AVALON CITY COUNCIL MEETING
MONDAY, MAY 19, 2026 -5:00 PM
410 AVALON CANYON ROAD, AVALON, CA 90704
AGENDA
In compliance with the Americans with Disability Act, if you need special assistance to participate in this meetIng, please contact the City Clerk’s Office (310) 510-0220. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. (28 CFR 35. 102-35.104 ADA Title II). All public records relating to an agenda item on this agenda are available for the public inspection at the time the records are distributed to all, or a majority of all, members of the City Council. Such records shall be available at City Hall located at 410 Avalon Canyon Rd.
For the public’s convenience, but not participation, the meeting can be viewed:
On local cable: Catalina Broadband Solutions channel 3
Streaming on YouTube: https://www.youtube.com/CityofAvalonCA
CALL TO ORDER I PLEDGE OF ALLEGIANCE I INVOCATION I ROLL CALL
ANNOUNCEMENTS I WRITTEN COMMUNICATIONS
DEPARTMENT HEAD REPORTS
CITY MANAGER REPORT I CITY ATTORNEY REPORT
COUNCILMEMBER REPORTS I REQUESTS I MAYOR REPORTORAL COMMUNICATION Members of the public may address the City Council at this time. No action will be taken onnon-agenda items at this meeting. Speakers should limit comments to two (2) minutes each.
PRESENTATIONS
1. Finance Director, Matthew Baker, will walk through the new 24-hour short-term rental complaint hotline offered through Host Compliance. (5 minutes)
2. Finance Director, Matthew Baker will provide an overview of the proposed operating budget for internal funds and sewer, saltwater and solid waste funds. (1 5 minutes)
3. A representative of Catalina Island Health will provide an update regarding the organization. (10 minutes)
CONSENT CALENDAR
1. Actions
Although the live recording is the official record of public meetings, minutes are prepared for the Council’s approval.
Recommended Action
Approve minutes from the April 21 and May 4, 2026 regular City Council Meetings.
CITY COUNCIL AGENDA
MAY 19, 2026PAGE 2
CONSENT CALENDAR
2. South Beach Restoration Proiect Budget Amendment and Request to go to RFP The Los Angeles County Regional Park and Open Space District awarded $2.48 million to support the South Beach Seawall Repair and Sand Restoration Project.
The City is ready to develop and solicit a request for proposals from qualified vendors to complete the scope of work.
Recommended Action
1. Authorize a budget amendment for CIP Project # 205004 — South Beach Seawall Repair and Sand Restoration Project — increasing fund 10425 by $2.48 million inFiscal Year 2025-26. 2. Authorize City Staff to develop and solicit a request for proposals from qualified vendors to complete the scope of work outlined in the SouthBeach Seawall Repair and Sand Restoration Project.
3. Authorization to Purchase Saltwater System Supplies for Public Works Operations.
Due to recent saltwater system breaks and ongoing maintenance demands, staff conducted an informal competitive procurement process and obtained three quotes for commonly used materials. These components are essential for emergency repairs, valve replacements, pipeline maintenance, and system rehabilitation projects.
Recommended Action
Authorize the City Manager or their designee to purchase saltwater system parts from Orange County Winwater Company utilizing Saltwater Fund 11325-6552 for an amount of not-to-exceed $80,000.
4. Authorize the Purchase of Vehicles to Expand the City’s Micro Transit System The City applied to the second funding round of Metro’s Zero Emission Vehicle Call for Projects to expand its GEM fleet utilized for the local transit program. The City was awarded $127,227 to purchase three (3) GEM E6 vehicles.
Recommended Action
1. Authorize City Manager, or their designee, to procure per the City’s purchasing policy, three (3) 2026 GEM E6 LSV carts for a not-to-exceed sum of $160,000.00 from the lowest responsive bidder. 2. Amend the budget for the Avalon Transit Fund to include a $160,000.00 expenditure for Vehicle Replacement Fund (Account 12325-6781) and$127,227 in offsetting grant revenues.
PUBLIC HEARING
5. Appeal of Oversized Vehicle Permit
On May 4, 2026, Mr. John Warner submitted a request, and paid the applicable hearing fees, to appeal the decision to deny the oversize Residential Vehicle permit.
Recommended Action
1. Open the Public Hearing. 2. Receive Public Comment. 3. Close the Public Hearing. 4.
Consider applicant appeal and determine to: a.) Uphold the decision of the Vehicle Hearing Officer, or b.) Overturn the decision of the Vehicle Hearing Officer, or c.) Issue a Temporary Permit until Avalon Municipal Code §4-4 revision.
CITY COUNCIL AGENDA
MAY 19, 2026PAGE 3
6. (1) Consider Resolution Making Findings and Determinations Regarding Objections to Proposed Sewer, Saltwater, and Solid Waste Fees; (2) Public Hearing — Sewer, Saltwater, and Solid Waste Fees; (3) Consider a Resolution to Adopt Sewer, Saltwater,and Solid Waste Fees; (4) Find the Fees Exempt from Review Under CEQA; and (5) Set Public Hearing for Collection of Fees on Tax Roll
The City Council and public received a presentation from HDR Engineering regarding the cost of service for the City’s Sewer, Saltwater, and Solid Waste funds over the next five years and the rates required to fund those services. At the March 17, 2026 City Council Meeting, City Council discussed the proposed rate changes and directed staff to set a public hearing for May 19, 2026 to hear public comments on the annual sewer, saltwater, and solid waste fees.
Recommended Action
1. Consider and adopt a resolution making certain findings and determinations regarding presentment of objections to proposed sewer, saltwater, and solid waste fees. 2. Open the public hearing to hear public comments. After all public comments have been heard, close the public hearing, and determine if written protests have been received from theowners of a majority of parcels which are subject to the proposed Sewer, Saltwater andSolid Waste rate increases. 3. Adopt the resolution establishing the maximum service fees for Sewer, Saltwater, and Solid Waste for the next five years. 4. Find the establishment of maximum service fees are exempt from the California EnvironmentalQuality Act (“CEQA”); and 5. If Resolution adopting rates is adopted by at least 2/3 of theCity Council, direct Staff to set a new public hearing to adopt a report and direct placementof the annual fees for Fiscal Year 2026-2027 for Sewer, Saltwater, and Solid Waste on the property tax roll by the County of Los Angeles
GENERAL BUSINESS7. First Reading of an Ordinance Prohibiting Fireworks in the City of Avalon Every year City of Avalon, LA County Fire and Sherriff personnel have problems with illegal fireworks. Though the City has already adopted the Los Angeles County Fire Code — which prohibits fireworks — in order to simplify enforcement, staff recommends adoption of a basic ordinance that prohibits the use, possession, sale and discharge of fireworks within the city without a permit.
Recommended Action
Introduce and waive all further readings of an ordinance prohibiting the use, possession, sale and discharge of fireworks within the City of Avalon.
8. Contract for Stage 1 Design and Engineering Services Progressive Design-Build Contract for the Cabrillo Mole Revitalization Proiect Phase 2
The Cabrillo Mole Revitalization, Phase 2 Progressive Design Build Stage 1 Project contract is for the design and engineering elements of the project only. The City will negotiate with Anderson Burton Construction, Inc. to determine necessary consultants and refine the engineering and design scope.
CITY COUNCIL AGENDA
MAY 19, 2026
PAGE 4
Recommended Action
1. Waive any minor irregularities in the proposal of Anderson Burton Construction, Inc., for the Cabrillo Mole Revitalization Project Phase 2; 2. Award the Stage 1 design andengineering services progressive design-build contract for the Cabrillo Mole Revitalization Phase 2 Project to Anderson Burton Construction, Inc., thus affirming the City Manager’s rejection on an appeal filed by Padelford; subject to finalization of such an agreement, 3.
Authorize the City Manager or designee to negotiate and bring back a contract agreement with Anderson Burton Construction for City Council approval.
CLOSED SESSION
1. CONFERENCE WITH LEGAL COUNSEL — ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of §54956.9.
One case.
ADJOURN
NOTICE OF POSTING
I, Devin Fuse Hart, declare that the City Council Agenda for Tuesday, May 19, 2026 was posted on Friday, May 15, 2026 on the City’s website, www.cityofavalon.qov/aqendacenter, and at City Hall, 410 Avalon Canyon Road.
Devin Fuse Hart, Senior Management Analyst
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM:
ORIGINATING DEP: City Clerk CITY MANAGER: SM’&
PREPARED BY: Gabrielle Morones, City Clerk
SUBJECT: City Council Minutes
RECOMMENDED ACTION(S): Approve minutes from the April 21 and May 4, 2026regular City Council Meetings.
REPORT SUMMARY: Although the live recording is the official record of public meetings, minutes are prepared for the Council’s approval.FISCAL IMPACTS: N/A.
GOAL ALIGNMENT: Not Aligned.
CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: N/A.
FOLLOW UP ACTION: File minutes in the City Clerk’s office.
ADVERTISING, NOTICE AND PUBLIC CONTACT: The item was properly listed on the posted agenda pursuant to the Brown Act.
ATTACHMENTS:
1. April 21, 2026 regular City Council Meeting Minutes
2. May 4, 2026 regular City Council Meeting Minutes
AVALON CITY COUNCIL MEETING
TUESDAY, APRIL 21, 2026
MINUTES
CALL TO ORDER-5:0O p.m.
ROLL CALL-Present: Mayor Anni Marshall, Councilmembers De La Rosa, Lisa Lavelle and Mary Schickling. Also present: City Manager David Maistros and City Clerk Gabrielle Morones.
Present via Teleconference: City Attorney Scott Campbell. Absent: Michael Ponce WRITTEN COMMUNICATIONS-The City received one written communication regarding [tem#10. Cabrillo Mole Revitalization Project Phase 2 Progressive Design Build Stage 1 Contract Award for Design and Engineering Services. Copies were distributed to City Council and is onfile in the City Clerk’s Office.
PRESENTATIONS
1. Finance Director, Matthew Baker, provided an overview of the Fiscal Year 2026-2027 Budget.
2. At the request of a member of City Council, a representative from ERBA Catalina provided a presentation regarding adult-use/recreational cannabis delivery. Direction was provided to bring back additional information and a menu of options for the Council to consider regarding adult use/recreational cannabis delivery.
CONSENT CALENDAR-There were four items on the Consent Calendar. Motion to approve Items #1-#4 made by Lisa Lavelle, seconded by Yesenia De La Rosa. (4 Ayes-Marshall, De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
1. City Council Minutes
Approved minutes from the April 7, 2026 regular City Council Meeting.
2. Warrants
Approved warrants totaling $824,156.27, US Bank LMI Housing Authority Warrant totaling $201,205.44, one payroll totaling $265,374.14, three electronic fund transfers totaling $54,545.94 for a total disbursement of $1,887,909.47 for March 23, 2026 through April 3, 2026 totaling.
3. Fiscal Year 2025-2026 Third Quarter Treasurer’s Report Adopted Resolution No. SA 26-13 of the City Council of the City of Avalon/SuccessorAgency to the Avalon Community Improvement Agency adopting the Treasurer’s Investment Report for Fiscal Year 2025/2026 Third Quarter.
CITY COUNCIL MINUTES
APRIL 21, 2026
PAGE 2
4. Waterside Project Change Conditions of Use— Catalina Snorkel and Scuba Made the affirmative finding that conditions set forth in the Avalon Municipal Code have been met and granted the amendment to the current Waterside Permit to Catalina Snorkeland Scuba and add additional services, with the following: 1. Catalina Snorkel and Scuba will add the service of unwrapping fouled propellers and general light salvage and retrieval of items lost overboard within the Harbor. 2. All personnel conducting dive services will have the appropriate dive certifications and training. 3. When conducting any dive operations Catalina Snorkel and Scuba will notify and obtain permission from the Harbor Department prior to the dive. 4. When diving in the Harbor, Catalina Scuba and Snorkel personnel will display a highly visible dive flag and take all precautions to avoid any boat traffic. 5. If a skiff or boat is to be used in providing these services, all required and current registration/documentation will be provided to the Harbor Department.
PUBLIC HEARING
5. Public Hearing to Receive Comment on the City’s FY 26-27 Community Development Block Grant (CDBG) Funds
1. Mayor Marshall opened the duly noticed Public Hearing and received no comments. 2.
Mayor Marshall closed the Public Hearing. 3. City Council approved the City’s estimated FY 26-27 Community Development Block Grant (CDBG) Funds to transfer into the Revolving Grant Fund. 4. Adopted Resolution No. 26-14 of the City Council of the City of Avalon, California, Authorizing the Allocation of the Fiscal Year 2026-2027 Community Development Block Grant Funds (CDBG).Motion to approve made by Mary Schickling, seconded by Lisa Lavelle. (4 Ayes-Marshall,De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
GENERAL BUSINESS6. Professional Services Agreement for On-Call Planning Consultant
1. City Council authorized an amendment to the current fiscal year professional services agreement with Sagecrest Planning and Environmental, LLC for a not-to-exceed sum of$225,000. 2. City Council authorized the City Manager or designee to execute a budgetadjustment transferring $50,000 from the General Planning/LCP Update Account Fund(10255-6781) to the Planning Professiona! Services Account (10255-5005). 3. CityCouncil authorized a budget amendment in the amount of $25,000 to the Planning Professional Services Account (10255-5005). 4. City Council authorized the City Manager to negotiate and execute a professional services agreement with Sagecrest Planning and Environmental, LLC for on-call planning consultant services for a two-year term for an annual cumulative total not-to-exceed amount of $200,000.00 commencing in FY 26-27.
Motion to approve made by Lisa Lavelle, seconded by Mary Schickling. (4 Ayes-Marshall, De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
CITY COUNCIL MINUTES
APRIL 21, 2026
PAGE 3
7. On-Call Consulting Services Contract Amendment for International Consulting Services, Inc.
City Council authorized the City Manager to negotiate and execute the secondamendment to the Professional Services Agreement with International ConsultingServices, Inc. fora not-to-exceed additional sum of $140,000—total of$240,000—forthe 12-month period of May 7, 2026 to May 6, 2027.
Motion to approve made by Mary Schickling, seconded by Yesenia De La Rosa. (4 Ayes Marshall, De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
8. ENGEO On-Call Engineering Services Contract
1. Made the affirmative finding that the City will not gain a competitive advantage by bidding and can contract work more economically or efficiently pursuant to Avalon Municipal Code Section 3-4.111 (c), and 2. Awarded a professional services contract for on-call engineering, materials testing and inspection for an amount not-to-exceed anannual cumulative total for all services of $100,000 to ENGEO, Inc. for a three-year term.
Motion to approve made by Lisa Lavelle, seconded by Mary Schickling. (4 Ayes-Marshall,De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
9. Cabrillo Mole Geotechnical Study Drilling RFP and Contract Award
1. Authorized City Staff to develop and solicit a request for proposals for qualified firms to conduct drilling services to accommodate a geotechnical study to support the Cabrillo Mole Revitalization Project. 2. Pursuant to Avalon Municipal Code Section 3-4.205, authorized the City Manager to negotiate and execute an agreement with the lowest responsive bidder for a not-to-exceed sum of $150,000.Motion to approve made by Lisa Lavelle, seconded by Mary Schickling. (4 Ayes-Marshall,De La Rosa, Lavelle, Schickling; 1 Absent-Ponce).
10. Cabrillo Mole Revitalization Project Phase 2 Progressive Design Build Stage 1 Contract Award for Design and Engineering Services
City staff informed City Council that a timely protest was filed. Accordingly, staff has requested that the City Council refrain from taking action on the item until the Council hashad an opportunity to hear and consider the protest.Mayor Marshall adjourned the meeting at 7:24 p.m.
I, Gabrielle Morones, City Clerk, do hereby certify that the digital recording of the regular City Council Meeting on April 21, 2026, is the official record of the Council Meeting and is on file andmaintained in City Hall.Gabrielle Morones, City Clerk
AVALON CITY COUNCIL MEETING
MONDAY, MAY 4, 2026
MINUTES
CALL TO ORDER-5:00 p.m.
ROLL CALL-Present: Mayor Anni Marshall, Councilmembers De La Rosa, Lisa Lavelle, MichaelPonce and Mary Schickling. Also present: City Manager David Maistros and City Clerk Gabrielle Morones. Present via Teleconference: City Attorney Scott Campbell WRITTEN COMMUNICATIONS-None.
PRESENTATION
Finance Director, Matthew Baker provided an overview of the proposed 2026-2027 operating budget.
CONSENT CALENDAR-There were two items on the Consent Calendar. Motion to approve Items #1-#2 made by Michael Ponce, seconded by Yesenia De La Rosa. (All Ayes)
1. Warrants
Approved warrants totaling $1,685,345.15, one payroll totaling $267,566.27, three electronic fund transfers totaling $213,035.01 totaling $2,165,946.43 for April 6, 2026 through April 24, 2026.
2. Wastewater Treatment Plant Lab and Casino Showers and Restrooms Roof Remediation and Replacement
Authorized the City Manager or their designee to develop and solicit a request for proposals (RFP) from qualified contractors for replacement of the Wastewater Treatment Plant (VW’JTP) Lab Roof (including sloped roof addition), and remediation and replacement of the Casino Showers and Restrooms Roof.
GENERAL BUSINESS
3. Authorize Procurement of LUCAS Device, Stryker Power Gurney & Power Chair with Measure B Funding
Recommended Action
1. Authorized City Manager to procure, per the City’s purchasing policy, a LUCAS 3 Chest Compression System, Stryker Power Gurney and Stryker Power Chair, that meets the required specification outlined by staff, for a total not-to-exceed $102,730.06 (10245- 6547) 2. Exempted this procurement from competitive bidding and made the affirmative finding that Stryker is a sole source vendor of these devices.
Motion to approve made by Michael Ponce, seconded by Lisa Lavelle. (All Ayes)
CITY COUNCIL MINUTES
MAY 4, 2026
PAGE 2
4. Approval of Rebuild for Public Works Telehandler
1. Authorized the City Manager or their designee to execute all necessary agreement to complete a certified rebuild of the City’s 2005 Caterpillar TH58OB telehandler by Quinn CAT in an amount not-to-exceed $70,000, and approved an additional appropriation ofup to $20,000 for rental equipment and barge transportation costs incurred during therebuild period. 2. Made the affirmative finding Quinn CAT is the only provider in Southern California offering a Caterpillar-certified rebuild program, meeting the requirements for the sole-source procurement policy outlined in Avalon Municipal Code Section 3-4.111(b).
3. Amended the 2025-2026 Capital Budget — Account 13825-6781 to include $90,000 for the refurbishment of the telehandler.
Motion to approve made by Michael Ponce, seconded by Mary Schickling. (All Ayes)
5. Resolution Approving and Adopting Public Participation Outreach and Disruption of Remote Access Policies
Adopted Resolution No. 26-15 of the City of Avalon, California, Approving and Adopting Public Participation Outreach and Disruption of Remote Access Policies in Compliance with Senate Bill 707.
Motion to approve made by Michael Ponce, seconded by Lisa Lavelle. (All Ayes) Mayor Marshall adjourned the meeting at 7:16 p.m.
I, Gabrielle Morones, City Clerk, do hereby certify that the digital recording of the regular City Council Meeting on May 4, 2026, is the official record of the Council Meeting and is on file andmaintained in City Hall.
