in the NBMC (Section 14.24.065). Notwithstanding a
majority protest, City Council can consider verbal testimony from anyone and written
protests from non -property owners and decide to approve the proposed rates. Should the
proposed rates be approved, staff recommends Council introduce an ordinance
amending the municipal code to remove the existing rates from NBMC section 14.24.065
and include them in the City's Fee Schedule, and pass the ordinance to second reading
on September 26, 2017. A redlined version of the NBMC amendment showing the
existing section 14.24.065 (Attachment B) and a final, clean version of section 14.25.065
(Attachment C) are attached for Council's review. In addition to the second reading of the
ordinance on September 26, 2017, staff will present to Council a resolution adopting the
sewer rates consistent with the HF&H study.
If the new sewer rates are approved, and the ordinance and resolution updating the City's
sewer fee amounts are adopted on September 26,2017, the new sewer rates would
become effective on January 1, 2018 and for every year thereafter with the final
adjustment occurring January 1, 2022. The City will notify customers of the change of
the new rates at least 30 days before the new rates become effective.
Concludinq Thoughts
It goes without saying that a functioning water and wastewater system is vital to any
municipality's viability. In Newport Beach, the maintenance and upgrade of the
wastewater system is even more critical to our quality of life, given our proximity to
Newport Bay and the ocean. While other communities farther inland might have
additional time to keep a wastewater spill from entering recreational waters, we do not
have that luxury. A spill from a pipe in Newport Beach almost always results in an ocean
or bay closure — something that is damaging to the ecosystem, to businesses and tourism,
and that can result in significant fines. Given the economic and cultural value of the
Harbor to Newport Beach, keeping our wastewater system functioning and strong is
critical.
Additionally, while we would always hope that the costs of doing business in any
government can be held to no change or minimal change, that's not always realistic. For
the wastewater system, the cost associated with regulations, employees, materials and
contracted work all continue to rise. As such, the rates paid to support a viable system
inevitably rise as well.
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Conduct a Proposition 218 Public Hearing and Consider a Sewer Rate Adjustment
September 12, 2017
Page 7
Staff has greatly appreciated the review of this issue by members of the public, members
of the Finance Committee, and the City Council. It is never easy to come before you to
increase a rate or fee, and we do so fully cognizant of the adverse impacts these changes
can have on our residents with limited and fixed incomes. Nevertheless, we believe that
this rate increase proposal is both moderate and necessary.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action 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
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — Final Sewer Rate Study
Attachment B — Ordinance (Redline)
Attachment C — Ordinance (Final)
25-7
CITY OF NEWPORT BEACH
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Sewer Rate Study
HF H
HF&H Consultants, LLC
25-9
CITY OF NEWPORT BEACH
592 Superior Avenue
Newport Beach, CA 92663
SEWER RATE STUDY
August 13, 2017
HF&H CONSULTANTS, LLC
201 North Civic Drive, Suite 230
Walnut Creek, CA 94596
O HF&H CONSULTANTS, LLC All rights reserved.
This document is printed on 100% recycled, post -consumer content paper
25-10
25-11
HILTON FARNKOPF Pr HOBSON
201 North Civic Drive, Suite 230
Walnut Creek, California 94596
Tel: (925) 977-6950
Fax: (925) 977-6955
hfh-consultants.com
August 13, 2017
Mr. George Murdoch
Municipal Operations Director
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Subject: Sewer Rate Study
Dear Mr. Murdoch:
HF&H CONSULTANTS, LLC
Managing Tomorrow's Resources Today
Robert D. Hilton, CMC
John W. Farnkopf, PE
Laith B. Ezzet, CMC
Richard J. Simonson, CMC
Marva M. Sheehan, CPA
Robert C. Hilton, CMC
HF&H Consultants, LLC, is pleased to submit this Sewer Rate Study to the City of
Newport Beach (City). The report summarizes the analysis that was conducted to
develop the recommended rates. A copy of the rate model is included in the appendix.
Very truly yours,
HF&H CONSULTANTS, LLC
I'
John W. Farnkopf, P.E., Senior Vice President
Geoffrey Michalczyk, Associate
25-12
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City of Newport Beach
TABLE OF CONTENTS
Sewer Rate Study
Table of Contents
1. EXECUTIVE SUMMARY................................................................................ 1
Findings And Recommmendations................................................................................... 1
2. INTRODUCTION.......................................................................................... 5
Study Purpose And Objectives......................................................................................... 5
Background.................................................................................................................... 5
3. PROJECTED REVENUE INCREASES............................................................. 7
Revenue Requirement Projections.................................................................................... 7
Salaries.................................................................................................................... 8
Benefits.................................................................................................................... 8
Operations & Maintenance......................................................................................... 8
Internal Services Allocation........................................................................................ 9
Capital Reserve Expense............................................................................................ 9
RevenueIncreases......................................................................................................... 9
FundBalance................................................................................................................ 11
4. RATE DESIGN............................................................................................ 13
Current Rate Structure.................................................................................................. 13
Rate Structure Evaluation.............................................................................................. 13
Proposed Rate Structure............................................................................................... 15
Sewer Service Component of Rate Structure............................................................. 15
Sewer Use Component of Rate Structure.................................................................. 17
BalancedRate Design................................................................................................... 19
ProjectedRates............................................................................................................ 20
Current and Proposed Customer Bill Comparisons........................................................... 21
Comparison with Neighboring agencies.......................................................................... 21
APPENDIX A. SEWER RATE MODEL
HF&H Consultants, LLC Page i August 13, 2017
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City of Newport Beach Sewer Rate Study
Table of Contents
TABLE OF FIGURES
Figure 1-1.
Projected Revenue Increases.............................................................................. 1
Figure 1-2.
Current and Proposed Monthly Sewer Rates ........................................................
3
Figure 1-3.
Current and Proposed Monthly Sewer Rates — Sewer -Only Customers ...................
3
Figure 1-4.
Current and Proposed Average Monthly Sewer Bills (FY 2017-18) .........................
4
Figure 3-1.
Annual Escalation Factors...................................................................................
7
Figure 3-2.
Annual Revenue Requirement Components..........................................................
8
Figure3-3.
Capital Projects..................................................................................................
9
Figure 3-4.
Projected Revenue Increases............................................................................
10
Figure 3-5.
Operating Fund Balance With and Without Rate Increases ..................................
11
Figure 4-1.
Monthly Sewer Service Charges (FY 2017-18 Before Rate Increase) ....................
16
Figure 4-2.
Monthly Sewer Service Charges (FY 2017-18 With Rate Increase) .......................
17
Figure 4-3.
Monthly Sewer Use Component — Sewer -Only (FY 2017-18 Before Rate Increase)18
Figure 4-4.
Monthly Sewer Use Component — Sewer Only (FY 2017-18 With Rate Increase) .
18
Figure 4-5.
Monthly Sewer Charge — Sewer -Only (FY 2017-18) ............................................
19
Figure 4-6.
Fixed and Variable Revenue..............................................................................
19
Figure 4-7.
Monthly Sewer Rate Projections.........................................................................
20
Figure 4-8.
Monthly Sewer Rate Projections — Sewer -Only Customers ....................................
21
Figure 4-9.
Monthly Customer Bill Comparison (FY 2017-18) .................................................
21
Figure 4-10.
Neighboring Agency Monthly Bill Comparison....................................................
22
ACRONYMS
CIP
Capital Improvement Plan
EDU
Equivalent Dwelling Unit; an average single-family residential
customer
EMU
Equivalent Meter Unit
FY
Fiscal Year
GPD
Gallons Per Day
HCF or CCF
Hundred Cubic Feet of metered water; 748 gallons; a cube of water 4.6
feet on edge
I&I
Inflow and Infiltration; stormwater runoff that enters collection systems
through surface or subsurface connections, cracks, or other openings
IRWD
Irvine Ranch Water District
O&M Operations and Maintenance
OCSD Orange County Sanitation District
OCWD Orange County Water District
OPEB Other Post -Employment Benefits
PAYGo Pay -As -You -Go, in reference to funding capital improvements from
cash rather than from borrowed sources of revenue
PERS Public Employees Retirement System
SFR Single Family Residential
HF&H Consultants, LLC Page ii August 13, 2017
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City of Newport Beach
ACKNOWLEDGEMENTS
City Council
Kevin Muldoon, Mayor
Duffy Duffield, Mayor Pro Tem
Diane Dixon, Council Member
Brad Avery, Council Member
Jeff Herdman, Council Member
Scott Peotter, Council Member
Will O'Neill, Council Member
City Finance Commission:
Diane Dixon, Council Member
Kevin Muldoon, Council Member
Will O'Neill, Council Member
William Collopy, Citizen Advisor
Patti Gorczyca, Citizen Advisor
Joe Stapleton, Citizen Advisor
Larry Tucker, Citizen Advisor
City Staff
George Murdoch, Municipal Operations Director
Dan Matusiewicz, Finance Director
Joshua Rosenbaum, Senior Management Analyst
HF&H Consultants, LLC
John Farnkopf, Sr. Vice President
Geoffrey Michalczyk, Associate
Sewer Rate Study
Table of Contents
HF&H Consultants, LLC Page iii August 13, 2017
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City of Newport Beach
Sewer Rate Study
Table of Contents
HF&H Consultants, LLC Page iv August 13, 2017
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SEWER RATE STUDY
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City of Newport Beach
1. EXECUTIVE SUMMARY
Sewer Rate Study
1. Executive Summary
This report summarizes the analysis of the City's sewer rates. The analysis represents a
collaborative effort of the City's Staff and consulting team. HF&H prepared the
financial plan model using the City's FY 2017-18 operating budget. The financial model
forecasts expenditures and revenues for the next ten years; a copy is included in the
appendix to this report. For rate adoption purposes, five-year projections are presented.
FINDINGS AND RECOMMMENDATIONS
1. Key Assumptions. Rates were set to generate revenue sufficient to fund the
City's sewer collection system expenses, to fund local capital improvements, and
to fund the Sewer Fund's reserves at targeted levels. The proposed rate
structures reflect current legal standards and industry practices.
2. Revenue Projections. The projected annual revenue increases enable the City to
address sewer collection and pump station improvement projects that were
identified in the City's Sewer Facilities Master Plan. These increases enable the
City to ramp up funding for capital projects to $1,000,000 per year on a pay-as-
you-go cash basis without issuing debt.
The annual revenue increases for the next five years are shown in Figure 1-1.
Note that the Sewer Fund is currently operating at a significant deficit. The
revenue increases proposed during the next five years steadily reduce the deficit.
By FY 2021-22, the Sewer Fund will be operating at a slight surplus with revenue
increases at inflationary levels.
II -i ure i -i. vro ectea Kevenue increases
FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
(Eff.1/1/18) (Eff.1/1/19) (Eff.1/1/20) (Eff.1/1/21) (Eff.1/1/22)
Revenue from Current Rates
Increase in Revenue from Rates
Revenue from Rate Increases
FY17-18 (effective 1/1/18)
FY19-20 (effective 1/1/19)
FY20-21 (effective 1/1/20)
FY21-22 (effective 1/1/21)
FY21-22 (effective 1/1/22)
Subtotal - Revenue Increases
Total Rate Revenue with Increase
Net Revenue Requirements
Surplus/(Deficit) after Increase
Source: Model Tab 8.
HF&H Consultants, LLC
$3,544,662 $3,544,662 $3,544,662 $3,544,662 $3,544,662
9.4% 9.4% 9.4% 8.4% 2.0%
$166,599 $333,198 $333,198 $333,198 $333,198
$0 $182,259 $364,519 $364,519 $364,519
$0 $0 $199,392 $398,784 $398,784
$0 $0 $0 $194,929 $389,858
$0 $0 $0 $0 $50,310
$166,599 $515,458 $897,109 $1,291,429 $1,536,668
$3,711,261 $4,060,119 $4,441,770 $4,836,091 $5,081,330
$4,579,977 $4,684,594 $4,791,719 $4,901,415 $5,013,746
($868,716) ($624,474) ($349,949) ($65,324) $67,583
Page 1
August 13, 2017
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City of Newport Beach Sewer Rate Study
1. Executive Summary
3. Rate Design. The City's current sewer customers pay the sum of the following: a
fixed monthly sewer service charge that is the same for all customers and a sewer
use charge based on monthly metered water use. In addition, for meters 2 -inch
or larger, a $10.00 monthly surcharge is assessed. For connections servicing two
or more dwelling units on the same connection, a monthly $2.00 per dwelling
unit surcharge is assessed for any additional dwelling units. For customers
receiving only sewer service from the City, a $6.25 flat charge per account is
charged plus a $2.00 charge per additional dwelling unit, if any.
We recommend combining the two surcharges into the monthly sewer service
charge and maintaining the uniform sewer use charge. Under this proposed rate
structure, customers will pay the sum of only two charges: a monthly sewer use
charge, graduated in proportion to the size of the water meter, and the uniform
sewer use charge. For customers receiving only sewer service from the City, the
proposed structure would comprise the same sewer service charge per account
plus a sewer use charge based on the average flow per meter for the City's water
customers.
It is recognized that the sewer use charge, which is based on year-round monthly
water use, has the effect of billing most residential customers for irrigation flow
that is not discharged to the sewers. This is a long-standing practice of the City
that will continue with the proposed rates. The benefit of this form of flow -based
rate structure outweighs the benefit customers receive over being charged a flat
rate that does not reflect any differences in flow, which is a common alternative
structure. The amount of irrigation water that may figure into the bill can be
reduced by using winter water use, rather than year-round water use. However,
the City's current customer billing system is unable to calculate sewer bills based
on winter water use. The City is evaluating the future capabilities of its billing
system to determine winter water use.
