HomeMy WebLinkAbout33 - Water & Sewer Fee IncreasesCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 33
June 28, 2005
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Utilities Department
Tim Deutsch, Administrative Manager, (949) 644 -3011,
tdeutsch(cDcitV.newport- beach.ca.us
Public Works Department
Michael J. Sinacori, Principal Civil Engineer, (949) 644 -3342
msinacori(v citV.newport- beach.ca.us
SUBJECT: Title 14 Amendments Incorporating Water and Sewer Fee Increases
ISSUE:
Should the City approve water and sewer fee increases?
RECOMMENDATION:
1. Introduce and if approved pass to second reading Ordinance No. 2005 -_
(amending Section 14.12.020 and 14.24.065 of Title 14 of the Newport Beach
Municipal Code);
a. Increasing the water use fee from $2.00 to $2.08 for each hundred
cubic feet of water delivered to each customer connected to the
City water system.
b. Increasing the water meter fee based on meter size as indicated
in report.
c. Increasing the sewer use fee from $0.20 to $0.30 for each
hundred cubic feet of water delivered to each customer connected
to the City water and sewer system, effective September 1, 2005.
d. Increasing the sewer use fee from $0.30 to $0.35 for each
hundred cubic feet of water delivered to each customer connected
to the City water and sewer system, effective September 1, 2006.
e. Increasing the sewer connection fee from a basic fee of $3.60 per
month to $4.50 per month for sewer customers connected to the
water and sewer system.
f. Increasing the sewer connection fee from a basic fee from $5.25
per month to $6.25 per month for sewer customers that do not
purchase water from the City.
Water and Sewer Rates
June 28, 2005
Page 2
2. Schedule a public hearing on the proposed amendments to Ordinance No. 2005-
_ (amending Section 14.12.020 and 14.24.065 of Title 14 of the Newport
Beach Municipal Code) for the next City Council meeting.
Brief Background:
The City of Newport Beach owns, operates and maintains water and wastewater
systems consisting of water pump stations, 3 reservoirs, 2 well sites, 26,500 water
connections, 20 sewer lift stations and over 23,500 sewer connections. Funds to
operate the City's water and wastewater systems are derived primarily from the revenue
generated by four distinct charges:
• Water use fees (based on the amount of water a customer uses and
calculated in "hundred cubic foot" or "HCF" increments)
• Water meter fees (based on the size of a water meter service)
• Sewer use fees (based on the amount of water used, which directly impacts
the amount of wastewater produced); and
• Sewer connection fees (based on the size of a customer's water meter).
The costs of the system include: maintenance and operations (like the repair of
transmission lines and the cleaning of pump stations), pumping and energy costs
(especially the cost to take groundwater from our wells in Fountain Valley to our Utilities
Yard on 16th Street), debt service, salaries, and capital improvements through the City's
Capital Improvement Program ( "CIP "). Each year's CIP implements parts of the City's
Water Master Plan and Wastewater Master Plan.
These master plans project costs and repair obligations 20 years into the future. The
plans detail the replacement of water transmission and distribution mains, water pump
station upgrades, reservoir and treatment improvements, sewer main replacements,
sewer pump station upgrades and other system infrastructure changes. In addition, the
City has been progressively adding new sewer maintenance programs as required by
the California Regional Water Quality Control Board ( "Regional Board ") to prevent
sanitary sewer overflows (SSOs) that adversely affect private property and our
waterways.
Why Water Fees are Going Up
The City buys drinking water from two main sources: groundwater from Orange County
Water District (OCWD) and imported water from Municipal Water District of Orange
County or " MWDOC," which is part of the Metropolitan [ "Met "] Water District
organization. Both MWDOC and OCWD have proposed rate hikes for the coming year.
