HomeMy WebLinkAboutPH 4 WTR SVC RATES 09-21-92PUBLIC HEARING N0. 4
9-21-92
DATE: SEPTEMBER 16, 1992 Inter -Com
TO: WILLIAM A. HUSTON, CITY MANAGER
FROM: RONALD A. NAULT, FINANCE DIRECTOR
SUBJECT: RESOLUTION NO. 92-110, ADJUSTING WATER SERVICE RATES
RECOMMENDATION:
That the City Council, at its meeting of September 21, 1992, adopt
Resolution No. 92-110, adjusting water service rates and authorize
staff to proceed with the issuance of bonds and refunding of
existing bonds as recommended in the Water Rate Study and Financing
Plan.
BACKGROUND:
In 1990, City Council was presented a complete engineering analysis
of the Tustin Water Storage and Supply System. The analysis
recommended major water supply storage and distribution system
improvements. The recommended improvements will allow the City to
maximize its use of lower-cost ground water. This analysis is the
basis for the Water Rate Study and Financing Plan recently
presented to Council.
DISCUSSION:
City staff along with the water rate consultant held a workshop on
the Financial Plan and proposed rates on August 31, 1992. During
this workshop City Council was presented recommendations on
adjustments to the City's water rates to cover operating, capital
expenses and financing of the recommended capital improvements.
The workshop included recommended rates for the next three years to
cover increases in operating costs and new bond debt service
expense.
The improvements called for by the Consulting Engineer and the
City's Water and Public Works departments total about $30 million
in current dollars. Inflation at 5 percent per year over a twelve
year construction period will increase total costs to almost $40
million. The City will need to borrow about $8.5 million to
finance the immediate water improvements and additional debt will
be needed in 1994/95 and 1996/97 for projects scheduled at that
time.
Adjusting Water Service Rates
September 16, 1992
Page 2
The rate schedule presented at the workshop is very similar to the
existing rate structure, with a fixed bi-monthly meter charge based
on flow capacity and a volume charge for all water consumption.
The current meter charge is made up of three components: service,
demand, and debt. The rate study recommends that meter charges be
combined to a single charge, and revenues from the meter charge
would be applied, along with revenues from volume charges, to all
the. system's expenses and obligations. The recommended meter
charges are designed to generate about one-third of the necessary
annual revenue thus reducing fluctuations in the City's water
revenue. Multiple units would be charged a meter charge of 80
percent of a 5/8" meter rate per unit, rather than a charge for
size of meter in use because their usage is similar to residential.
Four rate blocks are recommended:
Block 1- $0.35 - a reduced rate for the first 6 units (lifeline)
Block 2- $0.85 - 7 units to 40 units
Block 3- $1.00 - 41 units to 60 units
Block 4- $1.10 - Over 60 units
One unit is the equivalent to one hundred cubic feet (hcf) or 748
gallons of water. The rate blocks are designed to encourage water
conservation. Block rates for multiple units would be based on 80
percent of the blocks for other customers on a per-unit basis. The
rate blocks for multiple units would be 0-5 (hcf), 6-32 (hcf), 33-
48 (hcf) , and over 48 (hcf) . A four unit building would receive 20
hcf (5 hcf per unit) at the lifeline rate, then usage above 20 hcf
and up to 128 hcf would be billed at the next block rate, and so
forth.
The recommended rate increases for the next three years will
increase the typical residential customer billing as follows:
Current 1992/93 1994/95
5/8" meter $35.89 $42.00 $56.18
1" meter $60.92 $78.5'0 $104.18
Multiple units will experience an increase that will be dependant
on the number of units per meter. Each multiple unit will be given
5 hcf's at the lifeline rate as recommended by the rate study.
While the capital needs constitute the largest share of the
_._ increase in expenses facing the Water System, operating costs are
also increasing. Municipal Water District of Orange County (MWDOC)
projects the cost of imported water to increase from $263 per acre
Adjusting Water Service Rates
September 16, 1992
Page 3
foot to $475 an acre foot in 1993. The City needs to increase our
rates this year to meet increases in operating expenses regardless
of any future capital improvement plans.
