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Item 10.b. - Page 1
CITY CO
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Item 10.b. - Page 2
CITY COUNCIL
CONSIDERATION OF TEMPORARY WATER AND WASTEWATER RATES
AUGUST 9, 2016
PAGE 3
A number of items have been examined to help minimize the impact of the shortfall
in revenue, including deferring Reservoir No. 3 and 4 exterior recoating and seismic
evaluation project ($640,000) and suspending the contribution to the Water
Neutralization Fund ($200,000 per year). These actions will reduce expenditures by
approximately $1.3 million over the next three fiscal years.
It is recommended that a temporary drought rate be added to the current rates to
help offset the revenue shortfall caused by the dramatic reduction in consumption
and support continued conservation programs. These rates are temporary in nature
so that when the drought ends and consumption returns to “normal,” the revenues
initially projected should return as well. Regardless, consumption habits have been
permanently changed in some instances as demonstrated by the increased usage
in the cash for grass and plumbing retrofit programs. The City will need to examine
consumption habits after the drought to determine what constitutes the new normal
consumption and base rates accordingly. It is anticipated that this will be reviewed
in 2018, at the end of the current 5-year rate study.
Should the temporary rates remain in effect through FY 2018-19, it is anticipated
that this will carry the fund balance for the Water Fund above the minimum required
by $550,000.
Sewer Fund
Similar to the Water Fund, the Sewer Fund revenue is performing less than initially
projected due to the reduction in water consumption. A portion of sewer charges is
based on the amount of wastewater generated, as measured by the amount of water
consumed. In addition, there is a fixed fee. Prior to the Stage 1 Water Shortage
Emergency program, the average amount of wastewater added to the system was
approximately 64 gallons per person per day. Due to conservation measures, the
amount has been reduced to 55 gallons per person per day.
It was originally anticipated that the City would receive $3.3 million in sewer-related
revenues from FY 2016-17 through FY 2018-19. It is now projected that revenues will
be $2.8 million over the same period, a shortfall of $450,000.
Unlike the Water Fund, it is recommended that the capital projects anticipated to be
constructed over the next 3-years should not be deferred to future years. The need to
complete these projects is important to the overall infrastructure of the system and any
deferrals could place the City at higher risk for system failure and result in higher project
costs.
Without any additional rate increase, the Sewer Fund’s balance will remain above
minimum reserve. However, a 10% surcharge to the current rates is recommended
because the minimum reserves are relatively small and are unlikely to be sufficient
should a major system failure occur. Implementing drought rates for the Sewer Fund
will result in a fund balance of just over $1 million by the end of the 2018-19 fiscal year.
Item 10.b. - Page 3
CITY COUNCIL
CONSIDERATION OF TEMPORARY WATER AND WASTEWATER RATES
AUGUST 9, 2016
PAGE 4
Effects on the Customer
The impact of the water rate recommendations on an average water customer will be
approximately $10 to $18 per billing cycle (or $5-$9 per month). Eighty percent of the
Single Family Residential (SFR) customer base uses between 10 and 30 units of water
on a 5/8” size water meter per billing period. The actual increase per usage level is
shown below:
FY 2016-17 FY 2017-18 FY 2018-19
Current
Rates
Drought
Rates Increase
Current
Rates
Drought
Rates Increase
Current
Rates
Drought
Rates Increase
10-units 91.71 101.84 10.13 94.26 104.60 10.34 96.82 107.52 10.70
15-units 109.44 121.49 12.05 112.56 124.90 12.34 115.72 128.52 12.80
20-units 127.86 141.94 14.08 131.60 146.02 14.42 135.38 150.36 14.98
25-units 147.36 163.59 16.23 151.75 168.37 16.62 156.18 173.46 17.28
30-units 166.86 185.24 18.38 171.90 190.72 18.82 176.98 196.56 19.58
The impact of the sewer rate recommendations on an average water customer will be
approximately $6 to $8 per billing cycle (or $3-$4 per month). Unlike the water rates
that already have approved rate increases for the next three years, the sewer rates
remain the same for the next several years. As a result, the changes in the increase in
the drought rates will remain the same until a detailed rate study is conducted. The
actual increase per usage level is shown below:
Current
Rates
Drought
Rates Increase
10-units 11.50 17.96 6.46
15-units 14.85 21.66 6.81
20-units 18.20 25.36 7.16
25-units 21.55 29.06 7.51
30-units 24.90 32.76 7.86
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
1. Adopt a Resolution establishing new water and wastewater rates; or
2. Modify the proposed rates to reduce increases by drawing down future reserves
or increase rates more to utilize fewer reserves, which would require an
additional Proposition 218 public notice and public hearing; or
3. Provide direction to staff.
ADVANTAGES:
Implementing the proposed water rate increases and rate structure changes will provide
ongoing revenue to meet the next 3-years of operating, capital and debt expenditures
and reserve recommendations in the Water Fund and Sewer Fund. The
recommendations will balance minimizing rate increases with maintaining adequate
reserves available to meet important capital and water supply needs.