Gabrielle Morones, City Clerk
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: 1
ORIGINATING DEP: Administration CITY MANAGER: ‘M M\
PREPARED BY: Devin Hart, Senior Management Analyst
SUBJECT: South Beach Restoration Project Budget Amendment and Request to go to RFP
RECOMMENDED ACTION(S): 1. Authorize a budget amendment for CIP Project # 205004 — South Beach Seawall Repair and Sand Restoration Project — increasing fund 10425 by $2.48 million in Fiscal Year 2025-26. 2. Authorize City Staff to develop and solicit a request for proposals from qualified vendors to complete the scope of work outlined in the South BeachSeawall Repair and Sand Restoration Project.
REPORT SUMMARY: Deteriorating infrastructure, exacerbated by sever storm conditions has caused significant damage to the South Beach sea wall and groin wail. The conditions have limited public access and contributed to the loss of the sandy beach area.
In 2016, the City began taking action to mitigate damage to the seawall; however, without a substantial funding source, the City’s budget could not support a large scale project.
In 2022, the City developed the South Beach Seawall and Sand Restoration Project, the project proposed to restore the seawall and groin wall as well as improve public access points and replenish sand to combat ongoing erosion. The proposed enhancements will stabilize the beach, protect nearby businesses and structures from storm damage, and increase recreational opportunities for the community.
The City sought funding from a number of entities, and in April 2026 the Los Angeles County Regional Park and Open Space District (RPOSD) awarded $2.48 million to support the SouthBeach Seawall Repair and Sand Restoration Project.
With the project now funded through RPOSD, the City is ready to develop and solicit a requestfor proposals from qualified vendors to complete the scope of work outlined in the South Beach Seawall Repair and Sand Restoration Project.
In addition to requesting authorization to solicit a RFP, City Staff request the City Council approve a budget amendment accounting for $2.48 million in grant funds from RPOSD and the project budget for Fiscal Year 2025-26.
CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: The South Beach Seawall Repair and Sand Restoration Project will not begin.
FOLLOW UP ACTION: Implementation of City Council direction.
FISCAL IMPACTS: Expenses associated with this project will be reimbursed by grant funds up to $2.48 Million.
ADVERTISING, NOTICE AND PUBLIC CONTACT: Pursuant to the Brown Act.ATTACHMENTS: Ordinance.
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: 3
ORIGINATING DEP: Public Works CITY MANAGER: AC(
PREPARED BY: Jackeline Cordero, Public Works Director
SUBJECT: Authorization to Purchase Saltwater System Supplies for Public Works Operations.
RECOMMENDED ACTION(S): Authorize the City Manager or their designee to purchase saltwater system parts from Orange County Winwater Company utilizing Saltwater Fund 11325-6552 for an amount of not-to-exceed $80,000.
REPORT SUMMARY: The Public Works Department maintains and operates the City’s saltwater systems, which requires a reliable inventory of repair parts to ensure timely response to system failures, leaks, and ongoing maintenance needs. The saltwater system is critical to supporting daily operations and ensuring uninterrupted utility service for the community.
Due to recent saltwater system breaks and ongoing maintenance demands, staff conducted an informal competitive procurement process and obtained three quotes for commonly used materials, including HYMAX couplings, ductile iron fittings, MegaLugs, and gate valves. These components are essential for emergency repairs, valve replacements, pipeline maintenance, and system rehabilitation projects. The following quotes were received:
Company Location Proposed Cost
Ferguson Waterworks Redondo Beach, CA $75,209.64
Core & Main Santa Ana, CA $68,033.13
Orange County Winwater Anaheim, CA $55,327.52
Company
Orange County Winwater Company submitted the lowest responsive and responsible bid.
The solicitation of three quotes satisfies the informal bidding requirements under Avalon Municipal Code (AMC) Section 3-4.106(a).
FISCAL IMPACTS: The total cost of the purchase not-to-exceed $80,000. Sufficient funds are available in the FY 2025-2026 Saltwater Fund 11325-6552.
GOAL ALIGNMENT: Supports the City’s goal of maintaining and improving critical infrastructure by ensuring reliable operation of the City’s saltwater systems. flf’ Page 2 of 2
FERGUSON WATERWORKS /1 089
WATERWORKS Price Quotation
Fax: 951-674-1084
13:42:26 APR 10 2026
Reference No: B049197
Item Description Quantity Net Price UM Total
SUBTOTAl. 46107,11
LEAD TIMES
4”,8”,iO”,12” -6 WEEKS6’- 0 WEEKS
Net Total: $6821734
Tax: $699230
Freight: $0.00
Total: $75209.64
Quoted pnces are based upon receipt of the total quantity for immediate shipment (48 hours), SHIPMENTS BEYOND 48 FlOURS SHALL BE AT THE PRICE IN EFFECT AT TIME OF SHIPMENT UNLESS NOTED OTI-IERWISE. QUOTES FOR PRODUCTS SHIPPED FOR RESALE ARE NOT FIRM UNLESS NOTED OtHERWISE.
Due to the uncertain impact of potential taritfs, Ferguson’s quotation/proposal has not incluctart any provision or contingency for luture tanffs or increase of existing tariffs. Ferguson reserves the right to adjust prices to refloct the impact of any new or increased tariffs that affect our costs at the time of shipment. rP.Iguson will provide notice of any such adjustments along with documentation supporting the changes.
CONTRACTOR CUSTOMERS: IF YOU HAVE DBE/MBE;WBE/NBE/SDVBEISRE GOOD FAITH EFFORTS DI\JERSITY GOALS? REQUIREMENTS ON AFEDERAL, STATE, LOCAL GOVERNMENT PRIVATE SECTOR PROJECT, PLEASE CONTACT YOUR BRANCH SALES REPRESENATIVEIMMEDIATELY PRIOR TO RECEIVING A QUOTE/ORDER.
Seller not responsible for delays, lack of product or increase of pricing due to causes beyond our control, and/or based upon Local, State and Federal laws governing type of products that can he sold or put into commerce, This Quote is offered contingent upon theBuyer’s acceptance of Seller’s terms and conditions, which are incorporated by reference and found either following this document, or on the web at https://wwe’,ferguson.com/contentiwebsite-info/terms-of-sale Govt Buyers: All ilems are open market unless noted otherwise.LEAD LAW WARN NO Ilis illegal to install products that are not “leact free” in accordance with US Federal or othor applicable law in potable watersystems anticipated for human consumption. Products with NP in the description are N01 lead free and can only be installed in non-potable applications. Buyer is sold responsible for product selection.
WATER FLOW RATE NO ICE: lavatory Faucets with flow rates over 0.5 GPM are not allowed for ‘public use’ in California, Buyer shall accept delivery of products within 60 days of Seller receiving the products at Seller’s warehouse. II Buyer causes or requests a delay in delivery of the products, Buyer may be subject to storage fees end additional costs caused by such delay. Setter reserves the right to requole the products arid rescttedule the delivery date, subject to manufacturer’s lead times and price increases, if Buyer is unable to accept delivery within 60 days.
HOW ARE WE DOING? WE WANT YOUR FEEDBACK!
Scan the OR code or use the link below to
complete a sutvey about your bids:
https:IIsurveymedaIIia.comI?bidsorder&fc1 O89&on7O85
Bid Proposal for AVALON PARTS 4/7/26
CITY OF AVALON Job
410 Avon Canyon Rd AVALON PARTS 4/7/26Avalon, CA 90704 Avalon, CA Bid Date; 04/07/2026
Bid #; 4855579
Sales Representative Core & Main
Jenna Heim 610 Young Street
(M) 661-289-2719 Santa Ana, CA 92705
(T) 661-289-2719 (T) 7142658905
[email protected]
GATE VALVES HAVE A LEAD TIME OF 3 MONTHS.MEGALUGS IN STOCK WITH MANUFACTURER, :1-2 DAY TRANSIT FITTINGS IN STOCK, 1-2 DAY TRANSIT
04/08/2026 - 9:20 AM Actual taxes may vary Page 1 of 2
con:
Bid Proposal for AVALON PARTS 4/7/26
60 70
8090
100
110
120130
140
3 6MJ9OCIS3IMP
1 6 MI 22-1/2 C153 IMP
4 8MJ9OC153IMP
2 8 Mi 22-1/2 C153 IMP
4 IOMJ9OC153IMP
2 10 Mi 22-1/2 C153 IMP
2 12 Mi 90 C153 IMP
2 12 Mi 22-1/2 C153 IMP2 12 Mi 45 C153 IMP
160 3 4 A2361-7OLN HYM RW GV OL ON 4.48-5.02 OD 31GSS
B&N 040A236170LN
170 5 6 A2361-7OLN HYM RW GV OL ON 6,61-7.12 OD 316SS
B&N 060A236170LN
180 5 8 A2361-7OLN HYM OW GV OL ON 8,60-9.35 OD 31655
B&N 080A236170LN
190 S 10 A2361-7OLN HYM OW GV OL ON 10.73-11.49 OD
316SS B&N 100A236170LN
200 2 12 A2361-7OLN HYM OW GV OL ON 12.68-13.29 OD
316SS B&N 120A236170LN
STAINLESS PARTS TOTAL
EA 154.46
EA 113.48
EA 221.92EA 177.16EA 351.16EA 261,00EA 472.83
EA 341.70
EA 391.50
DUCTILE IRON TOTAL
HYMAX GATE VALVES TOTAl. 51,245,48
Sub Total 61,708.06
Tax 6,325.07
Total 68,033.13
UNLESS OTHERWISE SPECIFIED HEREIN, PRICES QUOTED ARE VALID IF ACCEPTED BY CUSTOMER AND PRODUCTS ARE RELEASED BY CUSTOMER FOR MANUFACTURE WITHIN THIRTY (30) CALENDAR DAYS FROM THE DATE OF THIS QUOTATION. CORE & MAIN LP
RESERVES THE RIGHT TO INCREASE PRICES TO ADDRESS FACTORS, INCLUDING BUT NOT LIMITED TO, GOVERNMENT REGULATIONS, TARIFFS, TRANSPORTATION, FUEL AND RAW MATERIAL COSTS. DELIVERY WILL COMMENCE BASED UPON MANUFACTURER LEADTIMES. ANY MATERIAL DELIVERIES DELAYED BEYOND MANUFACTURER LEAD TIMES MAY BE SUBJECT TO PRICE INCREASES AND/OR APPLICABLE STORAGE FEES, ‘mis BID PROPOSAL IS CONTINGENT UPON BUYER’S ACCEPTANCE OF SELLER’S TERMS AND CONDITIONS OF SALE, AS MODIFIED FROM TIME TO TIME, WHICH CAN BE FOUND AT: httpsj/CorendniincomLteims-oisak/ CITY OF AVAI.ON Jenna Heim
Job Location: Avalon, CA Mobile: 661-289-2719
Bid Date: 04/07/2026 Phone: 661-289-2719
Core & Main Bid l: 4855579 [email protected] Seqll City Description Units Price Ext Price
10 10 6EBAA2006PECMEGAI.UG F/PVCC900/IPSW/EBAASEALGSI<T EA 72.52 725.20 USA
20 2 8 EBAA 2008PEC MEGALUG F/PVC C900/IPS W/EBAA SEAL GSKT ACC USA
30 10 10 ERAA 2O1OPEC MEGALUG F/PVC C900/IPS W/EBAA SEAL GSI<T ACC USA
40 10 12 EBAA 2O12PEC MEGALUG F/PVC c900/IPS W/EBAA SEAl GSKT ACC USA
EA 97.11
EA 164.95
LA 173.61
194.22
1,649.501,736.10
4,305.02
463.38
:i. 13.48
887.68354.32
1,404.64
522.00
945.66683.40783.00
6,157.56
3,709.71
7,882 .85
12,557.85
17,990.45
9,104.62
LA 1,236.57
EA 1,576.57
EA 2,511.57
LA 3,598.09
EA 4,552.31
THIS BID MAY INCLUDE GLOBALLY SOURCED (IMPORTED) MATERIALS THAT ARE SUBJECT TO CHANGING TARIFFS. PRICES ARE SUBJECT TO CHANGE DUE TO POTENTIAL ADDITIONAL TARIFFS IMPOSED BY THE U.S. GOVERNMENT. IF IMPOSED, PRICES WILl.
Job Nau I
CITY OF AVALON
ORANGE COUNTY
Tl,1 Winwater
COMPANY
1617 P BALL RD
ANAJIEJ?4, CA 92805—4813
PHONE /714) 956—6299
FAX (714) 996—2599
/Qdoted To Cstomer
C[411EIT i3RD C4LF9
161/ P BALL RD
COIL CI1L]0S !.R6 FIlIALt
AFAHEJ4, CA 9280—5932PRom (714) 996—6299
(774) 784—3’57
Quote No.11. Dat Paj
0060381 [ 4/15/26 1
Expiration Date 5/15/26
Revised Date 4/25/26
Bid Due DaLe 4/15/26
Quoted By
Adrian Cawarillo
aciiariI ?O@?inwa rc woi R. corn
(774) 996 629.9
torneFavmentTernfl__Quoted To SspernJOB
000400 jCASH Adrian Carnariiio jSCOTT
-----
Ufliu EXcCflOe!
Line Qty. Description Price (JON Price
72.520000
97. 120000
164. 950000
LA
LA
Eli
1.0 2.C
3.04 . 0
5.0 6.0
10. 011.0
12.0 13.0
14.0 15 . 0
16. 0
17.018.0
22.0 23.0
24 . U25.3
26.3 10
2 10
10 232
232
3 1
4 2
4 2
2 2
2 3
5 2
:13.610000 LA
6.120000 LA
1.500000 1A
2006PV 6 PVC IILGAJIJG
20061’Cc u/ACC
2008PV 8 PVC (4EGALUG
200821/C 14/ACC
20101/v 10 PVC NEC;ALUC
2O1OPEC L/ACC
12 2O12PLC14FCGALUC NIACCY
3/4X4 SS T—EIOLT
SS316
3/4 31.6 SS HEAVY HEX NUTS
SUBTOTAL
DUCTILE IRON FITTINGS
6 DI NJ 90
6 DI NJ 22—1/2
8 DI NJ 908 Dl NJ 22—1/210 DI NJ 90
10 DI NJ 22—2/2
12 DI NJ 90
12 DI NJ 22—1/212 DI NJ 45
SUBTOTAL
GATE VALVES-NRS WI HYMAX GtIIP
4 A—2361—706” A—2361--70
8 A—2361—7010” A—2361—7012” A—2361—70
SUBTOTAL
725.20
194.24
1649.50
1736. 10
1419.84
348 . 00
6072.88
448.74
109 . 90859.64343.12
1360.28
505.52
i5.80
661.82
758.28
5963.10
2845.83
€047 . 209633.55
13801,05
6984 . 44
39312 .07
EA
Eli
El’
Eli
LAEli
LALAEli
149 .580000
109.900000
214 .910000171 .560000
340.070000
252.760000457.900000
330 .910000
379.140000
948.610000
1209.440000
1926.710000
2760.2300003492.220000
OUANGE COUNTY
fl$ ,gwater COMPANY Job Name : ::: CITY OF AVALON
Quote[Daë :;q
0060i81 4/J5/26 2
Fxpiratlon Darc /1L/26
Revised_Date
-
Bid Due Date 4/15/26
Zrea Id Net Sales 5L34805
I 050593090 Freight .30
Quotation Total 552 7.52
1)7
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: ________ ORIGINATING DEP: Administration CITY MANAGER:
PREPARED BY: Aliana Gonzales, Administrative Analyst
SUBJECT: Authorize the Purchase of Vehicles to Expand the City’s Micro Transit System
RECOMMENDED ACTION(S): (1): Authorize City Manager, or their designee, to procure per the City’s purchasing policy, three (3) 2026 GEM E6 LSV carts for a not-to-exceed sum of $160,000.00 from the lowest responsive bidder. (2). Amend the budget for the Avalon Transit Fund to include a $160,000.00 expenditure for Vehicle Replacement Fund (Account 12325-6781) and $127,227 in offsetting grant revenues.
REPORT SUMMARY: At the June 2023 Metro Board meeting, $13,937,073 million of local funds were approved for Zero Emission Vehicle (ZEV) and infrastructure projects for seven local operators. This additional funding for ZEV projects helps to assist Local Transit SystemsSubcommittee (LTSS) members, which Avalon is a member of through Metro, in complying with the California Air Resources Board (CARB) Innovative Clean Transit Rule (ICT), which requiresthe phased-in purchase of ZEV.
The City of Avalon applied for and was awarded funding in the first round of ZEV Call for Projects. With the award from the first round, the City purchased two (2) Ford E-Transit vans for the City’s transportation program.
In early 2026 the City applied during the second Call for Projects to expand its GEM fleet and was awarded $127,227 to purchase of three (3) GEM E6 vehicles. Per the terms of the grant the City is required to contribute a minimum 20% match — approximately $25,500.
Since its implementation in April 2024, the City’s has experienced great success with its micro transit program. Ridership has more than doubled with some months showing asmuch as a 70% increase in ridership over pre-COVID users. Due to the demand, the Cityhas found it necessary to expand the fleet. The Polaris GEM E6 provides a versatile and durable vehicle with proven success in providing high volume, mass transportation in other Southern California cities. Manufactured in Anaheim. California, the vehicles are electric with zero emissions and exceed Low Speed Vehicle federal manufacturing standards.
As required by the City’s procurement policy, City Staff solicited quotes from three (3) Southern California GEM dealers for three (3) fully loaded Polaris GEM E6 vehicles. At the time this report was authored, two dealers had provided quotes, the third did not provide a responsive bid:
Dealer Quote
Cart Mart, Inc. $159,032.98
Model I Commercial Vehicles, Inc. DNB
Coast Cart, Inc. $147,657.08
City Staff recommend authorizing the City Manager to purchase three (3) fully loaded PolarisGEM E6 vehicles from the lowest responsive bidder.
GOAL ALIGNMENT: Not aligned.
FISCAL IMPACTS: The proposed expenditure will be substantially offset by grant revenues.
CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: The City will not beable to utilize Proposition A Incentive Funds that are required to be spent in the current fiscal year.
FOLLOW UP ACTION: Implement City Council direction.
ADVERTISING, NOTICE AND PUBLIC CONTACT: This item was properly listed on the posted agenda pursuant to the Brown Act.
ATTACHMENTS: Vehicle Quotes from Cart Mart.lnc. and Coast Cart, Inc.
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM:
ORIGINATING DEP: Administration CITY MANAGER:
PREPARED BY: Jocelyn Francis, Assistant City Manager
SUBJECT: Appeal of Oversized Vehicle Permit
RECOMMENDED ACTION(S): 1. Open the Public Hearing. 2. Receive Public Comment. 3.
Close the Public Hearing. 4. Consider applicant appeal and determine to: a.) Uphold the decision of the Vehicle Hearing Officer, or b.) Overturn the decision of the Vehicle Hearing Officer, or c.) Issue a Temporary Permit until Avalon Municipal Code §4-4 revision.
BACKGROUND: On March 25, 2026 Mr. John Warner submitted a Residential Vehicle Hearing Application for an oversized transfer of a Residential Vehicle Permit (replacing a 2005 Nissan Frontier approximately 205” in length with a 2018 Toyota Tacoma approximately 208” in length).
On April 17, 2026, the Vehicle Hearing Officer conducted a hearing on the application and on April 23, 2026 subsequently denied the oversized Residential Vehicle Permit transfer due to the fact the replacement vehicle is 3” greater in length. A copy of the decision letter is attached tothis report.