It is recommended that the proposed rates become effective November
11 1992. Therefore, any water usage after September 25, 1992 will
be subject to the new rate due to our bi-monthly billing cycle
scheduling. The first water bills that will contain the new rates
will be mailed during the week of November 23rd, 1992. As directed
by Council, staff is currently working with Municipal Water
District of Orange County to prepare a brochure (attachment I) to
be mailed to all water customers the week of October 26, 1992. It
is hoped that this will inform our customers of the needed rate
increases and how we are improving the reliability of the Water
System.
The use of Agricultural (AG) Credits was also discussed at the
August 31, 1992 workshop. The City of Tustin discontinued issuing
AG credits in 1991 after Metropolitan's Board voted to suspend the
program "until after the drought". We were only passing through
the Met credits to our customers. Because Met remains in Stage I
of its conservation program, and uncertain of next year's imported
water supply, it is unlikely the credits will be reinstated for
1993. However, as directed by Council, staff will work with those
water customers affected by the loss of AG credits. A survey of
Orange County Water providers indicated that no AG credits are
currently being given. However, Irvine Ranch Water District (IRWD)
does give some AG credit if reclaimed water is used.
Staff has conducted preliminary research on the possible
privatization of the Tustin Water Service. The research indicates
that the 1986 Tax Reform Act serves as a constraint on the
privatization of water and waste water treatment facilities because
it eliminated tax-exempt financing, accelerated depreciation, and
investment tax credits for environmental infrastructure projects.
However, the Reason Foundation, a Los Angeles based think-tank,
devoted to studying free market solutions to traditional government
problems, is expected to publish a paper examining municipal water
supply privatization. Staff will continue to obtain data
concerning privatization options of water systems and will forward
this information as it becomes available.
A draft of the proposed brochure and a copy of the memo from MWDOC
regarding privatization are attached for your review. I've also
included a preliminary schedule for the sale of bonds. The two.
date columns simply show alternative schedules dependent on when
the Council authorizes us to proceed.
Adjusting Water Service Rates
September 16, 1992
Page 4
Ron d A. Nault
Director of Finance
RAN: IH: ls
a:watrate.adj
-n41
Irma Hernandez
Administrative Assistant
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RESOLUTION 92-110
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN
ADJUSTING WATER SERVICE RATES
iThe City Council of the City of Tustin finds and determines as
follows:
1. A complete analysis of the Tustin Water System's needs and
recommended water supply and storage projects and distribution
system improvements has been completed; and
2. The complete analysis revealed that major system improvements
are required to maintain system reliability; and
3. The analysis determined that substantial additional funding
will be required in order to complete the necessary
improvements; and
4. The Tustin Water Service has experienced increased costs of
operations; and
5. A complete study of the Tustin Water Service Rate Structure
and Financing Plan have been completed; and
6. The study has determined that it has become necessary to
adjust water service rates to maintain operations and to
finance the recommended capital improvements; and
7. It will be necessary to increase rates for next three years;
and
8. The revised rates as set forth herewithin are reasonable and
are necessary to cover the costs of operations of the Tustin
Water Service delivery for the next three years.
NOW, THEREFORE, the City Council of the City of Tustin does hereby
resolve as follows:
i Effective November 1, 1992, November 1, 1993, and November 1,
f 1994 the bi-monthly water usage rates and charges are hereby
established as follows:
FIXED CHARGE
11/1/92
11/1/93
11/1/94
Meter Size
Charge
Charge
Charge
5/8" and 3/4"
$ 11.00
$ 13.00
$ 16.00
1"
27.50
32.50
40.00
1 1/2"
55.00
65.00
80.00
2"
88.00
104.00
128.00
3"
165.00
195.00
240.00
411
275.00
325.00
400.00
5" or Larger
550.00
650.00
800.00
ltiple Units Charge/unit
8.80
10.40
12.80
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27
28
CONSUMPTION CHARGE- per one hundred cubic feet (HCF)
11/1/92 11/1/93 11/1/94
Volume Block Multi -family*
0-6 hcf
0-5 hcf
$ .35
$ .35
7-40 ""
6-32 I'll
.85
.97
41-60""
33-4811"
1.00
1.10
Over 6011"
Over 4811"
1.10
1.20
*Multiple
dwelling is per
unit charge
FIRE METER CHARGE 11/1/92
4"
$ 35.00
5"
44.00
6"
53.00
8"
71.00
10"
88.00
12"
106.00
11/1/93
$ 41.00
52.00
63.00
84.00
104.00
125.00
$ .35
1.12
1.20
1.32
PASSED AND ADOPTED at a regular meeting of the City Council of the
City of Tustin, held on the 21st day of September, 1992
ATTEST:
Mary E.. Wynn, City Clerk
Leslie Anne Pontious, Mayor
The City of Tustin I. -Vater Services
'1"1222 Del. A.mo Avenue.
