HomeMy WebLinkAboutCC RES 23-59Resolution 23-59
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RESOLUTION NO. 23-59
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN,
CALIFORNIA, ADJUSTING WATER RATES PROVIDED BY THE CITY OF
TUSTIN
WHEREAS, the City previously retained IB Consulting, LLC., independent financial
consultants, to review the City’s Water Enterprise to determine whether rates for service
charges are sufficient to meet increased costs of service, and to prepare a cost of service
rate study (COS); and
WHEREAS, based on the results of the COS, increases to the rates for water
service fees and charges are necessary; and
WHEREAS, the proposed water rate structure includes a variable water usage
charge and a fixed service charge, both billed on a bi-monthly basis. The proposed water
usage charge is based on the amount of water consumed, measured in dollars per
hundred cubic feet (“CCF”) of water delivered to the property. The fixed service charge
is independent of the amount of water used and is determined based on the size of the
meter serving the property, as measured in inches; and
WHEREAS, the proposed rate structure is for a period of five years and is
proposed to take effect on January 1, 2024, and to increase each January 1 thereafter
through and including January 1, 2028; and
WHEREAS, the revenues derived from the fees will not exceed the funds required
to provide the services for which the fees are imposed, and will be used exclusively for
the operation and maintenance of the City’s water system; and
WHEREAS, the fees are equitable to all customer classes; and
WHEREAS, the amount of fees will not exceed the proportional cost of service
attributable to each customer class upon which they are proposed for imposition; and
WHEREAS, the fees will not be imposed for general governmental purposes, but
only for the costs of operation and maintenance of the City’s water system; and
WHEREAS, article XIII D, section 6 of the California Constitution (“Article XIII D”)
requires that prior to imposing any increase to the fees, the City shall provide written
notice (“Notice”) by mail of the new or increased fees to the recorded owner of each parcel
upon which the fees are proposed for imposition and any tenant directly liable for payment
of the fees, the amount of the fees proposed to be imposed on each parcel, the basis
upon which the fees were calculated, the reason for the fees, and the date, time, and
location of a public hearing (“Hearing”) on the proposed fees; and
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Resolution 23-59
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WHEREAS, on October 20, 2023, the City distributed notices as required by Article
XIII D regarding the City Council’s consideration of the proposed adjustments to the water
rate fees at the December 5, 2023 public hearing to all owners of record and customers
in accordance with Article XIII D, Section 6(a)(1) of the California Constitution and
Government Code Section 53755; and
WHEREAS, on December 5, 2023, the City Council held a duly noticed public
hearing on the proposed water rate contained in this Resolution, and at that time invited
oral and written comments from the public; and
WHEREAS, upon close of said public hearing, the City did receive ___ written
protests to the proposed fees and therefore there has been no majority protest; and
WHEREAS, the City Council now desires to establish rates for the fees, effective
January 1, 2024, at the rates and subject to increases on the dates set forth in the
schedule in Section 5; and
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUSTIN DOES
HEREBY RESOLVE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. After considering the material presented in the COS, the City Council
hereby finds as follows:
a)Revenues derived from the fees do not exceed the funds required to
provide the related service;
b)Revenues derived from the fees shall not be used for any purpose other
than for that which the fees or charges are imposed;
c)The amount of the fees imposed upon any parcel or customer does not
exceed the proportional cost of service attributable to the parcel;
d)The fees are imposed for services that are actually used by, or
immediately available to, the owner of the property upon which the fees
are imposed; and
e)The fees will not be imposed for general governmental purposes, but
only for the costs of operation and maintenance of the City’s water
system.
SECTION 2. After receiving public comment and testimony on the new fee
structure for water services provided, and absent a majority protest to the proposed fee
increases, the new fee schedule for water fees and charges is hereby approved as set
forth in Section 5.
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SECTION 3. The new fee schedule for water services shall be implemented
beginning January 1, 2024, and shall be increased on January 1 annually thereafter, up
to the maximum rates set forth in Section 5. The scheduled adjustment authorized by
this Section may be made by the City Manager or designee, without conducting another
public hearing or any action on the part of the City Council.
SECTION 4. The establishment of a dedicated financial reserve is a prudent step
that is aimed at enhancing the financial resilience and sustainability of the water system.
Establishing a financial reserve provides a proactive approach to mitigating potential
financial risks.
