Item 8 - Proposed Water Rate and Sewer Service ChargesAE1r L1 RVj.k 1, OF p�9
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CITY OF POWAY
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TO: Honorable Mayor and Members of the City Council
a
FRCKJames L. Bowersox, City
INITIATED BY John, D. Fitch, Assistant City Manager
DATE: June 10, 1986
SUBJECT: Proposed Water Rate and Sewer Service Changes
a
r ABSTRACT
AnnUal.ly, a review of rates and charges which finance the City's water and sewer
Operations is conducted in conjunction with a review of the proposed financial
plan. Based upon a thorough analysis of the water operation, it will not be
necessary to change the water rates for Fiscal Year 1986-87. However, it will
be necessary to increase the -sewer service charge from the current bi-wnthly
rate of $14.10 to $18.19.
BACKGROUND
x'. water Rates
For the last few years, the City has annually had to raise the water rates as a
result of increases in raw water and other operational costs. Although opera-
tional costs are proposed to increase"slightly for Fiscal Year 1986-87, two of
the primary cost items, raw water costs and electricity for.water pumping, are
expected to remain constant. As a result of these factors and increases in the
amount of water being consumed, it will not be necessary to increase either the
commodity or the capacity water rates. E
Pumping Rates f
In addition to the regular water rates charged to all customers, additional
ping charges are added to the water bills of customers who have to be served }
from a water reservoir other than the clearwell. Of the six areas that receive
a pumping charge, it will only be necessary to recommend a rate change for
customers within Service Area VI'which ;is served by the Alta Mira Reservoir.
ACTION:
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Agenda Report
June 10, 1986
Page 3
The Alta Mira Reservoir is a relatively new reservoir which was built to serve
Brdlewood, Piedmont Park and the surrounding area. Since there were no homes
until this year, the current pining charge for this service area was calculated
based upon experience of other reservoirs. However, based upon actual usage,
it will.be necessary to increase this rate from the current rate of $0.125 per
unit to $0.135 per unit.
Sewer Service Charles
Sewer service charges are applied to custaners on the basis of equivalent
dwelling units which distribute the cost of sewer service according to the size
and purpose of improvements on the property. The current 12,464 equivalent
dwelling units is based upon assigning one unit
per .bane and an •equivalent
number on other developed property based upon the land use.
Over the :years, the sewer service charge has been kept artificially low by
supplementing the revenues from sewer fees with interest income from the sewer
fund balance. Although the City has inproved this situation since incor-
poration, it will be necessary. to increase the sewer ,service charge over the
next few years to ensure that the cost of operating and maintaining the sanitary
sewer system isrecoveredfrom the sewer service charge.
Currently, the sewer fund has a sizeable fund balance of approximately $4.8«,
million which is anticipated to grow to approximately $5.7 by the end of the
next fiscal year as a result of sewer connection fees that will be paid by deve-
lopers. The size of this fund will continue to grow as development occurs.
However, it is anticipated that $7.5 million will. be paid out of this fund over
the next few years to purchase additional sewage capacity and correct existing
deficiencies in the sanitary sewer system. As a result,.the sewer fund balance
will be depleted and the interest income will not be available to subsidize the
cost of operating the sanitary sewer system.
FINDINGS
water
As a result of an analysis of water usage since Fiscal Year 1979-80 and the fact
that water usage has increased and most of the major costs of providing water
have stabilized, at least for the present, it will. not be necessary to recommend
an increase in the water rates for the next fiscal year.
Sewer
It is necessary for the City to raise the sewer service charge to eliminate the
needtosubsidize this fee by interest earnings from the sewer fund and to
recover the $191,563 increase in sewage collection treatment costs by the City
of San Diego. If the City was to impose a full cost recovery system during
Fiscal Year 1986-87 the bi-monthly sewer service charge would have to be
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increased to approximately $23.64 per equivalent dwelling unit. Rather then
recommend such a drastic increase from the present bi-monthly fee of $14.10, it
is recommended that the City move toward full cost recovery over the next three
years. By subsidizing the sewer service charge by 2/3 of the estimated $612,200
in sewer fund interest income estimated for Fiscal Year 1986-87, the sewer ser-
vice charge would have to be increasedby $4.09 per bi-monthly billing cycle to
$18.19. The increase in costs as required by the contract with the City of San
Diego represents $2.56 of the $4.10 total increase. The majority of the
remainder represents the suggested reduction in use of capital improvement
interest income to subsidize sewer service charges.
The sewer service charge would be increased again over the next two years to
provide for normal increasesin the cost of operating the sanitary sewer system
and the elimination of the .subsidy from the sewer fund interest income.
It has been the past policy of the City Council to schedule a public hearing.' to
review water and sewer rates. It is recommended that this hearing be scheduled
for June 24, 1986.
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ATTACHMENT 1
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Examples Of Impact of Proposed Rate Increases
Fiscal Year 1986-1987
The following examples are intended to demonstrate the net annual impact of the
proposed sewer service charge increases on various types of water- and `sewer
customers. Although water rates will not be increased, these examples are being
provided since the sewer service charge is included as part of the water bill.
Example 1
A low consumption user with a 5/81' water meter at a single family residence and
an average consumption of 5 units per month.
Old Rate New Rate
Cc mYmodity Charge,5 x .8356 $ 4.18 $ 4.18
f
.Capacity Charge 6.41 6041
Sewer Service Charge 14.10 16021
{
Total bimonthly cost $ 24.69 $ 26.80
Total annual.bill $ 148.14 $ 160.80
Percent Annual Increase_ 8.55
ale 2
A residence in the Windmill area with a 5/8" water meter with an average con-
sumption of 57 units per month.
Old Rate New Rate
Catmodity Charge 57 x .8356 $ 47.63 $ 47.63
Capacity Charge 6.41 6.41
Sewer Service Charge 14.10 16.21
Total bimonthly cost $ 68.14 $ 70.25
i
s
g Total annual bill $.408.84 $ 421.50
Percentage Annual Increase 3.10
t
ATTACHMENT 1
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Examples of Impact of Proposed Rate
Increases - FY 1986-87
(continued)
Sample 3
A High Valley domestic agricultural
user based upon a single family residence,
that is on a septic system, with a grove or orchard on several acres of land
using a 1" water meter and averaging 421 units per month of consumption.
Old Rate
New Rate
Camnodity, Charge 52 x .8356
$ 43.45
$ 43.45
369 x .7346
271.07
271.07
Capacity Charge -
7.22
7.22
Pumping Charge .263 x 421
110.72
110.72
Total bimonthly cost
$ 432.46
$ 432.46
Total annual 'bill
$2r594.76
$2,,594.76
Percent Annual Increase
1
None
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