Tusfiri,. CA 92680
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SEP 03 '92 05:42PM HARTLE WELLS ASSOCS
P.4
CrIY OF TUS'TIN WATER SYSTEM
pRlrTIMINARY SCHEDULE FOR SALE OF BONDS
ACTION
SALE OEC.7
SALE
JAN. 18
Atttl,nri-yat;^" to pracaad - . . . . . . . . . . .
9/21
10113
Mcctins With staff re; data QollmLiuu, ruin issue sizing, issue structure ...
9/22
10/6
Solact h^,nA eotmcel . - - . .. . . . . . .
Bond romw to bond courwcl .............. ..........
10/5
1U/5P
Introductory meeting with water corporation ....................
10/13
10/13
First draft official statement ..... ... ....
.. ......... .... .....
10/26
12/7
First draft legal documents ................................
10/26
12/7
Document review meeting .................................
10/28
12/14
Final draft official statement
10/30
12/16
...............................
Firml draft Icgul dOCUMC=3................................
1 U SU
/'
1 1./ 16
Water corporation board consideration of actions leading to sale of -bonds. .
11/2
12/16
ocumen`t review meeting - - ...... .. - • . . . . . ........ 1
11/2
1.2/16
rind nflRC4^1 -091to-mrlit COrrr edon date ............. ..... . . . ...
11/♦
12/18
Council consideration of actions leading to sale of bonds .... , .......
11/2
12/21
Official statement production complete .............. . .........
11/13
1/8
Official statement mailing.....
11/15
1/8
... . . .... ... . ... .
.... .. ..
Bond sale /receipt of bids
12/7
1/18
.................................
Closing/ receipt of funds ................................ ...
12/29
2/15
@ARTLE WELLS ASSOCIATES 913/92
MEMORANDUM
TO: Irma Hernandez, City of Tustin
FROM: Keith G. Coolidge
DATE 16 September 1992
SUBJECT: AG CREDITS +& PRIVATIZATION OF WATER SYSTEMS
This memo Is In response to your request yesterday for information about Metropolitan's
policy on Ag credits and the potential for selling the City of Tustin's water system to a
private -sector entity.
Ag Credits — At a special meeting on March 4, 1991, Metropolitan's board voted on a
motionfrom Director William HUI of Chino to suspend the price differential on interruptible
water, 'until after the drought." Because Met remains in Stege I of its conservation
_ program, and the uncertainty of next year's imported water supply, it is unlikely the policy
will change for 1993. Because this occured on a motion at a special meeting, no
transmittal letter was prepared for the board.
Privatization — The 1966 Tax Reform Act still serves as a constraint on the privatization
of water and wastewater treatment facilities because it eliminated tax-exempt financing,
accelerated depreciation, and Investment tax credits for environmental infrastructure
projects. Nevertheless, according to policy analysts at the Reason Foundation, "where the
private sector has proprietary technologies or is better able to handle risks associated
with facility operation," privatization has occurred despite the 1986 Act
The Reason Foundation is a. Los Angeles think-tank generally devoted to studying free-
market solutions to traditional governmental problems. By October, it is expected to
publish a white paper examining municipal water supply privatization. If this continues to
be of interest to your Council, I can forward a copy on to you.
Generally, privattiation is more attractive If wastewater treatment is included as part of the
water system because of federal incentives. Another option Is to privatize operation of the
system, but leave ownership with the municipality because of its debt -financing abilities.