Note, too, that OCWD manages the groundwater basin by telling each community what
percentage of that community's overall water can come from the basin. This is called a
"basin pumping percentage or "BPP." The higher the BBP, the lower our overall water
cost, because groundwater is significantly less expensive than Metropolitan Water
Water and Sewer Rates
June 28, 2005
Page 3
District water. The lower the BPP, the more we must use Met water to meet our local
water demand. OCWD has told us both that it will lower our BPP (from the current 66%
to a proposed 64% of our total demand) and that it will charge us more for the
groundwater we use. OCWD cites, among other things, the Legislature and the
Governor's 2005 State Budget solution — which diverted property taxes from special
districts like OCWD — for its need to increase water charges.
Three of these changes — rate increases for Met water, increases for OCWD water, and
the change in BPP by OCWD — translate into a $550,000 annual increase in the cost of
water to meet demands.
Why Sewer Fees are Going Up
We believe that we need to increase sewer rates for different reasons. In recent years,
the Regional Board has adopted more stringent Waste Discharge Requirements or
"WDRs" that obligate all cities in Central and North Orange County to maintain
wastewater systems to a greater extent than done today. This includes more frequent
line cleaning, more frequent line replacement, and up- sizing some lines to ensure that
sewer capacity in the lines adequately prevents SSOs. In 1996, when the current
wastewater rates were established, the Wastewater Master Plan and related funding
focused on "A" priorities (the most critical needs) and directed monitoring of the
community's "B ", "C" and "D" priorities. The new WDRs require improvements at the "B"
and "C" priority levels to provide additional capacity safety factors.
Our Recommendations
Council Policy F -2 (Reserves and Designations of Fund Balance — see Exhibit B) and
the Master Plans direct us to perform specific capital expenditures and to maintain
appropriate reserves in our Water Enterprise and Wastewater Enterprise funds. Based
on the proposed 2005 -06 Utilities Department budgets, we recommend that the City
Council approve the proposed water and sewer rate and fee increases. On May 23,
2005, we brought this issue before the City Council's Finance Committee. The
Committee approved forwarding the proposed rate increases to the City Council. The
Committee examined three sewer rate options and four water rate options.
The Committee and we as staff members recommend that the City Council approve
water and sewer rate and fee increases of the following amounts:
• The water use fee will increase 4% from $2.00 to $2.08 per hundred cubic feet.
• The monthly water service fee for a W meter will increase by $1.00. All other
water service charges will increase proportionally by the size of the meter.
• The sewer use fee will increase by $0.05 per hundred cubic feet each year for the
next two years. This results in a change from $0.25 to $0.30 in fiscal year 2005 -06
and from $0.30 to $0.35 in fiscal year 2006 -07.
• The sewer connection fees will go from a basic fee of $3.60 per month to $4.50 per
month for sewer customers connected to the water and sewer system and from
$5.25 per month to $6.25 per month for sewer customers that do not purchase
water from the City.
Water and Sewer Rates
June 28, 2005
Page 4
Detailed Background:
More about Water Fees
The water that is used by the City of Newport Beach is purchased from the Metropolitan
Water District of Southern California (MWD) through Municipal Water District of Orange
County (MWDOC) and Orange County Water District (OCWD). In this upcoming fiscal
year, 64% of demand will be purchased through OCWD, while 36% will come from
MWDOC. By Council Policy L -20 (see Exhibit C), the water rate structure shall provide
sufficient revenues in the Water Enterprise Fund to cover the following costs:
1. Water purchased from MWD through MWDOC;
2. Water purchased from OCWD;
3. Operation and maintenance of the water system;
4. Water system betterments and improvements;
5. Transfers to the General Fund for administrative support;
6. Water for sewer, water main, and storm drain flushing, and fire fighting;
7. System losses; and
8. Operating reserves.
The City Manager and Finance Committee have reviewed the proposed 2005 -06 budget
for water operations in the amount of $19,020,174, which includes the purchase of
water, personnel costs, maintenance and operation, capital improvement projects and
debt service. Listed below are significant highlights of the proposed water budget:
1. MWD has increased its price for water from $476 to $497 per acre -foot. This is a
4.3% increase. It will raise the City's cost to purchase water by $450,000.