4. Projected Rates. Figure 1-2 shows the sewer rates that are needed to cover the
projected revenue requirements, and compares the revised structure to the
current structure. In the revised rate structure, the sewer service charges are
graduated from the smallest to the largest meters, rather than charging a flat
amount and adding surcharges, as is presently done. This gradation recovers
almost 60% of the revenue, which is consistent with the current rates.
The proposed rate structure maintains the sewer use charge, which is based on
metered water use. Because the City's facilities only collect and convey
wastewater and do not also treat wastewater, there is no need to differentiate
flow charges to account for differences in wastewater strength among customer
classes.
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City of Newport Beach
Sewer Rate Study
1. Executive Summary
Figure 1-2. Current and Proposed Monthly Sewer Rates
Source: Model Tab 8.
Figure 1-3 shows the rates for sewer -only customers. The proposed rates include
the same sewer service charges in Figure 1-2 plus a sewer use charge based on
the average flow per meter for the City's water customers.
Fiaure 1-3. Current and Proraosed Monthly Sewer Rates - Sewer -Only Customers
Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.1/1/22)
Sewer Service Charges
5/8"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
3/4"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
ill
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
1.5"
$4.50
$7.11
$7.78
$8.51
$9.23
$9.41
2"
$14.50
$9.70
$10.61
$11.61
$12.58
$12.83
3"
$14.50
$10.99
$12.02
$13.15
$14.26
$14.54
4"
$14.50
$12.93
$14.14
$15.47
$16.77
$17.11
6"
$14.50
$14.55
$15.91
$17.41
$18.87
$19.25
8"
$14.50
$16.16
$17.68
$19.34
$20.97
$21.39
10"
$14.50
$20.69
$22.63
$24.76
$26.84
$27.37
12"
$14.50
$25.86
$28.29
$30.95
$33.55
$34.22
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
Sewer Use Charge (per HCF)
$0.35
$0.38
$0.42
$0.46
$0.50
$0.51
Source: Model Tab 8.
Figure 1-3 shows the rates for sewer -only customers. The proposed rates include
the same sewer service charges in Figure 1-2 plus a sewer use charge based on
the average flow per meter for the City's water customers.
Fiaure 1-3. Current and Proraosed Monthly Sewer Rates - Sewer -Only Customers
Source: Model Tab 8.
Comparing the current rates with the proposed rates for the larger meters can be
misleading. In some cases such as hotels, the current bill would include the $6.25
charge per account plus the $2.00 surcharge per dwelling unit. A hotel with 100
rooms would be charged $206.25 under the current rates. Under the proposed
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Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.1/1/22)
Flat Charges Per Account
5/8"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
3/4"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
1"
$6.25
$11.59
$12.68
$13.87
$15.04
$15.34
1.5"
$6.25
$34.87
$38.15
$41.73
$45.24
$46.14
2"
$6.25
$35.92
$39.30
$42.99
$46.60
$47.54
3"
$6.25
$92.27
$100.94
$110.43
$119.70
$122.10
4"
$6.25
$163.41
$178.78
$195.58
$212.01
$216.25
6"
$6.25
$287.97
$315.04
$344.65
$373.60
$381.07
8"
$6.25
$289.58
$316.80
$346.58
$375.70
$383.21
10"
$6.25
$294.11
$321.75
$352.00
$381.57
$389.20
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
Source: Model Tab 8.
Comparing the current rates with the proposed rates for the larger meters can be
misleading. In some cases such as hotels, the current bill would include the $6.25
charge per account plus the $2.00 surcharge per dwelling unit. A hotel with 100
rooms would be charged $206.25 under the current rates. Under the proposed
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City of Newport Beach
Sewer Rate Study
1. Executive Summary
rates, the charge would depend on the size of the water service but could be of
similar magnitude because the majority of the City's large water meters serve
customers with a significant number of dwelling units. The proposed rate
structure recovers approximately twice as much revenue from the sewer -only
customers as the current rates.
5. Customer Bills. Figure 14 shows typical monthly residential and non-
residential bills at the current and proposed rates (excluding current dwelling
unit surcharges).
Fiaure 1-4. Current and Proaosed Averaae Monthly Sewer Bills WY 2017-181
Source: Model Tab 8.
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Current
Current
Current
Proposed
Proposed
Proposed
Proposed
Monthly
Service
Flow
Monthly
Service
Flow
Monthly
Minus
Customer Type MAU
Meter Size
Flow (HCF)
Charge
Charge
Bill
Charge
Charge
Bill
Current
Single Family Residential (low flow)
5/8" - 1"
3.0
$4.50
$1.03
$5.53
$6.46
$1.13
$7.60
$2.06
Single Family Residential (aig flow)
5/8.1-11,
11.8
$4.50
$4.13
$8.63
$6.46
$4.52
$10.99
$2.35
Single Family Residential (high flow)
5/8" - 1"
23.6
$4.50
$8.27
$12.77
$6.46
$9.05
$15.51
$2.74
Sewer -only (no additional DUs)
3/4"
9.0
$6.25
$0.00
$6.25
$6.46
$3.44
$9.90
$3.65
Commercial
1.5
29.7
$4.50
$10.40
$14.90
$7.11
$11.38
$18.49
$3.59
Commercial
2"
118.9
$14.50
$41.61
$56.11
$9.70
$45.52
$55.21
-$0.89
Commercial
3"
237.7
$14.50
$83.21
$97.71
$10.99
$91.03
$102.02
$4.31
Source: Model Tab 8.
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City of Newport Beach Sewer Rate Study
2. Introduction
2. INTRODUCTION
STUDY PURPOSE AND OBJECTIVES
The purpose of this study is to update the City's sewer rates, which have not been
adjusted since 2006. The City's current rate -making objectives include the following:
• Provide revenue sufficiency and financial stability to cover the projected capital
and O&M costs.
• Meet the City's operations and capital funds reserve targets for the sewer
enterprise fund.
• Rates should reflect equity of costs in proportion to the level of service.
• Provide for efficient administration and customer billing.
• Minimize "rate shock" to customers by smoothly moderating annual rate
increases.
• Rates should be clear and understandable to the customers.
• The rates must comply with Proposition 218 and applicable State codes.
BACKGROUND
The City provides sewer service to a population of approximately 86,700 residents. The
City's sewer collection system consists of 197 miles of gravity sewers, 4.7 miles of force
mains, 4,922 manholes and cleanouts, and 21 lift stations. Most of the City's 27,100
sewer accounts also receive water service from the City. As a result the City has ready
access to metered water data, which enables the City to include a component in the
sewer rate structure that bills customers bases on their individual water. However,
approximately 500 accounts only receive sewer service; their water service is provided
by either Irvine Ranch Water District (IRWD) or Mesa Water District; these customers
cannot be billed based on their individual metered water use.
The City's service area lies within the Orange County Sanitation District (OCSD), which
is responsible for treating the City's wastewater. OCSD is responsible for setting its
charges and bills customers on the tax rolls. The City plays no roll in setting OCSD's
rates. Customers are therefore billed for wastewater collection service on the City's
monthly utility bills and for wastewater treatment service on the annual Orange County
tax rolls.
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Sewer Rate Study
2. Introduction
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City of Newport Beach Sewer Rate Study
3. Projected Revenue Increases
3. PROJECTED REVENUE INCREASES
The City's Sewer Fund is an enterprise that is funded from revenue from sewer rates
paid by residents and businesses located within the City. The City does not serve
customers outside the city limits. The General Fund provided $3.5 million to the Sewer
Fund to avert the need for a rate increase proposed in 2016. This form of funding from
the General Fund is very unusual. Because the Sewer Fund is an enterprise that can set
its rates to cover its costs, it is preferable to set rates that will allow the Sewer Fund to be
financially self sufficient. The purpose of a rate study is to determine how much and
when rates need to be increased to cover its costs and maintain adequate reserves.
REVENUE REQUIREMENT PROJECTIONS
Rate analysis begins by determining the revenue requirements that must be funded by
rates. For purposes of this study, a ten-year rate projection period was developed using
a spreadsheet model (a copy is provided in the Appendix). For rate -making purposes,
however, only the first five years are presented. Under Proposition 218, the City can
adopt annual rate increases for as many as five years under one notification. Those five
years have been set within the context of a ten-year projection. The projections are
based on the draft budget for FY 2017-18. The future years were projected based on a
number of escalation factors that are summarized in Figure 3-1.
Fiaure 3-1. Annual Escalation Factors
Factors
FY 2018-19
FY 2019-20
FY 2020-21
FY 2021-22
Interest on Reserve Balance
0.75%
0.75%
0.75%
0.75%
General inflation
1.73%
1.73%
1.73%
1.73%
Personnel Increases
2.5%
2.5%
2.5%
2.5%
Benefits cost increases
2.5%
2.5%
2.5%
2.5%
Percent of Bad Debt
0.4%
0.4%
0.4%
0.4%
Utilities Increases - electricity
1.73%
1.73%
1.73%
1.73%
Increase in Sewer Accounts
0.00%
0.00%
0.00%
0.00%
Increase in Water Consumption
0.00%
0.00%
0.00%
0.00%
Increase in Recycled Water Use
0.00%
0.00%
0.00%
0.00%
Construction cost inflation
3.00%
3.00%
3.00%
3.00%
Source: Model Tab 1B.
We note the following regarding the escalation factors in Figure 3-1. Although the
model allows for annual variations in the factors, it was assumed that they would
remain constant during the projection period. The general inflation rate that applies to
many costs in the revenue requirement is based on a recent average of inflation in the
Los Angeles area based on US Statistics. It was assumed that there would be no growth
in customer accounts or estimated wastewater flow.
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City of Newport Beach Sewer Rate Study
3. Projected Revenue Increases
Figure 3-2 summarizes the revenue requirements projections for the next five years
based on the major cost categories, which are described below. The projection shows a
relatively gradual increase in expenditures after an initial increase in FY 2017-18.
Figure 3-2. Annual Revenue Requirement Components
$6.0
c $5.0
O
C $4.0
w
C
d
E
$3.0
�7
iT
d
$2.0
C
d
d
0� $1.0
$0.0
Capital Reserve Expense
Internal Services Allocation
Operations & Maintenance
Benefits
IIIIIIIIIIIIIIIIIIISalaries
-Revenue from Current Rates
Source: Model Tab 1A.
Salaries
FY 2016-17
FY 2017-18
FY 2018-19
FY 2019-20
FY 2020-21
FY 2021-22
750,000
1,000,000
1,030,000
1,060,900
1,092,727
1,125,509
486,500
475,296
483,519
491,883
500,393
509,050
1,417,443
1,457,443
1,482, 657
1,508,307
1,534,401
1,560,946
675,743
708,107
725,810
743,955
762,554
781,618
$1,020,322
$939,130
$962,609
$986,674
$1,011,341
$1,036,624
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
This cost category includes regular and overtime pay and is projected to increase
gradually at 2.5% per year during the projection period. There has been a slight
reduction in staffing in recent years and no staff headcount increases are anticipated;
the cost trend is driven primarily by cost of living adjustments set in labor agreements.
Benefits
This cost category includes health, dental, and vision as well as Other Post -Employment
(OPEB) and Public Employees Retirement System (PERS) benefits. During the
projection period these costs are projected to increase at 2.5% per year. The cost trend is
driven primarily by increases in health care costs set in labor agreements.
Operations & Maintenance
This cost category includes non -personnel related operating and maintenance expenses
as well as electrical utility costs, fuel, non -capital materials, and equipment. During the
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City of Newport Beach Sewer Rate Study
3. Projected Revenue Increases
projection period, these costs are expected to increase gradually at 1.73% per year,
based on the five-year historical average of inflation for the Los Angeles area.
Internal Services Allocation
The City has historically transferred funds from the Sewer Fund to the General Fund as
reimbursement for governmental costs incurred by the General Fund on behalf of the
Sewer Fund. Much of this funding reimburses the General Fund for salaries, equipment,
and program costs associated with general services. The amount of the reimbursement
is based on studies conducted by the City.' During the projection period, these costs are
forecast to increase gradually at 1.73% per year, based on the five-year historical
average of inflation for the Los Angeles area.
Capital Reserve Expense
The City conducted a Sewer System Master Plan study in 2010 that identified the 30 -
year capital improvement program expenditures, which are summarized in Figure 3-3.
The total averages about $1 million per year.
riaure s -s. uapitai
Collection System Capacity Improvements $1,281,391
Collection System Condition Improvements $16,648,060
Pump Station Improvements $11,088,000
$29,017,451
Source: Model Tab 8.
The City plans to fund these capital improvements with cash from rate revenue without
the use of bonds, which is appropriate because these projects are largely required to
keep up with constant sewer system depreciation rather than for large, periodic capital
projects. To accomplish this goal, the program is phased based upon the
implementation cost of the sewer system, and the quantity of work the City can
reasonably administer each year. The programmed rate increases over the next five
years allow the City to ramp up funding for capital projects and provide the City $1.0
million annually, which is adjusted for construction cost inflation.
REVENUE INCREASES
Figure 3-2 also indicates the amount of revenue from current rates without any rate
increases. It can be seen that rate revenue is not currently covering costs in FY 2016-17.
Without the $3.5 million transfer from the General Fund, the Sewer Fund's reserves
would have dropped well below the amount required by City policy. No further
transfers from the General Fund were included in the projections. Only rate increases
were considered for eliminating the deficit condition.