Nevertheless, in 1991, the City of Houston contracted the operation of the city's 80-rngd
MEMBER /AGENCY OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
.� IU .;4 r �!•'iJ r
X,nLAA_
OFFICERS
DIRECTORS
STANLEY E. =PRAGUE
N.E. •'SILL•• HARTO[
64016AArANA464
F111616611T
LORRAINE U. CROSS
ROBERT J. HUNTLEY
STRICT
Big
•tCN[irAmv
Y106 PASGINNNT
or
JAN L.ALLNUTT
WAYNE A. CLARKWILLIAM
F. DAVENPORT
A�TOAM[v
KENNETH H. WITT
P.O. BOX 20895 • 10500 ELLIS AVENUE • FOUNTAIN VALLEY. CALIFORNIA 0272a . (714) Sts -20511 • FAX (714) asa.satf
MEMORANDUM
TO: Irma Hernandez, City of Tustin
FROM: Keith G. Coolidge
DATE 16 September 1992
SUBJECT: AG CREDITS +& PRIVATIZATION OF WATER SYSTEMS
This memo Is In response to your request yesterday for information about Metropolitan's
policy on Ag credits and the potential for selling the City of Tustin's water system to a
private -sector entity.
Ag Credits — At a special meeting on March 4, 1991, Metropolitan's board voted on a
motionfrom Director William HUI of Chino to suspend the price differential on interruptible
water, 'until after the drought." Because Met remains in Stege I of its conservation
_ program, and the uncertainty of next year's imported water supply, it is unlikely the policy
will change for 1993. Because this occured on a motion at a special meeting, no
transmittal letter was prepared for the board.
Privatization — The 1966 Tax Reform Act still serves as a constraint on the privatization
of water and wastewater treatment facilities because it eliminated tax-exempt financing,
accelerated depreciation, and Investment tax credits for environmental infrastructure
projects. Nevertheless, according to policy analysts at the Reason Foundation, "where the
private sector has proprietary technologies or is better able to handle risks associated
with facility operation," privatization has occurred despite the 1986 Act
The Reason Foundation is a. Los Angeles think-tank generally devoted to studying free-
market solutions to traditional governmental problems. By October, it is expected to
publish a white paper examining municipal water supply privatization. If this continues to
be of interest to your Council, I can forward a copy on to you.
Generally, privattiation is more attractive If wastewater treatment is included as part of the
water system because of federal incentives. Another option Is to privatize operation of the
system, but leave ownership with the municipality because of its debt -financing abilities.
Nevertheless, in 1991, the City of Houston contracted the operation of the city's 80-rngd
MEMBER /AGENCY OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
i
f
� kma Hemar�de�z
. 't6 Sep�embe�r 1992
Page two
Southeast Water Purification Plant to Boston-based Metcalf & Eddy. This five-year
contract, valued_ between $3.5 and $4 million, is expected to save the city between
$300,000 and $500,000 annually. (See attached article from Reason's Privatization Wats.)
Although I do not have current information on this project, an article. in a 1991 issue of
Public Works Financing notes that the Sydney Water Board in Australia was examining
proposals for the design, construction, financing and operation of a new water treatment
system. The 900 to 1,000-mgd project, was expected to cost $1.2 billion. Also, an article
in Privatisation International notes that Argentina has appointed a firm to advise it on the
sale of Obras Sanitarias de la Naclon (OSN), the state-owned water company.
If I can be of further assistance, please let me know.
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY
J- \L U1 • ii - it u�. V•z
SZP is •sz 17.E
Watd
866604 km% ",to S. @ us v imp" ewd, Pow* ,nova &.•e •IwN&srr aw...r -1 Moab N� 1 ve I OeS&AMW
PRIVATE OAM BREAKS
Houston Water Facility Operations Privatized
Metcalf & Eddy Contract to Save City 5400,000
In what is tit USM to be the t"st
fadlity of is kind to be priva sly operated,
the city of Hounw. Texas bas contracted
tttt operation of. its SO -million g>stton-Ner-
day (GPD) Soudwast Water Purification
Plant.
The eleven•moat6-old, 52006 million
plant waves 11 separaee trwicipallso-, and
is Qwuolled by Hotvtvn's Dcpa=uwot of
Public Utllldez Taxan together with ow
city's othaur waxer fikdmm which supplies
225 mMien GPD, do city's pubUt wares
utillgr depamocnt anrves 330.000-mnetr
malluv eh—makietg it one at she laraat
public waw u0d" iit the amtry.
Bomon-based MaCaif A Eddy Servicr
(M & E) WOR the ooe wx. which is valued
at $3.5 to S4 million, dependin= m water
flow. Accacding to Marsha Slaught r, as-
sistant director of the cite, Departnum o(
Public Utilities, ft contract wit! be m-
"eweld Year to year and wi11 be pat Out to
e mpedtive bid at the sad of five yaart.