2. OCWD has increased its price for water from $172 to $205 per acre -foot. This is
a 19.2% increase. In addition, OCWD has decreased the allowable pumping
from 66% to 64 %. However, OCWD has reduced the City's basin annexation fee
by approximately $150,000, therefore the overall increase for OCWD water will
only be $100,000.
3. The Capital Improvement Project (CIP) budget shows a decrease due to the
completion of the Big Canyon Reservoir Cover Project. This year's CIP is based
on the City's Water Master Plan, which identifies replacement projects based on
industry standards for useful life of infrastructure.
4. Salaries and Benefits have been increased by $268,000 (an 8.2% increase
largely due to the City -wide PERS increase).
5. Council Policy F -2 establishes desired levels of reserve balances. The 2005 -06
desired reserve balance should be $10 million, based on the Council Policy F -2.
This proposed budget and rate adjustment will result in a reserve level of $10
million for the next five years. Without the proposed rate increase, the reserve
levels would begin to drop $1.5 million each year.
In an effort to cover the increasing cost of water, to keep funding planned capital
improvements, and to adhere to Council Policy F -2, the water use fee and the water
meter fee need to be increased.
Water and Sewer Rates
June 28, 2005
Page 5
Over the past nine years, the Water Enterprise Reserve has acted as a "rate stabilizer"
in that there have been increased costs that have not been passed on to the customer.
These costs amount to about $1.5 million of the proposed 2005 -06 Maintenance &
Operation Budget of $14,551,551. The Utilities Department and City Manager's office
reviewed the operating budget to determine that increased costs could not be off -set
further by cost reductions or from the use of reserves. On May 23, 2005, we informed
the City Council's Finance Committee of these issues and requested its approval to
bring the proposed rate and fee increase to the City Council. The Committee approved
the recommendation as described above.
The Committee examined the following table -- showing a comparison of water rates of
various agencies or cities - as it came to its conclusion:
WATER USE AND WATER METER FEES
Irvine Ranch Water District'
City of Garden Grove
El Toro Water District"
City of Huntington Beach
City of Newport Beach
city of Westminster
Mesa Consolidated Water District
Laguna Beach Water District"
Meter
Charge
17 HCF
1"
$4.24
$5.50
Charge
g
per HCF
p
TYPI� "B
Icustomer)
20 HCF r3O
HCF
40 HCF
3"
$14.00
$18.00
4"
$20.00
$25.50
$3.65
Tiered
$16.64
$20.79
$42.37
$75.57
$7.38
$1.25
$28.63
$32.38
$44.88
$57.38
$6.95
$1.32
$29.39
$33.35
$46.55
$59.75
$13.03
$1.37
$36.27
$40.37
$54.04
$67.71
$3.50
$2.00
$37.50
$43.50
$63.50
$83.50
$20.34
$1.26
$41.76
$45.54
$58.14
$70.74
$12.00
$1.77
$42.09
$47.40
$65.10
$82.80
$15.00
$2.74
$61.58
$69.80
$97.20
$124.60
City or agency italicized has a rate/fee increase pending
This agency receives property tax as a supplement to rates or fees collected.
Compared with other agencies' water rates and charges, the City's water meter fee (the
$3.50 /mo fee for a' /" meter) is the second lowest fixed rate component in the county.
This amount has remained unchanged since 1996. The water meter fee covers a
portion of our fixed costs to provide water service to our customers.
