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 CITY COUNCIL AGENDA ITEM NO.15


Meeting Date: November 26, 2002

Subject/Title: Approve proposed Ordinance adopting and implementing new monthly user charges for sanitary sewer service for Fiscal Years 2002/03 to 2007/08 as submitted herein and accept the Sewer Rate Study for the Sewer Enterprise Fund. 

Submitted by: Paul Zolfarelli, Director of Public Works/ Pam Ehler, Director of Finance & Information Systems

Approved by: John Stevenson, City Manager


RECOMMENDATION 

Approve proposed Ordinance adopting and implementing new monthly user charges for sanitary sewer service for Fiscal Years 2002/03 to 2007/08 as submitted herein and accept the Sewer Rate Study for the Sewer Enterprise Fund. All new monthly Sanitary Sewer Rates to be in effect February 1, 2003.

PREVIOUS ACTION

On May 4, 1999 the City Council introduced Ordinance No. 613 adopting sewer rates for Fiscal Years 1999/00 to 2004/05.

BACKGROUND

The City of Brentwood Sanitary Sewer Enterprise Fund must recover its cost of operation through rates to ensure that funds are not needed from the City General Fund. Additionally, the City secured a loan from the SWRCB (State Water Resources Control Board) for the construction of the new Waste Water Treatment Facility. The contact between the SWRCB and the City of Brentwood requires the City to maintain an adequate income to assure repayment of the loan, and generate enough income to pay for the operation of the facility, and maintain adequate income to provide for future expansion and improvement. The amount of funds secured from the SWRCB was $45.5 million dollars. This loan is to be paid back to the SWRCB over 20 years as a principal only payment. 

The Residential Sanitary Sewer Rate is based on a monthly fixed base rate and a variable rate based on volume to a dollar ceiling. The current rate is a $7.08 monthly fixed base plus $2.04/1,000 gallons to a ceiling rate of $22.51/month. Commercial sewer rate charges are based on a monthly fixed base rate plus a variable rate based on volume discharged without a ceiling.

DISCUSSION

The City contracted with Berryman & Henigar to perform the new Rate Study. It is assumed for this rate study that the new treatment facility will increase operations and maintenance cost including energy, chemical and personnel costs. The facility has gone from a simple secondary treatment plant with a daily process capacity of 2 million gallons to a state of the art tertiary treatment facility with a capacity to treat over 4.4 million gallons per day. With this increase in process design and capacity, expenditures are expected to increase.

This increase in expenditures necessitates an increase in revenues and rates. If the City continues to operate under the existing rate structure there will be a $1.8 million dollar deficit beginning in Fiscal Year 2003/04 and continuing until rates are adjusted. This deficit will also cause the City to default on the loan conditions with the SWRCB requiring the loan be immediately paid in full. The City does not have the funds available to repay this loan in a lump sum.

Berryman & Henigar have recommended a monthly sewer service charge increase based on the following table and an increase each year based on CPI (Consumer Price Indexes):

USER 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Residential Ceiling Rate
Residential Variable Rate $22.51/$23.75
$2.20 $24.94
$2.67 $26.19
$2.67 $27.49
$2.67 $28.87
$2.67 $30.31
$2.67
Fixed Monthly Rate $7.64 $7.80 $7.80 $7.80 $7.80 $7.80


The residential ceiling rate is the highest that any residential customer will pay regardless of the quantity of wastewater discharged. The ceiling rate is normally reached at about 7,000 gallons. Approximately 85% of our customers discharge greater then 7,000 gallons of wastewater per month and would be billed at the ceiling rate. A full list of all proposed residential and commercial rates are listed in the following table:


CITY OF BRENTWOOD
PROPOSED SEWER RATE CHARGES*

Customer Category Fiscal Year: 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Residential 
Monthly Fixed Rates $7.64 $7.80 $7.96 $8.12 $8.28 $8.44
Variable Rate per 1,000 gallons/month $2.20 $2.67 $2.72 $2.78 $2.83 $2.89
Total Ceiling Rate (fixed base + variable rate) $22.51/$23.75 $24.94 $26.19 $27.49 $28.87 $30.31
see note (a) 
Commercial 
Fixed Base Rates - Categories $7.64 $7.80 $7.96 $8.12 $8.28 $8.44
Variable Rate per 1,000 gallons/month 
Auto Sales and Repair $2.41 $2.93 $2.99 $3.05 $3.11 $3.17
Barber & Beauty Shops $2.02 $2.44 $2.49 $2.54 $2.59 $2.64
Bakery $6.16 $7.52 $7.67 $7.82 $7.98 $8.14
Car Washes $2.09 $2.52 $2.57 $2.62 $2.67 $2.73
Gas Stations $2.34 $2.83 $2.89 $2.94 $3.00 $3.06
Grocery Stores $5.24 $6.39 $6.52 $6.65 $6.78 $6.92
Hotels without Restaurants $2.41 $2.92 $2.98 $3.04 $3.10 $3.16
Institutions, Churches, Homeowners Assoc. $2.15 $2.59 $2.64 $2.70 $2.75 $2.81
Laundromats $2.21 $2.67 $2.72 $2.78 $2.83 $2.89
Laundry, Commercial $2.84 $3.45 $3.52 $3.59 $3.66 $3.73
Office Buildings, Banks $2.17 $2.62 $2.67 $2.73 $2.78 $2.84
Restaurants $5.82 $7.10 $7.24 $7.39 $7.53 $7.69
Retail Stores $2.21 $2.67 $2.72 $2.78 $2.83 $2.89
Schools $2.02 $2.44 $2.49 $2.54 $2.59 $2.64
Other Commercial $2.27 $2.74 $2.79 $2.85 $2.91 $2.97
Mixed Use (b) $2.94 $3.58 $3.65 $3.72 $3.80 $3.88
(*) Proposed rates do not include the Consumer Price Indexes increases that will be added each year. 
(a) Residential service rates ceiling will be raised in February through June 2003. 
(b) Mixed Use rate is for business centers with commercial users of different business types served by shared water meters. 


Berryman & Henigar prepared a comparison of residential sewer service rates. The monthly rate for 13 other agencies was compared to Brentwood's existing and proposed rate:

Comparison of Residential Sewer Service Rates
Current Charges for Service for Local Agencies

District/City Residential Rate
Union Sanitary District $15.67
Antioch $18.47
Central Contra Costa Sanitary District (Currently) $20.67
Pittsburgh $21.33
Brentwood (Existing 2002/03) $22.51
Ironhouse Sanitary District $23.50
Central Contra Costa Sanitary District (2003) $24.00
Brentwood Proposed 2002/03 $23.75
Oakland $27.17
Dublin – San Ramon Services District $27.25
Crockett/Valona Sanitary District $27.67
Benecia $32.00
Livermore $33.83
Pleasanton $31.50
Berkeley $49.64

The proposed rate maintains Brentwood in about the middle of the residential rate charge. In light of the fact that we have just completed building a $45.5 million dollar facility and that the SWRCB requires our rates fully support our operations and maintenance costs along with repayment of our loan, our rates remain competitive with our neighboring treatment facilities.

FISCAL IMPACT

The rate proposed here will insure that the Wastewater Enterprise is fully funded. This includes the requirements placed on the City by the SWRCB for the repayment of the loan. It is recommended that the rate plan outlined here also include a provision for annual adjustments based on CPI.

Attachments:
• Ordinance
• Sewer Rate Study


ORDINANCE NO.


AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD ADOPTING NEW MONTHLY USER CHARGES FOR SANITARY SEWER SERVICE

WHEREAS, the attached Sewer Enterprise Rate Study as prepared by Berryman & Henigar, Inc., dated November 15, 2002 (hereinafter referred to as the “Study”) proposes to provide adequate operating revenue(s) to pay for qualifying expenditures, provide adequate debt service coverage, maintain a positive cash flow in the sewer enterprise fund and equitably distribute the sewer treatment and collection system costs to each user; and

WHEREAS, the equitable distribution of the sewer treatment and collection cost is a requirement of the State Water Resources Control Board’s revolving fund loan program which provided a zero percent (0%) interest loan to the City for the Wastewater Treatment Plant expansion and upgrades; and

WHEREAS, it is imperative for the adequacy of the City’s sewer needs that an ordinance be adopted and establish new rates, in accordance with the requirements of Health and Safety Code Section 5471; and

WHEREAS, the City has reviewed the proposed charge per customer category in the Study and has concluded that the charge does not exceed the reasonable cost of providing sewer service and facilities to the subject categories and is proportionally representative of the costs incurred by the City. The charges reflect the burdens placed on the existing sewer system and the new Wastewater Treatment Facility by users and is not in excess of the benefits the users receive from the system; and 

WHEREAS, it is imperative to continue to implement the Study to establish new rates by this ordinance for the preservation of the public health and safety based on the recitals set forth above, to provide adequate operating revenues(s) to pay for operating expenditures, to maintain adequate debt service coverage, to maintain a positive cash flow within the Sewer Enterprise Fund, to equitably distribute the sewer treatment and collection system costs to each user, and the need for immediate processing of the new rates to users; and

WHEREAS, the revenue derived from the user rates shall be used in a manner consistent with Health and Safety Code Section 5471 and the City’s ordinances pertaining to wastewater and sewer services particularly Section 13.04.130 of the Brentwood Municipal Code, including without limitation, the payment of State Revolving Fund Loans and other debt service with respect to the financing of capital facilities for the sewer system; and

