HomeMy WebLinkAboutC-4 Staff Report Sewer Fund 1-7-02PUBLIC HEARING
TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: JOSEPH HSU, UTILITIES DIRECTOR
NASSER ABBASZADEH, CITY ENGINEER
VIA: RICK COLE,, CITY MANAGER
DATE: JANUARY 7, 2002
SUBJECT: SEWER FUND RATE INCREASE
RECOMMENDATION
It is recommended that the City Council:
1. Open the public hearing and receive testimony
Adopt the attached Ordinance to approve an initial 10% increase in the Sewer Rate
(effective February 1, 2002) and 4% annual adjustments in subsequent years to fund
increased costs of street sweeping, pollution control and capital maintenance of
Azusa's sewer system
BACKGROUND
Azusa Sewer rates have not been adjusted since June 1998. At that time, they were increased
by 1 I% to generate about $100,000 a year to pay for the cost of compliance with the
requirements of the National Pollutant Discharge Elimination Program (NPDES). Costs for future
compliance with new regulations implementing this law are expected to continue to increase
substantially.
The existing Azusa rates are as shown below:
Residential
$5.17/unit
Commercial
$6.65/unit + $0.0624 oer 100 cubic feet of water usage (CCF)
Industrial
$8.12/unit + $0.0624 per 100 cubic feet of water usage (CCF)
COVINA
WEST COVINA
Residential $7.00/unit
21.95/unit
Commercial $7.00/1000sf
21.95/667sf
Industrial $ 7.00/1000sf
2 i .95/667sf
Althou.-ah residential rates can be clearly compared on a Der unit basis. a comparison of
commercial and industrial rates are more difficult to compare since Azusa has a suDDlemental
charge based on water usage while Covina and West Covina have a suDDlemental charge based
on the square footage of the faciiity. However, a comparison of the base rates show that Azusa
has a lower rate in almost every category shown.
The increase in sewer rates is based on the following:
Street sweeDin-z' The capltal cost of reDlacinsE worn-out street sweeping eauiDment led to a
decision by the Council in Auiust lat vear to Drivatelv contract for the Citv's davtlme sweeDin!Z
operations. The staff recommendation at the time noted a need for an additional $90,000 in
sewer funds annually to fund street sweeping.
Imnlementation of the National Pollutant Discharge Elimination Program 17VPDE5J. The five vear
permit was to expire on lulv 15. 2001. and the Rerzional Water Ouality Control Board recentiv
adopted a new, more strini�ent Dermit (December 13. 2001 ) which is in future vears will
substantialiv increase the Citv's cost. Although the total impact of these strin.qent new
re,zulations is not year clear, we are expecting an additional $50,000 a year to comply with the
new rules.
Capital investment., As part of this vear's CIP. the Citv's 15 vear old Sewer MasterDlan was
updated. The new studv identifies a cost of $2.284.300 in needed capital investment in the
sewer system. While existing reserves will offset these costs, they will need to be replenished
to cover future year capital investment.
To capture one hundred Dercent of these costs over the next 10 years (without an inflation
factor) would require $358,430 a year, a rate increase of 32.6%.
To capture one hundred Dercent of the costs shown above in the next 15 vears (again, without
an inflation factor) would require $282,300 a year, a rate increase of 25.7%.
Rather than a dramatic one --time increase, staff is Droposin-q a Qradual aDDroach with an initial
10% increase effective on all utilltvbills rendered after February 1.2002. and another 4%1ncrease
effective luly 1. 2002. This option will fund street sweeDinq: current NPDS requirements: and
keen current on capital spendiniz and Dlannin,z for future MPDS recruirements. Staff will also be
analvzini� oDDortunities for issuln-a long term debt that would allow us to finance the maioritv
of the sewer capital needs. In addition, staff is develoDin-q sewer rates that could be applied to
new developments to further minimize the fiscal impact to current rate payers.
If approved. the initial upgraded rates and the eventual 10 -year rates (with 4% base rate only)
will be as shown below:
Residential
Commercial
Industrial
INITIAL RATES
$5.69/unit
$7.32/unit + $0.069 Der CCF
$8.93/unit + $0.069 per CCF
I 0 -YEAR RATES (4% base)
$ 8.42/unit
$10.84 + 0.102 Der CCF
$13.22 + 0.102 per CCF
The 10% increase will become effective on utility bills rendered after February 1. 2002. and the
first 4% increase will go into effect July 1, 2002. The final 4% base increase will apply to rates on
July 1, 2011.
The existin-q discount rates for low income and/or properties not connected to public sewer will
remain intact.
FISCAL IMPACT
The 10% Rate increase will generate $41.250 for the balance of the current fiscal vear (assuming
4.5 months to the end of the fiscal year once the new Rates go into effect). For FY02-03,
$158,400 will be generated.
Attachments