1 City of Newport Beach Full Cost Plan. October 31, 2016. P. 15.
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City of Newport Beach Sewer Rate Study
3. Projected Revenue Increases
To determine how much additional rate revenue is required, the projected revenue
requirements are compared to the revenue from current rates. The estimated revenue
from current rates for FY 2017-18 is derived from FY 2016-17. This may be a
conservative (i.e., low) revenue estimate because revenue from the flow component of
the current rate structure depends on flow. In FY 2016-17, flow was slightly lower
because customer water use was influenced by conservation during the drought. In FY
2016-17, the City estimated that revenue from the flow component of its sewer rates was
approximately $500,000 lower due to conservation efforts.
For rate -making purposes, it would be imprudent to assume that water use will
immediately return to pre -drought levels. The rate at which water use will rebound is
highly speculative at this time. If, however, this estimate is too conservative and flow
rebounds quickly, thereby generating additional revenue, the City will have the option
of not increasing rates as much as currently projected.
Based on this current estimate, annual revenue increases were projected as shown in
Figure 3-4.
ri ure 1-4. vro ectea Kevenue increases
FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
(Eff.1/1/18) (Eff.1/1/19) (Eff.1/1/20) (Eff.1/1/21) (Eff.1/1/22)
Revenue from Current Rates
Increase in Revenue from Rates
Revenue from Rate Increases
FY17-18 (effective 1/1/18)
FY19-20 (effective 1/1/19)
FY20-21 (effective 1/1/20)
FY21-22 (effective 1/1/21)
FY21-22 (effective 1/1/22)
Subtotal - Revenue Increases
Total Rate Revenue with Increase
Net Revenue Requirements
Surplus/(Deficit) after Increase
Source: Model Tab 8.
$3,544,662 $3,544,662 $3,544,662 $3,544,662 $3,544,662
9.4% 9.4% 9.4% 8.4% 2.0%
$166,599
$333,198
$333,198
$333,198
$333,198
$0
$182,259
$364,519
$364,519
$364,519
$0
$0
$199,392
$398,784
$398,784
$0
$0
$0
$194,929
$389,858
$0
$0
$0
$0
$50,310
$4,579,977 $4,684,594 $4,791,719 $4,901,415 $5,013.746
Figure 3-4 projects a series of three 9.4% rate increases and an 8.4% increase that draws
the fund balanced down to the target by FY 2019-20. In subsequent years, the rate
increases level out at inflationary increases. Prior to adopting any rate increases beyond
FY 2021-22, the City should update the revenue requirement projections to reflect new
expense projections, growth in customer accounts and flow, and reserve fund levels. If
it is determined at that time that rate increases are required, the City will need to
comply with Proposition 218.
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City of Newport Beach Sewer Rate Study
3. Projected Revenue Increases
FUND BALANCE
Figure 3-5 compares the operating fund balance with (solid green line) and without
(dashed green line) rate increases with the target reserve balance (blue line). The steep
increase in the fund balance from FY 2015-16 to FY 2016-17 shows the effect of the $3.5
million General Fund transfer. This transfer only increased the fund balance
approximately $2.0 million because the fund has been operating at a deficit. The
magnitude of the deficit can be seen in the dashed green line, which drops steeply in
subsequent years. By FY 2018-19, the fund balance is projected to drop below the target
balance if there are no rate increases.
With the proposed revenue increases, the fund balance (solid green line) is above or
very near the target balance throughout the five-year rate projection period.
Fluctuations in annual flow will affect revenue generation and the resulting fund
balance. The City is advised to carefully monitor the fund balance in the event of
downward fluctuations in flow.
Fiaure 3-5. Ooeratina Fund Balance With and Without Rate Increases
Source: Model Tab 1A.
The target balance is based on City Policy F-2:
Stabilization and Contingency Reserve: This Reserve is used to provide
sufficient funds to support seasonal variations in cash flows and in more
extreme conditions, to maintain operations for a reasonable period of time
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Year End Fund Balances - Fund 711 (Operations)
54.0
53.5
C
S3.0
G
52.5
U,
.� Reserves With
Rate Increases
'
$2.0
m
V
Target Reserve Balance'
li
S1.5
(operations)
LL
'o
a
Reserves Without
5
Rate Increase.
$0-0
FY 2015-16
FY 2016-17 FY 2017-18 FY 2018-19 FY 2919-20 FY 2020-21 FY 2021-22
Source: Model Tab 1A.
The target balance is based on City Policy F-2:
Stabilization and Contingency Reserve: This Reserve is used to provide
sufficient funds to support seasonal variations in cash flows and in more
extreme conditions, to maintain operations for a reasonable period of time
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City of Newport Beach
Sewer Rate Study
3. Projected Revenue Increases
so the City may reorganize in an orderly manner or effectuate a rate
increase to offset sustained cost increases. The intent of the Reserve is to
provide funds to offset cost increases that are projected to be short-lived,
thereby partially eliminating the volatility in annual rate adjustments. It is
not intended to offset ongoing, long-term pricing structure changes. The
target level of this reserve is fifty percent (50%) of the annual operating
budget. This reserve level is intended to provide a reorganization period
of 6 months with zero income or 24 months at a twenty-five percent (25%)
loss rate, The City Council must approve use of these funds, based on City
Manager recommendation. Funds collected in excess of the Stabilization
reserve target would be available to offset future rate adjustments, while
extended reserve shortfalls would be recovered from future rate increases.
Should catastrophic losses to the infrastructure system occur, the
Stabilization and Contingency Reserve may be called upon to avoid
disruption to wastewater service. [Page 8.]
This reserve target does not provide reserves for capital projects. Instead, a capital
account is maintained by Public Works out of which the CIP is funded. Although there
is no target balance for this account, sewer rates are set to generate revenue that is
deposited in the account for use by Public Works in funding the CIP.
The projected rate increases show the fund balance (solid green line) gradually climbing
above the dashed green line as the annual deficits diminish, which is also shown in
Figure 3-5. By FY 2021-22, the Sewer Fund is projected to be in a slight surplus
condition.
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City of Newport Beach Sewer Rate Study
4. Rate Design
4. RATE DESIGN
CURRENT RATE STRUCTURE
The City currently has 27,100 active sewer accounts that pay the sum of two charges
every month for Sewer service: a basic service charge of $4.50 per account plus a sewer
consumption charge of $0.35 per HCF based on metered water use during the billing
period. In addition, customers with a water service connection of 2"or greater pay a
$10.00 monthly surcharge. Moreover, customers with more than one dwelling unit that
is served by the same connection pay a surcharge of $2.00 for each additional dwelling
unit. Lastly, the City's 506 sewer customers who do not purchase potable water from
the City are charged $6.25 per account per month regardless of the size of their water
service connection.
RATE STRUCTURE EVALUATION
The general design of the current rate structure has been in place for many years. The
structure combines fixed and volumetric components customers. Such a design is in
keeping with industry standards:
Rate designs based on a single fixed charge component remain common
today among small utility systems and in service areas without water
metering. However, the use of fixed charges exclusively is steadily
declining and being replaced by rate schedules that combine fixed charges
with a volume rate. When used in conjunction with volume rates, fixed
charges commonly take the form of (1) service charges, (2) meter charges,
(3) minimum charges, or combinations thereof.2
The addition of a volume rate to the fixed charge is intended to improve equity.
Charging only a fixed charge has the effect of treating all customers equally, but not all
customers are equal. Customers discharge different amounts of wastewater. Adding a
volume rate to the structure can reflect differences among wastewater customers based
on the wastewater they discharge.
It is to the City's credit that it has a sewer rate structure that combines a fixed charge
with a volume rate. The current proportions of revenue from the fixed and volume
charges is in balance with the fixed and variable costs in the revenue requirement.
Approximately 60% of the revenue is generated by the fixed charges and 40% by the
volume charge. With this combination, the average customer bill covers its share of the
2 Financing and Charges for Wastewater Systems. Water Environment Federation Manual of Practice No. 27.
2004. P. 146. This publication provides guidance in setting wastewater rates similar to the American
Water Works Associations Manual M1, which provides guidance for setting water rates.
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City of Newport Beach Sewer Rate Study
4. Rate Design
fixed costs. We recommend maintaining a rate structure with the same 60%/40%
balance between the fixed and volume rates.
Our review of the structure of the current fixed charges leads us to recommend the
following refinement. The current set of three fixed charges (i.e., per account, per
dwelling unit, and per large meter) is comparatively complex based on industry
standards. We recommend consolidating the three fixed charges into a single set of
charges that are graduated in proportion to the size of the meter.
In addition to simplifying the structure, rate payer equity will be improved in three
ways by creating a single set of graduated fixed charges for three reasons. First, the
current $4.50 charge per account recovers a portion of fixed costs that are not clearly
distinguished from the fixed costs recovered from the other fixed charges. Although
there are certainly fixed costs associated with the charge per account, the cost of service
corresponding to this charge has not been recently updated.
Second, the $2.00 charge per dwelling unit can be viewed as problematic when it is
charged to unoccupied dwelling units. Moreover, the cost of service corresponding to
this charge has not been recently updated. Again, this is a case in which this charge
recovers a portion of fixed costs that are not clearly distinguished from the fixed costs
recovered from the other fixed charges.
Third, the $10.00 charge for 2" and larger meters raises a question as to why this charge
only applies to large meters beginning with 2" meters and is the same amount for all
larger meters. And, again, this is another case in which this charge recovers a portion of
fixed costs that are not clearly distinguished from the fixed costs recovered from the
other fixed charges.
Consolidating the current three fixed charges into a single set of fixed charges resolves
the complexity of having different fixed charges related to accounts, dwelling units, and
large meters. Graduating the proposed fixed charges based on water meter size is
appropriate because the size of the water meter is representative of the potential
production of wastewater. Although there is a correlation between water meter size
and wastewater discharge, the correlation for designing sewer rates is different than it
is for designing water rates.
In designing fixed charges for water rates, it is common to graduate the charge
reflecting the nominal capacity of each meter. The capacity of the meter is represents
the maximum possible flow that can be provided for inside, sewered uses and for
outside unsewered uses like irrigation. The size of larger water meters may also be
determined primarily based on fire flow requirements, which is also unsewered.
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City of Newport Beach Sewer Rate Study
4. Rate Design
When designing graduated fixed charges for sewer rates, consideration should be given
to reducing the capacity so that the sewer rate minimizes the amount of unsewered
capacity. There is no wastewater industry standard for graduating the fixed charges.
Our recommendation for designing the fixed charges is based on the existing fixed
charges, which currently range from $4.50 to $14.50 for meters ranging from 5/8" to
10", a range of 1.0 to 3.2. To accommodate 12" meters, of which there are two, we
extended the range to 1.0 to 4.0. This gradation is considerably less than the range in
the City fixed charges, which ranges from $17.27 to $2,663.48 or 1.0 to 154.2. The
gradation in the water fixed charges is much steeper because it reflects capacity that is
required for fire flows and irrigation, which is particularly the case with larger meters.
The gradation for the sewer fixed charges is comparatively flat and consistent with the
City's historic practice. As flat as the gradation, it fairly distributes fixed costs across
the meter sizes, shifting costs away from the smallest meters, which generally produce
the least wastewater, to the larger meters without burdening the larger meters with
capacity that is unsewered.
Our review of the structure of the current volume charge leads us to recommend
making no further structural changes. The volume charge is intended to recover a
portion of the fixed costs and all variable costs, which is appropriate. The volume
charge is uniform and does not vary by customer class, which is also appropriate
because the associated costs only relate to flows in the City's collection system. The cost
of treatment, which should reflect differences in wastewater strength among customer
classes, is charged separately by Orange County Sanitation District.
PROPOSED RATE STRUCTURE
The proposed rate structure should have two components. The fixed charge is a "Sewer
Service Charge" comprising a single set of fixed charges per meter and and the volume
rate is a "Sewer Use Charge". The derivation of these two components is described
below.
Sewer Service Component of Rate Structure
To give effect to these conclusions, a single set of fixed charges was derived in
proportion to the size of the water meter as shown in Figure 4-1. The calculation
combines the customers that receive both water and sewer service from the City as well
as the customers that receive only sewer service from the City.3 In this way, the
proposed rates for all customers will include a common fixed charge that is
proportionate to the meter size regardless of whether they receive only sewer service
from the City.
3 For ease of discussion, customers that receive both water and sewer service from the City will be
referred to as "sewer customers'. Customers that receive only sewer service from the City will be
referred to as "sewer -only customers".
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City of Newport Beach Sewer Rate Study
4. Rate Design
Figure 4-1. Monthly Sewer Service Charges (FY 2017-18 Before Rate Increase)
Meter Size
Meters
Sewer -Only
Meters
Total
Meters
EMU
Multiplier
Total
EMUS
Service
Charge
Per Meter
Revenue
No Rate
Increase
5/8"
16,604
275
16,879
1.00
16,879
$5.91
$1,196,868
3/4"
4
85
89
1.00
89
$5.91
$6,322
1"
7,437
57
7,494
1.00
7,494
$5.91
$531,385
1.5"
552
21
573
1.10
630
$6.50
$44,702
2"
1,465
58
1,523
1.50
2,284
$8.86
$161,958
3"
48
2
50
1.70
85
$10.05
$6,041
4"
253
4
257
2.00
513
$11.82
$36,378
6"
178
1
179
2.25
404
$13.30
$28,623
8"
95
1
96
2.50
239
$14.77
$16,965
10"
3
2
5
3.20
16
$18.91
$1,160
12"
2
-
2
4.00
8
$23.64
$567
26,641
506
27,147
28,642
$2,030,970
Source: Model Tab 7.
The "EMU4 Multiplier' in Figure 4-1 refers to the amount of capacity provided by
larger meters compared to the smallest meters. The multipliers used in Figure 4-1
follow a smooth progression from smallest to largest meter without the abrupt increase
that occurs in the current rates when the charge for large meters is added for 2" and
larger meters. The range from small to large EMUS is 1.0 to 4.0, which is considerably
less than the full hydraulic capacity of the larger meters. The range was kept low to
avoid including the peak capacity of larger meters that is often needed for fire flows or
irrigation, neither of which are sewered flows.
