HomeMy WebLinkAboutPH 1 WTR CONSUMP RT 07-06-82DATE: June 30, 1982
PUBLIC HEARING
NO. 1
7-6~82
Inter-Corn
Honorable Mayor and City Council
FROH:
Bill Huston, City Manager
SUBJECT: 1982-83 Water Consumption Rate
BACKGROUND:
The City Council scheduled a public hearing to consider a proposed 15%
increase in the water consumption rate effective July 1, 1982. A copy of the
staff report previously submitted to the Council is attached.
Following the public hearing, the Council has the discretion to adjust the
water consumption rate in accordance with whatever factors the Council
determines are relevant.
DISCUSSION:
Subsequent to preparing the attached report, staff reviewed the projected
cost of purchased water and energy for 1982-83. The projected cost of these
items were based upon information provided by the Edison Company and the East
Orange County Water District in April 1982 when the draft budget was
prepared. Based upon the latest information regarding purchased water and
energy rates, the revised amounts for 1982-83 are:
Requested Revised Difference
Purchased Water $ 1,173,681 $ 1,125,000 $ 48,681
Energy 384,385 356,000 28,385
$ 1,558,066 $ 1,481,000 $ 77,066
Proposed 1982-83 water fund expenditures of $3,506,519 have been revised to
$3,457,453 by reducing the projected cost of purchased water and energy, and
including the cost of salary adjustments. The revised amount is 1.8% more
than the 1981-82 water system budget.
The revised amount for energy is based upon a 21% increase in the basic
energy rate scheduled for January 1983, an allowance for an increase in the
fuel adjustment rate {which is adjusted periodically by the Edison Company)
and the projected increase in energy consumption with the scheduled operation
of the Redhill-Walnut well.
The combined effect of these factors is a 24% increase in energy costs during
1982-83. The original estimate, which as noted above was developed using
information available in April, was a 40% increase.
1982-83 Water Consumption Rate
Page Two
The revised amount for purchased water is based upon the projected amount of
water required to supplement water pumped from the City's wells, and the 15%
rate adjustment passed by the East Orange County Water District. The
original estimate of a 23% increase in the cost of purchased water (based
upon the rate increase proposed by the district in April) has been revised to
reflect a 16% increase in the cost of purchased water. A 1% increase in
amount of purchased water is projected.
The attached report discusses the factors which should be considered in
determining the adequacy of a fund balance (cash flow, contingencies, debt,
depreciation and capital improvements). The water management plan scheduled
to be submitted to the City Council this fall will provide the basis upon
which to determine the annual amount of revenue required to cover operating
costs and future obligations of the water system. The water rate analysis,
which is currently being prepared, will establish the criteria which should
be used in establishing water rates.
What is known at this point is the necessity of increasing the water consump-
tion rate in order to fund the cost of operations, debt service and a minimal
capital improvement program in 1982-83. Without a rate increase, the water
fund will have a deficit of $72,363 in 1982-83.
Listed below are alternative increases in the water consumption rate and the
corresponding amounts of additional revenue and fund balance as 'of June 30,
1983. The fund balances are predicated upon the increased revenue and
revised expenditures of $3,457,453 in 1982-83.
Rate Increase
Estimated
Revenue
Estimated Balance
6/30/83
7% $ 151,889 $ 79,526
9% 195,286 122,923
11% 238,683 166,320
13% 282,079 209,716
15% 325,476 253,113
It has been suggested that in lieu of a single increase in 1982-83, consi-
deration be given to an increase on July 1 and a second adjustment in January
1983. The first rate adjustment would cover the increased cost of operations
and capital improvement projects scheduled for 1982-83. The second rate
adjustment would occur after the City Council has acted upon the water
management plan and would take into account future capital improvement needs
and debt service. In otherwords, a rate structure would be established,
which on the basis of the water rate analysis and management plan, generates
sufficient income to cover the debt obligations of the system and an
accelerated capital improvement program. That certainly would be feasible as
long as it is recognized that a second rate increase would be required in
order to maintain a balanced budget and generate income to cover debt service
and future capital improvements.