Item 10.b. - Page 4
CITY COUNCIL
CONSIDERATION OF TEMPORARY WATER AND WASTEWATER RATES
AUGUST 9, 2016
PAGE 5
DISADVANTAGES:
Some customers will experience higher water utility costs.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
In compliance with Proposition 218, notices were mailed to all property owners and rate
payers more than 45 days in advance of the public hearing. The Agenda was posted in
front of City Hall on Thursday, August 4, 2016. The Agenda and report were posted on
the City’s website on Friday, August 5, 2016. All protest letters will be provided to the
Council.
Attachment:
1. Proposition 218 notice
Item 10.b. - Page 5
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO
GRANDE ESTABLISHING WATER AND WASTEWATER RATES
AND CHARGES
WHEREAS, Section 13.04.030 of the City of Arroyo Grande Municipal Code
enables the City Council to modify, by resolution, the rates and charges for
furnishing water and wastewater services to customers; and
WHEREAS, the City has conducted an analysis which developed financial plans
for the provision of water service and wastewater service that included any
revenue adjustments required to meet all financial obligations, construction of the
capital improvement projects determined to be necessary by the City, and
maintenance of appropriate fund balances and debt service coverage
requirements; and
WHEREAS, water and wastewater service rates and charges are designed to
meet the objectives desired by the City Council which consist of operating and
maintaining safe and reliable water and wastewater systems, simplified rate
structures that are easy to understand and administer, consideration of industry
practices, and recovery of the cost of service; and,
WHEREAS, the City Council has reviewed and considered the information and
public testimony presented at a duly noticed public hearing, and in the staff report
and record of this matter; and
WHEREAS, notice of the proposed increase in water and wastewater rates and
charges has been provided pursuant to Proposition 218, and a majority of the
affected property owners and ratepayers have not presented written protests to
the proposed increase in water and wastewater rates and charges.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Arroyo Grande hereby adopts the water and wastewater rates and service
charges set forth in Exhibit “A” attached hereto and incorporated herein by this
reference.
BE IT FURTHER RESOLVED that this Resolution shall repeal and replace all
prior inconsistent resolutions or portions thereof.
On motion of Council Member , seconded by Council Member , and
on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
The foregoing Resolution was passed and adopted this day of 2016.
Item 10.b. - Page 6
RESOLUTION NO.
PAGE NO. 2
JIM HILL, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
GEOFF ENGLISH, ACTING CITY MANAGER
APPROVED AS TO FORM:
HEATHER WHITHAM, CITY ATTORNEY
Item 10.b. - Page 7
RESOLUTION NO.
PAGE NO. 3
EXHIBIT A
WATER RATE SUMMARY
Fixed Service Charge ($/month)
Meter Size FY 2016‐17 FY 2017‐18 FY 2018‐19
5/8” 31.27 32.00 32.76
¾” 33.54 34.34 35.15
1” 40.39 41.34 42.31
1 ½” 49.51 50.67 51.87
2” 74.59 76.35 78.16
3” 259.28 265.40 271.66
4” 327.68 335.41 343.33
6” 487.30 498.79 510.56
8” 669.71 685.50 701.68
Service fee per
additional unit 8.47 8.67 8.87
Private Fire Line Fixed Service Charge ($/month)
Meter Size FY 2016‐17 FY 2017‐18 FY 2018‐19
2” 3.96 4.06 4.15
3” 11.52 11.80 12.08
4” 24.55 25.13 25.73
6” 71.33 73.02 74.74
8” 152.00 155.59 159.26
10” 273.36 279.81 286.41
Residential Tiered Volume Charges ($/ccf*)
Customer Class Allotment FY 2016‐17 FY 2017‐18 FY 2018‐19
Single Family
Tier 1 1 – 18 ccf 3.93 4.06 4.20
Tier 2 19 – 36 ccf 4.33 4.47 4.62
Tier 3 >36 ccf 5.76 5.96 6.16
Multi‐Family
Tier 1 1 – 18 ccf 3.93 4.06 4.20
Tier 2 19 – 27 ccf 4.33 4.47 4.62
Tier 3 >27 ccf 5.76 5.96 6.16
*ccf = 100 cubic feet
Non‐Residential Volume Charges ($/ccf)
Customer Class FY 2016‐17 FY 2017‐18
FY
2018‐19
Business 4.10 4.24 4.38
Irrigation 4.37 4.53 4.67
Hydrant 6.49 6.65 6.80
Wheeling 2.16 2.22 2.26
Item 10.b. - Page 8
RESOLUTION NO.