With these multipliers, the 27,147 meters of various sizes translate into 28,642
equivalent 5/8" meters. The unit charge per EMU (before rate increase) is $5.90.
Applyinig the EMU multipliers to the larger meters results in the Sewer Service Charges
for the larger meter sizes. The total revenue from these charges is about 58% of the total
rate revenue.
Figure 4-2 shows the sewer service charges for FY 2017-18 with the rate increase shown
in Figure 34. Note that the revenue shown would occur if the proposed rates were
effective for twelve months. Because the rates are planned to become effective January
1, 2018, only half of the revenue from the increase will be received.
4 "EMU" stands for "Equivalent Meter Unit."
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City of Newport Beach Sewer Rate Study
4. Rate Design
Fiaure 4-2. Monthiv Sewer Service Charaes (FY 2017-18 With Rate Increase
Meter Size
Meters
Sewer -Only
Meters
Total
Meters
EMU
Multiplier
Total
EMUS
Service
Charge
Per Meter
Revenue
With Rate
Increase
5/8"
16,604
275
16,879
1.00
16,879
$6.46
$1,309,374
3/4"
4
85
89
1.00
89
$6.46
$6,916
1"
7,437
57
7,494
1.00
7,494
$6.46
$581,335
1.5'
552
21
573
1.10
630
$7.11
$48,904
2"
1,465
58
1,523
1.50
2,284
$9.70
$177,182
3"
48
2
50
1.70
85
$10.99
$6,608
4"
253
4
257
2.00
513
$12.93
$39,798
6"
178
1
179
2.25
404
$14.55
$31,314
8"
95
1
96
2.50
239
$16.16
$18,560
10"
3
2
5
3.20
16
$20.69
$1,269
12"
2
0
2
4.00
8
$25.86
$621
26,641
506
27,147
28,642
$2,221,881
Source: Model Tab 7.
Sewer Use Component of Rate Structure
Sewer service charges are the same for all customers with the same size meter
regardless of customer class because the charge does not depend on what type of
customer is connected. The sewer service charge is based on the capacity of
connections, which is a reasonable approximation of the wastewater that can be
discharged. Sewer use charges are uniform charges per HCF that are also independent
of the type of customer that is discharging wastewater because the City's sewerage is
only related to conveyance and not to treatment.
Hence, the same $0.38 per HCF uniform sewer use charge is paid by all customers
based on their ongoing, monthly metered water use. In the case of non-residential
customers, significant irrigation water use is provided through irrigation accounts that
are not charged sewer use charges.
For residential customers, the use of ongoing, metered water use will unavoidably
include irrigation water. To minimize charging residential customers sewer use charges
that include irrigation water use, utilities base the water use on winter water use when
irrigation is minimal. In the City's case, the current customer billing system is unable to
calculate sewer bills based on winter water use. The City is evaluating the future
capabilities of its billing system to determine winter water use. Although it has been a
long-standing practice by the City to use ongoing water use for calculating residential
sewer use charges, the City recognizes the benefit of using only winter water use. The
City intends to improve its billing system in the future so that it will be possible to bill
residential sewer use charges based on winter water use.
For billing sewer -only customers sewer use charges, the City is at a disadvantage
because it does not have immediate access to water meter readings; the meters for
sewer -only customers are read by their water supplier and not the City. For lack of
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City of Newport Beach Sewer Rate Study
4. Rate Design
meter readings, average water use per meter was calculated for the City's water
customers and applied to the sewer -only customers. These average flows result in
sewer use charges for the sewer -only customers that are fixed for each size meter.
Figure 4-3 shows the derivation of the sewer use component of the rate structure for the
sewer -only customers.
Figure 4-3. Monthly Sewer Use Component
- Sewer -Only (FY 2017-18 Before Rate Increase
Meter Size
Meters
Avg HCF
Per Meter
Per Month
Current
Charge
Per HCF
Monthly
Use
Charge
Annual
Revenue
5/8"
275
8.97
$0.35
$3.14
$10,370
3/4"
85
8.97
$0.35
$3.14
$3,209
1"
57
13.39
$0.35
$4.69
$3,205
1.5'
21
72.49
$0.35
$25.37
$6,428
2"
58
68.49
$0.35
$23.97
$16,601
3"
2
212.27
$0.35
$74.29
$1,882
4"
4
393.01
$0.35
$137.56
$5,808
6"
1
714.08
$0.35
$249.93
$4,221
8"
1
714.08
$0.35
$249.93
$2,111
10"
2
714.08
$0.35
$249.93
$6,332
506
$60,167
Source: Model Tab 7.
Note that the averages for the 6" and larger meters involve very few customers. For
these meter sizes, the 8" flow was used for all three meter sizes.
Figure 4-4 shows the monthly sewer use charges for sewer -only customers with the rate
increase for FY 2017-18 shown in Figure 3-4.
Figure 4-4. Monthly Sewer Use Component
Sewer Only (FY 2017-18 With Rate Increase
Meter Size
Meters
Avg HCF
Per Meter
Per Month
Charge
Per HCF
Monthly
Use
Charge
Annual
Revenue
5/8"
275
8.97
$0.38
$3.44
$11,344
3/4"
85
8.97
$0.38
$3.44
$3,511
1"
57
13.39
$0.38
$5.13
$3,506
1.5'
21
72.49
$0.38
$27.76
$7,032
2"
58
68.49
$0.38
$26.23
$18,161
3"
2
212.27
$0.38
$81.28
$2,059
4"
4
393.01
$0.38
$150.49
$6,354
6"
1
714.08
$0.38
$273.42
$4,618
8"
1
714.08
$0.38
$273.42
$2,309
10"
2
714.08
$0.38
$273.42
$6,927
506
$65,823
Source: Model Tab 7.
Figure 4-5 shows the flat charge per account for the sewer -only customers that
combines the two rate components.
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City of Newport Beach
Figure 4-5. Monthly Sewer Charge - Sewer -Only FY 2017-18)
Meter Size
Service
Component
Use
Component
Flat
Charge
5/8"
$6.46
$3.44
$9.90
Current Rates
3/4"
$6.46
$3.44
$9.90
1"
$6.46
$5.13
$11.59
1.5
$7.11
$27.76
$34.87
2"
$9.70
$26.23
$35.92
3"
$10.99
$81.28
$92.27
57%
4"
$12.93
$150.49
$163.41
6"
$14.55
$273.42
$287.97
41%
8"
$16.16
$273.42
$289.58
10"
$20.69
$273.42
$294.11
Source: Model Tab 7.
BALANCED RATE DESIGN
Sewer Rate Study
4. Rate Design
Although this rate study recommends several structural modifications, the underlying
rate design balanced fixed and variable revenue with fixed and variable costs. Figure 4-
6 compares revenue from fixed and variable sources under the current rates with the
proposed rates.
Fiaure 4-6. Fixed and Variable Revenue
Source: Model Tab 7.
Under the current rates, 57% of the revenue comes from fixed charges 41 % from
variable charges. Those proportions are nearly the same with the proposed rates.
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Revenue Summary (FY 2017-18)
Proposed Rates
Current Rates
With 1/1/18 Increase
Fixed Charges
Service charge
$1,438,614
$2,085,636
DU surcharge
$347,076
$0
Large meter surcharge
$245,280
$0
$2,030,970
57%
$2,085,636
56%
Variable Charges
Use charge
$1,474,238
41%
$1,543,527
41
$3,505,208
$3,629,163
Sewer -Only
Seance charge
$37,950
$40,789
DU surcharge
$15,648
$0
Use charge
$0
$62,995
$53,598
2%
$103,784
3%
Total
$3,558,806
100%
$3,732,948
100%
Recap
Fixed Re\enue
SeMCe charges
$1,476,564
$2,126,425
DU surcharge
$362,724
$0
Large meter surcharge
$245,280
$0
Nonseasonal Variable
Charge
$737,119
$834,758.53
$2,821,687
79%
$2,961,184
79%
Variable re\enue
Seasonal Variable Charg
$737,119
21%
$771,764
21
$3,558,806
100%
$3,732,948
100%
Source: Model Tab 7.
Under the current rates, 57% of the revenue comes from fixed charges 41 % from
variable charges. Those proportions are nearly the same with the proposed rates.
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City of Newport Beach Sewer Rate Study
4. Rate Design
Those proportions balance well with the fixed and variable costs of providing sewer
service, which are at least 80% fixed. The lower part of Figure 4-6 makes an adjustment
for the portion of the water use that is nonseasonal and, hence, that also produces fixed
revenue. Assuming that half of the revenue from the sewer use charge is related to
nonseasonal water use shifts about 20% of the revenue from the flow charges to the
fixed charges. As a result, 79% of the revenue comes from fixed revenue sources, which
balances well with the fact that at least 80% of the costs are also fixed.
PROJECTED RATES
The FY 2017-18 rates shown in Figure 4-2 and Figure 4-5 are increased by the revenue
increases shown in Figure 3-4 for the five-year projection period, as shown in Figure 4-7
for all of the sewer customers with the exception of sewer -only customers, which are
shown in Figure 4-8.
Fiaure 4-7. Monthly Sewer Rate Proiections
Source: Model Tab 8.
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Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.1/1/22)
Sewer Service Charges
5/8"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
3/4"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
1 "
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
1.5"
$4.50
$7.11
$7.78
$8.51
$9.23
$9.41
2"
$14.50
$9.70
$10.61
$11.61
$12.58
$12.83
3"
$14.50
$10.99
$12.02
$13.15
$14.26
$14.54
4"
$14.50
$12.93
$14.14
$15.47
$16.77
$17.11
6"
$14.50
$14.55
$15.91
$17.41
$18.87
$19.25
8"
$14.50
$16.16
$17.68
$19.34
$20.97
$21.39
10"
$14.50
$20.69
$22.63
$24.76
$26.84
$27.37
12"
$14.50
$25.86
$28.29
$30.95
$33.55
$34.22
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
Sewer Use Charge (per HCF)
$0.35
$0.38
$0.42
$0.46
$0.50
$0.51
Source: Model Tab 8.
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City of Newport Beach
Sewer Rate Study
4. Rate Design
Fiaure 4-8. Monthly Sewer Rate Proiections - Sewer -Only Customers
Source: Model Tab 8.
CURRENT AND PROPOSED CUSTOMER BILL COMPARISONS
Figure 4-9 presents a comparison of monthly customer bills using the current rate
structure and the recommended revised rate structure.
Fiaure 4-9. Monthly Customer Bill Comparison (FY 2017-18)
Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.1/1/22)
Flat Charges Per Account
Proposed
Proposed
Monthly
Service
5/8"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
3/4"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
1"
$6.25
$11.59
$12.68
$13.87
$15.04
$15.34
1.5"
$6.25
$34.87
$38.15
$41.73
$45.24
$46.14
2"
$6.25
$35.92
$39.30
$42.99
$46.60
$47.54
3"
$6.25
$92.27
$100.94
$110.43
$119.70
$122.10
4"
$6.25
$163.41
$178.78
$195.58
$212.01
$216.25
6"
$6.25
$287.97
$315.04
$344.65
$373.60
$381.07
8"
$6.25
$289.58
$316.80
$346.58
$375.70
$383.21
10"
$6.25
$294.11
$321.75
$352.00
$381.57
$389.20
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
Source: Model Tab 8.
CURRENT AND PROPOSED CUSTOMER BILL COMPARISONS
Figure 4-9 presents a comparison of monthly customer bills using the current rate
structure and the recommended revised rate structure.
Fiaure 4-9. Monthly Customer Bill Comparison (FY 2017-18)
Source: Model Tab 8.
COMPARISON WITH NEIGHBORING AGENCIES
Based on available sources, Figure 4-10 shows the recent charges for sewer service
among similar Orange County agencies. Note that comparisons with other agencies
may not provide a complete understanding of the differences. For example, some of
these other agencies are currently updating their rates; the amounts of their proposed
increases were not known at this time. Some agencies' rates are supplemented by other
sources of non-operating revenue such as property or sales taxes, insurance or
settlement proceeds, rental or lease income, and general fund transfers, which are not
available to all agencies.
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Current
Current
Current
Proposed
Proposed
Proposed
Proposed
Monthly
Service
Flow
Monthly
Service
Flow
Monthly
Minus
Customer Type
Meter Size
Flow (HCF)
Charge
Charge
Bill
Charge
Charge
Bill
Current
Single Family Residential (low flow)
5/8" - 1"
3.0
$4.50
$1.03
$5.53
$6.46
$1.13
$7.60
$2.06
Single Family Residential (ag flow)
5/8" - 1"
11.8
$4.50
$4.13
$8.63
$6.46
$4.52
$10.99
$2.35
Single Family Residential (high flow)
5/8" - 1"
23.6
$4.50
$8.27
$12.77
$6.46
$9.05
$15.51
$2.74
Sewer -only (no additional DUs)
3/4"
9.0
$6.25
$0.00
$6.25
$6.46
$3.44
$9.90
$3.65
Commercial
1.5
29.7
$4.50
$10.40
$14.90
$7.11
$11.38
$18.49
$3.59
Commercial
2"
118.9
$14.50
$41.61
$56.11
$9.70
$45.52
$55.21
-$0.89
Commercial
3"
237.7
$14.50
$83.21
$97.71
$10.99
$91.03
$102.02
$4.31
Source: Model Tab 8.