On May 4, 2026, Mr. John Warner submitted a request, and paid the applicable hearing fees, toappeal the decision to deny the oversize Residential Vehicle permit which is attached to this agenda report for Council consideration.
City Staff support the findings of the Vehicle Hearing Officer denying the permit are consistent with AMC §4-4-1705.1 Replacement of Vehicles ‘The holder of a valid vehicle permit may replace the vehicle with a vehicle in the same category, provided that the replacement vehicleis within the size limits established by § 4-4.1705(a). An oversized vehicle that has been issued an oversized vehicle permit may not be replaced by a larger vehicle. No exceptions to this oversized vehicle rule may be made by the Vehicle Clerk, the Vehicle Hearing Officer, or anyother person.” However, during the March 4, 2025 City Council Meeting Vehicle Ordinance discussion item, Council discussed increasing the maximum length of a full-size vehicle from 200” to 210” in thenext ordinance revision. As such and alternatively, the City Council could approve staff issuing a Temporary Vehicle Permit until ordinance revision returns to Council for adoption to occur later this year.
FISCAL IMPACTS: None.
GOAL ALIGNMENT: Not applicable.CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: Council action could potentially set the City for additional vehicle appeals for larger, oversized residential vehicles, and additional vehicle appeals.
FOLLOW UP ACTION: Implement City Council direction.
ADVERTISING, NOTICE AND PUBLIC CONTACT: The item was properly listed on the posted agenda pursuant to the Brown Act.
ATTACHMENTS:
• Vehicle Hearing Decision• VehcIe Hearing Appeal
4A) City ofAvalon Santa Catalina Island, CA
KENNETH B. DAPEER
Vehicle 1-Jearing Officer
DECISION DENYING APPLICATION FOR VEHICLE PERMIT (OVERSIZED) APPLICANT:
John Warner
P.O. Box 402
Avalon, CA 90704
FINDINGS OF FACT
John Warner (“Applicant”) submitted an application for a vehicle permit for an oversizedvehicle. A duly noticed hearing was held at City Hall on April 17, 2026, at which time both oral and written evidence was received. Kenneth B. Dapeer presided as the Hearing Officer.
Rocio De La Cruz appeared on behalf of the City of Avalon, and Applicant John Warner was personally present.
The evidetce established that the previously permitted vehicle measured approximately 205 to 206 inches in length. Applicant seeks approval of a replacçrnent vehicle measuring approximately 209 inches in length, which he intends to use for personal purposes and for use at his ranch, including hauling horse feed. The proposed vehicle exceeds the length of thepreviously approved vhicIe.
Section 4-4-1705.1 of the Avaton Municipal Code provides:
“The holder of a valid vehicle permit may replace the vehicle with a vehicle in the same category, provided that the replacement vehicle is within the size limits established by § 4-
4.1705(a). An oversized vehicle that has been issued an oversized vehicle permit may not be replaced by a larger vehicle. No exceptions to this oversized vehicle rule may be made by the Vehicle Clerk, the Vehicle Hearing Of/Icer, or any other person.” a)ei I hill . 4 O •‘nhm (anycrn Rtad .PC I Ri I1 • ( ‘ flfl4,li I)phne: 1 11.51(1.11220 imile: . (1 5 l.IlO1 • vw’ .( nyof.\ j1on.i,jn
CONCLUSIONS OF LAW
The Hearing Officer has jurisdiction to hear and decide this matter pursuant to the Avalon Municipal Code. Section 4-4-1705.1 governs the approval of oversized vehicles and imposes a mandatory limitation on approval authority. Section 4-4-1705.1 prohibits approval of anyoversized vehicle that exceeds the length of a previously approved oversized vehicle. The express language of the Code provides that no exceptions may be made by the HearingOfficer or any other person, thereby eliminating any discretion in the approval of a largerreplacement oversized vehicle. Even if the Applicant’s circumstances or intended uses are reasonable or compelling, such equitable considerations cannot be considered where thegoverning law expressly removes discretion. Because the proposed vehicle exceeds the length of the previously approved oversized vehicle, the Hearing Officer lacks legal authority to approve the application.
DECISION
The application ofJohn Warner for a vehicle permit for an oversized vehicle is DENIED.Dated: April 23, 2026 Ii1f
KENN THI3. A EER
Vehicle Hearing Officer
APPEAL RIGHTS
Notice of appeal rights is attached to this decision. Any appeal must be filed in accordance with applicable provisions of the Avalon Municipal Code and California law. Failure to file a timely appeal may result in a waiver of your right to challenge this decision.NOTICE OF APPEAL RIGHTSYou have the right to appeal this decision. Any appeal must be filed in accordance with applicable provisions of the Avalon Municipal Code and California law. An appeal must be filed within the time limits prescribed by law. Failure to file a timely appeal may result in a waiver of your right to challenge this decision. You are advised to seek legal counsel regarding your appellate rights and obligations
PROOF OF SERVICE
I am a resident of the county of Los Angeles, State of California. I am over the age of 18 years and not a party to the within action. My address is 11500 W. Olympic Blvd., Suite 550, Los Angeles, CA 90064-1524.
I served the foregoing document described as DECISION, etc., by depositing a true copy thereon in the United States Mail in Los Angeles, State of California, on April 23, 2026, enclosed in a sealed envelope, with the postage fully prepaid, addressed as follows:
John Warner Via First Class Mail & Email:
P.O. Box 402 ,nisivsmom92gmail. co,n
Ava Ion, CA 90704
Rocio De La Cruz Via First Class Mail & Email:
City of Avalon veJncles(iiciivo/avalon. corn
P.O. Box 707
Ava Ion, CA 90704I declare under penalty of perjury that the foregoing is true and correct. Executed on April 23, 2026, at Los Angeles, California.
Maria Martine Veclarant
,1
CHAPTER 4- APPEALS
Sec. 1-4.01 Right to Appeal.
(a) Except as otherwise specifcahly provided in this Code, any person excepting to the den suspension or revoCation of permit applied for or held by him pursuant to any decision made by ppointvc board of the City pursuant to any of the provisions of this Code may appeal in writing to Cnuncil by ling with the City Clerk a written notice of such appeal setting forth the specific grotinds there (b) Except as otherwise specifically provided in this Code, any person excepting to a administrative decision made by any official of the City pursuant to any of’ the provisions of this Code n’ appeal in Writing to the Council by filing with the City Clerk a written notice of such appeal setting forth t specific grounds thereof.
Amended by § 1 , Oid. 620. eff. March I .1976)
Sec. 1-4.02 Time Within Which an Appeal Shall he Filed.
The written notice of appeal shall be filed with the City Clerk within fifteen (15) days after the recei of written notice of such action appealcd from.( LOrd. 782.cft’. November 13, 1985) Sec. 1-4.03 Hcarin: Notice.
The (‘it)’ (lerk shall forthwith set such matter for a heaiing before the Council at a subsequent regul ineenug and shall cause a notice thereof to be given to the applicant nol less than five (5) days prior to su hearing, unless such notice is waived in writing by the applicant. At such hearing the appellant shall sho cause on the grounds specified in the notice of appeal why the action excepted to should not be approved. TI (‘ounci I may continue the hearing from tine In lime, and its Ii ndi ngs on the appeal shall he final aiconclusive in the matter.
T1APTER 4 - APPEALS
IPublsed by ClerkBase
2O16 by Cterkbase No Claim to Onginat Government Works
‘kstiq cor,/Cc’lk’’l ;i’r.lo cbooIsIco(II: Rh - cIi hl’p Phjg John Warner
P0 box 402,
Avalon, Ca, 90704
Council members,
This is the limeline for our request for a continued vehicle sticker.3/24/26-2005 Nissan Frontier shipped to mainland donated to T2T (AFS doc mci)3/24/26-2018 Toyota Tacoma arrived from mainland (AFS doc md)3/25/26-john Warner went to City Hall to transfer current sticker John was told he would have to go before the vehicle Review Board, and the charge would be $86.00. He was notified that the meeting was to take place on April 17,2026.
John attended the Vehicle Review board meeting and was told the newer truck (Toyota) was 3 inches longer than the older truck (Nissan), and that his sticker was denied. On April 27 wereceived the official letter from the Hearing Officer Kenneth Dapeer that the request for a vehicle sticker was denied and that we could appeal the decision at the City Council meeting, and that would cost $488.
We would also like to mention that Kenneth Dapeer was very professional and nice.
In his CONCLUSIONS OF LAW he mentions
“The Hearing Officer has jurisdiction to hear and decide this matter pursuant to the Avalon Municipal Code Section 4-4-1705.1 governs the approval of oversized vehicles and imposes a mandatory limitation on approval authority. Section 4-4-1705.1 prohibits approval of any oversized vehicle THAT EXCEEDS THE LENGTH OF A PREVIOUSLY APPROVED OVERSIZED VEHICLE.”
We have never been made aware that our Nissan Truck was considered an oversized vehicle, renewing it every year for the past 16 years, it was never mentioned by the city, probablybecause it wasn’t a problem that many years ago. The Frontier was considered the smaller of the Nissan truck groups, and the Conservancy had just gotten a fleet of 10 so we thought it agood choice and it was. Having horses at the Middle Ranch Saddle Club Co-op for the past 28years, our vehicle needs to be safe and 4x4 necessary for inclement weather, we also use ourtruck to trailer and supply feed to the ranch.
When the Vanderweils moved off the Island 3 years ago we were the primary managers responsible for the care of the horses and day-to-day operations 5 days a week. We continue tobe very involved in the ranch operations.
Bottom line is we really need a truck and nothing else smaller will cut it. When Steve told us our Nissan was on its last leg we decided to go with the Toyota Tacoma because it was the smaller truck Toyota made but fit our daily needs. We decided to go with the older model 2018 and it is 209 inches; our 2005 Nissan was 206 inches a 3-inch difference. The new 2026 Toyota Tacoma trucks are 214 inches, which makes it hard to find a truck that fits your requirements they are just not making trucks smaller but bigger every year.We are lucky enough to have off street parking space, when we built our home 47 years ago, wewanted a garage and a driveway and have been thankful for that decision every day Whittley is loaded with golf carts and vehicles as you know, our vehicles are on our property. We neverpark our truck in town just the golf cart, our main use is to Middle Ranch and back and of course the gas station and Catalina Express to pick up and drop off guests on occasion.
We hope you will consider our request for sticker approval of our newer replacement truck.
Thank you,
€%AdVjFL.
John & Jackie Warner
JOHN WARNER
310-510-2651
Supplier:
JOHN WARNER
RECEIVED by the Carrier in apparent good order and condition (unless otherwise stated herein) the total number or quantity of Containers or other packages or units indicated in the box entitled Description for carriage from the Place of Receipt or Port of Loading to the Port of Discharge or Place of Delivery, whichever is applicabLe, subject to alt the terms and conditions, Including the law and jurisdiction clause, limitation of liability and declared value clauses, of the current Avalon Freight Services, LLC Bill of Lading (available from the Carrier or Its agents). IN ACCEPTING THIS BILL OF LADING THE MERCHANT EXPRESSLY ACCEPTS AND AGREES TO ALL THE TERMS AND CONDITIONS, WHETHER PRINTED, STAMPED OR OTHERWISE INCORPORATED ON THIS SIDE AND ON THE REVERSE SIDE OF THIS BILL OF LADING AND THE TERMS AND CONDITIONS OF ThE CARRIERS APPLICABLE TARIFF AS IF THEY WERE ALL SIGNED BY ThE MERCHANT.
If this is a negotiable (To Order I of) Bitt of Lading, one original BilL of Lading, duty endorsed must be surrendered by the Merchant to the Carrier (together with outstanding Freight) in exchange for the Goods or a Delivery Order. If this is a non-negotiable (straight) Bill of Lading, the Carrier shall deliver the Goods or Issue a Delivery Order (after payment of outstanding Freight) against the surrender of one orIgInal Bill of Lading or In accordance with the applicable law at the Port of Discharge or Place of Delivery whlcheer is applicabte.
Ava Ion Freight Services, LLC
___
385 E. Swinford Street
San Pedro, CA 90731
.J Tel.(310)221-6290
Bill To:
Invoice
Date Invoice #
3/24/2026 RCT255812
Ship To:
TODAY VET OUTREACH, INC.
P.0. No. Terms Due Date Agent
PAID 3/24/2026 KVB
(tern Description Class BiLl Weight Rate Amount
SMLL/MDM VEHICLES NISSAN FRONTIER AVA to SP 0 0.2703 0.00 LIC#7Z52930
‘Any item not picked up within 48 hours will be charged storage fees
(Minimum Charge $6.00 per day)
AL[ freight shipped at Shippers Risk
Invoices not paid within 30 days, a daily periodic finance charge of
0.05% will T $0.00 be applied to your statement. oa1
Payments/Credits $0.00
Balance Due $0.00
-i
Avalori Freight Services, LIC
385 E. Swlnford Street
San Pedro, CA 90731
Tel. (310) 221-6290
Invoice
Date Invoice It
3/23/2026 RCT255763
RECEIVED by the Carrier in apparent good order and condition (unless otherwise stated herein) the total number or quantity of Containers or other packages or units indicated in the box entitled Description for carriage from the Place of Receipt or Port of Loading to the Port of Discharge or Place of Delivery, __________________________________________________________ whichever Is applicable, subject to all the terms and conditions, including the law and jurisdiction clause, limitation of Liability and declared value clauses, of the current Avalon Freight Sevice5, LLC Bill of Lading (available from the Carrier or its agents). IN ACCEPTING ThIS BILL OF LADING THE MERCHANT EXPRESSLY ACCEPTS AND AGREES TO ALL THE TERMS AND CONDITIONS, WHEThER PRINTED, STAMPED OR OTHERWISE INCORPORATED ON THIS SIDE AND ON THE REVERSE SIDE OF ThIS 8111 OF LADING AND THETERMS AND CONDITIONS OF THE CARRIERS APPLICABLE TARIFF AS IF THEY WERE ALL SIGNEO BY THE MERCHANT.
If this is a negotiable (To Order / of) Bill of Lading, one original Bill of Lading, duly endorsed must be surrendered by the Merchant to the Carrier (together with outstanding Freight) in exchange for the Goods or a Delivery Order. If this is a non-negotiable (straight) Bill of Lading, the Carrier shalL deliver the Goods or issue a Delivery Order (after payment of outstanding Freight) against the surrender of one original 8111 of Lading or in accordance with the applicabie law at the Port of Discharge or Place of Delivery whichever is applicable.
BILl To:
JACKIE WARNER
310-510-2651
SuppLier:
JACKIE WARNER
Ship To:
JACKIE WARNER
JOHN WARNER
310-510-2651
P.O. No. Terms Due Date Agent
FREIGHT AHEAD Due on receipt 3/23/2026 SML
Item Description Class Bitt Weight Rate Amount
SMLL/MDM VEHICLES TOYOTA TACOMA SP to AVA 4,940 0.2703 1,335,28 VIN# 2740
FUEL SURCHARGE PUC AUTHORIZED FUEL SURCHARGE SP to AVA 10.00% 133.53 **Any Item not picked up within 48 hours will be charged storage fees
(Minimum Charge $6.00 per day)
All freight shipped at Shippers Risk
Invoices not paid withIn 30 days, a daily periodic finance charge of T $1 468.81 0.05% will be applied to your statement. oa Payments/Credits $0.00
Balance Due $1,468.81
JHIII1f’ 4”unne.owers Foundation
Donor:
April 7, 2026
John & Jackie Warner
Confirmation #: TV-467339
Catalina, California
Dear Donor:
Thank you for supporting our nations heroes and veterans. Your generous vehicle donation makes it possible for us to assist our defenders of freedom in their greatest time of need.
The funds raised from your donation will be used to help support the Tunnel to Towers outstanding programs, such as providing mortgage free homes, providing much needed assistance to our first responders and their families, as well as helping to eradicate homelessness in the veteran community.
This donation acknowledgement letter is your receipt for your vehicle donation. The IRS allows you to estimate the fair market value of your vehicle donation, up to $500, with this receipt.
If we sell your donated vehicle for over $500, we will send you an IRS Form 1098C, which will list the higher sales amount that you may use as your tax deduction.
Thanks again for your support.
Description of Donation:
Year: 2005
Make: NISSAN
Model: Frontier
Style:
VIN: i N6AD07W25C455275
Date: March 27, 2026
No goods or services were provided to you in consideration of your donation. 9 [email protected] 888.980.VETS(8387) TodaysVeterans.org
2026 TACOMA
FuLL Specs
Standard .../
Not Available
SR5
2.4L 4-CyL.
Turbo Engine
4-Wheel
Drive 6-ft.
bed XtraCab
2.4L 4-CyL.
Turbo Engine4-Wheel
Drive 5-ft.
bed DoubleCab
TRD Pro2.4L 4-CyL.Turbo Hybrid
Powertrain 4-
Wheel Drive
5-ft. bed
Double Cab
MPG/Other/Price
Price
Base MSRP *
Est. Mileage Ratings
Est, mpg rating (city/highway/combined) *
DToyotaCare i
$39,535
19/24/21
$43,615
19/23)21
$64,450
22/24/23
TRD Off
Road
No cost maintenance * $0 (No Cost) $0 (No Cost) $0 (No Cost) Maximumtongueweight(tbs.)* 650 640 640
Recovery Points
Passenger-side front recovery point *
Drivers-side and patsenger-side frontrecovery points *
Front and rear duaL recovery points* ,1
Dimensions
Exterior Dimensions (in.)
Oxerait iength 213 213 214.2
OveraLL width 76.9 11.9 79.9
OveraLl height 73.9 14.6 758
Running clearance 10.4 11 11.5
Bed depth 20.2 21.2 21.2
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: ________ ORIGINATING DEP: Finance Department CITY MANAGER: _______ PREPARED BY: Matthew Baker, Finance Director SUBJECT: (1) Consider Resolution Making Findings and Determinations Regarding Objections to Proposed Sewer, Saltwater, and Solid WasteFees; (2) Public Hearing — Sewer, Saltwater, and Solid Waste Fees; (3) Consider a Resolution to Adopt Sewer, Saltwater, and Solid Waste Fees; (4) Find the Fees Exempt from Review Under CEQA; and (5) SetPublic Hearing for Collection of Fees on Tax Roll RECOMMENDED ACTION(S): (1) Consider and adopt a resolution making certain findings and determinations regarding presentment of objections to proposed sewer, saltwater, and solid waste fees. (2) Open the public hearing to hear public comments. After all publiccomments have been heard, close the public hearing, and determine if written protests have been received from the owners of a majority of parcels which are subject to the proposed Sewer, Saltwater and Solid Waste rate increases. (3) Adopt the resolution establishing the maximum service fees for Sewer, Saltwater, and Solid Waste for the next five years. (4) Find the establishment of maximum service fees are exempt from the California Environmental Quality Act (“CEQA”); and (5) If Resolution adopting rates is adopted by at least 2/3 of the CityCouncil, direct Staff to set a new public hearing to adopt a report and direct placement of theannual fees for Fiscal Year 2026-2027 for Sewer, Saltwater, and Solid Waste on the property tax roll by the County of Los Angeles
REPORT SUMMARY: At the March 3, 2026 City Council Meeting, the City Council and publicreceived a presentation from HDR Engineering regarding the cost of service for the City’s Sewer, Saltwater, and Solid Waste funds over the next five years and the rates required to fund those services. At the March 17, 2026 City Council Meeting, City Council discussed the proposed rate changes and directed staff to set a public hearing for May 19, 2026 to hearpublic comments on the annual sewer, saltwater, and solid waste fees.
