HomeMy WebLinkAboutNB 1 WTR CONSUMP RTE 06-07-82DATE:
June 2, 1982
7:30 P.M. Meeting
NEW BUSINESS
No. 1
6-7-82
Inter-Corn
TO:
FROM:
SUBJECT:
HONORABLE MAYOR AND COUNCIL MEMBERS
BILL HUSTON, CITY MANAGER
1982-83 WATER CONSUMPTION RATE
RECOMMENDATION:
That the City Council adopt the attached resolution which provides for a
15% increase in the water consumption rate. The increase would apply to
the bi-monthly rate for over 600 cubic feet of water consumed. The
life-line rate (0-600 cubic feet of water) and meter char§es would not
change.
BACKGROUND:
The City Council has received the preliminary budget for fiscal year
1982-83. The water service preliminary budget for 1982-83 is predicated
upon a 15% increase in the water consumption rate. The City Council
recently authorized the establishment of a $6.50 bi-monthly service charge
for multiple dwelling units in order to generate income and cure an
inequity in the rate structure. A 12% increase in the water consumption
rate was authorized in 1981-81.
DISCUSSION:
The 1982-83 preliminary budget for the water system incluaes expenditures
of $3,506,519 and revenue of $3,722,116. Listed below is a comparison of
the 1981-82 and 1982-83 water system budgets:
1981-82
1982-83 % Difference
$3,367,619 8.7%
138,900 (53.4%)
$3,506,519 3.3%
Operations
Capital Improvements
$3,097,966
297,800
TOTAL $3,395,766
The preliminary expenditures amount does not include the cost of salary
adjustments which are currently being negotiated.
Listed below are the reasons for the proposed increase:
Operating Costs - have increased due to inflation and rate increases
which are passed onto the City. Energy costs, which constitute 11.4%
of the operating budget, are projected to increase 40% in 1982-83.
The cost of purchased water {which supplements pumped water),
constitutes 33.5% of the operating buUget and will increase 23% in
1982-83 due to a rate adjustment passed by the East Orange County
Water District.
e
Personnel expenses are $56,198 less than the budgeted amount for
1981-82 due to the elimination of two positions. Even with salary
adjustments, 1982-83 personnel expenses will be less than 1981-82.
When the cost of energy, debt service, purchased water and the water
system engineering analysis are deducted from the supplies and
services portions of the 1981-82 and 1982-83 budgets, supplies and
services for 1982-83 are 14% less than 1981-82. A comparison of the
major operating cost categories for the water system and the actual
dollar increases are:
1981-82 1982-83 Increase
Purchased Water $ 953,374 $1,173,681 $ 220,307
Energy 276,000 385,000 109,000
Debt Service 728,021 734,000 5,979
Enginrg. Analysis 15,000 70,000 55,000
$1,977,395 $2,362,681 $ 385,286
In 1982-83, the cost of debt service, purchased water and energy
total $2,292,681 which is 68% of the total operating budget.
Unfortunately, little can be done to control these cost increases.
The cost of the engineering analysis is a one time expenditure
which is essential in order to develop a plan for the management of
the system, identify present and future capital improvement
requirements and develop a rate structure which is stable yet
sufficient to cover the cost of operating the system. The cost of
debt service is fixed based upon obligations assumed from the
Tustin Water Works. Energy costs are incurred as a result of
operating pump stations. The water system engineering analysis will
include a review of pumping facilities and possible means of reducing
future energy costs through upgrading of those facilities. However,
reduction of annual energy costs would more than likely require a
long range program of capital improvements which will depend upon the
cost-benefit relationship and availability of funds. Purchased water
supplements water pumped from the City's wells. The current cost of
purchased water is recovered through the water consumption rate,
however if the consumpti6n rate is not increased to reflect the
higher cost of purchased water, net revenue will decline. The water
system engineering analysis will also evaluate groundwater production
vs. purchased water in order to determine whether additional wells
would reduce operating costs.
Debt Service - as indicated above, the 1982-83 budget includes
$734,000 for debt service which is a fixed operating cost. Debt
service for 1982-83 includes the following:
Water Works Purchase Agreement
Repayment of Developer Advances
Tustin Water Works Bonds
432,500
110,000
191,500
As of Nov. 1, 1980, the City assumed debt obligations of:
Developer Advances
Purchase Agreement (approximate)
Water Works Bonds
1,000,000
3,500,000
2,600,000
7,100,000
To date, $300,000 of the water works bonds have been paid.