PAGE NO. 4
EXHIBIT A
WASTEWATER RATE SUMMARY
Customer Class FY 2016‐17 FY 2017‐18 FY 2018‐19
All Customers 2.64 2.64 2.64
Volume Charge
($/ccf):
Single Family 0.74 0.74 0.74
Multi Family 1.03 1.03 1.03
Non‐Residential 1.45 1.45 1.45
Item 10.b. - Page 9
June 15, 2016
Dear Property Owner or Tenant Customer,
This notice is intended to inform you that the Arroyo Grande City Council will hold a public hearing
regarding proposed temporary water and wastewater service rate increases for City of Arroyo Grande
customers (the “Proposed Water and Wastewater Rate Increases”). The Proposed Water and Wastewater
Rate Increases will be considered by the Arroyo Grande City Council at the date, time and location
specified below. Consistent with the requirements of Proposition 218, this notice also provides you with
the following information:
The basis upon which the amount of the Proposed Water and Wastewater Rate Increases were
calculated
The amount of the Proposed Water and Wastewater Rate Increases;
The reason for the Proposed Water and Wastewater Rate Increases; and
Majority protest procedures.
PROPOSED WATER RATE INCREASE AMOUNTS AND BASIS OF CALCULATION
The following charts provide a summary of the proposed changes to the water and wastewater rates to be
considered by the Arroyo Grande City Council at the public hearing referenced above. The charts set
forth the Proposed Water and Wastewater Rate Increases from fiscal years 2016/2017 through 2018/2019.
The rate structure for both water and wastewater service has two components: (1) a fixed monthly charge;
and (2) a variable (water consumption-based) charge. The first component is a fixed amount calculated to
recover the City’s fixed costs of operating and maintaining the City’s water and wastewater systems and
NOTICE OF PUBLIC HEARING
A Public Hearing for the Proposed Water and Wastewater Rate Increases will be held on:
Date: Tuesday, August 9, 2016
Time: 6:00 pm
Place: City of Arroyo Grande, Council Chambers,
215 East Branch Street, Arroyo Grande, CA 93420
This notice has been sent to all property owners and customers who are tenants o f leased property
(tenant customer) that are directly responsible for payment of water utility services. If adopted, the
Proposed Water and Wastewater Rate Increases would become effective August 1, 2016. If you
would like to receive this notice in Spanish, please contact the City of Arroyo Grande at (805) 473-
5438. Si le gustaria recibir este documento en Espanol, por favor llame a the City of Arroyo Grande
(805) 473-5438.
ATTACHMENT 1
Item 10.b. - Page 10
is established on the basis of the customer class and size of water meter. The variable component of the
rate structure is based on water consumption. The variable component is structured in such a way as to
capture the costs of providing water or wastewater service and to deter waste and encourage conservation.
For residential water customers, the variable charges (base and peaking) are further apportioned between
three distinct tiers. The goal of the first tier is to provide for basic indoor water use; the second tier is to
provide for outdoor irrigation; and the third tier is for excessive use or to encourage conservation.
Together, the components are calculated to recover the proportionate cost of providing water and
wastewater service attributable to parcels within each customer class.
The Proposed Water and Wastewater Rate Increases are scheduled to go into effect September 1, 2016.
As part of the proposed increases, staff has proceeded with the notification process, pursuant to
Proposition 218.