On March 20, 2026, the Finance Department mailed notices of the public hearing to allaffected property owners of the proposed change in rates, as required by Proposition 218. Inaddition, the Finance Department published copies of the cost of service reports, presentation to Council, and information on historical and proposed rates by parcel to the City’s website (www. cityofavalon .qov/parcelassessments).
The Sewer, Salt Water, and Solid Waste Funds are enterprise funds for which a fee is charged in exchange for the cost of service. These funds are intended to support themselves by collecting sufficient revenues to cover the cost of service. The process of increasing rates of the City’s sewer, salt water and solid waste service fees is subject to the 1996 constitutional amendment known as “Proposition 218, Right to Vote on Taxes Act.” 65059.00000\450 15200.1
The proposed rates were designed to produce the minimum revenue needed to cover projected operating costs, including direct operating expenses, administrative costs, and ongoing capital improvement repairs, replacements, and upgrades, while establishingadequate reserves. The proposed rates represent the maximum amount that may be charged per year, with increases scheduled and spread out over the next five years. City Staff willpropose to set the rates for the next fiscal year at a public hearing to be scheduled in June 2026.
Additionally, the City implemented an exhaustion of administrative remedies procedure, pursuant to which members of the public must inform the City by May 15, 2026, if they believe there is a legal infirmity with the proposed rates. The City followed all requirements to ensure afull and fair process. All valid legal objections have been responded to in accordance with applicable law, and have been presented to the Council tonight.
ENVIRONMENTAL: The proposed rates are exempt from CEQA review. First, the proposedrates, in and of themselves, do not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment and therefore are not considered a “project” under CEQA. (Pub. Resources Code,§ 21065, 14 Cal. Code Regs., § 15378, subd. (a).) Second, the proposed rates are covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment; here, there is no possibility that the proposed rates, inand of themselves, may have a significant effect on the environment since they only produce the minimum revenue needed to cover projected operating costs. (14 Cal. Code Regs., § 15061, subd. (b)(3).) And third, even if the proposed rates are considered a project for purposes of CEQA, the proposed rates are still exempt because CEQA does not apply to the modification and approval of rates for the purpose of meeting operating expenses and doesnot involve any commitment on behalf of the City to any specific project which may result in apotentially significant physical impact on the environment. (14 Cal. Code Regs., § 15273, subd.(a)(1 ).) Staff is directed to file a Notice of Exemption within five business days of approval.
GOAL ALIGNMENT: Achieve a structurally balanced budget.
FISCAL IMPACTS: The rates published in Attachment 2 will increase the total Sewer revenue by approximately $307,000 next year and by $1 535,000 annually over five years; increase the total Saltwater revenue by approximately $80,000 next year and by $485,000 annually overfive years, and increase the Solid Waste revenue by approximately $140,000 next year and by $765,000 over five years.CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: The Sewer and Saltwater enterprise funds would have insufficient funds to complete essential capital improvements to ensure the reliability of the systems. The Solid Waste enterprise fund wouldnot have sufficient funds to pay for landfill expansion or to pay for the cost to ship waste to an off-island landfill.
65059.00000\450 15200.1
FOLLOW UP ACTION:
• June 2, 2026 — Open a public hearing on whether to collect the annual trash collection service fees, grease collection service fees, sewer use fees, and saltwater chargesthrough the property tax roll by the County of Los Angeles. • July 15, 2026 — Submit FY2026-27 rates to Los Angeles County to be included in the 2026-2027 property tax rolls.
• Annually review adopted Sewer, Saltwater, and Solid waste rates and cost of service.
ADVERTISING, NOTICE AND PUBLIC CONTACT: This item was properly listed on the posted agenda pursuant to the Brown Act. The notice of Public Hearing was advertisedMay 8, 2026 and May 15, 2026.
ATTACHMENTS:
1. Resolution Making Findings and Determinations Regarding Presentment of Objections to Proposed Sewer, Saltwater, and Solid Waste Fees
2. Notice of Public Hearing Concerning Proposed Rate Increases to Sewer and Saltwater Service Fees
3. Resolution adopting Sewer, Saltwater, and Solid Waste service fees commencing July 1,2026.
4. Comprehensive Sewer Rate Study
5. Comprehensive Saltwater Rate Study
6. Comprehensive Solid Waste Rate Study
65059.00000\450 15200.1
RESOLUTION NO.____________
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF AVALON ADOPTING
FINDINGS AND DETERMINATIONS
RELATED TO THE PRESENTMENT OF
OBJECTIONS TO THE PROPOSED SEWER,
SALTWATER, AND SOLID WASTE SERVICE
FEES
WHEREAS, section 6 ofArticle XIII D ofthe California Constitution (“Proposition 21 8”) and the Proposition 218 Omnibus Implementation Act (Government Code § 53750, et seq.) require that, prior to imposing any increase to the sewer, saltwater, and solid waste service fees, the City of Avalon (“City”) shall provide written notice by mail of: (1) the proposed increases to such ratesand charges to the record owner of each parcel upon which the rates and charges are proposed for imposition (record owners); (2) the amount of the rates and charges proposed to be imposed on each parcel; (3) the basis upon which the rates and charges were calculated; (4) the reason for therates and charges; and (5) the date, time, and location of a public hearing (“Hearing”) on theproposed rates and charges; and WHEREAS, pursuant to Proposition 218, such written notice is required to be provided to the record owners not less than forty-five days (45) prior to the Hearing on the proposed rates and charges; and
WHEREAS, the City provided written notice (“Notice”) to record owners and to customers of record who are not the property owner (e.g., a tenant) in compliance and consistentwith Proposition 218; and WHEREAS, the Notice included a prominently displayed statement that contained the information that all written objections to a proposed fee or assessment must be submitted within the written objection period and that a failure to timely object in writing bars any right to challengethe proposed fees or charges through a legal proceeding and that contained all substantive and procedural requirements for submitting an objection to the proposed fee or assessment; and WHEREAS, the City established a written objection period with a deadline of 10:00 A.M. on Friday, May 15, 2026, to submit an objection; and
WHEREAS, the City made available to the public the proposed fees no less than 45 days prior to the deadline to submit an objection; and
WHEREAS, the City posted on its internet website a written basis for the proposed fees and charges and included a link to the internet website in the Notice; and WHEREAS, the City mailed the written basis to a property owner upon request or, if not such request were made, would have mailed the written basis to a property owner upon request;and 65059.00000\45015 1591
WHEREAS, the City provided at least 45 days for a property owner or customer ofrecord (e.g., a tenant), to review the proposed fees or charges and to timely submit to the City a writtenobjection to the proposed fees or charges that specifies the grounds for alleging noncompliance; and
WHEREAS, the City considered and responded in writing, including the grounds for which a challenge is not resulting in amendments to the proposed fee or charge, to any timelysubmitted written objections prior to the close of the Hearing; and WHEREAS, timely submitted written objections and agency responses were presented to the City Council for consideration prior to or during the Hearing; and WHEREAS, the City Council now desires to make findings and determinations related to the proposed sewer, saltwater, and solid waste service fees.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF AVALON AS FOLLOWS:
Section 1. The foregoing Recitals are true and correct, and by this reference are incorporated herein and made a part hereof.
Section 2. The City Council has found and has determined that that the written objections and the City’s response do not warrant clarification to any proposed fee or charge; no reduction in any proposed fee or charge is warranted; no further review is needed before making a determination on whether clarification Or reduction of the proposed rates and charges isneeded; and to proceed with the Hearing.
Section 3. The City Clerk shall certify to the adoption of this Resolution.PASSED AND ADOPTED BY the City Council ofthe City of Avalon, Avalon, California, held on the 1 9st day of May, 2026, by the following vote:Ayes:
Noes:
Absent:Abstain:
Ann H. Marshall, Mayor
ATTEST:
Gabrielle Morones, City Clerk
6509.0004505159.1
(eIiiIIrzW CITY OF AVALON
NOTICE OF PUBLIC HEARING
CONCERNING PROPOSED RATE INCREASES
TO SEWER, SALTWATER, AND SOLID WASTE SERVICE FEES
Tuesday, May 19, 2026 - 5:00 P.M.
Avalon City Council Chambers
410 Avalon Canyon Road, Avalon, CA 90704
The City of Avalon will conduct a public hearing on Tuesday, May 19, 2026, at 5 PM at 410 Avalon Canyon Road,Avalon, California, in the City Council Chambers to consider changes to sewer, saltwater, and solid waste service charges. The proposed changes are based on cost-of-service studies completed by independent consultants.
All property owners and customers of record whose parcels receive sewer, saltwater, and solid waste services provided by the City of Avalon are being issued this public hearing notice. The proposed rate changes may apply to all parcels that receive sewer, saltwater, and solid waste services from the City of Avalon. The hearing is open to the public.
The property owners upon which the rates and charges are proposed and any tenants directly responsible for the payment of sewer, saltwater, and solid waste services and charges may submit a written protest and/or a legal objection to the proposed rate changes, provided that only one protest will be counted per parcel. At the time of the public hearing, the City Council will receive a final tabulation of all written protests received by the City Clerk. The City Council will then carefully consider the public input and may approve the rate increases unless a majority of property owners file written protests.
Why Are Rate Changes Being Considered?
The City is committed to providing the highest quality utility services at the lowest possible rates for our customers, maintaining financially sound and fiscally responsible sewer, saltwater, and solid waste programs,all while keeping pace with inflation and other cost increases. To meet this commitment, the City engaged an independent consultant to evaluate the infrastructure needs and operations and maintenance costs of its sewer, saltwater, and solid waste utilities. This review assessed the adequacy of rate revenues to operate and maintain the utilities and comply with all state and federal regulations. Based on this evaluation, it has been determined that rate increases are necessary to enable the City to:
• Recover current and projected increases in the costs of operating and maintaining the sewer, saltwater, and solid waste systems;
• Construct capital infrastructure improvements needed to repair, replace and update City’s aging sewer and saltwater systems and expand the height of the existing landfill to extend its useful life; • Comply with all state and federal regulatory requirements; and• Maintain prudent reserves to ensure operational and financial stability.
The City’s sewer, saltwater, and solid waste service fees are all billed on an annual basis and collected on the property tax roll. Detailed descriptions of the proposed rates for each of the utilities are provided below.
Proposed Sewer Service Fees
CITY OF AVALON
The proposed rate structure for the City’s sewer service fees has various customer classes: residential, public showers, hotels, laundries, shops/offices, combined shops/offices, take-out restaurants, churches, bars/restaurants with up to 100 seats, and bars/restaurants with more than 100 seats. Within each customer class, the sewer service fee to be imposed is calculated to proportionately distribute the cost of providing sewer services to each parcel based on the estimated amount of wastewater discharged. If adopted, the proposed rates will be in effect beginning July 1, 2026, and will be increased each July 1 thereafter through, and including, July 1, 2030. The current and proposed rates and the annual increases in the rates resulting from the proposed rates for the sewer service fees are as set forth in the table below.
Customer Class Billing Unit / Basis Current 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Residential Per Dwelling Unit $1,097.50 $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00 Commercial
Public Shower Per Shower $364.30 $398.80 $436.80 $478.30 $507.00 $537.40Hotel Per Room $603.60 $660.95 $723.70 $792.45 $840.00 $890.40Laundries Per Wash Unit $1,481.60 $1,622.35 $1,776.45 $1,945.20 $2,061.90 $2,185.60 Shops/Offices Each $1,097.50 $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00 Other combined Per 1000 SQFT $702.35 $769.05 $842.10 $922.10 $977.45 $1,036.10 Shops/Offices Take-out Restaurant Each $1,666.00 $1,824.25 $1,997.55 $2,187.30 $2,318.50 $2,457.65 churches Each $2,218.75 $2,429.50 $2,660.30 $2,913.00 $3,087.75 $3,273.05 Bar/Restaurant (<100) Each $3,300.00 $3,613.45 $3,956.70 $4,332.55 $4,592.45 $4,868.05Bar/Restaurant (>100) Each $4,934.40 $5,403.10 $5,916.30 $6,478.30 $6,867.00 $7,279.05*For multiple shops and/or offices on a single parcel Proposed Saltwater Service Fees
The rate structure for the City’s saltwater service fees has three customer classes: residential, hotel, and commercial customers. Within each customer class, the amount of the saltwater service fees to be imposed are calculated to proportionately distribute the cost of providing saltwater services to each parcel based on theestimated amount of saltwater used. If adopted, the proposed rates will be in effect beginningJuly 1, 2026, and will be increased each July 1 thereafter through, and including, July 1, 2030. The current and proposed rates for the saltwater service fees are as set forth in the table below.
Customer Class Billing Unit / Basis Current 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Residential Per Dwelling Unit $300.60 $329.15 $360.40 $394.65 $432.15 $473.20 commercial Per Toilet/Urinal $300.60 $329.15 $360.40 $394.65 $432.15 $473.20 Hotel Per Toilet/Urinal $165.35 $181.05 $198.20 $217.05 $237.70 $260.25 Proposed Solid Waste Service Fees
The proposed rate structure for the City’s solid waste service fees has 10 customer classes: residential, residential with more than 10 dwelling units, hotels, gathering spaces (which include churches, public showers, schools, and the casino building), shops/offices (which include hospitals), grocers, restaurants with up to 100seats, restaurants with more than 100 seats, and take out restaurants. Within each customer class, the amount 2 of the solid waste service fees to be imposed are calculated to proportionately distribute the cost of providing solid waste services for each parcel based on the estimated amount of solid waste generated. If adopted, the proposed rates will be in effect beginning July 1, 2026, and will be increased each July 1 thereafter through, andincluding, July 1, 2030. The current and proposed rates are as set forth in the table below.
Customer Class Billing Unit / Basis Current 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 I Residential Per Dwelling Unit $928.20 $969.95 $1,013.60 $1,059.20 $1,106.85 $1,156.65 Residential > 10 Units Per Dwelling Unit $742.75 $776.15 $811.10 $847.60 $885.75 $925.60 Commercial
Shops/Offices Per 1000 SQFT $1,466.75 $1,532.75 $1,601.70 $1,673.80 $1,749.10 $1,827.80Grocer Per 1000 SQFT $4,400.25 $4,598.25 $4,805.15 $5,021.40 $5,247.35 $5,483.50Gathering Space Per 1000 SQFT $733.35 $766.35 $800.85 $836.90 $874.55 $913.90 Bar/Restaurant (<100) Each $5,866.95 $6,130.95 $6,406.85 $6,695.15 $6,996.45 $7,311.30Bar/Restaurant (>100) Each $11,733.80 $12,261.80 $12,813.60 $13,390.20 $13,992.75 $14,622.40 Take-out Restaurant Each $2,933.45 $3,065.45 $3,203.40 $3,347.55 $3,498.20 $3,655.60 Hotels Each $353.75 $369.65 $386.30 $403.70 $421.85 $440.85 Grease Disposal Per Gallon $4.25 $4.45 $4.65 $4.85 $5.05 $5.30 How to Participate in the Public Hearing
The City of Avalon welcomes the public’s participation and input during the public hearing process. More information on the proposed rate adjustments, including the rate study, is available for review in the following ways:
• Online at www.cityofavalon.gov/parcelassessments;• In-person at the City Hall Front Desk, located at 410 Avalon Canyon Road, Avalon, CA 90704; or• By contacting us directly at (310) 510-0220 or [email protected] Members of the public are welcome to attend the public hearing regarding the proposed rate adjustments. The hearing will take place on Tuesday, May 19, 2026, at 5 PM at 410 Avalon Canyon Road, Avalon, California, in the City Council Chambers. All members of the public will have an opportunity to speak and testify regarding the proposed rate changes; however, only written protests will count toward a majority protest. Written protests must be received before the conclusion of the public hearing.How to Submit a Formal Written Protest For purposes of determining whether a majority protest exists, property owners and customers of record may submit a written protest. To be valid, please specify the rate or charge being protested and include your name, parcel number, and/or service address, and your name and signature. Mail your formal written protest to: City of Avalon, Attn: City Clerk, P0 Box 707 Avalon, CA 90704 or deliver your formal written protest in person to:City of Avalon, Attn: City Clerk, 410 Avalon Canyon Road, Avalon, CA 90704. Only one written protest will be considered per parcel. All protests must be received by the City Clerk before the conclusion of the publiccomment portion of the public hearing. 3 CITY OF AVALON
How to Submit a Formal Written Legal Objection
Pursuant to California Government Code Section 53759.1 and separate from the majority protest, property owners who will be affected by these proposed rate adjustments and any tenants directly responsible for the payment of sewer, saltwater, or solid waste service charges who wish to preserve the ability to challenge theproposed rate adjustments in a legal proceeding may submit a written legal objection. In order to be valid, the written legal objection must include the following information:
(1) Written legal objection must be mailed or delivered in person to: City of Avalon, Attn: City Clerk, P0 Box 707, Ava Ion, CA 90704;
(2) Specify the rate or charge for which the objection is being submitted;(3) Include your name, parcel number, and/or service address and signature;(4) Indicate that the submission is a legal objection;(5) Specify the grounds for alleging the City of Avalon’s noncompliance with Proposition 218. Please note that the grounds must be sufficiently detailed to allow the City of Avalon to determine whether alterations to the proposed rates are needed. By way of example, an objection stating a proposed ratechange violates Proposition 218, without explaining the basis of this claim, is insufficient for the purpose of administrative exhaustion. Similarly, an objection on the grounds that the rates are too high, without explaining a basis for illegality, will not constitute a valid legal objection.
Objections submitted by email, fax, or other electronic means will not be accepted. Objections must be received by 10 AM on Friday, May 15, 2026, in order to be valid. Failure to submit an objection on time willbar any right to challenge the fee or charge through a legal proceeding. All timely objections received will also be counted as a protest. Any objection received after 10 AM on Friday, May 15, 2026, will only be considered and counted as a protest.
Upon the conclusion of the public hearing, the City Council will consider the adoption of the proposed rate increases for the saltwater, sewer, and solid waste service charges described herein. If written protests against the proposed rates are not presented by a majority of the property owners or tenants directly responsible forthe payment of sewer, saltwater and/or solid waste service charges of the identified parcels upon which the rates and charges are proposed to be imposed, the City Council will be authorized to impose the respective rateincreases, If adopted as proposed, the increased rates and charges become effective on July 1, 2026.
