AGENDA TITLE:
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Set Public Hearing for January 17, 2024, to Consider Adopting Resolution Setting Future Water and Wastewater Rate Schedules Pursuant to Proposition 218 for Residential, Commercial and Industrial Customers (PW)
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MEETING DATE:
November 15, 2023
PREPARED BY:
Rebecca Areida, PW Management Analyst
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RECOMMENDED ACTION:
Set public hearing for January 17, 2024, to consider adopting resolution setting future water and wastewater rate schedules pursuant to Proposition 218 for residential, commercial and industrial customers.
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BACKGROUND INFORMATION:
In 2019, the City Council approved a five-year rate program for the water and wastewater utilities. The Council action complied with the Proposition 218 requirements pertaining to such actions. The last pre-approved rate adjustment under the current program for the water utility reflected a 3% increase effective March 1, 2023, which was at the cap of 3% approved in 2019; and a 3% increase for wastewater utility effective July 1, 2023, which was also at the cap of 3%, also approved in 2019. The Staff recommendation for the maximum annual rate increase of 3 percent was largely driven by the historic inflation rates over the past several years.
In the new five-year program, the requested cap would be set at 5% in consideration of the recent rise in inflation. A summary of the past rate adjustments is provided in the table in Exhibit A. The purpose of this table is to demonstrate past rate increases have frequently been below the approved rate cap of 3 percent.
Proposed rate schedules and information outlining the financial plan, along with a cost of services study examining the operational costs, water and wastewater treatment, water delivery, wastewater collection, facility replacement/upgrades and many other factors was presented at the September 26, 2023, Shirtsleeve meeting. The public hearing being conducted is to consider adopting the various rate schedules for the period from February 1, 2024, through December 31, 2028. The rate schedules (listed in Exhibit B) set maximum limits (5%) on the various water and wastewater rates for the next five years. It should be emphasized that the City Council retains authority to approve the actual rates to be implemented each year, but they could never exceed the 5% maximum approved.
In preparation of the new five-year program, staff engaged the services of Hildebrand Consulting, LLC to conduct an extensive financial plan, cost of services study and current rate structure within both utilities. The final report, Water and Wastewater Rate Study, is provided in Exhibit C.
Proposition 218 protest hearing notices, both English and Spanish translations (Exhibit D), will be mailed at least 45 days prior to the proposed public hearing. At the public hearing on January 17, 2024, the City Council will be asked to adopt a resolution setting future adjustments to water and wastewater rates with limits for the period of February 1, 2024 through December 31, 2028.
Staff is recommending a new five-year rate program for water and wastewater that will be subject to the Proposition 218 process. As in the past, rate adjustment forecasts are based upon the financial needs for each utility. Excerpts of the water and wastewater financial models are provided in Exhibits E and F, respectively. These tables reflect the projected revenues vs. expenditures throughout the term of the 5-year rate plan. For both the water and wastewater utilities, the programmed adjustments are not forecasted to less than the five percent per year rate cap.
STRATEGIC VISION:
3A. Fiscal Health: Promote City's transparency & fiscal fluency.
FISCAL IMPACT:
Increased revenues are required to keep up with cost of service increases and new mandated costs.
FUNDING AVAILABLE:
Not Applicable
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Charles E. Swimley
Public Works Director
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Andrew C. Keys
Interim City Manager