The developer advances (a debt incurred as a result of a PUC
regulation which governed the Tustin Water Works) will be re-paid in
nine years. The purchase agreement is being finalized and would
provide that the net purchase price be re-paid over a 25 year
period. The bonds issued by Tustin Water Works and now an obligation
of the City require annual interest payments of:
1982 - 1985 $191,500
1985 - 1989 119,500
1989 - 1990 95,500
1990 - 1993 71,500
1991 - 1993 47,500
The bonds will be paid off in 1993. The remaining principal payments
for the Tustin Water Works bonds (which are in addition to the annual
interest payments) are due in:
1985 $900,000
1989 300,000
1990 300,000
1991 300,000
1993 500,000
$2,300,000
A 15% increase in the consumption rate will generate approximately
$325,000. When the new consumption rate is combined with the current water
meter charge, the water bill of the average single family dwelling unit
will increase 9.8% or $1.63 per month.
The projected June 30, 1983 fund balance of $230,547 is predicated upon the
15% rate increase and proposed expenditures in the 1982-83 preliminary
budget. In determining the adequacy of a fund balance for an enterprise
system, which the City's water system is, the following factors should be
considered:
Contingencies and cash flow - a minimum of 5 -10% of the annual
operating budget should be retained to cover unanticipated expenses
and cash flow requirements.
Debt - monies should be reserved for future debt service. As
~cated above, the City has a debt obligation totalling 6.8 million
dollars (7.1 million dollars tess the $300,000 paid to date). The
developer advances repayments, purchase agreement payments, and
interest payments on the water works bonds are budgeted as operating
expenses. However, no reserve has been established for the principal
payments of 2.3 million doll ars which are due beginning in 1985.
Depreciation - monies should be set-aside to fund system
depreciation. Monies are being earmarked for replacement of
equipment, however, funds have not been reserved on an annual basis
tO fund the replacement of major facilities such as pump stations,
reservoirs, and the underground system.
Capital Improvements - the 1982-83 budget includes $138,900 for
capital improvement projects. Given the size and age of the water
system, this amount is minimal. The fund balance should include a
reserve for future capital improvement projects.
In order to address the financial status of the water system, a water
management plan will be submitted to the City Council this fall which
addresses:
The basic objectives of the system.
Feasibility of expanding or decreasing the scope of the system.
Evaluation of groundwater production vs. purchased water; pumping
vs. storage facilities; water quality constraints vs. consumer costs,
and system redundancy vs. interruptible water pricing.
Definition of the short and long-term tasks the City must undertake
to address the needs of the system.
Evaluation of the system's ability to meet the demands of present and
future development domestic and fireflow requirements.
Evaluation of the condition of system facilities.
A master water system plan for future development.
A capital improvement plan (including funding and scheduling).
The plan is necessa~ in order to have a benchmark upon which to evaluate
the system's present and future rate structure and its operational
requirements. Ideally, consideration of an increase in the water
consumption rate would be deferred until the water management plan is
completed and acted upon by the City Council. It can be assumed that
additional funds will be generated by selling accounts in the cities of
Orange and Santa Aha. However, it should be expected that the water
management plan will reinforce the need to develop a rate structure which
generates funds required to cover operating costs, debt service,
depreciation and capital improvements. The proposed 15% increase in the
consumption rate provides funds to cover increased operating expenses and
generates a fund balance which, although nominal given the obligations of
the water system is necessary.
Attached is a budget comparison of the 1981-82 wa~er system budget with the
1982-83 budget request.
WH: dmt ,/~,'~J
1 RESOLUTION NO. 82-44
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF TUSTIN, CALIFORNIA, ADJUSTING
WATER SERVICE RATES
WHEREAS, the Tustin Water Service has experienced increased
costs of operations; and
WHEREAS, it has become necessary to adjust certain water service
rates to recover the additional costs of operations;
NOW, THEREFORE, the City Council of the City of Tustin does
hereby resolve as follows:
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1. Effective July 1 , 1982, the adjusted bi-monthly water
usage rates and charges are hereby established:
Water Usage Charges:
a. 0 to 600 cubic feet ..... $0.295 per 100 cubic feet
b. Over 600 cubic feet ..... 0.537 per 100 cubic feet
Meter Charges:
c. Plus bi-monthly service charge per meter (except for
meters serving more than one residential unit):
5/8" x 3/4" METER .
1" METER ·
1 1/2" METER .
2" METER .
3" METER .
4" METER .
6" METER .
.... $ 6.5o
..... 9.74
..... 13.10
..... 17.85
..... 33.04
..... 44.55
...... 74.50
Multiple Residential Charges:
d. Plus bi-monthly service charge for service where more
than one residential unit is served by a meter:
$6.50 per residential unit.
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2. Bi-monthly fire line and detector check valve charges:
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4" fire service · · ·
5" fire service · . ·
6" fire service · · ·
8" fire service · · ·
10" fire service · . ·
12" fire service · . .