Under California Government Code Section 53759, there is a 120-day statute of limitations for challenging sewer, saltwater, or solid waste service charges should the proposed rate adjustments be adopted, which commences the day the resolution establishing the proposed rates are adopted. 4 RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF AVALON ESTABLISHING
RATES FOR SEWER, SALTWATER, AND
SOLID WASTE SERVICE FEES AND
FINDING THESE RATES ARE EXEMPT
FROM THE CALIFORNIA
ENVIRONMENTAL QUALITY ACT
WHEREAS, the City ofAvalon (the “City”) contracted HDR Engineering to conduct a cost of service and rate study for its sewer, saltwater, and solid waste services; and WHEREAS, the study assessed the adequacy of the revenues to maintain the physical integrity of the sewer, saltwater and solid waste systems to comply with all Federal and State regulations; and
WHEREAS, the study reviewed the method of cost allocation to various classes of parcel owners; and
WHEREAS, the results and recommendations ofthe study were presented at the March 17, 2026 City Council Meeting; and
WHEREAS, the City has accepted the report and the proposed rates for sewer, saltwater, and solid waste to ensure parcel owners are billed their fair share of the costs to maintain and makenecessary infrastructure improvements to the systems, and WHEREAS, the proposed rates are designed to produce the minimum revenue needed to cover projected operating costs, including direct operating expenses, administrative costs, andongoing capital improvement repairs, replacements, and upgrades ofthe City’s sewer, saltwater, andsolid waste systems; and WHEREAS, the revenues derived from the sewer service fees shall be used exclusively for the sewer system; and
WHEREAS, the revenues derived from the saltwater service fees shall be used exclusively for the saltwater system; and
WHEREAS, the revenues derived from the solid waste fees will be used exclusively for the solid waste system and landfill closure; and
WHEREAS, the sewer, saltwater, and solid waste service fees will not be imposed on a parcel unless the services are actually used by, or immediately available to, the owner ofthe parcel; and
65059.00000\450 15162.1
WHEREAS, the City, as the lead agency under the California Environmental Quality Act (“CEQA”), determined that this Resolution is exempt from CEQA review under Public ResourcesCode section 21 080(b)(8), State CEQA Guidelines section 15061 (b)(3), and State CEQA Guidelinessection 15273 because the sewer, saltwater, and solid waste service fees are not considered a “project’ for purposes of CEQA, but, even if these fees are considered a project, they are further exempt because CEQA does not apply to the modification and approval of rates for the purpose ofmeeting operating expenses; and WHEREAS, California Constitution article XIII D, section 6 (“Article XIII D”) requires that prior to imposing any increase to the property-related fee such as the sewer, saltwater, and solidwaste service fees, the City shall provide written notice (the “Notice”) by mail of: (1) the proposed increases to such rates and charges to the record owner of each parcel upon which the rates and charges are proposed for imposition and any tenant directly liable for payment of the rates andcharges; (2) the amount ofthe rates and charges proposed to be imposed on each parcel; (3) the basisupon which the rates and charges were calculated; (4) the reason for the rates and charges; and (5) the date, time, and location of a public hearing (the “Hearing”) on the proposed rates and charges; and
WHEREAS, pursuant to Article XIII D such Notice is required to be provided to the affected property owners and any tenant directly liable for the payment ofthe rates and charges not less than forty-five days prior to the Hearing on the proposed rates and charges; and WHEREAS, the City only bills property owners for such services and the City did provide such Notice to the affected property owners ofthe proposed sewer, saltwater, and solid waste service fees in compliance with Article XIII D; and
WHEREAS, the Hearing was held on this day, May 19, 2026; and WHEREAS, the City implemented the administrative remedy and exhaustion procedures set forth in Government Code section 53759. 1, and prior to opening the Hearing on May 19, 2026, theCouncil adopted Resolution No. , determining that after reviewing and responding to all valid written legal objections, no changes to the proposed rates were required, and that the Councildetermined to proceed with the Hearing; and WHEREAS, at the Hearing the City Council heard and considered all oral testimony, written materials, and written protests concerning the establishment and imposition of the proposed rateincreases for the sewer, saltwater, and solid waste service fees, and at the close of the Hearing the City did not receive written protests against the establishment and imposition ofthe proposed rate increases for the service fees from a majority of the affected property owners; and WHEREAS, the City Council ofthe City now desires to establish and impose the proposed rates for the sewer, saltwater and solid waste service fees for the next five fiscal years; and 2 65059 00000\45015 162.1
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF AVALON AS FOLLOWS:
Section 1. The City Council finds and determines that the foregoing Recitals are true and correct and incorporates the Recitals herein.
Section 2. As the decision-making body for the City, the City Council has reviewed and considered the information contained in the Preliminary Exemption Assessment and administrativerecord. The City Council finds that the Preliminary Exemption Assessment contains a complete andaccurate reporting ofthe environmental impacts associated with the adoption ofthis Resolution andreflects the independentjudgment of the City Council.
Section 3. The City Council hereby finds that the proposed rates are exempt from CEQA review. First, the proposed rates, in and of themselves, do not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physicalchange in the environment and therefore are not considered a “project” under CEQA. (Pub.
Resources Code, § 21065, 14 Cal. Code Regs., § 15378, subd. (a).) Second, the proposed rates are covered by the general rule that CEQA applies only to projects which have the potential for causinga significant effect on the environment; here, there is no possibility that the proposed rates, in and of themselves, may have a significant effect on the environment since they only produce the minimum revenue needed to cover projected operating costs. (14 Cal. Code Regs., § 15061, subd. (b)(3).) And third, even ifthe proposed rates are considered a project for purposes ofCEQA, the proposed rates are still exempt because CEQA does not apply to the modification and approval of rates for thepurpose of meeting operating expenses and does not involve any commitment on behalf ofthe City to any specific project which may result in a potentially significant physical impact on the environment. (14 Cal. Code Regs., § 15273, subd. (a)(1).).
Section 4. The documents and materials that constitute the record of proceedings on which these findings have been based are located at City of Avalon, 410 Avalon Canyon Road,Avalon, California 90704. The custodian for these records is the City Clerk of the City.
Section 5. The City Council hereby approves the rates for sewer, saltwater, and solid waste service fees set forth in Exhibit A, attached hereto and by this reference incorporated herein.
Such rates shall be in effect beginning July 1, 2026, and will remain in effect until otherwise modified by the City. The City Council further approves collection of the rates on the property taxroll in accordance with Health and Safety Code section 5471 et seq..
Section 6. The City Council hereby directs City staff to file a Notice of Exemption within five business days of this approval.
Section 6. The City Council hereby authorizes and directs the City Manager to implement and take all actions necessary to effectuate the rates for the sewer, saltwater, and solid waste service fees set forth herein and to file a Notice of Exemption with the County Clerk for LosAngeles County within five (5) working days of the date of the adoption of this Resolution. 3 65059.00000\450 15162.1
Section 7. If any section, subsection, subdivision, sentence, clause, or phrase in this Resolution or any part thereof is for any reason held to be unconstitutional or invalid, ineffective by any court ofcompetentjurisdiction, such decision shall not affect the validity or effectiveness ofthe remaining portions ofthis Resolution or any part thereof. The City Council hereby declares that it would have adopted each section irrespective of the fact that any one or more subsections,subdivisions, sentences, clauses, or phrases be declared unconstitutional, invalid, or ineffective.
Section 9. This Resolution shall supersede all other previous City Council resolutions and ordinances that may conflict with, or be contrary to, this Resolution.
Section 10. The City Clerk shall certify to the adoption ofthis Resolution.PASSED AND ADOPTED BY the City Council ofthe City ofAvalon, Avalon, California, held on the 19st day of May, 2026, by the following vote:
Ayes:
Noes:
Absent:Abstain:
Ann H. Marshall, Mayor
ATTEST:Gabrielle Morones, City Clerk
4 65059 00000\45015 162 I
EXHIBIT A
ANNUAL RATES FOR SEWER, SALWATER, AND SOLID WASTE SERVICE FEES
ANNUAL RATES FOR SEWER SERVICE FEES
Customer Class
ANNUAL RATES FOR SOLID WASTE SERVICE FEES
7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030
Customer Class 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Residential ($/Dwelling Unit) $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00Public Showers ($/Shower) $398.80 $436.80 $478.30 $507.00 $537.40Hotels (S/Room) $660.95 $723.70 $792.45 $840.00 $890.40 Laundries ($IWash Unit) $1,622.35 $1,776.45 $1,945.20 $2,061.90 $2,185.60 Shops/Offices ($/Acct.) $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00Combined Shops/Offices ($/1,000 sq. ft.) $769.05 $842.10 $922.10 $977.45 $1,036.10 Take-out Restaurants ($/Acct.) $1,824.25 $1,997.55 $2,187.30 $2,318.50 $2,457.65 Churches ($IAcct.) $2,429.50 $2,660.30 $2,913.00 $3,087.75 $3,273.05 Bars / Restaurants (up to 100) ($IAcct.) $3,613.45 $3,956.70 $4,332.55 $4,592.45 $4,868.05 Bars / Restaurants (>100) ($/Acct.) $5,403.10 $5,916.30 $6,478.30 $6,867.00 $7,279.05
ANNUAL RATES FOR SALTWATER SERVICE FEES
Customer Class 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Residential (S/Thi’elling unit) $329.15 $360.40 $394.65 $432.15 $473.20 Commercial (‘S/Toilet & Urinal) $329.15 $360.40 $394.65 $432.15 $473.20Hotel (S/Toilet & Urinal) $181 .05 $198.20 $217.05 $237.70 $260.25 Residential (S/Dwelling Unit) $969.95 $1,013.60 $1,059.20 $1,106.85 $1,156.65 Res> 10 Units (S/Duelling Unit) $776.15 $811.10 $847.60 $885.75 $925.60 Shops / Office (5/1,000 sq. fl) $1,532.75 $1,601.70 $1,673.80 $1,749.10 $1,827.80Grocer (S/J,000 sq. ft.) $4,598.25 $4,805.15 $5,021.40 $5,247.35 $5,483.50 Gathering Space (5/1,000 sq. /1.) $766.35 $800.85 $836.90 $874.55 $913.90Restaurants>100 seats (S/Acct.) $6,130.95 $6,406.85 $6,695.15 $6,996.45 57,31 1.30Restaurants up to 100 seats (S/Acct.) $12,261.80 $12,813.60 $13,390.20 $13,992.75 $14,622.40 Restaurants—Take Out (S/Acct.) $3,065.45 $3,203.40 $3,347.55 $3,498.20 $3,655.60Hotels (‘S/Room,) $369.65 $386.30 $403.70 $421.85 $440.85 G rease Disposal (‘S/Ga/lon) $5.30
(1) Restaurants must also pay a grease removal charge based on gallons removed in the prior year. $4.45 $4.65 $4.85 $5.05
6505900000\450I5 162 I
A-i
I Draft Report
Comprehensive Sewer
Draft Rate Study
March 2026 FY
I
FY
March 13, 2026Mr. Matt BakerFinance Director
City of Avalon
410 Avalon Canyon RoadAvalon, California 90704Subject: City of Avalon Draft Sewer Rate Study Report Dear Mr. Baker:HDR Engineering, Inc. (HDR) is pleased to presentthe draft reportforthe sewer rate study (Study) conducted for the City of Avalon (City). The primary objective in conducting a rate study for thesewer utility is to establish cost-based and proportional sewer rates, for a five-year period, whichare intended to provide adequate and sustainable funding for the City’s sewer utility operationaland capital needs. This report outlines the approach, methodology, findings, and conclusions of the rate study process undertaken for the sewer utility.
This report was developed utilizing the City’s accounting, operating, and historical customer billing records. HDR has relied upon this information to develop our analyses which formed our findings, conclusions, and recommendations. At the same time, the Study was developed utilizinggenerally accepted rate setting principles and the sewer utility specific system and customer characteristics. The conclusions and recommendations contained within this report are intended to provide the City with cost-based and proportional sewer rates for its customers.
We appreciate the assistance provided by the City staff, management, and the City Council in the development of the Study.
Sincerely yours,
HDR Engineering, Inc.
Josiah Close
Utility Rates Project Manager
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Executive Summary 1
Overview of the Rate Setting Process 5
1.1 Report Organization 5
1.2 Overview of the Rate Study Process 51.3 Generally Accepted Rate Setting Principles 61.4 Determining the Revenue Requirement 61.5 Designing Rates 71.6 Summary 7 2 Sewer Revenue Requirement 8
2.1 Determining the Sewer Utility Revenue Requirement 8
2.1.1 Determining the Time Period and Approach 82.1.2 Projection of Sewer Revenues 82.1.3 Projection of Sewer Operations and Maintenance Expenses 92.1.4 Projection of Sewer Capital Improvement Projects and Funding 102.1.5 Projection of Debt Service 112.1.6 Reserve Funding 112.1.7 Summary of the Sewer Revenue Requirement 122.1.8 Review of the Sewer Reserve Levels 13
2.1.9 Consultant’s Conclusions 13
3 Sewer Cost of Service 14
3.1 Objectives of a Cost of Service Analysis 14
3.2 Development of the Sewer Cost of Service 14
3.3 Consultant’s Conclusions 15
4 Sewer Rate Design 17
4.1 Rate Design Criteria and Considerations 174.2 Overview of the Proposed Rate Structures 184.3 Present and Proposed Sewer Rates 184.4 Summary of the Sewer Rate Study Update 19 Technical Appendix 20
F Table of Contents City of Avalon — Sewer Rate Study
IiExecutive Summary
HDR was retained by the City of Avalon to conduct a comprehensive sewer rate study. The objective of the Study was to review the City’s sewer utility operating and capital costs to develop proposed cost-based and proportional sewer rates for the City’s customers. The Study determined the adequacy of the existing sewer rates and provides the framework for cost-basedand proportional proposed sewer rates.
Overview of the Rate Study Process
A sewer rate study uses three interrelated analyses to address the sufficiency and proportionality of a utility’s rates. These three analyses are a revenue requirement analysis, a cost of service analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES-i.
Figure ES—i
Overview of the Comprehensive Rate Analyses
Compares the revenues to the expenses of
Revenue Requirement Analysis the utility to determine the overall level of rate adjustment required
Distributes the revenue requirement to the
Cost of Service Analysis customer classes ofservice in a - proportional manner Considers both the revenue
Rate Design Analysis requirement and cost ofservice
_______
__I results to develop the proposed rates
The results from each of the above tasks were used as the basis for establishing cost-based and proportional rates for the City’s customers.
Key Rate Study Results
The technical analysis for the City’s sewer rate study was developed based on the operating and capital infrastructure costs identified by the City to provide sewer service to the City’s customers.
The City’s sewer rate study resulted in the following key findings, conclusions, and recommendations:
• A revenue requirement analysis was developed for the ten-year period of FY 2025-26 — FY 2035-36
• The starting point for the revenue requirement analysis was the City’s adopted FY 2025- 26 O&M budget and capital improvement plans
• O&M expenses are projected to increase at inflationary levels, with no assumed changes to levels of service or anticipated extraordinary expenses F Executive Summary 1 City of Avalon — Sewer Rate Study • A five-year rate transition plan (FY 2026-27 — FY 2030-31) was developed to adequately fund the operating and capital needs
v’ 9.0% in FY 2026-27 and FY 2027-28, 6.5% in FY 2028-29 and FY 2029-30, and 5.0% in FY 2030-31
• A review of the proportionality of the sewer rates for the service fees among customers was developed as part of the Study
• The Study developed proposed sewer rates for the FY 2026-27 through FY 2030-31 based on the overall revenue needs and proportional distribution of costs • By FY 2030-31, the City should review the financial/rate status and the potential need for additional rate adjustments and/or a rate structure review Summary of the Sewer Revenue Requirement Analysis
The starting point of the sewer revenue requirement analysis was the adopted FY 2025-26 budget. HDR developed a projection of revenues and expenses for future years based on assumed escalation (inflationary) factors. The focus for purposes of rate setting was the next fiveyear period (FY 2026-27 — FY 2030-3 1).
The proper and adequate funding of capital projects is important to maintain the City’s existing sewer infrastructure and service levels. At the same time, it is important to create a funding planwhich maximizes the amount of funds available for capital investment yet minimizes sewer rates over time to the extent possible. Within the City’s proposed capital funding plan, the City is projected to fund $225,000 in FY 2025-26 increasing to $790,000 by FY 2030-31; the average is approximately $583,000 per year. In addition to rate funding, it is assumed that the City willutilize reserves to fund the capital improvement plan. Provided below in Table ES - 1 is a summaryof the capital improvement funding plan over the rate setting period (FY 2025-26 through FY 2030—31).
Table ES—i
Summary of the Capital Improvement Plan ($000)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Total Capital Projects $350 $848 $878 $727 $564 $584
Future Unidentified Projects 0 0 0 0 0 0
To Cash Reserves 0 0 0 93 156 206
Total $350 $848 $878 $820 $720 $790Less: Other Funding $125 $478 $303 $0 $0 $0 Total Rate Funded Capital $225 $370 $575 $820 $720 $790 The revenue requirement analysis sums the sewer utility’s operating and capital expenses and compares it to the total sewer revenues to determine if a rate adjustment is necessary and, if so,at what level to adequately fund the costs to provide sewer service. As noted, a multi-year rate transition plan was developed to meet the financial needs of the sewer utility over the next five F Executive Summary 2 City of Avalon — Sewer Rate Study years. The summary of the sewer revenue requirement shown in Table ES— 2 indicates the need for rate adjustments to adequately fund the sewer utility.
Table ES-2
Summary of the Sewer Revenue Requirement ($000s)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
RevenuesRate Revenues $3,229 $3,229 $3,229 $3,229 $3,229 $3,229Non-Operating Revenues 296 342 364 395 422 455Total Revenues $3,525 $3,571 $3,593 $3,624 $3,652 $3,684 Expenses
O&M Expenses $3,297 $3,449 $3,608 $3,775 $3,949 $4,131
Rate Funded Capital 225 370 575 820 720 790
Net Debt Service 0 0 0 0 0 0
To/(From) Reserve Funding 3 59 53 40 248 298
Total Expenses $3,525 $3,878 $4,236 $4,635 $4,917 $5,219 BaI./(Def.) of Funds $0 ($307) ($643) ($1,011) ($1,265) ($1,535)Bal./(Def.) as % of Rate Revenue 0.0% 9.5% 19.9% 31.3% 39.2% 47.5%Proposed Rate Adjustments 0.0% 9.5% 9.5% 9.5% 6.0% 6.0% Addi Revenue with Rate Adj. $0 $307 $643 $1,011 $1,265 $1,535 The results of the sewer revenue requirement show the need for a 9.5% annual rate adjustment in FY 2026-27 through FY 2028-29 and 6.0% in FY 2029-30 and FY 2030-3 1. The total deficiency of revenues before rate adjustments ranges from $307,000 in FY 2026-27 to $1.5 million by FY2030-31. The level of the overall deficit is driven, in part, by the increased funding from rates for capital improvement projects, general inflation of annual O&M expenses, and maintaining financial metrics. The proposed rate adjustments are designed to provide sufficient revenue to fund the annual O&M and capital needs of the sewer utility, as well as maintaining strongfinancial metrics for debt service coverage ratios and reserve balances. The development of the revenue requirement is outlined and discussed in Section 2 of this report Summary of the Sewer Cost of Service Analysis
The City’s current sewer rate structure was reviewed to determine the cost-basis and the proportionality of the sewer rates. It is also important to note that the City does not receivemetered water use data, which is typically used to estimate the wastewater flow in a sewer cost of service analysis for establishing rates. Therefore, the first step was to define one (1) equivalentdwelling unit (EDU), as the base for estimated sewer flow. The EDU reflects the estimated flow of the typical single-family residential customer. In other words, each single-family customer isassigned 1 EDU. The remaining customers (non-residential) are billed based on a variety ofdifferent units such as the number of rooms, showers, seats, etc., with each billing unit being a proportion of 1 EDU based on industry standard sewer flow estimates. The cost of service and review of the proportionality between customers is further discussed in Section 3 of this report F Executive Summary 3 City of Ava Ion — Sewer Rate Study Summary of the Sewer Rate Design Analysis
The final component of the rate study is the development of sewer rates which reflect the overall revenue needs and based on the definition of an EDU. As part of the Study, the current rate structure was maintained and no changes were recommended to the proposed sewer rates.