Mealy as a result of luk of cxpe6saw
in contractiel in this arca, and political
iruszt. the process of telec=5 a cos= -tor
took thtft years. The city had sot out to have
the new plant begin functioning soder pei-
vara aasssagstt>attt. 'lieoppo�eatroroty to privy
tine tht: facility may have been aided by the
filet that it is not un&r the caotrol of aqp one
locality but is owned by 11 anunicipat;dm.
The em► etttp Vou who had roe the
plant w m* 000 of tbrs thm patties dxxdk and
is tM biddWS process. M & E his Wnrd five
of the 25 city atnploya* who had pmcvioudy
worked at the pudiiadon plum. no re.
ma of rho wodcets have be=. ttm@-
f rad to tier city's other :u lm* and grouad
w►aar ptanti wheee openings were reaatved
in advaata.
By taming to the cotttpstit ive cm-
tr96fit_pcnoea94 tie eiq► txpoctr be yield a
cwt savicirg of betwOen 5300.000 io
SS0O,000 per ye&4 which is amiad 1be 10%
savMS tttber tnta=Palit= have mideved
w►heaeoUtactiag t topemdonof deirwater
MW wastawasa plana. ingx rt m sooraes of
uvinp are M A E's vast egnder" and
technical expeniae, its off -ate labomiary
ser+ bs. and its phos to introduce mall.
� � and ep.ra� �aaad
systems.
Table systema allow in A E to pmcaivc
predCtivc Aad prima ottive a nsom Io
aaoetast ea connective midas mcc- predicr
five and pmetttive are its
costal►, eaabl M the RXLWor to araticipae
prohi m= belbrs tbey arise. Malt B is also
Looking stthe poslblllty of,naomtta gP1M
operations during the night shift, when
demand for worr is low.
In addition, the City is promcted by pet
foM=G guarantee sad Mit clau9es OM-
tained in the contract, which abift the
operation's risk anm the peivaee conuacror
and bolsters the aity't control. Mw pelrfa m -
mc* gua:aotres wQrk to ensure dut any
fines or penalties levied on tete plant for not
meeting waetr quality rtsadar+ds will be
Pied up by M & E. rw exit glass s ng=
that the city baa pt out of the contract if it
is aobappy with tho contractor'&
Pfd
A.rcord.ing to Steve Niro, project
maaagcr for M A; E, his cempaoy gper&m
15 W&W Ven tuaQt plants and Moto d= 30
w►axwwater Uftwraatt acnitis& atrots tat
couWY. M h E operaw a 4-toillioo GPD
autotwlad waw supply punt m Mammo.
um. I'm company to presandy axanhining
ebb pomible operadw of it 100gnMJ*n QpD
want =pplY Plant in Pftth. Aassuli&
--Dmid H&cmryff
City Council Turn,,
Municipal Zoo Ove
to Private Anociatic
7u Pot Vvonb City Council awo
X coaft set with the Palm Worth Zook
Aascw iativn tbst MuNfaered dally m
maw= and operation af.the city Zoo b
privasa. Oona-prolk rwodstioia. Tba ma
apprt ad last MAY, came in the wake
enabling lcgisladon passed by the Te.,
Dana caw -- � w
RktwmiL
MW ambling kgft &** was weeded
840= tale C bwwd bad ooh 201mad =npc
ave Ws wblea k Mond IM Ocsmber a o
am aid q*r asioa of the s
to rbc aaottiaclah Cram so" law puft
prof bw du aw'aWhe of Bove rnmaRt a
tracts without a competitive biddl,
Prawn) -
Ma lesuktioe extsnpts from tat so
Wding �
aasmW=* t aalased swok
provided by a am-pw t aarSanixatioe
A.-. dLky a which to oraanWW=has pr
visaed sigmificlOt ftmwmW ar ad= becefin
Privadntioe advocatas is Taxes a
eoecac�aatl dw an exempdon WM pave t9
MAY fm cOffvPdm is the proem by u*L ,
city ca tarn am aw►at+dbd.
INSIDE THIS ISSUE
Ur" Stant
to UN ON kts Liq" SkaM;
Coy baborta Nqi % sot Fieeord
sa,.+om on Pdv Priem= �.p.
Mary snd Tom the l.at" OWN
to Push Pdvols ToRwoys; pppr,$
Is tamdsrs Urge Unions to
ftnbraas P1vatlsatlon: pW 5