COMPARISON WITH NEIGHBORING AGENCIES
Based on available sources, Figure 4-10 shows the recent charges for sewer service
among similar Orange County agencies. Note that comparisons with other agencies
may not provide a complete understanding of the differences. For example, some of
these other agencies are currently updating their rates; the amounts of their proposed
increases were not known at this time. Some agencies' rates are supplemented by other
sources of non-operating revenue such as property or sales taxes, insurance or
settlement proceeds, rental or lease income, and general fund transfers, which are not
available to all agencies.
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City of Newport Beach
Sewer Rate Study
4. Rate Design
The comparison shows that some agencies' rate structures are flat charges per account.
Other agencies' rates are like the City's and include both fixed and volume components.
The amount of these bills that is fixed varies considerably, which reflects the variability
of the industry practice.
Figure 4-10. Neighboring Agency Monthly Bill Comparison
Monthly Sewer Bill
(3/4" SFR, 11 HCF)
$4.00
$2.00
$0,00
Fullerton Fountain Costa Mesa
Valley Sanitary
District
Source: Model Tab 9.
HF&H Consultants, LLC
i i I
La Habra Newport Irvine Ranch Newport
Beach - Water District Beach -
Current Proposed
■ Fixed Charge M Flow Charge
Page 22
Huntington Garden Grove Buena Park
Beach Sanitary
District
August 13, 2017
25-41
City of Newport Beach
Sewer Rate Study
Appendix — Sewer Rate Model
APPENDIX. SEWER RATE MODEL
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City of Newport Beach
City of Newport Beach
Sewer Rate Study
Table 1A. Summary
Fiscal Year.
Revenue Increases -Sewer
Cumulative Increase
Sewer Rate Study
Appendix - Sewer Rate Model
Projected
FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27
9.40% 9.40% 9.40% 8.40% Z00% 2.00% 2.00% 2.00% 2.00% 2.00%
9.4% 19.7% 30.9% 41.9% 44.8% 47.7% 50.6% 53.6% 56.7% 59.8%
Special Pays
3,784
4,563
4,677
4,794
4,914
5,037
5,163
5,292
5,424
5,560
5,699
Benefits
675,743
708,107
725,810
743,955
762,554
781,618
801,158
821,187
841,717
862,760
884,329
Lump Sum Pays
-
-
-
-
-
-
-
-
-
-
-
Other Pays
45,000
45,000
46,125
47,278
48,460
49,672
50,913
52,186
53,491
54,828
56,199
Contract Services
51,000
91,000
92,574
94,176
95,805
97,463
99,149
100,864
102,609
104,384
106,190
Utilities
97,700
97,700
99,390
101,110
102,859
104,638
106,449
108,290
110,164
112,069
114,008
Supplies & Materials
19,850
19,850
20,193
20,543
20,898
21,260
21,627
22,002
22,382
22,769
23,163
Maintenance & Repair
786,000
785,363
798,950
812,772
826,833
841,137
855,689
870,492
885,552
900,872
916,457
Travel & Training
10,260
10,260
10,437
10,618
10,802
10,989
11,179
11,372
11,569
11,769
11,973
General Expenses
412,497
412,497
419,633
426,893
434,278
441,791
449,434
457,209
465,119
473,166
481,351
Internal SVC Premium
486,500
475,296
483,519
491,883
500,393
509,050
517,856
526,815
535,929
545,201
554,633
Insurance Reserve
20,773
20,773
21,132
21,498
21,870
22,248
22,633
23,025
23,423
23,828
24,240
Capital Expenditures
33,000
33,000
33,571
34,152
34,743
35,344
35,955
36,577
37,210
37,854
38,508
Non -Operating Revenue
(13,000)
(13,000)
(13,225)
(13,454)
(13,686)
(13,923)
(14,164)
(14,409)
(14,658)
(14,912)
(15,170)
Storm Drain Operating
Storm Drain Capital
Transfers to Insfrastructure Replace
$750,000
$1,000,000
$1,030,000
$1,060,900
$1,092,727
$1,125,509
$1,159,274
$1,194,052
$1,229,874
$1,266,770
$1,304,773
$
4,350,646 $
4,579,977 $
4,684,594 $
4,791,719 $
4,901,415 $
5,013,746
$ 5,128,779
$ 5,246,580
$ 5,367,219
$ 5,490,769
$ 5,617,301
Annual increase
5.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
HF&H Consultants, LLC
Page A-1
August 13, 2017
25-43
City of Newport Beach
City of Newport Beach
Sewer Rate Study
Table 1B. General
Factors
FY 2018-19
FY 2019-20
FY 2020-21
FY 2021-22
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27
Interest on Reserve Balance
0.75%
0.75%
0.75%
0.75%
0.75%
0.75%
0.75%
0.75%
0.75%
General inflation
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
Personnel Increases
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
Benefits cost increases
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
Percent of Bad Debt
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
Utilities Increases - electricity
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
1.73%
Increase in Sewer Accounts
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Increase in Water Consumptioi
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Increase in Recycled Water Us
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Construction cost inflation
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
Reserve Policies
Operations Fund
Purpose
Funding priority
Minimum balance
Infrastructure Replacement Funds
Purpose
Funding priority
Target balance
Working capital for O&M cash flow during the year.
Highest. If not maintained, interfund loans are needed.
50% of annual O&M costs
For wastewater master plan construction projects.
Second highest.
No Minimum or Maximum. Should be reviewed periodically
Model Tables Included
Table 1A. Summary
Table 1B. General
Table 2A. Revenue Requirement Projection - Sewer
Table 3A. Revenue Increases - Sewer
Table 4. Reserves
Table 5. CIP
Table 7A. Rate Revenue - Sewer
Table 8. Sample Customer Bills
Table 9. Sewer Agency Comparison
HF&H Consultants, LLC
Page A-2
Sewer Rate Study
Appendix - Sewer Rate Model
Source Notes
City Estimate
To Table 4
US Statistics, LA Area 5 -year average To Table 2
Estimate
To Table 2
Estimate
To Table 2
Based on City's Fund Worksheet
To Table 3A,3B
City Estimate
To Table 3A
To Table 2, 8
To Table 2, 3B
To Table 2B. 5
August 13, 2017
25-44
City of Newport Beach
Sewer Rate Study
Appendix - Sewer Rate Model
City of Newport Beach
Sewer Rate Study
Table 2A. Revenue Requirement Projection - Sewer
Table 16 Budgeted Projected
Factors FY 2016.17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026.27 Notes
Reuular Salaries
711001
SALRY MISC
C.
$ 971,539
$881,540
$903,579
$926,168
$949,323
$973,056
$997,382
$1,022,317
$1,047,875
$1,074,071
$1,100,923
711003
SALRY PIT
C.
$8,026
$8,227
$8,433
$8,644
$8,860
$9,081
$9,308
$9,541
$9,779
$10,024
Total Regular Salaries
971,539
889,567
911,806
934,601
957,966
981,915
1,006,463
1,031,625
1,057,416
1,083,851
1,110,947
Special Pays
712003
NIGHT DIFF
C.
-
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
712004
CERT PAY
C.
3,784
$4,563
$4,677
$4,794
$4,914
$5,037
$5,163
$5,292
$5,424
$5,560
$5,699
Total Special Pays
3,784
4,563
4,677
4,794
4,914
5,037
5,163
5,292
5,424
5,560
5,699
Benefits
713008
CALLBACK
C.
35,000
$35,000
$35,875
$36,772
$37,691
$38,633
$39,599
$40,589
$41,604
$42,644
$43,710
713009
STANDBY
C.
26,250
$26,250
$26,906
$27,579
$28,268
$28,975
$29,699
$30,442
$31,203
$31,983
$32,783
721001
CAF ALW FT
d.
281,086
$245,814
$251,959
$258,258
$264,715
$271,333
$278,116
$285,069
$292,196
$299,500
$306,988
722001
PERS MBR M
d.
101,752
$89,905
$92,153
$94,457
$96,818
$99,239
$101,720
$104,263
$106,869
$109,541
$112,280
723002
PERS ER M
d.
56,638
$52,897
$54,220
$55,575
$56,965
$58,389
$59,848
$61,345
$62,878
$64,450
$66,061
723004
RET PIT
d.
-
$301
$309
$316
$324
$332
$341
$349
$358
$367
$376
724001
EE CNTRB M
d.
($126,845)
($101,930)
($104,479)
($107,091)
($109,768)
($112,512)
($115,325)
($118,208)
($121,163)
($124,192)
($127,297)
725001
UNFND LB M
d.
209,986
$194,103
$198,956
$203,930
$209,028
$214,254
$219,610
$225,100
$230,728
$236,496
$242,408
725003
DISC UAL M
d.
-
$79,895
$81,892
$83,940
$86,038
$88,189
$90,394
$92,654
$94,970
$97,344
$99,778
727003
CELLPHONE
d.
6,300
$6,360
$6,519
$6,682
$6,849
$7,020
$7,196
$7,376
$7,560
$7,749
$7,943
727004
RHS $2.50
d.
11,584
$9,458
$9,695
$9,937
$10,185
$10,440
$10,701
$10,969
$11,243
$11,524
$11,812
727007
PAY > ARC
d.
-
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
727012
LIFE INS
d.
1,358
$1,097
$1,124
$1,152
$1,181
$1,211
$1,241
$1,272
$1,304
$1,336
$1,370
727013
EAP
d.
326
$239
$245
$251
$257
$264
$270
$277
$284
$291
$298
727016
MEDICARE
d.
18,218
$17,796
$18,241
$18,697
$19,164
$19,643
$20,134
$20,638
$21,154
$21,683
$22,225
727019
SURV BEN
d.
-
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
728001
WC MISC
d.
20,068
$20,068
$20,570
$21,084
$21,611
$22,151
$22,705
$23,273
$23,855
$24,451
$25,062
728003
COMP ABS
d.
34,022
$30,854
$31,625
$32,416
$33,226
$34,057
$34,908
$35,781
$36,675
$37,592
$38,532
729001
PAYRL ACC
d.
-
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
729015
PENS EXPCT
d.
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Total Benefits
675,743
708,107
725,810
743,955
762,554
781,618
801,158
821,187
841,717
862,760
884,329
Lump Sum Pays
714001
LUMP SUM
C.
-
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Total Lump Sum Pays
-
-
-
-
-
-
-
-
-
-
-
Other PaVs
713001
OT MISC
C.
45,000
$45,000
$46,125
$47,278
$48,460
$49,672
$50,913
$52,186
$53,491
$54,828
$56,199
Total Other Pays
45,000
45,000
46,125
47,278
48,460
49,672
50,913
52,186
53,491
54,828
56,199
Contract Services
811004
EQUIP RNTL
b.
1,000
$1,000
$1,017
$1,035
$1,053
$1,071
$1,090
$1,108
$1,128
$1,147
$1,167
811008
SVCS PROF
b.
20,000
$60,000
$61,038
$62,094
$63,168
$64,261
$65,373
$66,504
$67,654
$68,825
$70,015
841060
OTHR AGNCY
b.
30,000
$30,000
$30,519
$31,047
$31,584
$32,130
$32,686
$33,252
$33,827
$34,412
$35,008
Contract Services
51,000
91,000
92,574
94,176
95,805
97,463
99,149
100,864
102,609
104,384
106,190
Utilities
831002
UTL PHONE
b.
8,700
$8,700
$8,851
$9,004
$9,159
$9,318
$9,479
$9,643
$9,810
$9,980
$10,152
831003
UTL GAS
b.
1,000
$1,000
$1,017
$1,035
$1,053
$1,071
$1,090
$1,108
$1,128
$1,147
$1,167
831004
UTL ELCTRC
f.
68,000
$68,000
$69,176
$70,373
$71,591
$72,829
$74,089
$75,371
$76,675
$78,001
$79,351
831005
ULT WATER
b.
20,000
$20,000
$20,346
$20,698
$21,056
$21,420
$21,791
$22,168
$22,551
$22,942
$23,338
Total Utilities
97,700
97,700
99,390
101,110
102,859
104,638
106,449
108,290
110,164
112,069
114,008
Supplies & Materials
841007
OFC SUPPLS
b.
350
$350
$356
$362
$368
$375
$381
$388
$395
$401
$408
841015
SPCDEPTSUP
b.
15,000
$15,000
$15,260
$15,523
$15,792
$16,065
$16,343
$16,626
$16,914
$17,206
$17,504
841043
CONCRETE
b.
2,000
$2,000
$2,035
$2,070
$2,106
$2,142
$2,179
$2,217
$2,255
$2,294
$2,334
841044
TOOLS
b.
2,500
$2,500
$2,543
$2,587
$2,632
$2,678
$2,724
$2,771
$2,819
$2,868
$2,917
Total Supplies & Materials
19,850
19,850
20,193
20,543
20,898
21,260
21,627
22,002
22,382
22,769
23,163
HF&H Consultants, LLC
Page A-3
August 13, 2017
25-45
City of Newport Beach
Sewer Rate Study
Appendix - Sewer Rate Model
Maintenance & Repair
851001 GNRATRM&R
J.
18,500
$18,500
$18,820
$19,146
$19,477
$19,814
$20,157
$20,505
$20,860
$21,221
$21,588
851007 AUTO FUEL
b.
45,000
$45,000
$45,779
$46,570
$47,376
$48,196
$49,030
$49,878
$50,741
$51,618
$52,511
851010 EQP MNT&RP
b.
5,000
$5,000
$5,087
$5,174
$5,264
$5,355
$5,448
$5,542
$5,638
$5,735
$5,835
851016 BLDG MAINT
b.
4,662
$4,662
$4,743
$4,825
$4,908
$4,993
$5,079
$5,167
$5,257
$5,348
$5,440
851032 ROOT CUT
J.
16,601
$16,601
$16,888
$17,180
$17,478
$17,780
$18,088
$18,400
$18,719
$19,043
$19,372
851035 CCTV MAINT
b.