1982-83 Water Consumption Rate
Page Three
Listed below is a summary of the major expenditure cata~ories in the revised
water fund budget and the projected increases in 1982-83 for each:
Increase
Percent of Operating Budget
Energy 24.0% 10.7%
Purchased Water 16.0 33.9
Operating Expenses (1) 15.0 37.6
(1) all expenses less personnel, energy, purchased water, capital
outlay and capital improvements.
Proposed personnel expenses in 1982-83, including the cost of salary adjust-
ments, are 5.2% less than 1981-82 due to the elimination of two positions.
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RESOLUTION NO. 82-44
A RESOLUTION OF THE CITY COUNCIL OF THE
CItY OF TUSTIN, CALIFORNIA, ADJUSTING
WATER SERVICE RATES
5
WHEREAS, the ~ustin Water Service has experienced increased
6 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:
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 ........ $ 6.50
1" METER ......... 9.74
1 1/2" METER ......... 13.10
2" METER ......... I 7.85
3" METER ......... 33.04
4" METER ......... 44.55
6" METER ......... 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.
2. Bi-monthly fire line and detector check valve charges:
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 servzce
47.04 per service
62.72 per service
78.40 per service
94.08 per servzce
3. Construction water from metered fire hydrants:
Ail water sold ....... $0.39 per 100 cubic feet
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4. Construction water from un-metered fire hydrants:
Ail water sold ...... $0.11 per 100 gallons
Minimum charge ....... 5.60 per application
5. Water usage rates for un-metered developments during
construction:
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.
ATTEST:
MAYOR
CITY CLERK
JGR:se:D:3/4/82
JGR:se:R:3/9/82
JGR:se:R:3/10/82
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I~TE:
TO:
FROM:
SUBJECT:
--7:30 P.M. Meeting
NEW BUSINESS
6-7-82
June 2, 1982 Inter-Corn
....... 4 yxl,
HONORABLE PLRYOR AND COUNCIL MEMBERS
BILL HUSTON, CITY MANAGER
1982-83 WATER CONSUMPTION P~%TE
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 charges 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 incluoes 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
Operations
Capital Improvements
$3,097,966 $3,367,619 8.7%
297,800 138,900 (53.4%)
TOTAL $3,395,766 $3,506,519 3.3%
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 infla{ion 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 budget and will increase 23% in
1982-83 due to a rate adjustment passed by the East Orange County
Water District.
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 198t-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 thanlikely 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
Repa~qnent of DeveloperAdvances
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.
for the Tustin Water Works bonds (which are in addition to
interest payments) are due in:
The remaining principal payments
the annual
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.
e
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 pu~ 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 sho~ 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 necessary 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 water system budget with the
1982-83 budget request.
WH: dmt ,?~/~
WATER FUND
BUDGET COMPARISON
June 2, 1982
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
81/82
Budget
$3,196,556
$ 428,547
110,134
$ 538,681
5,000
9,000
$ 14,000
$ 5,000
8OO
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
81/82
Projected
$3,094,402
$ 377,374
94,303
$ 471,677
$ 2,500
5,400
5,000
3,000
700
9,000
$ 25,600
$ 2,765
430
3,250
1,075
1,885
$ 9,405
$ 14,067
$ 14,067
$ 5,035
701
3,000
953,374
276,000
3,500
135
14,840
100
35,990
120,000
82/83
Rec~uest
$3,722,116
$ 388,738
93,745
$ 482,483
$ 1,500
9,000
3,000
1,500
79,825
8,700
1,500
$ 105,025
$ 2,925
250
4,225
1,505
2,055
$ 10,960
$ 12,500
$ 12,500
$ 750
2,000
3,115
3,500
1,000
5O0
1,173 681
384 385
4 000
2 000
20 000
5 000
600
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
97
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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