A table of the existing and proposed monthly fees follows:
Meter Size Existing Rate Proposed Rate
3/4"
$3.50
$4.50
1"
$4.24
$5.50
11/2"
$5.50
$7.00
2"
$7.25
$9.50
3"
$14.00
$18.00
4"
$20.00
$25.50
6"
$30.00
$38.50
8"
$35.00
$45.00
Water and Sewer Rates
June 28, 2005
Page 6
More about Sewer Fees
The City of Newport Beach operates and maintains the local sewer collection and
pumping system consisting of more than 1 million feet of sewer mains, 23,500 sewer
connections and 20 wastewater pump stations. By means of 20 wastewater pump
stations, sewage is moved through the system into transmission mains that are owned
and operated by the Orange County Sanitation District (OCSD), through which sewage
is carried to Huntington Beach for treatment, reuse and ocean discharge.
Funds to operate the City's wastewater collection and pumping systems are derived
solely from the revenues generated by the sewer use fees and sewer meter fees. The
costs of the system include maintenance and operations, pumping and energy costs,
salaries and benefits, and system betterments through the City's capital improvement
program.
The City has maintained an aggressive Wastewater Capital Improvement Program,
consisting of the replacement of sewer mains, sewer pump station upgrades and other
system infrastructure changes. In addition, the City has been progressively adding new
sewer maintenance programs as required by the Regional Board's WDR.
Like the Water Enterprise Fund, over the past eight years, the Wastewater Enterprise
Reserve has acted as a "rate stabilizer" to maintain current sewer rates. But increases
in expenses are catching up to us. These increases are about $1.1 million of the total
proposed 2005 -06 Maintenance & Operation Budget of $2,466,637. The Utilities
Department and City Manager's office reviewed the operating budget to determine that
increased costs could not be off -set further by cost reductions or from the use of
reserves. On May 23, 2005, we informed the City Council's Finance Committee of
these issues and requested its approval to bring the proposed rate and fee increase to
the City Council. The Committee approved the recommendation as described above.
The table below shows a comparison of sewer rates of various agencies or cities.
Water and Sewer Rates
June 28, 2005
Page 7
SEWER USE AND CONNECTION FEES
In a comparison of other agencies or cities sewer rates and fees, the City's sewer use
fee is the lowest known fixed rate component (the connection fee) in the county. This
fee has remained unchanged at $3.60 since 1997.
How an Average Customer's Bill Will Appear with the Fee Increases
A comparison of average monthly charges for water and sewer customers using 17
hundred cubic feet (HCF) of water per month (the typical user's average) assuming the
current fees and the proposed fees is shown below. Note that this comparison does not
include any other charges on the Municipal Services Statement, such as the recycling
or medic subscription fees.
2004 -05
(current)
Municipal Services Statement Comparison
Current Rate and Proposed Rate
2005 -06
(proposed)
$34.00
17 HCF of water used
$35.36
$3.50
Water service charge • 3/4"-inch meter
$4.50
$0.43
Other agency charge
$0.43
Agency Name
connection
ras
Use
FeelHCF
17 HCF
(TYpiw",
20 HCF
30 HCF
Notes
$45.78
Total monthly billing
$49.89
Customs
City of Fountain Valley
$4.00
nla
$4.00
$4.00
$4.00
Flat rate based on meter size
City of Garden Grove
$4.64
nla
$4.64
$4.64
$4.64
Flat rate
City of Huntington Beach
$6.48
nla
$6.48
$6.48
$6.48
Flat rate
City of Orange
nla
$0.43
$7.31
$8.60
$12.90
No maximum
City of Newport Beach
$3.60
$0.25
$7.85
$8.60
$11.10
No maximum
Irvine Ranch WD
$8.35
nla
$8.35
$8.35
$8.35
Flat rate
Moulton Niguel WD'
$5.50
$0.40
$1230
$13.50
$15.50
Maximum of 25 units billed
El Toro WD'
$16.60
nla
$16.60
$16.60
$16.60
Flat rate for SFR
Santa Margarita WD'
$8.25
$0.88
$20.57
$20.57
$20.57
Maximum of 14 units billed
South Coast WD'
$24.68
n/a
$24.68
$24.68
$24.68
Flat rate of $296.241yr
City or agency highlighted has a rate/lee increase pending
' This agency receives property tax as a supplement to rates or fees collected.