87,036
$87,036
$88,542
$90,073
$91,632
$93,217
$94,830
$96,470
$98,139
$99,837
$101,564
851036 GREASE DEV
b.
79,544
$79;544
$80,920
$82,320
$83,744
$85,193
$86,667
$88,166
$89,691
$91,243
$92,822
851037 MAINT&REP
b.
211,007
$211,007
$214,657
$218,371
$222,149
$225,992
$229,902
$233,879
$237,925
$242,041
$246,228
851049 MNTSCADA
b.
25,252
$25,252
$25,689
$26,133
$26,585
$27,045
$27,513
$27,989
$28,473
$28,966
$29,467
851050 MANHL LINE
b.
75,000
$75,000
$76,298
$77,617
$78,960
$80,326
$81,716
$83,130
$84,568
$86,031
$87,519
851051 MNTPUMPSTA
b.
13,000
$13,000
$13,225
$13,454
$13,686
$13,923
$14,164
$14,409
$14,658
$14,912
$15,170
851052 ALLEYRPL
b.
43,500
$43,500
$44,253
$45,018
$45,797
$46,589
$47,395
$48,215
$49,049
$49,898
$50,761
851053 MNHL MNT
b.
37,601
$37,601
$38,251
$38,913
$39,586
$40,271
$40,968
$41,677
$42,398
$43,131
$43,877
851054 ROOT FOAM
b.
85,000
$85,000
$86,471
$87,966
$89,488
$91,036
$92,611
$94,214
$95,843
$97,501
$99,188
851062 UTL FAC MN
b.
20,375
$20,375
$20,727
$21,086
$21,451
$21,822
$22,199
$22,584
$22,974
$23,372
$23,776
851066 SWR/PRPFEE
b.
18,922
$18,285
$18,602
$18,923
$19,251
$19,584
$19,923
$20,267
$20,618
$20,975
$21,338
Total Maintenance & Repair
786,000
785,363
798,950
812,772
826,833
841,137
855,689
870,492
885,552
900;872
916,457
Travel & Training
861001 TRVL&MTGS
b.
1,000
$1,000
$1,017
$1,035
$1,053
$1,071
$1,090
$1,108
$1,128
$1,147
$1,167
861003 TRAINING
b.
9,260
$9,260
$9,420
$9,583
$9,749
$9,918
$10,089
$10,264
$10,441
$10,622
$10,806
Total Trawl & Training
10,260
10,260
10,437
10,618
10,802
10,989
11,179
11,372
11,569
11,769
11,973
General Expenses
871001 CERTMEMBR
b.
5,500
$5,500
$5,595
$5,692
$5,790
$5,891
$5,992
$6,096
$6,202
$6,309
$6,418
871004 PUBS&DUES
b.
1,000
$1,000
$1,017
$1,035
$1,053
$1,071
$1,090
$1,108
$1,128
$1,147
$1,167
871006 UNIFORM
b.
5,000
$5,000
$5,087
$5,174
$5,264
$5,355
$5,448
$5,542
$5,638
$5,735
$5,835
871017 SFTWR RNEW
b.
29,249
$29,249
$29,755
$30,270
$30,793
$31,326
$31,868
$32,419
$32,980
$33,551
$34,131
871022 ADMN SVC
b.
371,748
$371,748
$378,179
$384,722
$391,377
$398,148
$405,036
$412,043
$419,172
$426,423
$433,800
Total General Expenses
412,497
412,497
419,633
426,893
434,278
441,791
449,434
457,209
465,119
473,166
481,351
Internal SVC Premium
726002 ANUAL OPEB
b.
50,697
$55,932
$56,900
$57,884
$58,885
$59,904
$60,940
$61,995
$63,067
$64,158
$65,268
881001 EQPMNTISF
b.
157,069
$154,868
$157,547
$160,273
$163,046
$165,866
$168,736
$171,655
$174,624
$177,645
$180,719
881003 VEHCL ISF
b.
190,435
$193,854
$197,208
$200,619
$204,090
$207,621
$211,213
$214,867
$218,584
$222,365
$226,212
881004 IT OP ISF
b.
72,358
$48,845
$49,690
$50,550
$51,424
$52,314
$53,219
$54,140
$55,076
$56,029
$56,998
881005 IT REPLCI
b.
15,941
$21,797
$22,174
$22,558
$22,948
$23,345
$23,749
$24,160
$24,578
$25,003
$25,435
Total Internal SVC Premium
486,500
475,296
483,519
491,883
500,393
509,050
517,856
526,815
535,929
545,201
554,633
Insurance Reserve
891001 GL INS ISF
b.
20,773
$20,773
$21,132
$21,498
$21,870
$22,248
$22,633
$23,025
$23,423
$23,828
$24,240
Total Insurance Reserve
20,773
20,773
21,132
21,498
21,870
22,248
22,633
23,025
23,423
23,828
24,240
Capital Expenditures
911001 OFC EQUIP
b.
2,000
$2,000
$2,035
$2,070
$2,106
$2,142
$2,179
$2,217
$2,255
$2,294
$2,334
911004 COMP EQUIP
b.
5,000
$5,000
$5,087
$5,174
$5,264
$5,355
$5,448
$5,542
$5,638
$5,735
$5,835
911023 SHOP EQP
b.
1,000
$1,000
$1,017
$1,035
$1,053
$1,071
$1,090
$1,108
$1,128
$1,147
$1,167
911024 EQUIP NOC
b.
25,000
$25,000
$25,433
$25,872
$26,320
$26,775
$27,239
$27,710
$28,189
$28,677
$29,173
Total Capital Expenditures
33,000
33,000
33,571
34,152
34,743
35,344
35,955
36,577
37,210
37,854
38,508
Non -Operating Revenue
'5860 DAMAGE TO CITY PROPERTY
b.
($5,000)
($5,000)
($5,087)
($5,174)
($5,264)
($5,355)
($5,448)
($5,542)
($5,638)
($5,735)
($5,835)
'5870 REVENUE, N.O.C.
b.
($8,000)
($8,000)
($8,138)
($8,279)
($8,422)
($8,568)
($8,716)
($8,867)
($9,021)
($9,177)
($9,335)
Total Non -Operating Revenue
(13,000)
(13,000)
(13,225)
(13,454)
(13,686)
(13,923)
(14,164)
(14,409)
(14,658)
(14,912)
(15,170)
Contribution to Capital Reserve
To Replacement Reserves
750,000
1,000,000
1,030,000
1,060,900
1,092,727
1,125,509
1,159,274
1,194,052
1,229,874
1,266,770
1,304,773
Total Contribution to Replacement Reserves
750,000
1,000,000
1,030,000
1,060,900
1,092,727
1,125,509
1,159,274
1,194,052
1,229,874
1,266,770
1,304,773
Net Revenue Requirement (before Reserve Expense) $
4,350,646 $
4,579,977 $
4,684,594 $
4,791,719 $
4,901,415 $
5,013,746 $
5,128,779 $
5,246,580 $
5,367,219 $
5,490,769 $
5,617,301
5.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
2.3%
$3,049,802 $
3,600,646 $
3,579,977 $
3,654,594 $
3,730,819 $
3,808,688 $
3,888,238 $
3,969,505 $
4,052,528 $
4,137,346 $
4,223,999 $
4,312,528
HF&H Consultants, LLC
Page A-4
August 13, 2017
25-46
City of Newport Beach
Sewer Rate Study
Appendix - Sewer Rate Model
City of Newport Beach
Water Rate Study
Table 3A. Revenue Increases- Sewer
Months
in 1st FY of
Estimated
Projected
rate increase*
FY 2016-17
FY 2017-18
FY 2018-19
FY 2019-20
FY 2020-21
FY 2021.22
FY 2022-23
FY 2023-24
FY 2024-25
FY 2025-26
FY 2026-27 Notes
Revenue from Rates without Rate Increases
Revenue from Current Rates
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806
$3,558,806 FY13-14 from Table 7A; Table 1B, g.
Bad Debt Expense
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
($14,144)
Net Revenue
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
Net Revenue Requirements
$4,579,977
$4,684,594
$4,791,719
$4,901,415
$5,013,746
$5,128,779
$5,246,580
$5,367,219
$5,490,769
$5,617,301 From Table 2
Surplusi(Deficit) before rate increase
($1,035,315)
($1,139,933)
($1,247,058)
($1,356,754)
($1,469,085)
($1,584,117)
($1,701,918)
($1,822,558)
($1,946,107)
($2,072,639) To Table 4
Revenue from Rates with Rate Increases
Increase in Revenue from Rates
9.4%
9.4%
9.4%
8.41/6
2.0%
2.0%
2.0%
2.0%
2.0"/0
2.0% From Table 1A
Cumulative Increase
4.3%
14.1%
24.8%
35.9%
42.8%
45.6%
48.6%
51.5%
54.6%
57.6% To Table 1A
Total Revenue from Existing Rates
Revenue from Current Rates
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
Revenue from Rate Increases
FY17-18(effective 111/18)
6
$166,599
$333,198
$333,198
$333,198
$333,198
$333,198
$333,198
$333,198
$333,198
$333,198
FY 19-20 (effective 1/1/19)
6
$182,259
$364,519
$364,519
$364,519
$364,519
$364,519
$364,519
$364,519
$364,519
FY20-21 (effective 1/1/20)
6
$199,392
$398,784
$398,784
$398,784
$398,784
$398,784
$398,784
$398,784
FY21-22 (effective 1/1/21)
6
$194,929
$389,858
$389,858
$389,858
$389,858
$389,858
$389,858
FY21-22 (effective 1/1/22)
6
$50,310
$100,620
$100,620
$100,620
$100,620
$100,620
FY23-24 (effective 1/1/23)
6
$51,316
$102,633
$102,633
$102,633
$102,633
FY24-25 (effective 1/1/24)
6
$52,343
$104,685
$104,685
$104,685
FY25-26 (effective 1/1/25)
6
$53,390
$106,779
$106,779
FY26-27 (effective 1/1/26)
6
$54,457
$108,915
FY26-27 (effective 1/1/27)
6
$55,547
Subtotal - Revenue from Rate Increases
$166,599
$515,458
$897,109
$1,291,429
$1,536,668
$1,638,295
$1,741,954
$1,847,686
$1,955,533
$2,065,537
Total Rate Revenue
$ 3,558,806
$3,711,261
$4,060,119
$4,441,770
$4,836,091
$5,081,330
$5,182,957
$5,286,616
$5,392,348
$5,500,195
$5,610,199 FY13-14 from Table 7A
Net Revenue Requirements
$ 4,350,646
$4,579,977
$4,684,594
$4,791,719
$4,901,415
$5,013,746
$5,128,779
$5,246,580
$5,367,219
$5,490,769
$5,617,301 From Table 2
Surplusf(Deficit) after Rate Increase
($791,840)
($868,716)
($624,475)
($349,949)
($65,324)
$67,583
$54,178
$40,036
$25,129
$9,426
($7,102) To Table 4
HF&H Consultants, LLC
Page A-5
August 13, 2017
25-47
City of Newport Beach
Sewer Rate Study
Beginning Balance
$3,675,000
$2,830,589
$2,225,001
Appendix — Sewer Rate Model
City of Newport Beach
$1,920,666
$1,989,452
$2,044,559
$2,085,116
$2,110,216
Surplus/(Deficit)
($868,716)
Sewer Rate Study
($349,949)
($65,324)
$67,583
$54,178
$40,036
$25,129
$9,426
Table 4. Reserves
Transfers (to)lfrom
Budgeted
Projected
$1,000,000
$1,030,000
$1,060,900
FY 2016-17
FY 2017-18
FY 2018-19 FY 2019-20
FY 2020-21
FY 2021-22 FY 2022-23
FY 2023-24
FY 2024-25
FY 2025-26 FY 2026-27 Notes
Sewer Operating Reserve Funds With Rate Increase (530)
$2,206,114
$1,875,052
$1,825,103
$1,906,620
$1,974,844
$2,029,488
$2,069,687
Revenue Increase
$2,103,114
Estimated Interest Earnings
$24,305
$18,888
$15,375
$13,933
$14,046
Annual increases
9.4%
9.4% 9.40/6
8.41/6
2.0% 2.0%
2.0%
2.0%
2.0% 2.0% From Table 1A
Cumulative increase
9.4%
19.7% 30.9%
41.9%
44.8% 47.7%
50.6%
53.6%
56.7% 59.8%
Operations Fund
Beginning Balance
$3,675,000
$2,830,589
$2,225,001
$1,890,428
$1,839,036
$1,920,666
$1,989,452
$2,044,559
$2,085,116
$2,110,216
Surplus/(Deficit)
($868,716)
($624,475)
($349,949)
($65,324)
$67,583
$54,178
$40,036
$25,129
$9,426
($7,102) From Table 3A
Transfers (to)lfrom
General Fund
$1,000,000
$1,030,000
$1,060,900
$1,092,727
$1,125,509
$1,159,274
$1,194,052
$1,229,874
$1,266,770
$1,304,773 (to)/from above
Subtotal - Fund Balance
$2,806,284
$2,206,114
$1,875,052
$1,825,103
$1,906,620
$1,974,844
$2,029,488
$2,069,687
$2,094,542
$2,103,114
Estimated Interest Earnings
$24,305
$18,888
$15,375
$13,933
$14,046
$14,608
$15,071
$15,428
$15,674
$15,800
Ending Balance
$3,675,000 $2,830,589
$2,225,001
$1,890,428
$1,839,036
$1,920,666
$1,989,452
$2,044,559
$2,085,116
$2,110,216
$2,118,914
Target balance
$1,800,323 $1,800,323
$1,789,988
$1,827,297
$1,865,410
$1,904,344
$1,944,119
$1,984,752
$2,026,264
$2,068,673
$2,111,999 50% of annual 0&M
Sewer Infrastructure Replacement Account (540)
Beginning Balance
$660,231 $1,504,808
$1,890,041
$1,904,216
$1,918,498
$1,932,887
$1,947,383
$1,961,988
$1,976,703
$1,991,528
$2,006,465
Capital Improvement Projects
Master Plan Projects
($627,450)
($1,030,000)
($1,060,900)
($1,092,727)
($1,125,509)
($1,159,274)
($1,194,052)
($1,229,874)
($1,266,770
(1,304,773) From Table 5
Other Projects
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0 From Table 5
Transfers (to)/from
Revenue Requirement
$1,000,000
$1,030,000
$1,060,900
$1,092,727
$1,125,509
$1,159,274
$1,194,052
$1,229,874
$1,266,770
$1,304,773 (to)/from above
Subtotal -Transfers
$1,000,000
$1,030,000
$1,060,900
$1,092,727
$1,125,509
$1,159,274
$1,194,052
$1,229,874
$1,266,770
$1,304,773
Subtotal - Fund Balance
$1,877,358
$1,890,041
$1,904,216
$1,918,498
$1,932,887
$1,947,383
$1,961,988
$1,976,703
$1,991,528
$2,006,464
Estimated Interest Eamings
$12,683
$14,175
$14,282