Operating Reserve: An Operating Reserve is essential for addressing unforeseen
operational challenges that may arise, such as equipment failures, supply chain
disruptions, or unexpected fluctuations in demand. Having a designated reserve for such
contingencies allows for a swift response and maintains uninterrupted service delivery.
As such, the Operating Reserve shall have a minimum requirement of 90 days of
operating costs and a target reserve requirement of 120 days of operating costs. The
Fiscal Year 2024 minimum reserve requirement is calculated to be $5,688,740, and the
target reserve requirement is calculated to be $7,584,986.
Capital Reserve: The reserve fund can serve as a reliable source of capital for
essential projects and infrastructure upgrades. This allows for the undertaking of strategic
initiatives without solely relying on external financing or imposing additional financial
burdens on our ratepayers. A reserve specifically earmarked for capital expenditures
ensures the timely execution of projects critical to the long-term success of our water
enterprise. As such, the Capital Reserve shall have a minimum requirement of 1 year of
depreciation and a target reserve requirement of the average of the five-year capital
improvement program costs. The Fiscal Year 2024 minimum reserve requirement is
calculated to be $2,171,607, and the target reserve requirement is calculated to be
$2,938,143.
Emergency Reserve: Unforeseen circumstances, such as emergency repairs,
regulatory changes, or extreme weather events, can impact the operational and financial
stability of our water utility. A dedicated reserve acts as a financial buffer, enabling us to
address these challenges without compromising service delivery. As such, the
Emergency Reserve shall have a minimum and target requirement of $1,000,000.
The following defines the criteria under which a fiscal emergency may be declared,
and emergency reserve funds may be accessed. The objective is to maintain financial
stability, protect essential services, and uphold the fiduciary responsibilities to our
stakeholders.
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Criteria for declaring a Fiscal Emergency:
1. Revenue Shortfalls:
• A fiscal emergency may be declared if there is a significant and
sustained decline in revenue beyond what was forecasted or
budgeted, threatening the ability to meet financial obligations and
maintain essential services.
2. Unforeseen Expenditures:
• The occurrence of unforeseen and extraordinary expenditures, such
as emergency repairs, legal settlements, or compliance-related
expenses, poses a severe financial burden on the Water Enterprise.
3. External Economic Factors:
• Economic downturns or external economic factors that substantially
impact the financial health of the organization, necessitating
immediate action to stabilize finances.
Procedure for Declaring a Fiscal:
1. Financial Analysis:
• Conduct a thorough financial analysis to determine the severity and
nature of the fiscal emergency. This analysis should include a review
of revenue and expenditure trends, potential long-term impacts, and
alternative cost-saving measures.
2. City Council Approval:
• The declaration of a fiscal emergency and the use of emergency
reserve funds should be subject to approval by the City Council. A
special meeting may be convened if urgency dictates.
3. Communication Plan:
• Develop a comprehensive communication plan to keep stakeholders
informed about the fiscal emergency, the reasons for its declaration,
and the proposed utilization of emergency reserve funds.
Use of Emergency Reserve Funds:
1. Limited to Essential Expenditures:
• Emergency reserve funds should be utilized exclusively for essential
expenditures directly related to mitigating the fiscal emergency.
Examples include maintaining critical infrastructure, safeguarding
public health, or addressing immediate financial obligations.
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2. Transparent Reporting:
• Implement transparent reporting mechanisms to keep stakeholders
informed about the use of emergency reserve funds. Regular
updates should be provided to the City Council and the community,
outlining the funds' allocation and the progress made in resolving the
fiscal emergency.
3. Replenishment Plan:
• Develop a plan for replenishing the emergency reserve funds once
the fiscal emergency has been addressed. This may involve
identifying strategies for increasing revenues or implementing cost-
saving measures to rebuild the reserve over a defined period.
Rate Stabilization Reserve: A well-managed financial reserve contributes to rate
stability by absorbing fluctuations in operating costs. Instead of passing immediate cost
increases on to our customers, the reserve can be utilized to bridge temporary gaps,
smoothing out the impact on water rates. This approach fosters predictability for our
ratepayers while maintaining the financial health of the water enterprise. As such, the
Rate Stabilization Reserve shall have a minimum requirement of 5% of Rate Revenue
and a target reserve requirement of 10% of Rate Revenue. The Fiscal Year 2024
minimum reserve requirement is calculated to be $1,063,300, and the target reserve
requirement is calculated to be $2,126,600.