Table ES — 3 summarizes the present and proposed sewer rates.
Table ES—3
Present and Proposed Annual Sewer Rates
Present FY 2026- FY 2027- FY 2028- FY 2029- FY 2030- Customer Class Rates 27 28 29 30 31 Residential $1,097.50 $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00 Commercial
Public Shower $364.30 $398.90 $436.80 $478.30 $507.00 $537.40Hotel 603.60 660.95 723.70 792.45 840.00 890.40Laundries 1,481.60 1,622.35 1,776.45 1,945.20 2,061.90 2,185.60 Shops / Offices 1,097.50 1,201.75 1,315.90 1,440.90 1,527.35 1,619.00 Other combined Shops/Offlces* 702.35 769.05 842.10 922.10 977.45 1,036.10 Take-out Restaurant 1,666.00 1,824.25 1,997.55 2,187.30 2,318.50 2,457.65 churches 2,218.75 2,429.50 2,660.30 2,913.00 3,087.75 3,273.05 Bar / Restaurant (<100) 3,300.00 3,613.45 3,956.70 4,332.55 4,592.45 4,868.05Bar / Restaurant (>100) 4,934.40 5,403.10 5,916.30 6,478.30 6,867.00 7,279.05 *For multiple shops and/or office on a single parcel *
The proposed sewer rates maintain the current rate structure, which is a fixed annual charge based on the customer class of service. The rate designs are further reviewed and discussed in Section 4 of this report.
Summary of the Sewer Rate Study
The adequacy of the City’s sewer rates were reviewed by HDR. Based upon the analyses developed herein, HDR has proposed cost-based and proportional rates for the sewer utility. Thedevelopment of the Study was based on the customer and budgeted data and information provided by the City at the time of the analyses. Should the costs or assumptions change, theresults of the study should be reviewed to determine if revisions to the Study recommendations are necessary. The following sections of the report provide a more detailed discussion of the technical analyses undertaken - along with the findings, conclusions, and recommendations of the Study.F Executive Summary 4 City of Ava Ion — Sewer Rate Study The overarching goal of the Study is to determine whether existing sewer rates are adequate (sufficient) to meet the utility’s operating and capital expenses. Rates set too low may result ininsufficient funds to maintain system integrity. The Study provides a cost-basis and rationale formaking appropriate rate adjustments, as well as reviewing the proportionality of the sewer utility’s current rates.
1.1 Report Organization
This report is organized in a sequential manner that first provides an overview of utility rate setting principles, followed by sections that detail the specific technical and analytical steps used to develop the City’s proposed sewer rates. The following sections comprise the City’s sewer rate study report:
• Section 2 reviews the development of the revenue requirement analysis• Section 3 reviews the development of the cost of service analysis• Section 4 reviews the development of the rate design analysis A technical appendix is attached at the end of the report which provides a copy of the technical analyses undertaken in the preparation of this report.
1.2 Overview of the Rate Study Process
A study consists of three interrelated analyses performed for each utility. Figure 1 -1 provides an overview of these analyses.
Figure 1—1
Overview of the Comprehensive Rate Analyses
Revenue Requirement Analysis !
:::::;r:r;z:r ::r:z:ri:r:;-:;rr::.::;n
Cost of Service Analysis
Rate Design Analysis Li
F Overview of the Rate Setting Process City of Ava Ion — Sewer Rate Study Compares the revenues to the expenses of
the utility to determine the overall level of
rate adjustment required
Distributes the revenue requirement to the
customer classes ofservice in a
proportional manner
Considers both the revenue
requirement and cost ofservice
results to develop the proposed rates
5 1 Overview of the Rate Setting Process
In a rate study, the revenue requirement analysis is concerned with the overall funding sources and expenses, both operating and capital, of the sewer utility. From this analysis, a determinationcan be made as to the overall level of adjustment to rates. Next, a cost of service analysis is performed to allocate and proportionally distribute the revenue requirements to the customers served (e.g., residential, commercial). Finally, once an overall level of rate adjustment is determined and a proportional distribution of those costs is completed, the last step of the rate study process is the design of proposed rates to collect the appropriate level of revenues from the sewer customers. For the City’s Study, all three analyses were conducted. The results from each task of the sewer rate study were used as the basis for establishing cost-based and proportional rates for the City’s sewer customers.In developing the Study, HDR utilized generally accepted rate setting techniques and industrybest practices along with the specific costs of the sewer utility in the development of the Study.
This report discusses the methodology, findings, conclusions, and recommendations of the sewer rate study. The Study has focused on the level of rate revenue needed to fully fund the utility on a standalone basis, and the development of proportional rates needed to best generate that levelof funding.
1.3 Generally Accepted Rate Setting Principles
As a practical matter, utilities should consider setting rates on generally accepted or global principles and guidelines. In summary form, utility rates should be:
• Cost-based, proportional, and set at a level that meets the utility’s full revenue requirement
• Easy to understand and administer• Designed to conform with generally accepted rate setting techniques• Stable in their ability to provide adequate revenues for meeting the utility’s financial, operating, and regulatory requirements
• Established at a level that is stable from year-to-year from a customer’s perspective• Established in compliance with State and local legislative requirements
1.4 Determining the Revenue Requirement
Most public utilities use the cash basis1 approach for establishing their revenue requirement and setting rates. This approach conforms to most public utility budgetary requirements and thecalculation is easily developed. A public utility:
• Totals its cash expenditures for a specified time period to determine required revenues• Adds operations and maintenance (O&M) expenses to applicable taxes or transfer payments to determine total operating expenses. Operations and maintenance expenses 1 This is the basis of accounting under which revenues are recorded when cash is received and expenditures arerecorded when cash is disbursed.
F Overview of the Rate Setting Process 6 City of Avalon — Sewer Rate Study include the materials, electricity, labor, supplies, etc. needed to keep the utility functioning.
• Calculates capital costs by adding debt service payments (principal and interest) to capital improvements financed with rate revenues. In lieu of including capital improvements financed with rate revenues, a utility may sometimes include annual depreciation expense to stabilize annual revenue requirement.
Under the cash basis approach, the sum of the annual capital and operating expenses equals theutility’s revenue requirement during any period of time (see Table 1 - 2).
Table 1-2
Cash versus Utility Basis Comparison
Cash Basis Utility Basis (Accrual)
+ D&M Expense + O&M Expense+ Taxes or Transfer Payments + Taxes or Transfer Payments + Capital Improvements Financed with Rate + Depreciation Expense Revenues ( Depreciation Exp.)
+ Debt service (Principal + Interest) + Return on Investment= Total Revenue Requirement = Total Revenue Requirement Note that the two portions of the capital expense component (debt service and capital improvements financed from rates) are necessary under the cash basis approach because utilities generally cannot finance all their capital facilities with long-term debt. An exception occurs if a public utility provides service to a wholesale or contract customer. In this situation, a public utility could use the utility basis approach (see Table 1-2) to earn a reasonable return on its investment.
The analyses developed within this report utilize the cash basis methodology. This is consistent with past practices of the City for establishing sewer rates.
1.5 Designing Rates
For the Study, rates that meet the utility’s objectives are designed based on the revenuerequirement analysis and cost of service analysis. This provides rates that are cost-based (i.e., designed to collect a cost-based level of revenues) and proportional (i.e., reflect the costs placedon the system by a customer class and customers within a class).
1.6 Summary
This report will review and discuss the Study prepared for the City. This report has been prepared utilizing generally accepted sewer rate setting methodologies and techniques, the specific sewer utility costs, and sewer customer characteristics to meet the intent of Proposition 218.
F Overview of the Rate Setting Process 7 City of Avalon — Sewer Rate Study [12 Sewer Revenue Requirement
The development of the revenue requirement analysis is the first analytical step of the comprehensive sewer rate study process as described in Section 1. This section of the reportdescribes the development of the revenue requirement analysis for the City’s sewer utility. TheCity provided HDR with detailed revenue, expense, and customer data for the sewer system thatallowed for the development of the revenue requirement analysis.
The revenue requirement analysis, as developed for the City’s sewer utility, determines the adequacy of sewer rates at current rate levels. From this analysis, a determination can be madeas to the overall level of rate revenue adjustment needed to provide adequate funding for bothoperating and capital expenses. HDR has developed an independent analysis based on the dataand information provided by the City.2.1 Determining the Sewer Utility Revenue Requirement In developing the revenue requirement, it was assumed the sewer utility must financially “stand on its own” and be properly funded. As a result, the revenue requirement as developed hereinassumes the full and proper funding needed to operate and maintain the system on a financiallysound and prudent basis. This includes maintaining adequate reserve levels, prudently fundingannual repair and replacement needs (rate-funded capital), and meeting other industry standard financial metrics (e.g., debt service coverage), where applicable. Provided below is a more detailed discussion of the development of the revenue requirement analysis for the City’s sewer utility.
2.1.1 Determining the Time Period and Approach
The first step in calculating the revenue requirement for the sewer utility was to establish a time frame for the revenue requirement analysis. For the Study, the revenue requirement was developed for the FY 2025-26 — FY 2035-36 time period.
The second step in determining the revenue requirement for the City was to decide on the basis of accumulating costs. As discussed in the previous section, the sewer utility’s revenue requirement was established using a cash basis approach, the same methodology that was usedin prior rate studies completed for the City.
The primary financial inputs in this process were the City’s historic sewer customer billing records, adopted O&M budget, and capital improvement plan. Presented below is a discussion of the analytical steps and key assumptions contained in the development of the sewer revenue requirement analysis.
2.1.2 Projection of Sewer Revenues
The City receives revenue from two primary sources, sewer rate revenues from customers and miscellaneous revenue as a result of operating a sewer utility. Sewer rate revenues are based on the current sewer rate structure and collected on an annual basis. Other revenue includes itemsF Sewer Revenue Requirement 8 City of Avalon — Sewer Rate Study such as the Harbor Fund contributions, lateral fees, and interest revenues. Provided below is a brief discussion of the projection of the sewer revenues for the sewer rate study.
The first step in developing the revenue requirement was to develop a projection of sewer rate revenues which was based on the current customer characteristics and current sewer rates. This calculated level of rate revenues was compared to the projected FY 2025-26 budget to determine if the customer billing characteristics resulted in planned revenue levels. The vast majority of the City’s rate revenues are derived from residential customers. There are two main customer classesof service: residential and commercial. Within the commercial class there are nine (9) subgroups:
public shower, hotel, laundry, shop/office, combined shops/offices, take-out restaurant, church,bar/restaurant (<100 seats), and bar/restaurant (>100 seats). In total, at present rates levels, the City is projected to receive approximately $3.2 million in sewer rate revenues in FY 2025-26. Over the planning horizon of the Study, customergrowth is expected to be flat, at 0.0% annually, which reflects the City’s recent historical customer growth, resulting in projected total sewer raterevenues of approximately $3.2 million annually through FY 2030-31.In addition to rate revenues, the City also receives a variety of miscellaneous revenues.Miscellaneous sewer revenues are projected to be approximately $296,000 in FY 2025-26.Miscellaneous revenues are expected to increase over the review period and are projected to be approximately $437,000 by FY 2030-31. This increase is the result of an estimated increase in harbor enterprise fund revenues. The transfer from the harbor enterprise fund is based on thenumber of moorings and public restrooms and calculated at the present rates. Revenues willincrease as the sewer rate adjustment to keep the appropriate relationship to the level of serviceprovided.
On a combined basis, taking into account both rate revenues and miscellaneous revenues, theCity’s total projected sewer revenues are projected to be approximately $3.5 million in FY 2025-26, increasing to $3.7 million by FY 2030-31, absent proposed rate revenue adjustments. The total revenues — both from rates and other miscellaneous sources — are summarized in Exhibit 3 of the Technical Appendix.
2.1.3 Projection of Sewer Operations and Maintenance Expenses Operations and maintenance expenses are incurred by the City to operate and maintain thesewer system. The costs incurred in this area are expensed during the current year and are notcapitalized or depreciated. In general, O&M expenses are grouped into a number of different functional categories. To begin the process of projecting O&M expenses over the planning horizon, escalation factors were developed. Escalation factors were developed to project increases in the basic types of expenses incurred by the sewer utility— e.g., salaries, benefits, materials and supplies, utilities, equipment, insurance—and other miscellaneous expenses.
These escalation factors were based on historical increases in City costs for the sewer utility. For the Study planning period, the escalation factors were estimated to range between 3.5% - 5.0% per year, depending upon the specific cost incurred.
The escalation of costs, using the escalation factors, assumes no changes in the current levels of service, meaning no extraordinary changes in O&M levels were assumed. Given the City’s adopted budgeted for FY 2025-26 O&M expenses, HDR then escalated the O&M expenses based F Sewer Revenue Requirement 9 City of Avalon — Sewer Rate Study on the previously mentioned escalation factors. Total sewer O&M expenses for the City are projected to be approximately $3.3 miflion in FY 2025-26. Sewer O&M expenses are projected toincrease to approximately $4.1 million by FY 2030-31 reflecting the assumed escalation factors over the time period. The budgeted and projected O&M expenses are shown in detail in Exhibit3 of the Technical Appendix.2.1.4 Projection of Sewer Capital Improvement Projects and Funding The City has a long-term sewer capital improvement plan that was utilized for the Study. The City’s sewer capital improvement plan averages approximately $827,000 annually over the review period of FY 2025-26 through FY 2030-31. Provided in Table 2 - 1 is the sewer capitalimprovement program for the period of FY 2025-26 — FY 2030-31. This data is shown in Exhibit 4in the Technical Appendix. The actual capital projects completed during the time period will depend on available funding sources and priority of the projects. The primary funding sources for these projects are assumed to be from rate funding of capital and available reserves.
Table 2—1
Summary of the Capital Improvement Plan ($000)
FY FY FY Pt Pt FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Total Capital Projects $350 $848 $878 $727 $564 $584
Future Unidentified Projects 0 0 0 0 0 0
To Cash Reserves 0 0 0 93 156 206
Total Capital Expenses $350 $848 $878 $820 $720 $790Less: Other Funding Sewer Fund - 107 $125 $478 $303 $0 $0 $0
New Revenue Bonds 0 0 0 0 0 0Total Other Funding Sources $125 $478 $303 $0 $0 $0 Total Rate Funded Capital $225 $370 $575 $820 $720 $790 There are numerous funding sources that can be used to fund the capital projects. Among the methods that may be used to finance these sewer capital improvement projects are long-term debt, reserves, and rates. For the capital funding plan, the City is assumed to utilize long-termdebt, rates, and reserves to fund the capital improvements. Provided below is a summary of the typical funding sources the City has used, and will continue to use, to fund the capital improvements over the next five year period.
2.1.4.1 Rate Funding
A general financial guideline states that, at a minimum, a utility should fund an amount from rates which is equal to or greater than the annual depreciation expense. Annual depreciation expense reflects the current investment in plant being depreciated or “losing” its useful life.
Therefore, this portion of plant investment needs to be annually funded to maintain the existing level of infrastructure. In addition, consideration should be given to using rate revenues to fund an amount greater than the annual depreciation expense for repairs and replacements as costs F Sewer Revenue Requirement 10 City of Ava Ion — Sewer Rate Study escalate over time and replacement cost is generally greater than the original cost. Whenever possible, the City should be funding capital projects from rates in an amount greater than annual depreciation expense to better reflect replacement costs. At the present time, the annual depreciation expense of the sewer utility is approximately $479,000 based on the City’s financial statements. Over the course of the review period, the City is funding a total of $3.5 million via rates, or an average of $583,000 per year. With the rate funding included within the Study, the sewer utility has made significant strides toward adequate funding for the repair and replacement of the existing sewer system infrastructure.
2.1.4.2 Reserve Funding
The use of reserves to fund capital improvements is another method available to the City, when and if reserves are available. During the review period, there will be approximately $907,000 in reserves used as a funding source for capital improvement projects. The sewer utility reserve fund has historically been established by annual surpluses in years where revenues may be greater than the annual expenses of the sewer utility or when capital projects are delayed. This allows the City to reserve funds for projects in later years when more or larger projects areundertaken or a delayed project is finally completed. This approach helps to mitigate future rate adjustments and smooth rates overtime. However, close attention should be given to the reserve balance as to not reduce it below the minimum target.
2.1.4.3 Long-Term Debt
Another potential funding source for capital projects is the issuance of long-term debt. Whilethere are certain advantages and disadvantages with the issuance of long-term debt, it is important to weigh all of them when deciding whether to issue or not. Long-term debt is typically not issued to fund renewal and replacement projects. Rather, long-term debt is often issued formajor capital projects such as in this case with the treatment plant upgrades which have animmediate impact on rates. Long-term debt can be a financing mechanism to smoothly finance/fund the impacts of a major capital improvement project. For this analysis, there is no new long-term debt issuances assumed for capital projects.
2.1.5 Projection of Debt Service
The final component of the sewer revenue requirement is debt service. At the present time, the City has no outstanding debt obligations and no long-term debt issuances were projected oranticipated within the sewer capital improvement plan above.
2.1.6 Reserve Funding
The Study has used reserve funding - or the transfer to/from reserve funds - to smooth and mitigate the rate adjustments in any particular year. Reserve funding can also be used to helpbuild or replenish reserves if they have been drawn down in prior years. In this analysis, changein working capital is primarily used to balance revenue requirements to the proposed rate adjustments.
F Sewer Revenue Requirement 11 City of Avalon — Sewer Rate Study
2.1.7 Summary of the Sewer Revenue Requirement
Given the above projections of revenues and expenses, a summary of the revenue requirement for the sewer utility can be developed. In developing the sewer revenue requirement,consideration was given to the financial planning considerations of the City. In particular,emphasis was placed on attempting to minimize rates yet still have adequate funds to support the operational and capital expenses throughout the review period. Presented in Table 2 - 2 is asummary of the sewer revenue requirement. A detailed analysis of the sewer revenue requirement can be found in Exhibit 3 of the Technical Appendix.
Table 2-2
Summary of the Sewer Revenue Requirement ($000s)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Revenues
Rate Revenues $3,229 $3,229 $3,229 $3,229 $3,229 $3,229 Non-Operating Revenues 296 342 364 395 422 455
Total Revenues $3,525 $3,571 $3,593 $3,624 $3,652 $3,684 ExpensesD&M Expenses $3,297 $3,449 $3,608 $3,775 $3,949 $4,131Rate Funded Capital 225 370 575 820 720 790Net Debt Service 0 0 0 0 0 0 To/(From) Reserve Funding 3 59 53 40 248 298
Total Expenses $3,525 $3,878 $4,235 $4,635 $4,917 $5,219Bal./(Def.) of Funds $0 ($307) ($643) ($1,011) ($1,265) ($1,535) BaI./(Def.) as % of Rate Revenue 0.0% 9.5% 19.9% 31.3% 39.2% 47.5%Proposed Rate Adjustments 0.0% 9.5% 9.5% 9.5% 6.0% 6.0% AddI Revenue with Rate Adj. $0 $307 $643 $1,011 $1,265 $1,535 It is important to note the annual deficiencies shown in Table 2 - 2 are cumulative. That is, anyrate adjustments in the initial years will reduce the overall deficiency in the remaining years. Theresults of the revenue requirement analysis indicate, absent any rate adjustments, a deficiency of funds over the planning period (FY 2025-26 — FY 2030-31). The deficiency ranges fromapproximately $307,000 in FY 2025-26 to $1.5 million in FY 2030-31. Over the rate setting period, the overall deficiency in rates is approximately 47.5%. The level of this overall deficiency in rates is being driven by a variety of factors, but in large part it is a function of the need to strengthen the rate funding for capital infrastructure (i.e., annual renewal and replacement capital funding), maintaining financial metrics, and annual increases in O&M expenses. Based on the City’s sewerrevenue requirement analysis, annual rate adjustments have been proposed over the five-year period. The proposed rate transition plan in Table 2 -2 is projected to adequately and fully fund the City’s sewer O&M, along with the planned capital improvement projects. At the same time,these proposed rate adjustments will strengthen the overall financial health of the sewer utility.