$14,389
$14,497
$14,605
$14,715
$14,825
$14,936
$15,048
Ending Balance
$1,504,808 $1,890,041
$1,904,216
$1,918,498
$1,932,887
$1,947,383
$1,961,988
$1,976,703
$1,991,528
$2,006,465
$2,021,513
HF&H Consultants, LLC
Page A-6
August 13, 2017
25-48
City of Newport Beach
City of Newport Beach
Sewer Rate Study
Table 7A. Rate Revenue - Sewer
CUSTOMERS WITH CITY WATER AND SEWER SERVICE - CURRENT
Sewer Rate Study
Appendix - Sewer Rate Model
Current Monthly Sewer Service Charge - Per Meter
FY 17-18
FY 17-18
FY 17-18
FY 17-18 Total
Customer Class
FY 17-18
FY 17-18
FY 17-18
FY 17-18
FY 17-18
FY 17-18
Customer Class
Meter Count Charge/meteinnual RevenL
Surcharge nual RevenTotal S/C Rev
5/8"
16,604
$4.50
$896,616
$1,327 $204,775
COMMERICAL
$896,616
3/4"
4
$4.50
$216
42
$2.00
$216
1"
7,437
$4.50
$401,598
$22,776
$816 $23,592
$401,598
1.5"
552
$4.50
$29,808
Current Sewer Use Charge With No Increase
$29,808
2"
1,465
$4.50
$79,110
$10.00
$175,800
$254,910
3"
48
$4.50
$2,592
$10.00
$5,760
$8,352
4"
253
$4.50
$13,662
$10.00
$30,360
$44,022
6"
178
$4.50
$9,612
$10.00
$21,360
$30,972
8"
95
$4.50
$5,130
$10.00
$11,400
$16,530
10"
3
$4.50
$162
$10.00
$360
$522
12"
2
$4.50
$108
$10.00
$240
$348
No Sewer Charge
26,641
794,347
$1,438,614
-
$245,280
$1,683,894
Source: MeterUseConsuptCount-4-4-17 - MainQuery8.3
Current Monthly Supplemental Sewer Service Charge - Per additional DU
Source: MeterUseConsuptCount-4-4-17
HF&H Consultants, LLC
Page A-7
August 13, 2017
25-49
FY 17-18
FY 17-18
FY 17-18
FY 17-18 Total
Customer Class
DUs
Charge/DU
Annual Reve
Annual Re\Annual Revenue
SINGLE FAMILY RES
81
$2.00
$1,944
$48 $1,992
MULTI FAMILY RES
8,477
$2.00
$203,448
$1,327 $204,775
COMMERICAL
759
$2.00
$18,216
$48,746 $66,962
CITY METER
42
$2.00
$1,008
$48,746 $49,754
CONSOLIDATED
949
$2.00
$22,776
$816 $23,592
10,308
$247,392
$99,684 $347,076 $347,076
Current Sewer Use Charge With No Increase
CY 2016
FY 17-18
FY 17-18
Average
Customer Class
Flow
Charge/CCF
Annual Reve
Month
SINGLE FAMILY RES
2,353,927
$0.35
$823,874
11.81
MULTI FAMILY RES
752,561
$0.35
$263,396
7.40
COMMERICAL
1,082,691
$0.35
$378,942
118.87
CONSOLIDATED
-
$0.35
$0
POOL
22,930
$0.35
$8,026
4,212,109
$1,474,238
CITY METER
69,583
$0.000
$0
No Consumption Charge - Only Fixed Fee
BOAT DOCK
5,178
$0.000
-
No Sewer Charge
SPRINKLER
794,347
$0.000
-
No Sewer Charge
FIRE
879
$0.000
-
No Sewer Charge
PUMP STATION
16
$0.000
-
No Sewer Charge
870,003
$0
Source: MeterUseConsuptCount-4-4-17
HF&H Consultants, LLC
Page A-7
August 13, 2017
25-49
City of Newport Beach Sewer Rate Study
Appendix - Sewer Rate Model
CUSTOMERS WITH CITY WATER AND SEWER SERVICE - PROPOSED
Proposed Sewer Use Charae With Rate Increase
Source: MeterUseConsuptCount-4-4-17
Revised Monthly Sewer Service Charge Before Rate Increase - Per Meter
Meter Size
CY 2016
FY 17-18
FY 17-18
Average
Customer Class
Flow
Charge/CCF Annual Reve
Month
SINGLE FAMILY RES
2,353,927
$0.38
$901,319
2,421.74
MULTI FAMILY RES
752,561
$0.38
$288,156
12.11
COMMERICAL
1,082,691
$0.38
$414,562
0.11
CONSOLIDATED
-
$0.38
$0
1.00
POOL
22,930
$0.38
$8,780
552
21
4,212,109
1.10
$1,612,817
$6.50
CITY METER
69,583
$0.00
$0
No Consumption Charge - Only Fixed Fee
BOAT DOCK
5,178
$0.00
-
No Sewer Charge
SPRINKLER
794,347
$0.00
-
No Sewer Charge
FIRE
879
$0.00
-
No Sewer Charge
PUMP STATION
16
$0.00
-
No Sewer Charge
6"
870,003
1
$0
2.25
Source: MeterUseConsuptCount-4-4-17
Revised Monthly Sewer Service Charge Before Rate Increase - Per Meter
Meter Size
Meters
Sewer -Only
Meters
Total
Meters
EMU
Multiplier
Total
EMUs
Service
Charge
Per Meter
Revenue
No Rate
Increase
5/8"
16,604
275
16,879
1.00
16,879
$5.91
$1,196,868
3/4"
4
85
89
1.00
89
$5.91
$6,322
1"
7,437
57
7,494
1.00
7,494
$5.91
$531,385
1.5"
552
21
573
1.10
630
$6.50
$44,702
2"
1,465
58
1,523
1.50
2,284
$8.86
$161,958
3"
48
2
50
1.70
85
$10.05
$6,041
4"
253
4
257
2.00
513
$11.82
$36,378
6"
178
1
179
2.25
404
$13.30
$28,623
8"
95
1
96
2.50
239
$14.77
$16,965
10"
3
2
5
3.20
16
$18.91
$1,160
12"
2
-
2
4.00
8
$23.64
$567
26,641
506
27,147
28,642
$2,030,970
a montniy Sewer Service c:narge witn Kate increase - Per meter
Meter Size
5/8"
3/4"
1"
2"
3"
4"
6"
8"
10"
12"
Meters
16,604
4
7,437
552
1,465
48
253
178
95
3
2
Sewer -Only
Meters
275
85
57
21
58
2
4
1
1
2
0
Tota I
Meters
16,879
89
7,494
573
1,523
50
257
179
96
5
2
26,641 506 27,147
EMU
Total
Multiplier
EMUs
Charge
With Rate
1.00
16,879
1.00
89
1.00
7,494
1.10
630
1.50
2,284
1.70
85
2.00
513
2.25
404
2.50
239
3.20
16
4.00
8
$20.69
28,642
$2,221,881
HF&H Consultants, LLC Page A-8 August 13, 2017
25-50
Service
Revenue
Charge
With Rate
Per Meter
Increase
$6.46
$1,309,374
$6.46
$6,916
$6.46
$581,335
$7.11
$48,904
$9.70
$177,182
$10.99
$6,608
$12.93
$39,798
$14.55
$31,314
$16.16
$18,560
$20.69
$1,269
$25.86
$621
$2,221,881
HF&H Consultants, LLC Page A-8 August 13, 2017
25-50
City of Newport Beach
SEWER ONLY CUSTOMERS (WATER PROVIDED BY OTHERS)
Current Monthly Sewer Service Charge
FY 17-18
FY 17-18
FY 17-18
Customer Class
ccounts or Dl
Charge
Annual Revenue
Sewer Only - Flat charge
506
$6.25
$37,950
Sewer Only - DU charge
652
$2.00
$15,648
Per HCF
Charge
Revenue
$53,598
Revised Monthly Sewer
Service Charge
With No Increase
$3.14
FY 17-18
Service
Annual
Meter Size
Meters
Charge
Revenue
5/8"
275
$5.91
$19,512
3/4"
85
$5.91
$6,038
1"
57
$5.91
$4,042
1.5"
21
$6.50
$1,647
2"
58
$8.86
$6,138
3"
2
$10.05
$254
4"
4
$11.82
$499
6"
1
$13.30
$225
8"
1
$14.77
$125
10"
2
$18.91
$479
$249.93
506
10"
$38,958
Proposed Monthly Sewer Service Charge With Increase
$0.35
FY 17-18
Service
Annual
Meter Size
Meters
Charge
Revenue
5/8"
275
$6.46
$21,346
3/4"
85
$6.46
$6,606
1"
57
$6.46
$4,422
1.5"
21
$7.11
$1,802
2"
58
$9.70
$6,715
3"
2
$10.99
$278
4"
4
$12.93
$546
6"
1
$14.55
$246
8"
1
$16.16
$136
10"
2
$20.69
$524
506
$42,620
Kewsea mommy newer use %,narge vvicn NO increase
Avg HCF
Current
Monthly
Monthly
Per Meter
Charge
Use
Annual
Meter Size
Meters
Per Month
Per HCF
Charge
Revenue
5/8"
275
8.97
$0.35
$3.14
$10,370
3/4"
85
8.97
$0.35
$3.14
$3,209
1"
57
13.39
$0.35
$4.69
$3,205
1.5"
21
72.49
$0.35
$25.37
$6,428
2"
58
68.49
$0.35
$23.97
$16,601
3"
2
212.27
$0.35
$74.29
$1,882
4"
4
393.01
$0.35
$137.56
$5,808
6"
1
714.08
$0.35
$249.93
$4,221
8"
1
714.08
$0.35
$249.93
$2,111
10"
2
714.08
$0.35
$249.93
$6,332
$6,927
506
506
$60,167
Proposed Monthly Sewer Use Charge
Avg HCF
Monthly
Per Meter
Charge
Use
Annual
Meter Size
Meters
Per Month
Per HCF
Charge
Revenue
5/8"
275
8.97
$0.38
$3.44
$11,344
3/4"
85
8.97
$0.38
$3.44
$3,511
1"
57
13.39
$0.38
$5.13
$3,506
1.5"
21
72.49
$0.38
$27.76
$7,032
2"
58
68.49
$0.38
$26.23
$18,161
3"
2
212.27
$0.38
$81.28
$2,059
4"
4
393.01
$0.38
$150.49
$6,354
6"
1
714.08
$0.38
$273.42
$4,618
8"
1
714.08
$0.38
$273.42
$2,309
10"
2
714.08
$0.38
$273.42
$6,927
506
$65,823
HF&H Consultants, LLC
Page A-9
Sewer Rate Study
Appendix - Sewer Rate Model
August 13, 2017
25-51
City of Newport Beach
Sewer Rate Study
Appendix - Sewer Rate Model
Proposed Monthly Sewer Flat Charge (Combined Service and Use components) With Rate Increase
Meter Size
Service
Component
Use
Component
Flat
Charge
5/8"
$6.46
$3.44
$9.90
3/4"
$6.46
$3.44
$9.90
1"
$6.46
$5.13
$11.59
1.5"
$7.11
$27.76
$34.87
2"
$9.70
$26.23
$35.92
3"
$10.99
$81.28
$92.27
4"
$12.93
$150.49
$163.41
6"
$14.55
$273.42
$287.97
8"
$16.16
$273.42
$289.58
10"
$20.69
$273.42
$294.11
HF&H Consultants, LLC Page A-10 August 13, 2017
25-52
Revenue Summary (FY 2017-18)
Proposed Rates
Current Rates
With 1/1/18 Increase
Fixed Charges
Service charge
$1,438,614
$2,085,636
DU surcharge
$347,076
$0
Large meter surcharge
$245,280
$0
$2,030,970
57%
$2,085,636
56%
Variable Charges
Use charge
$1,474,238
41%
$1,543,527
41%
$3,505,208
$3,629,163
Sewer -Only
Service charge
$37,950
$40,789
DU surcharge
$15,648
$0
Use charge
$0
$62,995
$53,598
2%
$103,784
3%
Total
$3,558,806
100%
$3,732,948
100%
Recap
Fixed Revenue
Service charges
$1,476,564
$2,126,425
DU surcharge
$362,724
$0
Large meter surcharge
$245,280
$0
Nonseasonal Variable
Charge
$737,119
$834,758.53
$2,821,6T7
79%
$2,9611,1184_
79%
Variable revenue
Seasonal Variable Chargi
$737,119
21%
$771,764
21%
$3,558,806
100%
$3,732,948
1001
HF&H Consultants, LLC Page A-10 August 13, 2017
25-52
City of Newport Beach
City of Newport Beach
Sewer Rate Study
Table 8. Report Tables
WASTEWATER RATES
Sewer Rate Study
Appendix - Sewer Rate Model
HF&H Consultants, LLC Page A-11 August 13, 2017
25-53
Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.1/1/22)
Sewer Service Charges
5/8"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
3/4"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
1"
$4.50
$6.46
$7.07
$7.74
$8.39
$8.55
1.5"
$4.50
$7.11
$7.78
$8.51
$9.23
$9.41
2"
$14.50
$9.70
$10.61
$11.61
$12.58
$12.83
3"
$14.50
$10.99
$12.02
$13.15
$14.26
$14.54
4"
$14.50
$12.93
$14.14
$15.47
$16.77
$17.11
6"
$14.50
$14.55
$15.91
$17.41
$18.87
$19.25
8"
$14.50
$16.16
$17.68
$19.34
$20.97
$21.39
10"
$14.50
$20.69
$22.63
$24.76
$26.84
$27.37
12"
$14.50
$25.86
$28.29
$30.95
$33.55
$34.22
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
Sewer Use Charge (per HCF)
$0.35
$0.38
$0.42
$0.46
$0.50
$0.51
HF&H Consultants, LLC Page A-11 August 13, 2017
25-53
Current
FY 2016-17
FY 2017-18
(Eff.1/1/18)
FY 2018-19
(Eff.1/1/19)
Proposed
FY 2019-20
(Eff.1/1/20)
FY 2020-21
(Eff.1/1/21)
FY 2021-22
(Eff.111/22)
Flat Charges Per Account
5/8"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
3/4"
$6.25
$9.90
$10.83
$11.85
$12.84
$13.10
1"
$6.25
$11.59
$12.68
$13.87
$15.04
$15.34
1.5"
$6.25
$34.87
$38.15
$41.73
$45.24
$46.14
2"
$6.25
$35.92
$39.30
$42.99
$46.60
$47.54
3"
$6.25
$92.27
$100.94
$110.43
$119.70
$122.10
4"
$6.25
$163.41
$178.78
$195.58
$212.01
$216.25
6"
$6.25
$287.97
$315.04
$344.65
$373.60
$381.07
8"
$6.25
$289.58
$316.80
$346.58
$375.70
$383.21
10"
$6.25
$294.11
$321.75
$352.00
$381.57
$389.20
Surcharge Per Dwelling Unit
$2.00
$0.00
$0.00
$0.00
$0.00
$0.00
HF&H Consultants, LLC Page A-11 August 13, 2017
25-53
City of Newport Beach
Sewer Rate Study
Appendix - Sewer Rate Model
CIP Project Description
Collection System Capacity Improvements
Collection System Condition Improvements
Pump Station Improvements
HF&H Consultants, LLC
Project Cost
$1,281,391
$16,648,060
$11,088,000
$29,017,451
Page A-12
August 13, 2017
25-54
FY 2017-18
FY 2018-19
Current
FY 2020-21
FY 2021-22
Proposed
Proposed
Proposed
Proposed
Eff.1/1/21
Eff.1/1/22
Monthly Flow
Service
Current Flow
Current
Service
Flow
Monthly
Minus
Customer Type
Meter Size
(HCF)
Charge
Charge
Monthly Bill
Charge