In a comparison of other agencies or cities sewer rates and fees, the City's sewer use
fee is the lowest known fixed rate component (the connection fee) in the county. This
fee has remained unchanged at $3.60 since 1997.
How an Average Customer's Bill Will Appear with the Fee Increases
A comparison of average monthly charges for water and sewer customers using 17
hundred cubic feet (HCF) of water per month (the typical user's average) assuming the
current fees and the proposed fees is shown below. Note that this comparison does not
include any other charges on the Municipal Services Statement, such as the recycling
or medic subscription fees.
2004 -05
(current)
Municipal Services Statement Comparison
Current Rate and Proposed Rate
2005 -06
(proposed)
$34.00
17 HCF of water used
$35.36
$3.50
Water service charge • 3/4"-inch meter
$4.50
$0.43
Other agency charge
$0.43
$3.60
Sewer service charge
$4.50
$4.25
Sewer use charge
$5.10
$45.78
Total monthly billing
$49.89
As shown above, the average water and sewer customer's bill - assuming 17 HCF of
water used every month) -- will go up by $4.11 per month, including both the water and
sewer components of the proposed hikes. This results in a 9% increase in the
statement.
Water and Sewer Rates
June 28, 2005
Page 8
Public Notification:
All ratepayers in the community received the attached letter (see Exhibit D) from the
City Manager in mid -June describing this proposed action. The City Attorney believes
that this meets the City's notification requirements.
Environmental Review:
The setting of rates, tolls, fares, or charges is statutorily exempt from the California
Environmental Quality Act (CEQA) (Section 15273 of Title 14 of the California Code of
Regulations.
Prepared by:
/ TL
Tim Deutsch, Administrative Manager
Prepared by:
Civil Engi
Submitted by:
V_I__�t, L
Eldo avidson, Utilities ]rect r
Submitted by:
ector
Attachments: ExhibitA — Section 14,12.020 and Section 14.24.065 Ordinance Modifications
Exhibit B — Council Policy F -2
Exhibit C — Council Policy L -20
Exhibit D — City Manager's letter to the ratepayers
Water and Sewer Rates
June 28, 2005
Page 9
Exhibit A
Section 14.12.020 and 14.24.065 of the NBMC as proposed to be adopted
ORDINANCE NO. 2005-
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH AMENDING SECTIONS 14.12.020 AND
14.24.065, OF TITLE 14 OF THE NEWPORT BEACH
MUNICIPAL CODE PERTAINING TO WATER AND
SEWERS
The City Council of the City of Newport Beach does hereby ordain that certain Newport
Beach Municipal Code sections are amended to read, in full, as follows:
SECTION 1: Section 14.12.020 of Chapter 14.12 is amended to read as follows:
Section 14.12.020 Water Rates Established.
The following rates, fees and charges are hereby established and shall be charged and
collected in accordance with the provisions of this chapter:
A. There shall be charged and collected a monthly water service charge from each
customer for each meter on the basis of the following schedule:
For 3/4 -inch meter or less
$ 3:504.50
For 1 -inch meter
4- 255.50
For 1 1/2 -inch meter
6-.507.00
For 2 -inch meter
7.259.50
For 3 -inch meter
a4- 0818.00
For 4 -inch meter
20. 0025.50
For 6 -inch meter
30. 0038.50
For 8 -inch meter
35 0045.00
For each living unit in excess of one
per water meter, per month
1.00
For each hotel or motel unit and each
hospital or convalescent home
bedroom in excess of one per
water meter, per month
.50
B. The rate for water supplied to consumers through a meter, other than pursuant to
a written contract approved by the City Council, shall be two dollars ($2 -00) two
dollars and eight centers ($2.08) per one hundred (100) cubic feet.
Water and Sewer Rates
June 28, 2005
Page 10
City water rates shall be adjusted to reflect Metropolitan Water District and Orange
County Water District rate changes.