PROPOSED THREE-YEAR TEMPORARY WATER RATE SUMMARY
Fixed Service Charge ($/month)
Meter Size FY 2016-17 FY 2017-18 FY 2018-19
5/8” 31.27 32.00 32.76
3/4” 33.54 34.34 35.15
1” 40.39 41.34 42.31
1 ½” 49.51 50.67 51.87
2” 74.59 76.35 78.16
3” 259.28 265.40 271.66
4” 327.68 335.41 343.33
6” 487.30 498.79 510.56
8” 669.71 685.50 701.68
Service fee per
additional unit 8.47 8.67 8.87
Private Fire Line Fixed Service Charge ($/month)
Meter Size FY 2016-17 FY 2017-18 FY 2018-19
2” 3.96 4.06 4.15
3" 11.52 11.80 12.08
4” 24.55 25.13 25.73
6” 71.33 73.02 74.74
8” 152.00 155.59 159.26
10” 273.36 279.81 286.41
Residential Tiered Volume Charges ($/ccf*)
Customer Class Allotment FY 2016-17 FY 2017-18 FY 2018-19
Single Family
Tier 1 1 - 18 ccf 3.93 4.06 4.20
Tier 2 19 - 36 ccf 4.33 4.47 4.62
Tier 3 >36 ccf 5.76 5.96 6.16
Multi-Family
Tier 1 1 - 18 ccf 3.93 4.06 4.20
Tier 2 19 - 27 ccf 4.33 4.47 4.62
Tier 3 >27 ccf 5.76 5.96 6.16
*ccf = 100 cubic feet
Item 10.b. - Page 11
Non-Residential Volume Charges ($/ccf)
Customer Class FY 2016-17 FY 2017-18 FY 2018-19
Business 4.10 4.24 4.38
Irrigation 4.37 4.53 4.67
Hydrant 6.49 6.65 6.80
Wheeling 2.16 2.22 2.26
PROPOSED THREE-YEAR TEMPORARY WASTEWATER RATE SUMMARY
Customer Class FY 2016-17 FY 2017-18 FY 2018-19
All Customers 2.64 2.64 2.64
Volume Charge ($/ccf):
Single Family 0.74 0.74 0.74
Multi Family 1.03 1.03 1.03
Non-Residential 1.45 1.45 1.45
REASON FOR THE PROPOSED WATER & WASTEWATER RATE INCREASES
The Proposed Water and Wastewater Rate Increases are necessary for the City to continue to provide safe
and reliable water and wastewater services to the citizens of Arroyo Grande. Due to the essential and
unprecedented decrease in water consumption, the City will not generate enough revenue to meet
obligations for fiscal years 2016-17 through 2018-19. Due to the drought, the City’s water supply is
restricted and all customers, existing and new, are required to conserve. However, the water and
wastewater systems have large fixed costs, such as payments on debt, which must be paid regardless of
the amount of water sold to customers. As the amount of water sold is reduced, the price per unit must be
increased in order to generate sufficient revenue to cover these fixed costs. The proposed rates are
temporary and are intended to be in effect until the drought ends and consumption returns to normal but
no later than June 30, 2019, unless otherwise notified and noticed through an additional Proposition 218
process. Even with these proposed water and wastewater rate increases, the City will be required to reduce
expenses and drawdown on fund reserves to meet its obligations. For further detail, please refer to the
Water and Wastewater Financial Plan presented to City Council on May 10, 2016.
WRITTEN PROTEST
Pursuant to Proposition 218, you may submit a written protest against any or all of the Proposed Water
and Wastewater Rate Increases to the City Clerk before the close of the Public Hearing referenced above
(page 1).
A written protest must contain a statement that you protest the Proposed Water Rate Increases, the
Proposed Wastewater Rate Increases, or both the Proposed Water and Wastewater Rate Increases, the
address or assessor’s parcel number of the parcel or parcels which receive water and wastewater service
and must be signed by either the owner or the tenant customer of the parcel or parcels. If the person
signing the protest is not shown on the last equalized assessment roll of San Luis Obispo County as an
owner of the property, the protest must contain, or be accompanied by, written evidence that such person
is an owner of the property or tenant responsible for payment. Protest letters must include an original
signature of the owner or tenant customer. Only one written protest will be counted per identified parcel.
Item 10.b. - Page 12
Written protests regarding the Proposed Water and Wastewater Rate Increases may be mailed to:
City of Arroyo Grande
Attn: City Clerk
300 E. Branch St
Arroyo Grande, CA 93420
Written protests may also be personally delivered to the City Clerk at the Arroyo Grande City Hall (300
E. Branch Street, Arroyo Grande, CA). To be valid, a protest must be in writing, signed and received by
the City Clerk before the close of the public hearing referenced above (page 1). Written protests will not
be accepted by e-mail or by facsimile. Oral protests will not be counted in determining the existence of a
majority protest.
If you have questions about the Proposed Water and Wastewater Rate Increases, please call the City of
Arroyo Grande Financial Services Department at (805) 473-5438.
City of Arroyo Grande
300 East Branch Street·
Arroyo Grande, CA 93420
Pre-Sort Standard
U.S. Postage
PAID
Arroyo Grande
California
Permit #37
ECRWSS
Item 10.b. - Page 13
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Item 10.b. - Page 14