WHEREAS, the subdivision and development of property within the existing and planned sewer service area will require construction of the facilities described in the Plan and the user charges are fairly apportioned within such area on the basis of the need for such facilities created by such planned and existing development; and

WHEREAS, the rates set forth herein are for the provision of sewer service and shall not constitute a capital facilities fee pursuant to Government Code Section 54999.3; and 

WHEREAS, the rates set forth herein are not levies imposed upon a parcel or person as an incident of property ownership and are not charged for a property related service and are in all respects exempt from the provisions of Article XIII C and Article XIII D of the State Constitution; and

WHEREAS, the Sewer Enterprise Rate Study for the Fiscal Years 2002/03 to 2007/08 proposed new monthly sewer rates to address the needs of the citizens for sanitary and effective wastewater service, and those rates are as follows:

CITY OF BRENTWOOD
PROPOSED SEWER RATE CHARGES*

Customer Category Fiscal Year: 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Residential 
Monthly Fixed Rates $7.64 $7.80 $7.96 $8.12 $8.28 $8.44
Variable Rate per 1,000 gallons/month $2.20 $2.67 $2.72 $2.78 $2.83 $2.89
Total Ceiling Rate (fixed base + variable rate) $22.51/$23.75 $24.94 $26.19 $27.49 $28.87 $30.31
see note (a) 
Commercial 
Fixed Base Rates - Categories $7.64 $7.80 $7.96 $8.12 $8.28 $8.44
Variable Rate per 1,000 gallons/month 
Auto Sales and Repair $2.41 $2.93 $2.99 $3.05 $3.11 $3.17
Barber & Beauty Shops $2.02 $2.44 $2.49 $2.54 $2.59 $2.64
Bakery $6.16 $7.52 $7.67 $7.82 $7.98 $8.14
Car Washes $2.09 $2.52 $2.57 $2.62 $2.67 $2.73
Gas Stations $2.34 $2.83 $2.89 $2.94 $3.00 $3.06
Grocery Stores $5.24 $6.39 $6.52 $6.65 $6.78 $6.92
Hotels without Restaurants $2.41 $2.92 $2.98 $3.04 $3.10 $3.16
Institutions, Churches, Homeowners Assoc. $2.15 $2.59 $2.64 $2.70 $2.75 $2.81
Laundromats $2.21 $2.67 $2.72 $2.78 $2.83 $2.89
Laundry, Commercial $2.84 $3.45 $3.52 $3.59 $3.66 $3.73
Office Buildings, Banks $2.17 $2.62 $2.67 $2.73 $2.78 $2.84
Restaurants $5.82 $7.10 $7.24 $7.39 $7.53 $7.69
Retail Stores $2.21 $2.67 $2.72 $2.78 $2.83 $2.89
Schools $2.02 $2.44 $2.49 $2.54 $2.59 $2.64
Other Commercial $2.27 $2.74 $2.79 $2.85 $2.91 $2.97
Mixed Use (b) $2.94 $3.58 $3.65 $3.72 $3.80 $3.88
(*) Proposed rates do not include the Consumer Price Indexes increases that will be added each year. 
(a) Residential service rates ceiling will be raised in February through June 2003. 
(b) Mixed Use rate is for business centers with commercial users of different business types served by shared water meters. 



NOW, THEREFORE be it resolved that the City Council of the City of Brentwood does ordain as follows:

1. The City Council accepts the Study attached hereto;

2. The City Council adopts the rates as set forth in the Study, which shall be effective and applied to all users February 1, 2003;

3. The City Council authorizes an annual automatic adjustment to the rates effective each July 1st based upon the most current San Francisco CPI (Consumer Price Indexes) for the preceding twelve (12) months;

4. The rates, as may be adjusted, shall be effective through and including the Fiscal Year 2007/08 unless otherwise modified by virtue of future Council action. If no such Council action occurs relative to the Fiscal Years following 2007/08, the rates then charged for the Fiscal Year 2007/08 shall continue to apply to subsequent fiscal years;

5. The above Sanitary Sewer Rates for Fiscal Years 2002/03 through and including Fiscal Year 2007/08;

6. Until the February 1, 2003 effective date specified in Section 2 of this Ordinance, all Sanitary Sewer Rates as established in Ordinance 613, adopted by this Council on May 11, 1999 shall remain in full force and effect;

7. Notwithstanding any other provision hereof, in the event that any installment sale or purchase agreement, loan, bond or other indebtedness lawfully entered into by the City requires the City to increase the rates and charges to comply with any covenant regarding rates and charges for the City's wastewater system, the rates and charges herein provided for may be increased by this Council by resolution; and

8. All resolutions and ordinances, or portions thereof, in conflict herewith are hereby repealed. The City Clerk is directed to publish this ordinance in any manner consistent with Government Code Section 36933.

INTRODUCED, WITH FIRST READING WAIVED by the City Council of The City of Brentwood at its regular meeting on November 26, 2002. .
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