Should the automatic adjustments require a water rate increase, the amount of the
increase shall be added to the quantity charges and shall be equal to the Metropolitan
Water District and Orange County Water District increase, raised to the next highest
whole penny for each one hundred (100) cubic feet used.
SECTION 2: Section 14.24.065 of Chapter 14.24 is amended to read as follows:
Section 14.24.065 Sewer Use Charge.
A. A monthly basic sewer use charge of threefour dollars and swift cents
($3- 604.50) per month, shall be assessed against each individually metered
dwelling unit or business structure connected to the public sewer system and for
each sewer connection to the public sewer system for customers who purchase
water from the City of Newport Beach except as provided in subsection (C) of
this section.
B. A monthly basic sewer use charge of fivesix dollars and twenty -five cents
($56.25) per month, shall be assessed for each use connection to the public
sewer system for customers who do not purchase water from the City of Newport
Beach.
C. A monthly supplemental sewer use charge of two dollars ($2.00) per month, shall
be assessed for each additional living unit served by the same sewer connection.
For the purposes of this subsection, the term 'living unit' shall mean each
additional dwelling unit and structures designed for permanent residential use
and each room with sanitary and sleeping facilities in any hospital, care facility,
hotel or motel.
D. In addition to the charges specified above, a sewer consumption charge of
tweRM_birty cents ($0.230) shall be assessed for each hundred (100) cubic feet
of water delivered to each customer connected to the public sewer system.
Effective duly —1, IQWSeptember 1. 2006, the sewer consumption charge shall
become twefltythirtv -five cents ($0.235).
E. A monthly wastewater surcharge of ten dollars ($10.00) per month shall be
assessed to each water customer on all nonirrigation water meters which have a
diameter that equals or exceeds two inches. Water meter connections for the
exclusive purpose of providing water for fire sprinkler of fire protection systems
shall be exempted from this surcharge.
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
Water and Sewer Rates
June 28, 2005
Page 11
hereby declares that it would have passed this ordinance, and each section, subsection,
clause or phrase hereof, irrespective of the fact that any one or more sections,
subsections, sentences, clauses and phrases be declared unconstitutional.
SECTION 4: The Mayor shall sign and the City Clerk shall attest to the passage of this
ordinance. The City Clerk shall cause the same to be published once in the official
newspaper of the City, and it shall be effective thirty (30) days after its adoption.
SECTION 5: This ordinance was introduced at a regular meeting of the City Council of the
City of Newport Beach, held on the _ day of 2005, and adopted on the
_ day of 2005, by the following vote, to wit:
AYES, COUNCILMEMBE
NOES, COUNCILMEMBERS
ABSENT COUNCILMEMBERS
MA
ATTEST:
CITY CLERK
Exhibit B
Council Policy F -2
RESERVES /DESIGNATIONS OF FUND BALANCE
PURPOSE
Water and Sewer Rates
June 28, 2005
Page 12
To establish City Council policy for the administration of financial reserves and fund balances.
DISCUSSION
D. Water Fund.
(City Council Policy L -20 contains additional information concerning budgeting and rate setting
within the Water Fund.)
1. Accounting Reserves. The same four Accounting Reserves identified in the General Fund
will also be used in the Water Fund.
2. Contingency Reserve.
Water System Reserve. This Reserve is used for emergency repair to the water system.
The target level for this Reserve is thirty -five percent (35 %) of the annual budget for
operations.
3. Designated Reserves.
Future Water Infrastructure Reserve. This Reserve is used for large designated projects
that are part of the water distribution system. System replacement/upgrade and most
improvement/major maintenance projects are funded within that amount. However,
certain large -scale projects are projected on a ten -year horizon, which is updated and
refined each year. The purpose of this Reserve is to set aside partial funding for those
projects in advance.