F Sewer Revenue Requirement 12 City of Ava Ion — Sewer Rate Study
2.1.8 Review of the Sewer Reserve Levels
Reserves are an important part of a utility’s financial picture. There can be many different purposes for reserves. Currently, the sewer reserve fund has a minimum target balance of $1.6million; this is calculated based on approximately 180 days of O&M expenses. The graphic of the sewer reserve levels shows the balance of reserves for the City’s sewer utility over the review period show the balance is below the target, however, it is increasing towards meeting the target after the rate adjustments have been implemented.
The City should also routinely analyze the reserve funds to maintain adequate levels. As stated earlier, the reserve fund is used to help pay for large capital infrastructure projects that require funding above the level of annual rate funding. To have adequate reserves to provide funding from reserves, additional funding of the reserve fund may be required in the future.2.1.9 Consultant’s Conclusions Based on the sewer revenue requirement analysis the proposed overall sewer rate adjustments are 9.5% annually in FY 2026-27 through FY 2028-29 and 6.0% in FY 2029-30 and FY 2030-31.
These proposed rate adjustments are needed to fully fund the projected operating costs of the utility, along with funding the capital improvement plan and maintaining a strong financialperformance for the City’s sewer utility.
F Sewer Revenue Requirement City of Ava Ion — Sewer Rate Study 13 Sewer Utility - Reserve Fund
$2,200,000
$2,000,000
$1,800,000$1,600,000$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000$400,000$200,000
$0
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Sewer Fund -107 — — — Target: 180 days of O&M
Sewer Cost of Service
In the previous section, the revenue requirement analysis focused on the total revenues required to adequately fund the City’s sewer utility. This section will provide an overview of the second step in a comprehensive sewer rate study; the cost of service analysis developed for the City’ssewer utility.
3.1 Objectives of a Cost of Service Analysis
A cost of service analysis determines the proportional distribution of the revenue requirementto the identified customer classes of service to establish the proposed sewer rates. There are two primary objectives in conducting a cost of service analysis:
• Allocate and proportionally distribute the City’s sewer revenue requirement, and • Derive the cost basis for subsequent rate designs by customer class of service The objectives of the cost of service analysis are different from determining a revenue requirement. As noted in the previous section, a revenue requirement analysis determines the utility’s overall financial needs, while the cost of service analysis determines the proportionalmanner to collect the calculated revenue requirement. In this case, the revenue requirement forFY 2026-27, the first year of the proposed rate transition plan, was used for establishing the cost of service analysis.3.2 Development of the Sewer Cost of Service It is important to note that the City does not have the ability to obtain metered water consumption data, which is helpful in reviewing and developing a proportional distribution ofcosts. Additionally, the City’s current rate structure is not directly related to available industrydata by customer type as the units billed are unique. Given these limitations and based on thecurrent rate structure used by the City, an approach was developed to review the proportionality,or cost comparison, of the rate structure.
For the cost comparison, it is assumed that residential customers were charged based on being assigned 1 EDU for their estimated sewer flow. The calculation of the billing unit for each type of billing for the non-residential customers is based on the estimated sewer flows resulting from each component (seats, rooms, etc.) on a per EDU basis. HDR researched available industry information to review the flow assumptions for each billing component of the City’s sewer rates.
There were four (4) industry sources of information found that HDR utilized to review the calculation of the non-residential charges for the City. The estimated flows from each of these sources were used to determine the proportion of an EDU for each billing component (seats, rooms, etc.). In other words, the estimated flow for each customer was compared to the estimated residential flow. This calculation provided a ratio of each customer class to a residentialcustomer. This calculation was completed for each of the City’s different types of non-residentialcustomers. As noted, this approach was necessary given the lack of metered water data which is typically used to establish the relationships between customer classes. The industry data provided the relationship between the customer classes on a flow based perspective that is j,)‘ Sewer Cost of Service 14 City of Ava Ion — Sewer Rate Study typically used in the development of a sewer cost of service study as noted in the Water Environment Federation Manual of Practice No. 27 (WEF MOP #27). Provided in Table 3 - 1 is a summary of the flow estimates on an EDU basis for the customers served by the City by sourceof information obtained by HDR.
Table 3-1
Example of the Sewer Rate Proportionality Review
Proportion to 1 EDU (230 gallons per day)
2005 EPA WA
Billing Unit Current Metcalf Design Dept. of Ohio Proposed Customer Class / Basis City & Eddy11’ Manual (2] Health (31 EPA (41 Ratio Residential Living Unit 1.00 1.00Public Shower Per Shower 0.33 0.18 0.17 0.33Hotel Per Room 0.55 0.30 0.48 0.40 0.40 0.55 Take-Out Restaurant Each 1.52 1.56 1.30 2.08 2.10 1.52
Shop / Office Each 1.00 0,80 1.04 1.20 1.60 1.00
Laundry Wash Unit 1.35 1.35 2.20 2.00 1.60 1.35Bar/Restaurant (<100) Each 3.01 2.80 3.60 3.20 3.50 3.01Bar/Restaurant (>100) Each 4.50 4.20 5.40 4.80 5.60 4.50 Church Each 2.02 1.20 1.60 2.00 2.00 2.02
[1]— “Wastewater Engineering -Treatment and Resource Recovery”, Metcalf& EddylAEcOM, Fifth Edition[2] — “Onsite Wastewater Treatment Systems Manual”, United States Environmental Protection Agency, June 2005[3] — “Water System Design Manual”, Washington Department of Health, 2020[4] — “NOl Instructions” Attachment B, Ohio Environmental Protection Agency, 2012 Given the results of the review of the flow assumptions, and resulting proportion of an EDU, theCity’s rates for non-residential customers appear to be reasonable and proportional. While there is a difference in the ratios, it should be noted that the flow assumptions vary depending on the calculation and assumptions for each reference. As an example, for hotels, it can vary dependingon the total flow from the hotel which may, or may not, include laundry facilities, restaurant, bar,etc. Given this discussion, it is recommended that the proposed rates maintain the current billingstructure and only the level of the rates be adjusted to reflect the impacts customers place on the system.
3.3 Consultant’s Conclusions
The City’s current sewer rate structure was reviewed to determine the cost-basis and the proportionality of the sewer rates. It is also important to note that the City does not receivemetered water use data, which is typically used to estimate the wastewater flow in a sewer cost of service analysis for establishing rates. Therefore, the first step was to define one (1) equivalent dwelling unit (EDU), as the base for estimated sewer flow. The EDU reflects the estimated flowof the typical single-family residential customer. In other words, each single-family customer isassigned 1 EDU. The remaining customers (non-residential) are billed based on a variety of F Sewer Cost of Service 15 City of Avalon — Sewer Rate Study different units such as the number of rooms, showers, seats, etc., with each billing unit being a proportion of 1 EDU based on industry standard sewer flow estimates.
The City’s cost of service study analyzed the proportions based on assumed wastewater contributions. Given the results of the review of the flow assumptions, and resulting proportionof an EDU, the City’s rates for non-residential customers appeared to be reasonable and proportional. Given this, proposed sewer rates can be developed to reflect the overaW revenueneeds and relationships between the customer types on an EDU basis as is the City’s current approach.
F Sewer Cost of Service 16 City of Ava Ion — Sewer Rate Study 114 Sewer Rate Design
____
The final step of the City’s comprehensive sewer rate study is the design of proposed rates to collect the appropriate levels of revenues, based on the results of both the revenue requirementand the cost of service analyses. In developing the City’s proposed sewer rates, consideration is given to the level of the rates as well as the structure of the rates. The level of rates reflects the amount of revenues that should be collected while the structure of the rates is how it is collected (i.e., component charges) from the customers.
The overall revenue level for the City’s has been established in the revenue requirement analysis (Section 2) while the proportional distribution of costs has been developed in the cost of service analysis (Section 3) which provides the revenue levels to be collected based on cost causationand the cost basis for each rate component.
4.1 Rate Design Criteria and Considerations
Prudent rate administration dictates that several criteria that are considered when setting utilityrates. Some of these rate design criteria are listed below:
• Rates which are easy to understand from the customer’s perspective• Rates which are easy for the City to administer• Consideration of the customer’s ability to pay- Cost-based and proportional• Continuity, overtime, of the rate making philosophy• Policy considerations (encourage efficient use, economic development, etc.)• Provide revenue stability from month to month and year to year• Promote efficient allocation of the resource• Proportional and non-discriminatory (cost-based)• Meet the requirements of Proposition 218 Given the requirement and intent of Proposition 218, the last consideration, cost-based rates, should be of paramount importance and provide the primary guidance to utilities on ratestructure and policy. However, it is important that the City provides its customers with a proper price signal as to what their consumption is costing. This goal may be approached through ratelevel and structure. When developing the proposed rate designs, all the above-listed criteria canbe taken into consideration. However, it should be noted that it is difficult, if not impossible, to design a rate that meets all the goals and objectives listed above. For example, it may be difficult to design a rate that takes into consideration the customer’s ability to pay, and one which is costbased. In designing rates, there are always trade-offs between the goals and objectives and a delicate balance must always be struck.
The establishment of cost-based and proportional rates was of paramount importance in the development of the City’s sewer Study. Meeting the requirements and documenting the steps taken to develop cost-based and proportional rates has been in the forefront with the legal challenges in the State of California on utility rates. A focus has been given to meeting the requirements of California Constitution article XIII D, section 6 (Article XIII D). A key component F Sewer Rate Design 17 City of Ava Ion — Sewer Rate Study of Article XIII D is the development of rates which reflect the cost of providing service and are proportionally distributed between the customer classes of service, and the customers within each class. HDR would point out that there is no single methodology for proportionallyassigning costs to the customer classes. The Water Environment Federation Manual of Practice #27 provides methodologies which may be used to establish cost-based rates.
Unfortunately, Article XIII D is not prescriptive and does not provide a specific methodology for establishing cost-based rates.
HDR is of the opinion that the proposed rates meet the legal requirements of Article XIII D.HDF re4eet anot exceed the funds required to provide the property related service (i.e., sewer service). The proposed rates are designed to collect the overall revenue requirement of the City’s sewer system. • The revenues derived from sewer rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the City’s sewer rates are used exclusively to fund the City’s sewer system O&M and provide adequate funding for capital improvement, repair, and replacement. • The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel. The Study has appropriately grouped customers into customer classes of service (residential, restaurants, hotel, theatre, etc.) that reflect the varying customer usage patterns and system requirements (i.e., the benefits they receive from and burdens they place on the system) of each customer class of service. The grouping of customers and rates into these classes of service creates the proportionality expected under Article XIII D by having differing rates by customer classes of service which reflect both the level of revenue to be collected by the utility, and the manner in which these costs are incurredand assigned to customer classes of service based upon their proportional impacts.
4.2 Overview of the Proposed Rate Structures
The main goal was to provide the cost-basis, or justification, for the proposed rates to reflect the rate setting requirements in California. This was accomplished through the development of the cost of service analysis using industry standard approaches (WEF MOP #27) and the City’s systemand customer characteristics. The cost of service analysis provided the allocation and proportional distribution of costs as developed in the cost basis for purposes of final proposedrates.
4.3 Present and Proposed Sewer RatesThe City’s rate structure is an annual flat fixed charge for all customers, and only the units andthe level of rate are unique to each class. In developing the proposed sewer rates, the current rate structure was maintained and the level of the rates was adjusted to reflect the revenue target for the proposed five-year rate setting period. As noted, the proportionality, and calculation of the proposed rates, are maintained based on the review of the flow assumptions and calculation of an EDU. The annual flat fixed charges were adjusted to maintain revenue sufficiency and to maintain parity between customers over the five-year period.
F Sewer Rate Design 18 City of Ava Ion — Sewer Rate Study Provided below in Table 4 — 1 is a summary of the present and proposed annual rates for the City’s sewer customers. The proposed rate is calculated by taking the rate for Residential (which is set at 1 EDU) and multiplying it by the current EDU ratios. The proposed rates for subsequent years were calculated based on the annual rate adjustment taken from the revenue requirement analysis and shown in Table 4—1.
Table 4—1
Present and Proposed Annual Sewer Rates
Present FY FY FY FY FY Customer Class Rates 2026-27 2027-28 2028-29 2029-30 2030-31 Residential $1,097.50 $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00 Commercial
Public Shower $364.30 $398.90 $436.80 $478.30 $507.00 $537.40Hotel 603.60 660.95 723.70 792.45 840.00 890.40Laundries 1,481.60 1,622.35 1,776.45 1,945,20 2,061.90 2,185.60 Shops / Offices 1,097.50 1,201.75 1,315.90 1,440.90 1,527.35 1,619,00Other Combined Shops/Offices* 702.35 769.05 842.10 922.10 977.45 1,036.10 Take-out Restaurant 1,666,00 1,824.25 1,997.55 2,187.30 2,318.50 2,457.65 Churches 2,218.75 2,429.50 2,660.30 2,913.00 3,087.75 3,273.05 Bar / Restaurant (<100) 3,300.00 3,613.45 3,956.70 4,332.55 4,592.45 4,868.05Bar / Restaurant (>100) 4,934.40 5,403.10 5,916.30 6,478.30 6,867.00 7,279.05
4.4 Summary of the Sewer Rate Study Update
This completes the analysis for the City’s sewer utility. Based on the operating and capital needs, it is recommended that rates be increased by 9.5% in FY 2026-27 through FY 2028-29 and 6.0% in FY 2029-30 and FY 2030-31. The City will continue to monitor the need for future adjustments and implement rates that reflect the costs incurred to provide sewer services. As noted, the data typically used to establish the customer relationships, in this case metered water consumption, is not available. Given this, industry standard flow rates were used to establish the relationships between the customer classes of service, the technical analyses completed as part of the comprehensive sewer rate study can be found in the Technical Appendix of this report.