SECTION 5. The variable water usage charge and fixed service charge are hereby
established as follows:
Bi-Monthly Commodity/Variable Water Usage Charge
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Effective
Date 1/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Bi-Monthly Potable Water Usage Charges ($/unit) ***1 unit = 100 cubic feet
(hcf) = 748 gallons***
Per Unit $3.57 $3.90 $4.26 $4.65 $5.07
Bi-Monthly Fixed Service Charge
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Effective
Date 1/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Bi-Monthly Fixed Service Charges
Meter Size
5/8” or
3/4" $49.73 $54.21 $59.09 $64.41 $70.21
1” $104.86 $114.30 $124.59 $135.81 $148.04
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FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
1 1/2" $196.73 $214.44 $233.74 $254.78 $277.72
2” $306.98 $334.61 $364.73 $397.56 $433.35
3” $656.11 $715.16 $779.53 $849.69 $926.17
4” $1,115.48 $1,215.88 $1,325.31 $1,444.59 $1,574.61
6” $2,493.61 $2,718.03 $2,962.66 $3,229.30 $3,519.94
8” $5,157.98 $5,622.20 $6,128.20 $6,679.74 $7,280.92
10” $7,730.48 $8,426.23 $9,184.60 $10,011.22 $10,912.23
Per
Additional
Dwelling
Unit
Charge
$12.98 $14.15 $15.43 $16.82 $18.34
Bi-Monthly Private Fire Protection Service Charge
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Effective
Date 1/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Fire Protection Services
Fireline
Size
4” $10.60 $11.56 $12.61 $13.75 $14.99
5” $13.25 $14.45 $15.76 $17.18 $18.73
6” $15.90 $17.34 $18.91 $20.62 $22.48
8” $21.20 $23.11 $25.19 $27.46 $29.94
10” $26.50 $28.89 $31.50 $34.34 $37.44
12” $31.80 $34.67 $37.80 $41.21 $44.92
Passthrough Charge
The passthrough charge is a targeted mechanism designed to account for specific costs
directly associated with external factors that impact the Water Enterprise’s operational
expenses. This charge will be separate from the standard water rate structure and will
be applied only when triggered by predefined circumstances, ensuring transparency
and accountability in our financial management.
Implementation Process, Justifications, and Triggering Events:
1. Council Review:
• The passthrough charge will not require a public hearing or any
additional action by the City Council. The passthrough charge
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mechanism will undergo regular reviews to assess its continued
relevance and effectiveness. Any adjustments or modifications
deemed necessary will be communicated to the City Council and the
community in a timely manner.
2. Escalating External Costs:
• The passthrough charge will be triggered in response to escalating
external costs beyond our control, such as significant increases in
energy prices, imported/purchased water from The Metropolitan
Water District of Southern California (MWD) through the East Orange
County Water District (EOCWD), or replenishment assessment
charges paid to the Orange County Water District (OCWD) for
pumping groundwater. Should the water supply costs significantly
increase in excess of the amounts identified in the COS, the Water
Enterprise may implement the passthrough charge.
3. Cost Transparency:
• This charge is intended to provide transparency to our ratepayers by
clearly identifying and isolating specific external costs. By separating
these costs from the standard water rates, we aim to foster a better
understanding among our customers regarding the factors
influencing rate adjustments.
3. Increase amount:
• Any increase in the rates from any passthrough charge shall not
exceed 10 percent per year. In no event shall the rates be increased
by more than the cost incurred.
4. Clear Communication:
• At least 30 days before implementing the passthrough charge, clear
communication will be disseminated to the customers, outlining the
purpose, triggering events, and the expected impact on water rates.
This communication will ensure transparency and provide ratepayers
with the necessary information to understand the reasons behind the
passthrough charge.
PASSED AND ADOPTED at a regular meeting of the City Council held on the 5th day
of December 2023.
________________________________
AUSTIN LUMBARD,
Mayor
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ATTEST:
_________________________________
ERICA N. YASUDA,
City Clerk
APPROVED AS TO FORM:
________________________________
DAVID E. KENDIG,
City Attorney
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
I, Erica N. Yasuda, City Clerk and ex-officio Clerk of the City Council of the City of Tustin,
California, do hereby certify that the whole number of the members of the City Council of
the City of Tustin is five; that the above and foregoing Resolution No. 23-59 was duly
passed and adopted at a regular meeting of the Tustin City Council, held on the 5th day
of December 2023, by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
COUNCILMEMBER RECUSED:
____________________________
ERICA N. YASUDA,
City Clerk
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Lumbard, Clark, Gallagher, Gomez, Schnell (5)
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