Included as part of the City Manager's annual budget proposal will be a plan to fund this
Reserve at a level of not more than one hundred percent (100 %) of the projected cost of
planned projects by the year in which contract award is anticipated. Projected future
costs notwithstanding, a minimum of ten percent (10 %) of the annual budget for
operations will be set aside to this reserve each year. The City Council must approve the
ultimate fund transfer from this Reserve to a designated Water Enterprise Fund Capital
Project Account as part of the Budget process.
No new funds will be added to Designated Reserves unless Contingency and
Stabilization Reserves are fully funded.
3. Stabilization Reserve.
Water and Sewer Rates
June 26, 2005
Page 13
Water Rate Stabilization Reserve. This Reserve is used for water rate or fee stabilization
to offset large expenditures changes such as water purchase, energy or treatment costs. 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 twenty -five
percent (25 %) of the annual budget for operations. Funds will be set aside only if target
Contingency Reserve level is met. The City Council must approve use of these funds, based on
City Manager recommendation. See also City Council Policy L -20.
Chanqe in Fair Market Value of Investments. This Reserve will be used in the Water
Fund in the same manner it is used in the General Fund.
E. Wastewater Fund.
Contingency Reserve.
Wastewater System Reserve. This Reserve is used for emergency repair to the
Wastewater system. The target level for this Reserve is seventy percent (70 %) of the
annual budget for operations.
2. Designated Reserve.
Future Wastewater Infrastructure Reserve. This Reserve is used for large designated
projects that are part of the City's Wastewater system. Funds are reserved for large -
scale future projects, which cannot be accommodated within the annual budget of the
year in which they are planned. In the years prior to estimated contract award, the City
Manager's budget proposal will include a plan to set money aside in this Reserve
sufficient to accumulate not more than one hundred percent (100°/x) of the projected cost
of such projects.
3. Stabilization Reserve.
Wastewater Rate Stabilization Reserve. This Reserve is used for wastewater rate or fee
stabilization to offset large expenditure changes such as energy or operational costs.
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 twenty -five percent (25 %) of the annual budget for operations. Funds will
be set aside only if target Contingency Reserve level is met. The City Council must
approve use of these funds, based on City Manager recommendation. See also City
Council Policy L -20.
Water and Sewer Rates
June 28, 2005
Page 14
Exhibit C
Council Policy L -20
WATER RATES
A. The City's water rates shall provide sufficient revenue to offset the following costs:
1. Water purchased from the Metropolitan Water District (MWD) through Municipal
Water District of Orange County.
2. Water purchased from the Orange County Water District.
3. Operation and maintenance of the water system.
4. Water system betterments and improvements.
5. Transfers to the General Fund for administrative support.
6. Water for sewer, water main, and storm drain flushing, and fire fighting.
7. System losses.
8. Operating reserves.
Water rates shall not be used to offset costs of City department activities not directly
related to the cost of providing water. In the case of overlapping responsibilities and
activities, the City Manager or the City Manager's designee shall review and recommend
to the City Council activities or responsible fees directly attributable to the cost of
providing water.
B. Reserves — See Policy F -2 Reserves /Designations of Fund Balance.
C. The City will attempt to set water rates and utilize reserves in a manner that will facilitate
uniform rate increases over the long term rather than sporadic or large increases.
D. Water rates shall be reviewed annually. Additional review of the water rates may be
performed in the event special circumstances such as unanticipated MWD rate
increases or unanticipated major capital expenditure needs occur.
Exhibit D
CITY OF NEWPORT BEACH
June 13, 2005
Dear Newport Beach Water and Sewer Customer:
I have two important items to tell you about regarding your water and sewer service.
The first is about rate changes, and the second is about the Water Quality lab that we
operate at our 16t" Street Utilities Yard.
Rates. You may have seen news in the paper about water getting more expensive,
even following the strong rain year we have just had. As such, in the upcoming
months, the City Council will hold public hearings to potentially increase water and
sewer rates. These rates fund the purchase of water as well as the operation,
maintenance and capital replacement of our water and wastewater systems. If you
reside in an area served by IRWD or Mesa Consolidated Water District, you can
disregard this message (although they too may be raising rates soon!).
