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Item 3 - First Reading of Ord Amending Section 13.03.010 Sewer Service Charges and Establishing Sewer Rates AGENDA REPORT SUMMARY TO: Honorable Mayor and Members of the City Council FROM: James L. Bowersox, City Man~ ------, INITIATED BY: Warren H. Shafer, Director of Administrative Service~" DATE: June 21, 2005 SUBJECT: Consideration of an Ordinance of the City of Poway, California Amending Section 13.03.010 of the Poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates ABSTRACT The City adopts sewer charges on a fiscal year basis. This report recommends an average increase of 9.7% to single-family, bimonthly sewer rates; and adjustments to the non-residential/multifamily, bimonthly capacity rates ranging from 9.1 % to 23.6%, plus an average adjustment of 7.4% to the non- residential/multifamily commodity charges. ENVIRONMENTAL REVIEW This item is not subject to CEQA review. FISCAL IMPACT As stated throughout this report. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE Published in the Poway News Chieftain on June 2 and 9, 2005. RECOMMENDATION It is recommended that the City Council introduce and hold the first reading of the proposed Ordinance, Attachment 1, establishing sewer rates. It is further recommended that the Public Hearing be continued for the second reading and adoption of the Ordinance on July 5, 2005. ACTION n1, \customer services\Rates\FY 05-0G1agenda-summary ~ sewer. doc 1 of 11 June 21,2005 Item # '3 CITY OF POWAY AGENDA REPORT TO: Honorable Mayor and Members of the City Council FROM: James L. Bowersox, City Mana~ ~ INITIATED BY: Warren H. Shafer, Director of Administrative Service~ Peter Moote, Deputy Director of Administrative Services~f\./ Tina White, Revenue & Business Activity Manager ~ DATE: June 21,2005 SUBJECT: Consideration of an Ordinance of the City of Poway, California Amending Section 13.03.010 of the Poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates BACKGROUND The City's sewer rates are established each year effective the first full billing cycle after July 1, which corresponds with the normal annual rate adjustments made by San Diego Metropolitan Sewer (Metro). The City's rate consultant has analyzed all of the utilization data and budget information and applied it to the City's rate model. The results of the analysis are contained in this report. Sewer Charaes The City's sewer charges for residential customers are based on three years of "wet" weather water consumption. This structure was developed and implemented in 1996 to provide equity in the distribution of sewer costs. A primary factor in determining the rates continues to be the City's share of system costs among Metro's participating agencies. Metro charges, and shared costs for the Bernardo and Peliasquitos systems for FY 2005-06, are expected to be $4,322,590, for an estimated system use of 3.88 MGD. This cost represents 57% of the City's total expenditures for wastewater, including collection, pumping, treatment, and administration. The City has historically managed variable increases in Metro costs by utilizing rate stabilization funds, permitting rate adjustments to be moderated over a multi-year period. The use of stabilization funds to offset Metro cost increases has permitted the City to achieve sewer rate adjustments of no more than 8.0% annually. The stabilization fund, established in FY 1996-97 with a $2.5 million set-aside from the Sewer Fund balance, has a projected balance of $2 million at the close of FY 2004-05. 2 of 11 June 21, 2005 Item # ~ Consideration of an Ordinance Amending Section 13.03.010 of the Poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates June 21,2005 Page 2 At this time, it is still uncertain how the City of San Diego's financial situation and its pending audits for 2003 and 2004 will affect Metro's charges and, in turn, charges to participating agencies including Poway. The proposed sewer rates for FY 2005-06 are based on the use of $350,000 of rate stabilization funds. With this application of stabilization funds, the average bi-monthly cost increase for a residential customer is $6.85, or 9.7%. Residential Sewer Rate The rate structure adopted in 1996 utilized a seven-tier commodity charge for residential, single-family users based on 85% of the lowest water use during the prior year's winter months. This structure aligned cost-of-service with actual use. The originally adopted seven-tier structure was based on a three-year average of fiscal years 1994, 1995, and 1996. The tier breaks were updated in FY 1999-00, the cap was increased to 51 units, and the median user now fell into Tier 3. In April 2000, the City Council directed staff to adjust the assignment method for residential tiers by using 85% of the customer's three-year average of lowest winter water use. Using a three-year average in place of only the prior year's consumption moderates the impact of weather and year-to- year irregularities in household consumption. The following table depicts last year's and the current distribution of residential customers among the 7 tiers. 