Charge
Bill
Current
Single Family Residential (low flow)
5/8" - 1"
3.0
$4.50
$1.03
$5.53
$6.46
$1.13
$7.60
$2.06
Single Family Residential (avg flow)
5/8" - 1"
11.8
$4.50
$4.13
$8.63
$6.46
$4.52
$10.99
$2.35
Single Family Residential (high flow)
5/8" - 1"
23.6
$4.50
$8.27
$12.77
$6.46
$9.05
$15.51
$2.74
Sewer -only (no additional DUs)
3/4"
9.0
$6.25
$0.00
$6.25
$6.46
$3.44
$9.90
$3.65
Commercial
1.5"
29.7
$4.50
$10.40
$14.90
$7.11
$11.38
$18.49
$3.59
Commercial
2"
118.9
$14.50
$41.61
$56.11
$9.70
$45.52
$55.21
-$0.89
Commercial
Y
237.7
$14.50
$83.21
$97.71
$10.99
$91.03
$102.02
$4.31
CIP Project Description
Collection System Capacity Improvements
Collection System Condition Improvements
Pump Station Improvements
HF&H Consultants, LLC
Project Cost
$1,281,391
$16,648,060
$11,088,000
$29,017,451
Page A-12
August 13, 2017
25-54
FY 2017-18
FY 2018-19
FY 2019-20
FY 2020-21
FY 2021-22
Eff.1/1/18
Eff.1/1/19
Eff.1/1/20
Eff.1/1/21
Eff.1/1/22
Revenue from Current Rates
$3,544,662
$3,544,662
$3,544,662
$3,544,662
$3,544,662
Increase in Revenue from Rates
9.4%
9.4%
9.4%
8.4%
2.0%
Revenue from Rate Increases
FY17-18 (effective 1/1/18)
$166,599
$333,198
$333,198
$333,198
$333,198
FY19-20 (effective 1/1/19)
$0
$182,259
$364,519
$364,519
$364,519
FY20-21 (effective 1/1/20)
$0
$0
$199,392
$398,784
$398,784
FY21-22 (effective 1/1/21)
$0
$0
$0
$194,929
$389,858
FY21-22 (effective 1/1/22)
$0
$0
$0
$0
$50,310
Subtotal - Revenue Increases
$166,599
$515,458
$897,109
$1,291,429
$1,536,668
Total Rate Revenue with Increas(
$3,711,261
$4,060,119
$4,441,770
$4,836,091
$5,081,330
Net Revenue Requirements
$4,579,977
$4,684,594
$4,791,719
$4,901,415
$5,013,746
Surplus/(Deficit) after Increase
($868,716)
($624,474)
($349,949)
($65,324)
$67,583
CIP Project Description
Collection System Capacity Improvements
Collection System Condition Improvements
Pump Station Improvements
HF&H Consultants, LLC
Project Cost
$1,281,391
$16,648,060
$11,088,000
$29,017,451
Page A-12
August 13, 2017
25-54
HF H
HF&H Consultants, LLC
201 N. Civic Drive, Suite 230
Walnut Creek, CA 94596
25-55
ATTACHMENT B
ORDINANCE NO. 2017-15
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH AMENDING SECTION 14.24.065 OF
TITLE 14 OF THE NEWPORT BEACH MUNICIPAL CODE
PERTAINTING TO SEWER USE CHARGE
WHEREAS, the City of Newport Beach charges users of the City's sewer service
to fund the operation and maintenance of the City's sewer system, as well as the repair
and replacement of pipes, pump stations, facilities and equipment to improve the sewer
system safety, efficiency and reliability;
WHEREAS, on March 20, 2017, the City's Municipal Operations Department
retained the consulting services of HF&H Consultants, LLC ("HF&H") to update HF&H's
prior sewer rate study from 2013-14 in order to analyze the current cost of sewer services
and to provide recommendations regarding an appropriate rate structure;
WHEREAS, the resulting HF&H study recommended a revised rate structure that
includes a both a fixed charge and a use charge for sewer customers who also receive
water service from the City, and a fixed charge for sewer customers who do not receive
water service from the City;
WHEREAS, following a public hearing held on September 12, 2017 in conformity
with Proposition 218, the City Council determined that no majority protest against the
recommended rates had occurred; and
WHEREAS, the City's current sewer charges are codified in Newport Beach
Municipal Code Section 14.24.065. By this ordinance, the City Council intends amend
that Section to have the sewer charges and any changes thereto be adopted and charged
pursuant to a resolution adopted by the City Council.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows..
Section 1: Newport Beach Municipal Code Section 14.24.065 is hereby
amended to read as follows:
A. A monthly Basi fixed sewer eseservice charge adopted bV resolution of four
dollars and fifty Gents ($4.50) perment#,the City Council shall be assessed against
each individually metered dwelling unit or business structure connected to the
public sewer system and for eaGh seweF GenneEtien to the p blit sewer systern
for customers who pUFGh also receive water service from the City of Newport
Beach eXGept as nrevoi- ed on s bseGtien (G) of this seGtien This sewer service
charge is based on the customer's water meter size.
B. A monthly Basi fixed sewer useservice charge adopted by resolution of six
dollars and tWeRt.,_five nontc ($6.25) nor mnnth,the City Council shall be assessed
25-56
fo-ragainst each useservice connection to the public sewer system for customers
who do not PUFGhasealso receive water service from the City of Newport Beach.
. .... .. _.._ ._ . ..
P .. ._3.
D. addition to the chis -fixed sewer service charge specified in subdivision
A above, a sewer use charge adopted by resolution of thirty Gents
($0.30)the _Cit shall be assessed for each hundred (100) cubic feet of
water delivered to sewer customers who also receive water service from the City
of Newport Beach.eaGh c� F eeGt }e ^ sewer syste�EffeGtiVe,,
September 1 , 00 , tttl�ewcr GORSU rptiOR Gharr`y shall shall Re thirtywive GeRtS
($0.35).
The recitals provided in this ordinance are true and correct and are incorporated
into the substantive portion of this ordinance.
Section 2: If any section, subsection, sentence, clause or phrase 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, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 3: The City Council finds the introduction and adoption of this ordinance
is not subject to the California Environmental Quality Act ("CEQA") pursuant to Section
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 to have a significant effect on the environment.
Section 4: Except as expressly modified in this ordinance, all other sections,
subsections, terms, clauses and phrases set forth in the Newport Beach Municipal Code
shall remain unchanged and shall be in full force and effect.
25-57
Section 5: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
published pursuant to City Charter Section 414.
This ordinance was introduced at a regular meeting of the City Council of the City
of Newport Beach held on the 12th day of September, 2017, and adopted on the 26th day
of September, 2017, by the following vote, to -wit:
AYES, COUNCILMEMBERS
NOES, COUNCILMEMBERS
ABSENT COUNCILMEMBERS
KEVIN MULDOON, MAYOR
ATTEST:
LEILANI I. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
AARON C. HARP, CITY ATTORNEY
25-58
ATTACHMENT C
ORDINANCE NO. 2017-15
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH AMENDING SECTION 14.24.065 OF
TITLE 14 OF THE NEWPORT BEACH MUNICIPAL CODE
PERTAINTING TO SEWER USE CHARGE
WHEREAS, the City of Newport Beach charges users of the City's sewer service
to fund the operation and maintenance of the City's sewer system, as well as the repair
and replacement of pipes, pump stations, facilities and equipment to improve the sewer
system safety, efficiency and reliability;
WHEREAS, on March 20, 2017, the City's Municipal Operations Department
retained the consulting services of HF&H Consultants, LLC ("HF&H") to update HF&H's
prior sewer rate study from 2013-14 in order to analyze the current cost of sewer services
and to provide recommendations regarding an appropriate rate structure;
WHEREAS, the resulting HF&H study recommended a revised rate structure that
includes a both a fixed charge and a use charge for sewer customers who also receive
water service from the City, and a fixed charge for sewer customers who do not receive
water service from the City;
WHEREAS, following a public hearing held on September 12, 2017 in conformity
with Proposition 218, the City Council determined that no majority protest against the
recommended rates had occurred; and
WHEREAS, the City's current sewer charges are codified in Newport Beach
Municipal Code Section 14.24.065. By this ordinance, the City Council intends amend
that Section to have the sewer charges and any changes thereto be adopted and charged
pursuant to a resolution adopted by the City Council.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows..
Section 1: Newport Beach Municipal Code Section 14.24.065 is hereby
amended to read as follows:
A. A monthly fixed sewer service charge adopted by resolution of the City
Council shall be assessed against each individually metered dwelling unit or
business structure connected to the public sewer system, for customers who also
receive water service from the City of Newport Beach. This sewer service charge
is based on the customer's water meter size.
B. A monthly fixed sewer service charge adopted by resolution of the City
Council shall be assessed against each service connection to the public sewer
system for customers who do not also receive water service from the City of
Newport Beach.
25-59
Ordinance No. 2017 -
Page 2 of
C. In addition to the fixed sewer service charge specified in subdivision A above,
a sewer use charge adopted by resolution of the City Council shall be assessed
for each hundred (100) cubic feet of water delivered to sewer customers who also
receive water service from the City of Newport Beach.
Section 2: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 3: If any section, subsection, sentence, clause or phrase 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, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 4: The City Council finds the introduction and adoption of this ordinance
is not subject to the California Environmental Quality Act ("CEQA") pursuant to Section
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 to have a significant effect on the environment.
Section 5: Except as expressly modified in this ordinance, all other sections,
subsections, terms, clauses and phrases set forth in the Newport Beach Municipal Code
shall remain unchanged and shall be in full force and effect.
Section 6: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
published pursuant to City Charter Section 414.
This ordinance was introduced at a regular meeting of the City Council of the City
of Newport Beach held on the 12th day of September, 2017, and adopted on the 261" day
of September, 2017, by the following vote, to -wit:
Page 12
25-60
AYES, COUNCILMEMBERS
NOES, COUNCILMEMBERS
ABSENT COUNCILMEMBERS
ATTEST:
LEILANI I. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
AARON C. HARP, CITY ATTORNEY
Ordinance No. 2017 -
Page 3 of
KEVIN MULDOON, MAYOR
Page 13
25-61