Our rates have held steady since July 1996. We would have liked that to continue,
however two major factors are causing these proposed hikes:
• The increase in water prices charged to us, as a water buyer, from both the
Metropolitan Water District (which sells us Colorado River water) and the Orange
County Water District (the Orange County groundwater basin administrator); and
• Recent regulatory obligations placed upon us that direct more rapid replacement of
our wastewater lines.
Water. The proposed water rate increase will likely affect both the commodity rate
(based on how much water you use) and the fixed charge (a flat rate reflecting the size
of your meter). The commodity rate, which is currently $2.00 per hundred cubic feet
(HCF — an amount that equals 748 gallons), may go up to $2.08 per HCF. In addition,
the fixed portion or water service fee will likely be increased based on the size of your
meter. Most meters are 3 /4" in size — if you have this type of meter, today you pay
$3.50 a month. The proposed increase for this meter size will be $1.00 per month,
resulting in a $4.50 month charge.
Sewer. The proposed sewer rate increases will affect both the sewer use and service
fee. The sewer use fee is based on the amount of water you use. The current rate is
$0.25 per HCF. The City is proposing a two -year, two -step increase to $0.30 per HCF in
September 2005 and then $0.35 per HCF in September 2006. The sewer service fee
may go from $3.60 to $4.50 per month. For some customers who do not receive water
from us, your sewer service fee will be increased from $5.25 to $6.25 per month.
City Hall • 3300 Newport Boulevard • Post Office Box 1768
Newport Beach California 92658 -8915 • www.city.newport- beach.ca.us
Page 2
For a typical customer, based on average usage history, the proposed water and sewer
rate increases (combined) will amount to a $4.11 increase on your monthly statement.
The City Council will be reviewing the proposed water and sewer rates at the June 28,
2005 Council meeting. Adoption of the new rates, if approved by the City Council,
would take place at the July 26, 2005 meeting. The new rates would be reflected on
billing statements processed in September. The Council invites members of the
community to attend either or both meetings to ask questions, state opinions, and to
provide your comments.
Our Lab. In the attached Consumer Confidence Report, you will read all about the
quality of our drinking water. You will also see a note in there telling you about a
testing oversight in our lab. Our water quality monitoring plan, which must be
approved by the State Department of Health Services, says that we will test 29 samples
monthly for bacteria and chlorine residual. This testing must be done at a certified lab.
Typically, we send 23 samples to an outside lab and perform six at our own lab.
However, for one year (September 2003 through September 2004), we inadvertently
allowed our lab's certification to lapse. We kept doing the six tests per month at our lab
and the 23 elsewhere. During this period, all of the tests showed that the water was
fine. But, for six of the 29 monthly tests, the work was done at a non - certified lab. It
is our duty to inform you of this lapse, which has since been corrected (we have
contracted out all 29 tests from that point forward).
The attached Report — which attempts to explain the lab problem and doesn't do so
very well — contains language mandated by State DHS, including a phrase about "not
need(ing) to boil your water." Obviously, a warning like that in 2005 for a lab lapse in
2003 -04 is not useful. But it's something we're required to write. Again, because our
tests were consistently clean — even during the 2003 -04 period — we are confident that
our water was fine throughout the period. However, I apologize for the concern. We
have taken corrective actions so that this will not happen again.
Should you have any questions about the proposed water or sewer rates or the water
quality testing program, please do not hesitate to contact the Utilities Department at
(949) 644 -3011 or you can call me at (949) 644 -3000. You may also look on the City's
website at www.city.newport- beach.ca.us to learn more about the MWD /OCWD rate
changes and why we came to this point. As always, thank you for your understanding.
Sincerely,
HOMER L. BLUDAU
City Manager
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