2004/2005 2005/2006 No. of Users % of Users No. of Users % of Users Tier 1 0-5 557 5.0% 821 7.4% Tier 2 6-12 2,531 22.8% 2,892 26.0% Tier 3 13-19 3,160 28.4% 3,310 29.8% Tier 4 20-26 1,851 16.7% 1,666 15.0% Tier 5 27-37 1,283 11.6% 1,142 10.3% Tier 6 38-50 714 6.4% 560 5.0% Tier 7 51+ 1,015 9.1% 751 6.8% Totals 11,111 11,142 3 of 11 June 21, 2005 Item # ~ Consideration of an Ordinance Amending Section 13.03.010 of the Poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates June 21, 2005 Page 3 It is proposed that the replacement reserve charge (RRC) component of residential sewer rates remain the same and that the commodity and service charges be increased for FY 2005-06, for residential sewer rates as follows: FY 20~5 FY 2005-06 Currents ..... .. .... Proposed Water Comm~ "2:1'(,';". Comm- Chlilnge Tier Use odity Service RRC odity Service RRC Total Amouhtl% Tier 1 0-5 $19.55 $9.59 $3.00 $32.14 $20.14 $12.02 $3.00 $35.16 $ 3.021 9.4% Tier2 , 6-12 35.24 9.59 3.00 47.83 37.41 $12.02 3.00 52.43 4.601 9.6% Tier.3' 13-19 53.55 9.59 3.00 66.14 57.55 $12.02 3.00 72.57 6.431 9.7% TierA 20-26 58.78 9.59 3.00 71.37 63.31 $12.02 3.00 78.33 6.9619.7% Tier 5 27-37 69.24 9.59 3.00 81.83 74.82 $12.02 3.00 89.84 8.011 9.8% Tiar6 38-50 79.70 9.59 3.00 92.29 86.33 $12.02 3.00 101.35 9.061 9.8% 'Tier 7 51+ 87.54 9.59 3.00 100.13 94.96 $12.02 3.00 109.98 9.851 9.8% Average $70.25 $77.09 $ 6.8519.7% A companion agenda report separately addresses water rates. The proposed sewer rate adjustment for a Tier 3 residential customer, combined with the recommended water rate adjustment, will result in an increase of approximately 6.4% to the average customer's water and sewer utility bill. Commercial/Industrial Sewer Rate The sewer rate structure for non-residential users takes into account both the quantity and quality (strength) of a customer's sewage. Commercial/industrial and multifamily accounts are billed on a percentage of actual flow, so shifts in utilization are not a factor in their rate setting. The capacity charge portion of the sewer rate for non-residential customers, including the replacement reserve fee, is proposed to increase and new rates will range from $19.60 to $861.16 bi-monthly. It is proposed that non-residential customer commodity charges be increased an average of 7.4%, with new rates ranging from $2.88 per unit (returned to sewer) to $6.08 depending on tYpe of use. 4 of 11 June 21, 2005 Item # ~ ---~--_. ",- ------ ------ Consideration of an Ordinance Amending Section 13.03.010 of the poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates June 21, 2005 Page 4 Multifamilv and Mobile Home Estimated sewer flow based on 85% of customer's bimonthly $2.88 water usage (75% if a separate landscape meter does not exist) Nonresidential Customers Estimated sewer flow based on 90% of customer's bimonthly water usage: General Commercial $2.88 Medium-Low 3.23 Medium 3.71 Medium-High 4.65 High 6.08 Light Industry 3.00 Photo/Printer 3.23 Special Industrial Users -The Director of Administrative Services is hereby authorized to determine the percentage of water flow based on actual discharge to the sewer system as evidenced by data supplied by the user, and classified per the currently approved water and sewer rate study. Institutional Churches--Estimated sewer flow based on calculated $2.88 percentage of customer's bimonthly water usage. Schools--Estimated sewer flow based on calculated flow per $2.88 student per day. 5 of 11 June 21, 2005 Item #.3 Consideration of an Ordinance Amending Section 13.03.010 of the Poway Municipal Code, Schedule of Sewer Service Charges, and Establishing Sewer Rates June 21, 2005 Page 5 Sewer Pumpina Charae In addition to the regular sewer service rates charged to all customers, pumping charges are added to the sewer bills of those customers who are served by a sewer lift station. Due to the potential irregularity of electricity costs to the City, the ordinance establishing sewer service rates includes a provision for periodic (no more than bimonthly) adjustments to the sewer pumping energy charges to a level that offsets actual energy costs. The initial proposed sewer pumping rate for 2005-2006 remains unchanged from $3.86 bi-monthly for each pump station utilized. FINDINGS The following sewer charges should be established as set forth in this report, effective the first full billing cycle after July 1, 2005: . Bi-monthly capacity/service charge for residential and non-residential users . Seven-tier commodity charge for residential, single family users . Commodity sewer charge for multifamily and non-residential users . Bimonthly pumping charge for users of wastewater lift stations ENVIRONMENTAL REVIEW This item is not subject to CEQA review. FISCAL IMPACT As noted throughout the report. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE Published in the Po way News Chieftain on June 2 and 9, 2005. RECOMMENDATION It is recommended that the City Council introduce and hold the first reading of the proposed Ordinance, Attachment 1, establishing sewer rates. It is further recommended that the Public Hearing be continued for the second reading and adoption of the Ordinance on July 5, 2005. Attachment: (1) Ordinance establishing sewer rates rn,\customer services\Rateslry_o:J.()f)\,SW! fate 05-U6rpLdoc 6 of 11 June 21, 2005 Item # . .3 ---"-- - -- - - ORDINANCE NO. AN ORDINANCE OF THE CITY OF POWAY, CALIFORNIA AMENDING SECTION 13.03.010 OF THE POWAY MUNICIPAL CODE, SCHEDULE OF SEWER SERVICE CHARGES, AND ESTABLISHING SEWER RATES WHEREAS, the City of Poway provides sewer service to citizens of Poway; and WHEREAS, the City has a user charge system based on water consumption and which takes into account both quantity and quality of a customer's sewage; and WHEREAS, a bimonthly service charge is established which recovers all costs associated with customer service and a portion of the fixed costs associated with maintaining the capacity of the City's sewer system; and WHEREAS, a seven-tier, single-family residential sewer commodity charge is established, which includes the bimonthly sewer service charge for single-family customers. Single-family residential customers are assigned a commodity charge tier each year based on 85 percent of their three-year average of lowest winter water use; and WHEREAS, a variable sewer commodity rate is established for multifamily and mobile home customers. The variable commodity charge is based on 85 percent of the water through the water meter if a separate landscape meter exists. If a separate landscape meter does not exist, the variable commodity charge is based on 75 percent of the water through the water meter; and WHEREAS, a variable sewer commodity rate is established for all non-residential customers based upon customer class and estimated sewage strength of the user. The variable commodity charge is based on 90 percent of the water through the meter for the five categories of commercial users. The variable commodity charge for the special industrial user class is based upon an assigned percentage of water through the meter; and WHEREAS, a variable sewer commodity rate is established for schools. The variable commodity charge is based on a per-student-per-day water use amount. The per-student-per-day use amount is derived from dividing the student count into the March/April water consumption for the previous year; and WHEREAS, a variable sewer commodity rate is established for churches. The variable commodity charge is based upon an assigned percentage of water through the meter. The percentage is based on the average winter use for the prior year as compared to the total annual average for the church; and WHEREAS, the variable sewer commodity charge adopted herein shall be imposed on the basis of the established percentages of the amount of water through the water meter. The fee or charge is not imposed upon real property or upon a person as an incident of property ownership. A customer may reduce or avoid the fee by reducing or discontinuing use; and 7 of 11 Attachment 1 June 21, 2005 Item # .3 Ordinance No. Page 2 WHEREAS, the City has pumping charges for established service areas; and WHEREAS, the City has a delinquency fee and other noted fees. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF POWA Y DOES ORDAIN AS FOLLOWS: Section 1. That a schedule of bimonthly sewer service charges is hereby established for all sewer services billed beginning the first full billing cycle after July 1, 2005: Schedule of Bimonthly Sewer Service Charges All sewer customers shall pay a bimonthly basic sewer service charge effective 7/1/05 for service based upon meter size as follows: Meter Size: Single Family. $ 12.02 $ 3.00 $ 15.02 5/8 inch and 3/4 inch 15.10 4.50 19.60 1-inch 19.20 7.50 26.70 1-1/2-inch 29.45 15.00 44.45 2-inch 41.76 24.00 65.76 3-inch 74.57 48.00 122.57 4-inch 111.49 75.00 186.49 6-inch 255.05 180.00 435.05 8-inch 337.09 240.00 577.09 10-inch 501.16 360.00 861.16 *A universal class has been established for sewer bimonthly service charge for all single-family residential users based on a 5/8-inch meter. All other classes of residential and commercial/industrial bimonthly service charges are based on actual water meter size beginning with the combined 5/8-inch and 3/4-inch class. 8 of 11 June 21, 2005 Item #3 --<--...-. ..-- Ordinance No. Page 3 Commodity Rate - Single-Family Residential All single-family residential customers shall pay a bimonthly seven-tier flat commodity charge effective 7/1/05 as follows: Blmonthiv-Chame Variable Description Canacltv + Replacement Reserve + Flow =Total Tier Water Use Tier 1 (0-5 HCF) $12.02 $3.00 $20.14 $35.16 Tier 2 (6-12 HCF) 12.02 3.00 37.41 52.43 Tier 3 (13-19 HCF) 12.02 3.00 57.55 72.57 Tier 4 (20-26 HCF) 12.02 3.00 63.31 78.33 Tier 5 (27-37 HCF) 12.02 3.00 74.82 89.84 Tier 6 (38-50 HCF) 12.02 3.00 86.33 101.35 Tier 7 (51+ HCF) 12.02 3.00 94.96 109.98 Single-family customers are assigned a commodity charge tier each year based on 85% of their three-year average of lowest winter water use. New customers in single-family residential, and condominium and town homes with separate master landscape meters, are assigned to Tier 3. They will remain at this tier until they establish their own winter water use (one full billing cycle during the winter months of November-April). Commodity charge tier assignments are evaluated and updated annually, at the first full billina cvcle after Julv 1. Commodity Rate - Multifamily, Mobile Home, Nonresidential All multifamily, mobile home, nonresidential and institutional customers shall pay a bimonthly variable commodity rate on estimated sewer flow effective 7/1/05 as follows: . ;, - " " , . , , , , Multifamily and Mobile Home Estimated sewer flow based on 85% of customer's bimonthly $2.88 water usa e 75% if a se arate landsca e meter does not exist. 9 of 11 June 21, 2005 Item #j .__._....-._-~- ._-----~--_._- Ordinance No. Page 4 Nonresidential Customers Estimated sewer flow based on 90% of customer's bimonthly water usage: General Commercial $2.88 Medium-Low 3.23 Medium 3.71 Medium-High 4.65 High 6.08 Light Industry 3.00 PhotolPrinter 3.23 Special Industrial Users: The Director of Administrative Services is hereby authorized to determine the percentage of water flow based on actual discharge to the sewer system as evidenced by data supplied by the user, and classified per the currently approved water and sewer rate study. Institutional Churches--Estimated sewer flow based on calculated percentage of customer's bimonthly water usage. $2.88 Schools--Estimated sewer flow based on calculated flow per student per day. $2.88 All service connections whose wastewater is served by wastewater pump stations (including the Rancho Bernardo Pump Station) will be charged $3.86/bi-monthly surcharge for each pump station utilized. This surcharge may be adjusted by the City no more than once bimonthly to offset actual energy costs. Upon change of customer, sewer charges will be prorated on a 60-day billing period basis between old and new customer. A delinquency fee of 10 percent of the unpaid balance or $50, whichever is less, shall be charged on all accounts that remain unpaid for more than 30 days. 10 of 11 June 21, 2005 Item # oS Ordinance No. Page 5 A fee of $15 will be charged if, because of non-payment, a shut-off notice must be delivered advising a customer of possible service disruption. A fee of $25 shall be charged for returned checks and returned automatic payments. EFFECTIVE DATE: This ordinance shall take effect and be in force thirty (30) days after the date of its passage; and before the expiration of fifteen (15) days after its passage, it shall be published once with the names of members voting for and against the same in the Poway News Chieftain, a newspaper of general circulation published in the City of Poway. Introduced and first read at a Regular Meeting of the City Council of the City of Poway held on the 21st day of June 2005 and thereafter PASSED AND ADOPTED at a regular meeting of said City Council held on the 5th day of July 2005, by the following roll call vote: AYES: NOES: ABSENT: DISQUALIFIED: Michael P. Cafagna, Mayor ATTEST: L. Diane Shea, City Clerk 01 ICllstumer services\Rates\FY _05-06\swr rate 05-06ord doc 11 of 11 June 21, 2005 Item # ~ --~._.