$31.36 per service
39.20 per service
47.04 per service
62.72 per service
78.40 per service
94.08 per service
3. Construction water from metered fire hydrants:
Ail water sold ....... $0.39 per 100 cubic feet
4. Construction water from un-metered fire hydrants:
construction:
Ail water sold ....... $0.11 per 100 gallons
Minimum charge ....... 5.60 per application
Water usage rates for un-metered developments during
For each commercial or industrial unit,
or each residential dwelling unit of a
redevelopment ............ $10.00 for first two months
of the construction period
and $5.00 for each additional
month or portion thereof.
PASSED AND ADOPTED at a regular meeting of the City Council of the
City of Tustin, California, held on the __day of , 1982.
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ATTEST:
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MAYOR
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CITY CLERK
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JGR:se:D~3/4/82
28 JGR:se:R:3/9/82
JGR:se:R:3/10/82
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Revenue
Expenditures
Personnel:
Salaries
Retirement & Insurance
sub total
Supplies & Services:
Contractual services -
Econ. & Financial Consult.
Auditing services
Legal - City Attny.
Legal - other
Personnel services
Engineering services
Water testing
Communications
Sub total
Facilities Expense:
Building repair
Custodial supplies
Electric
Natural gas
Telephone
Sub total
Office Expense:
Postage
Sub total
Departmental Expense:
Department supplies
Small tools
Uniforms
Safety supplies
Special Equip. - Maint.
Printing
Purchased water
Electric
Telemetering
Structural improvements
Equipment maintenance
Well maintenance
Misc. expense
Pump tax
WATER FUND
BUDGET COMPARISON
81/82
Budget
$3,196,556
$ 428,547
110,134
$ 538,681
5,000
9,000
$ 14,000
$ 5,000
8O0
3,250
640
4,540
$ 14,230
$ 15,000
$ 15,000
$ 7,010
1,000
5,000
1,128,250
276,000
3,500
1,975
16,590
2,305
6,685
120,000
June 2, 1982
81/82
Projected
$3,094,402
82/83
Request
$3,722,116
377,374
94,303
471,677
$ 388,738
93,745
$ 482,483
2,500
5,400
5,000
3,000
700
9,000
25,600
$ 1,500
9,000
3,000
1,500
79,825
8,700
1,500
$ 105,025
2,765
430
3,250
1,075
1,885
9,405
$ 2,925
250
4,225
1,505
2,055
$ 10,960
$ 14,067
$ 14,067
$ 12,500
$ 12,500
5,035
701
3,000
953,374
276,000
3,500
135
14,840
100
35,990
120,000
750
2,000
3,115
3,500
1,000
5OO
1,173,681
384,385
4,000
2,000
20,000
5,000
60O
120,000
Property tax
Water treatment expense
Franchise fees
Reservoir maintenance
Mainline maintenance
Service lateral maintenance
Meter maintenance
Hydrant maintenance
Equipment rental
Computer operations
Computer maintenance
Computer supplies
sub total
Transportation Expense:
Vehicle operations
Vehicle repair
Special equip, repair
Vehicle mileage
Vehicle lease equip, fund
sub total
Training & Development:
Meetings
Training expense
Membership & subscriptions
Sub total
Other expenses:
Debt service
Developer advances
Expense reimbursement
Sub total
SUb total supplies & services
Capital Outlay:
Mobile equipment
Department equip.
SUb total
Capital Improvements:
Total Expenses
Increase (Decrease) to
owner equity
81/82
Budget
$ 11,000
270
7,500
4,240
26,375
14,470
10,420
3,700
4,000
3,000
$1,653,290
$ 15,300
9,560
9,100
100
49,560
$ 83,620
$ 1,565
264
180
$ 2,009
$ 607,450
120,000
25,000
$ 752,450
$2,534,599
$ 23,800
886
$ 24,686
$ 293,800
$3,391,766
$ (195,210)
81/82
Projected
$ 32,605
960
7,500
250
13,285
5,345
6,135
320
4,526
2,315
$1,485,916
$ 20,000
21,452
1,700
150
49,560
$ 92,862
$ 1,350
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180
$ 1,627
$ 608,021
120,000
25,000
$ 753,021
$2,382,498
$ 23,822
636
$ 24,458
$ 297,800
$3,176,433
$ (82,031)
82/83
Request
$ 35,000
1,050
7,500
5,800
32,950
19,800
24,775
5,225
3,000
9,000
2,400
3,000
$1,870,031
$ 24,000
10,000
9,925
110
54,075
$ 98,110
$ 1,700
300
200
$ 2,200
$ 624,000
110,000
25,000
$ 759,000
$2,857,826
27,310
$ 27,310
$ 138,900
$3,506,519
$ 215,597
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