F Sewer Rate Design 19 City of Ava Ion — Sewer Rate Study Technical Appendix
F Technical Appendix City of Ava Ion — Sewer Rate Study 20 City of Avalon
Sewer Rate Study
Revenue Requirement Summary
Exhibit 1
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenue
Rate Revenues $3,229,210 $3,229,210 $3,229,210 $3,229,210 $3,229,210 $3,229,210 Non-Operating Revenues 296,000 341,746 364,222 394,998 422,457 454,946 Total Revenues $3,525,210 $3,570,956 $3,593,432 $3,624,208 $3,651,667 $3,684,156 Expenses
Total Operations & Maintenance $3,297,096 $3,449,058 $3,608,090 $3,774,525 $3,948,709 $4,131,006 Net Debt Service 0 0 0 0 0 0
Rate Funded Capital 225,000 370,000 575,000 820,000 720,000 790,000 Reserve Funding 3,114 58,673 53,035 40,207 247,866 297,705 Total Revenue Requirement $3,525,210 $3,877,731 $4,236,125 $4,634,733 $4,916,576 $5,218,712 Balance/(Deficiency) of Funds $0 ($306,775) ($642,694) ($1,010,524) ($1,264,908) ($1,534,555) Bal/(Def.) as a % of Rate Rev. 0.0% 9.5% 19.9% 31.3% 39.2% 47.5% Proposed Rate Adjustment 0.0% 9.5% 9.5% 9.5% 6.0% 6.0%
Add’l Revenue from Adj. $0 $306,775 $642,694 $1,010,524 $1,264,908 $1,534,555 Total Bal./(Def.) of Funds $0 ($0) ($0) $0 $0 $0
Additional Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% DSC
Before
Ratio
RateAdjustment N/A N/A N/A N/A N/A N/A
After Rate Adjustment N/A N/A N/A N/A N/A N/A
Avg Res Annual Bill $1,097.50 $1,201.76 $1,315.93 $1,440.94 $1,527.40 $1,619.04 Total Ending Balance $1,442,161 $1,022,397 $772,299 $905,412 $1,308,872 $1,812,416 lof9 03/12/2026
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Sewer Rate Study
Exhibit 2
Escalation Factors
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenues
Customer Growth Calculated 0.0% 0.0% 0.0% 0.0% 0.0%
Consumption Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Miscellaneous Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expenses
Labor Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits -Medical Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits -Other Budget 3.5% 3.5% 3.5% 3.5% 3.5%
Materials & Supplies Budget 3.5% 3.5% 3.5% 3.5% 3.5%
Equipment Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Miscellaneous Budget 3.0% 3.0% 3.0% 3.0% 3.0%
Utilities Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Insurance Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Environ Budget 4.7% 4.7% 4.7% 4.7% 4.7%
Rate Adjustment 0.0% 9.5% 9.5% 9.5% 6.0% 6.0%
Flat Budget 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
New Debt Service
Low Interest Loans
Term in Years 20 20 20 20 20 20
Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Bond
Term inYears 20 20 20 20 20 20
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
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Evhibit S
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FT 2027-28 FY 2028-29 FY 2029-30 FT 2030-31 Notes Rote
Revenues
Total
Revenues
Rote Revenues $3,229,210 $3,229,210 $3,229,210 $3,229,210 $3,229,210 $3,229,210 As Customer Growth Non-Operoting Revenues
Interest $43,500 $24,646 $17,947 $16,777 $22,143 $31,213 CaIc’d on Oper. Balance Harbor tnterprise Fund 242,500 307,101 336,275 368,221 390,314 413,733 As Rate Adjustment Sewer Lateral Fee 10,000 10,000 10,000 10,000 10,000 13,000 As Miscellaneous Revenues Island Co Discharge Permit 0 0 0 0 0 0 As Miscellaneous Revenues Tutu! Non-Operoting Revenues $296,000 $341,746 $364,222 $394,998 $422,457 $454,946 Total Revenues $3,525,210 $3,570,956 $3,593,432 $3,624,208 $3,651,667 $3,684,156 Sewer Service
Solories & Benefits
Salaries Regular $61,232 $64,264 $67,508 $70,684 $74,426 $78,149 As Labor FICA Retirement 9,396 9,725 10,065 10,418 10,782 11,160 As Benefits - Other CALPers Unfunded Liability PMT 270 279 289 299 310 321 As Benefits - Other Health / Life Insurance 1,415 1,486 1,560 1,638 1,720 1,806 As Benefiss - Medical Workers Comp 4,303 4,518 4,744 4,981 5,230 5,492 As Benefits - Medical Unemployment Ins 166 174 183 192 202 212 As Benefits - Medical Clothing Allowance 0 0 0 0 0 0 As Benefits - Other
Tutu! Sulearieo & Benefits $76,782 $60,476 $84,350 $88,412 $92,672 $97,139 Maintenance & Opemtions
Special Dept. Expense $1,000 $1,030 $1,061 $1,093 $1,126 $1,159 As Miscellaneous Utilities General 9,000 9,360 9,734 10,124 10,529 10,950 As Utilities Utilities - Electricity 125,000 130,000 135,200 140,608 146.232 152,082 As Utilities Utilities Gas / Water / Damp 150,000 156,000 162,240 168,730 175.479 182,498 As Utilities Miscellaneous Fees 35,000 36,050 37,132 38,245 39,393 40,575 As Miscellaneous Storm Damage 10,500 10,815 11.139 11,474 11,81B 12,172 As Miscellaneous Emergency Maintenance 150,000 156,000 162,240 168,730 175.479 182,498 As Equipment Communications 3,5131 3,605 3,713 3,825 3,939 4,057 As Miscellaneous Tutu! Maintenance & Opemtions $484,000 $502,860 $522,459 $542,827 $563,994 $585,991 Contract Services
Professional Services $52,500 $55,125 $57,881 $60,775 $63,814 $67,005 As Labor Pro, Srvcs -Annual Permitting 72,500 76,125 79,931 83.928 88,124 92,530 As Labor Pro. Srvcs- H25 Control 0 0 0 0 0 0 An Labor
Pro. Srvcs - Falconer 60,000 63,000 66,150 69,458 72,930 76,577 As Labor City Attorney Retainer 13,000 13,650 14,333 15,049 15.802 16,592 As Labor Environ StrateP9 Consultants 1,697,951 1,777,755 1,961,309 1,948,791 2,040,384 2,136,282 As Environ Tutu! Contract Services $1,899,991 $1,985,655 $2,079,604 $2,178,001 $2,281,054 $2,388,986 Internal Services
General Insurance $88,833 $93,274 $97,938 $102,835 $107,977 $113,375 As Insurance Admix Overhead 267,181 260,540 294,567 309,295 324,760 340,998 As Labor Tofu! Internal Services $356,014 $373,814 $392,505 $412,130 $432,737 $454,374 Total Sewer Service $2,812,747 $2,942,805 $3,078,919 $3,221,370 $3,370,457 $3,526,490 3 of 9 03/12/2026
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tuhibit 3
Revenue Requirement
Budqet Projected
Ff 2025-26 fl 2026-27 Ft 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Sewer Service Public Works
Solorfes & Benefits
Salaries Regular $141,371 $148,440 $155,862 $1t3,655 $171,837 $180,429 As Labor Overtime Regular 4,325 4,541 4,768 5,007 5,257 5,520 As Labor PICA Retirement 25,801 26,704 27,639 28,606 29,607 30,643 As Benefits - Other CALPers Unfunded Liability PMT 36,228 37,496 38,808 40,167 41,572 43,027 As Benefits - Other Health / Life Insarance 33,814 3S,S05 37,280 39,144 41,101 43,196 As Benefits - Medical Workers Comp 10,038 10,540 11,067 11,620 12,201 12,811 As Benefits - Medical Unemployment Ins 389 408 429 450 473 496 As Benefits - Medical Other Personnel Servites 0 0 0 0 0 0 As Benefits - Other Clothing Allowance 1,165 1,206 1,248 1,292 1,337 1,384 As Benefits - Other TotolSolories& Benefits $253,131 $264,848 $277,101 $289,940 $303,386 $317,468 Moinrenonce & Dperotions
Special Dept. tnpense $1,175 $1,210 $1,247 $1,284 $1,322 $1,362 As Miscellaneous Miscellaneous Fees 1S,000 15,450 15,914 16,391 16,883 17,385 As Miscellaneous Totol Moinnenonce & Operotions $16,175 $16,660 $17,160 $17,675 $18,205 $18,751 Controct Services
SWRCB -Waste Discharge Pen $0 $0 $0 $0 $0 $0 As Materials & Supplies SWRCB -Annual Audit SSMP 19,S00 20,183 20,889 21,620 22,377 23,160 As Materials & Supplies Totol Controct Services $19,500 $20,183 $20,889 $21,620 $22,377 $23,160 lnternol Services
General Insurance $0 $0 $0 $0 $0 $0 As Insurance
Admin Overhead 0 0 0 0 0 0 As Labor
Equipment Lease Charges 145,543 1S2,820 180,461 168,484 176,908 185,753 As Labor Totol lnternol Services $145,543 $152,820 $160,461 $168,484 $176,908 $185,753 Total Sewer Service Public Works $434,349 $454,502 $475,610 $497,719 $S20,876 $545,132 Sewer Maintenance & Development
Salaries & Benefits $0 $0 $0 $0 $0 $0 As Labor
Contract Services 0 0 0 0 0 0 As Labor
WWTP - Maint. & Repair of Bldg. Grnds. S0,000 S1,7S0 53,561 SS,436 57,376 59,384 As Materials & Supplies TorolSewerMointenonce& Development $50,000 $51,750 $53,561 $55,436 $57,376 $59,384 Total Operations & Maintenance $3,297,096 $3,409,058 $3,608,090 $3,774,525 $3,948,709 $4,131,006 Debt Service
Interfund Loan $0 $0 $0 $0 $0 $0 Debt Schedule
NemSRflLoans 0 0 0 0 0 0 Calc@3%for2ovrs
New Revenue Bonds 0 0 0 0 0 0 Cult @ 5% for 20 Yrs
Totol Debt Service $0 $0 $0 $0 $0 $0
Less Connection Fees $0 $0 $0 $0 $0 $0
Net Debt Service $0 $0 $0 $0 $0 $0
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Exhibit 3
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Rate Funded Capital $225,000 $370,000 $575,000 $820,000 $720,000 $790,000 $479,328 FY 2024-25 Depr.
Reserve Funding
To / (From) Sewer Fund - 107 $3,114 $58,673 $53,035 $40,207 $247,866 $297,705 To / (From) Sewer Capital Reserve Fund - 108 0 0 0 0 0 0 To / (From) WWTP Replacement Fund - 110 0 0 0 0 0 0
Total Reserve Funding $3,114 $58,673 $53,035 $40,207 $247,866 $297,705 Total Revenue Requirement $3,525,210 $3,877,731 $4,236,125 $4,634,733 $4,916,576 $5,218,712 Bal./(Def.) of Funds $0 ($306,775) ($642,694) ($1,010,524) ($1,264,908) ($1,534,555) Rate Adj. as a % of Rate Rev. 0.0% 9.5% 19.9% 31.3% 39.2% 47.5% Proposed Rate Adjustment 0.0% 9.5% 9.5% 9.5% 6.0% 6.0%
Months ofAdjustment 12 12 12 12 12 12
AddI Revenue from Adj. $0 $306,775 $642,694 $1,010,524 $1,264,908 $1,534,555 Total Bal./(Def.) of Funds $0 ($0) ($0) $0 $0 $0
Additional Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% DSC
Before
Ratio
Rate Adjustment N/A N/A N/A N/A N/A N/A
After Rate Adjustment N/A N/A N/A N/A N/A N/A
Avg Res Annual Bill $1,097.50
After Proposed Rate Adjustment $1,097.50 $1,201.76 $1,315.93 $1,440.94 $1,527.40 $1,619.04 Annual $ Change 104.26 114.17 125.01 86.46 91.64
Cumulative Change 104.26 218.43 343.44 429.90 521.54
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Sewer Rate Study Page 4 of 4
Exhibit 3
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Reserve Funds
Total Beginning Balance $1,564,046 $1,442,161 $1,022,397 $772,299 $905,412 $1,308,872 Sewer Fund - 107
Beginning Balance $1,564,046 $1,442,161 $1,022,397 $772,299 $905,412 $1,308,872 Plus: To Reserves 3,114 58,673 53,035 133,113 403,459 503,544 Interfund Loan Proceeds 0 0 0 0 0 0
Less: Uses of Funds (125,000) (478,438) (303,133) 0 0 0 Ending Balance $1,442,161 $1,022,397 $772,299 $905,412 $1,308,872 $1,812,416 Target: 180 days of O&M $1,625,965 $1,700,905 $1,779,332 $1,861,410 $1,947,309 $2,037,209 Sewer Capital Reserve Fund - 108
Beginning Balance $0 $0 $0 $0 $0 $0
Plus: To Reserves 0 0 0 0 0 0
Less:UsesofFunds 0 0 0 0 0 0
Ending Balance $0 $0 $0 $0 $0 $0
WWTP Replacement Fund - 110
Beginning Balance $0 $0 $0 $0 $0 $0
Plus: To Reserves 0 0 0 0 0 0
Less: Uses of Funds 0 0 0 0 0 0
Ending Balance $0 $0 $0 $0 $0 $0
Total Ending Balance $1,442,161 $1,022,397 $772,299 $905,412 $1,308,872 $1,812,416 6of9 03/12/2026
City of Avalon
Sewer Rate Study
Exhibit 4
Inflation 3.5%
Capital Improvement Plan
Future Unidentified Projects
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 To Cash Reserve $0 $0 $0 $92,906 $155,593 $205,839
Total Capital Improvement Projects $350,000 $848,438 $878,133 $820,000 $720,000 $790,000 Less: Outside Funding Sources
Sewer Fund - 107 $125,000 $478,438 $303,133 $0 $0 $0
Sewer Capital Reserve Fund - 108 0 0 0 0 0 0
WWTP Replacement Fund -110 0 0 0 0 0 0
NewSRFLoans 0 0 0 0 0 0
NewRevenueBonds 0 0 0 0 0 0
Total Outside Funding Sources $125,000 $478,438 $303,133 $0 $0 $0 Rate Funded Capital $225,000 $370,000 $575,000 $820,000 $720,000 $790,000 WWTP Headworks Rehabilitation $100,000 $0 $0 $0 $0 $0
Secondary Clarifier Rehabilitation 250,000 0 0 0 0 0
Collection and Distribution System (75%) 0 323,438 334,758 277,179 215,161 222,691 Treatment Plant (60%) 0 525,000 543,375 449,915 349,246 361,470 Total Capital Projects $350,000 $848,438 $878,133 $727,094 $564,407 $584,161 $0 $0 $0 $0 $0 $0
7 of 9 03/12/2026
City of Avalon Paqel nfl
Sewer Rate Study
Exhibit S
Revenues at Present Rates
Effective 7/1/2025 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Total Fixed Charge Unit Rate
Residential (DU) $1,097.50 2100 2,100
Corn mercial
Public Shower (per sho wer) $364.30 44 44
Hotel (per room) 603.60 823 823
Laundries (per wash unit) 1,481.60 41 41
Shops/Offices (each) 1,097.50 111 111
Combined Shops/Offices ($11,000 sq ft) 702.35 lOS 105
Take-out Restaurant (each) 1,666.00 24 24
Churches (each) 2218.75 3 3
Bar/Restaurant (<100) (each) 3,300.00 15 15
Bar/Restaurant (>100) (each) 4934.40 12 12
3,278 0 0 0 0 0 0 0 0 0 0 0 3,278
TotolfixedCharqeRevenue $3,229,210 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,229,210 Total Revenue $3,229,210 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,229,210 Customer
Summary
Residential 2,100 0 0 0 0 0 0 0 0 0 0 0 175
Commercial
Public Shower 44 0 0 0 0 0 0 0 0 0 0 0 4
Hotel 823 0 0 0 0 0 0 0 0 0 0 0 69
Laundries 41 0 0 0 0 0 0 0 0 0 0 0 3
Shops/ornces 111 0 0 0 0 0 0 0 0 0 0 0 9
Combined Shops/Offices 105 0 0 0 0 0 0 0 0 0 0 0 9
Take-outRestaurant 24 0 0 0 0 0 0 0 0 0 0 0 2
Churches 3 11 0 0 0 0 0 0 0 0 0 0 0
Bar/Restaurant (<100) 15 0 0 0 0 0 0 0 0 0 0 0 1
Bar/Restaurant (>100) 12 0 0 0 0 0 0 0 0 0 0 0 1
3,278 0 0 0 0 0 0 0 0 0 0 0 273
Total Revenue
Residential $2,304,750 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,304,750 Commercial
Public Shower 16,029 0 0 0 0 0 0 0 0 0 0 0 16,029
Hotel 496,763 0 0 0 0 0 0 0 0 0 0 0 496,763
Laundries 60,746 0 0 0 0 0 0 0 0 0 0 0 60,746
Shops/Offices 121,823 0 0 0 0 0 0 0 0 0 0 0 121,823
Combined Shops/Offices 73,747 0 0 0 0 0 0 0 0 0 0 0 73,747 Take-out Restaurant 39,984 0 0 0 0 0 0 0 0 0 0 0 39,984 Churches 6,656 0 0 0 0 0 0 0 0 0 0 0 6,656
Bar/Restaurant (<100) 49,500 0 0 0 0 0 0 0 0 0 0 0 49,500 Bar/Restaurant (>100) 59,213 0 0 0 0 0 0 0 0 0 0 0 59,213 $3,229,210 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,229,210
FY 2024-28 Budget $3,340,238
Difference ($111,028)
Percent -3,3%
FY 2025-25 Budget $3,456,832
Diffrrence ($227,622)
Percent -6.6%
8of9 03/12/2026
Present Proposed Rates
Rates FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Residential $1,097.50 $1,201.75 $1,315.90 $1,440.90 $1,527.35 $1,619.00 Commercial
Public Shower $364.30 $398.90 $436.80 $478.30 $507.00 $537.40 Hotel 603.60 660.95 723.70 792.45 840.00 890.40
Laundries 1,481.60 1,622.35 1,776.45 1,945.20 2,061.90 2,185.60 Shops/Offices 1,097.50 1,201.75 1,315.90 1,440.90 1,527.35 1,619.00 Other Combined Shops/Offices * 702.35 769.05 842.10 922.10 977.45 1,036.10 Take-out Restaurant 1,666.00 1,824.25 1,997.55 2,187.30 2,318.50 2,457.65 Churches 2,218.75 2,429.50 2,660.30 2,913.00 3,087.75 3,273.05 Bar! Restaurant (<100) 3,300.00 3,613.45 3,956.70 4,332.55 4,592.45 4,868.05 Bar! Restaurant (>100) 4,934.40 5,403.10 5,916.30 6,478.30 6,867.00 7,279.05 *For multiple shops and/or office on a single parce!*
9 of 9 03/12/2026
Comprehensive Saltwater
Draft Rate Study
March 2026 FY
FY
March 13, 2026Mr. Matt Baker
Finance Director
City of Avalon
410 Avalon Canyon RoadAvalon, California 90704
Subject: City of Avalon Draft Saltwater Rate Study Report Dear Mr. Baker:
HDR Engineering, Inc. (HDR) is pleased to present the draft report for the saltwater rate study conducted for the City of Avalon (City). The primary objective of conducting a rate study is toestablish cost-based and proportional rates, for a five-year period, which is intended to provideadequate and sustainable funding for the saltwater utility’s operational and capital needs. This report outlines the approach, methodology, findings, and conclusions of the rate study process undertaken for the utility.
This report was developed utilizing the City’s accounting, operating, and historical customer billing records. HDR has relied upon this information to develop our analyses which formed our findings, conclusions, and recommendations. At the same time, the saltwater rate study was developed utilizing generally accepted rate setting principles and the saltwater utility specific system and customer characteristics. The conclusions and recommendations contained within this report are intended to provide the City with cost-based and proportional saltwater rates for its customers.
We appreciate the assistance provided by the City staff, management, and the City Council in the development of the Study.
Sincerely,
HDR Engineering, Inc.
Josiah Close
Utility Rates Project Manager
Tabec4Contents
Executive Summary 1
Overview of the Rate Setting Process 5
1.1 Report Organization 5
1.2 Overview of the Rate Study Process 5
1.3 Generally Accepted Rate Setting Principles 6
1.4 Determining the Revenue Requirement 71.5 Designing Rates 8
1.6 Summary 8
2 Saltwater Revenue Requirement 9
2.1 Determining the Saltwater Utility Revenue Requirement 9
2.1.1 Determining the Time Period and Approach 92.1.2 Projection of Saltwater Revenues 92.1.3 Projection of Saltwater Operation and Maintenance Expenses 10
2.1.4 Projection of Saltwater Capital Improvement Projects and Funding 102.1.5 Projection of Debt Service 12
2.1.6 Reserve Funding 122.1.7 Summary of the Saltwater Revenue Requirement 122.1.8 Review of the Saltwater Reserve Levels 13
2.1.9 Consultant’s Conclusions 14
3 Saltwater Cost of Service 15
3.1 Objectives of a Cost of Service Analysis 153.2 Development of the Saltwater Cost of Service 15
3.3 Consultant’s Conclusions 15
4 Saltwater Rate Design 16
4.1 Rate Design Criteria and Considerations 16
4.2 Overview of the Proposed Rate Structures 174.3 Present and Proposed Saltwater Rates 174.4 Summary of the Saltwater Rate Study 18 Technical Appendix 19
F Table of Contents City of Ava Ion — Saltwater Rate Study I xecutive
HDR was retained by the City of Avalon to conduct a comprehensive saltwater rate study (Study).
The objective of the Study was to review the City’s saltwater utility operating and capital costs and develop cost-based and proportional proposed saltwater rates for the City’s customers. The Study determined the adequacy of the existing saltwater rates and provides the framework for cost-based and proportional proposed saltwater rates.Overview of the Rate Study Process A saltwater rate study uses three interrelated analyses to address the sufficiency and proportionality of a utility’s rates. These three analyses are a revenue requirement analysis, a cost of service analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES-i.
Figure ES—i
Overview of the Comprehensive Rate Analyses
Compares the revenues to the expenses of
Revenue Requirement Analysis ! the utility to determine the overall level of rate adjustment required
Distributes the revenue requirement to the
various customer classes ofservice in a Cost ofService Analysis proportional manner ..-
Considers both the revenue
Rate Design Analysis requirement and cost ofservice
..... .:=.:‘‘-
results to develop the proposed rates
The results from each of the above tasks were used as the basis for establishing cost-based and proportional rates for the City’s saltwater utility customers.Key Rate Study Results The technical analysis for the City’s saltwater rate study was developed based on the operating and capital infrastructure costs necessary to provide saltwater service to the City’s customers.
The City’s comprehensive saltwater rate study resulted in the following key findings, conclusions, and recommendations:
• A revenue requirement analysis was developed for the projected time period of FY 2025- 26—FY2035-36
• The starting point for the revenue requirement analyses was the City’s adopted FY 2025- 26 O&M budget and capital improvement plans
F Executive Summary 1 City of Ava Ion — Saltwater Rate Study • O&M expenses are projected to increase at historical inflationary levels, with no assumed changes to levels of service or anticipated extraordinary expenses • The revenues need to be increased to prudently fund the operating and capital needs over the next 5-year period
• A five-year rate transition plan (FY 2026-27 — FY 2030-31) was developed to adequately fund the operating and capital needs based on the Study assumptions / 6.0%, annually, from FY 2026-27 through FY 2030-31
• A cost of service analysis was developed as part of the Study• The Study developed proposed rates for the FY 2026-27 through FY 2030-31 based on the overall revenue needs and proportional allocation of costs • By FY 2030-31, the City should review the financial/rate status and the potential need for additional rate adjustments and/or a rate structure review Summary of the Saltwater Revenue Requirement Analysis
The starting point of the saltwater revenue requirement analysis was the adopted FY 2025-26 budget. HDR developed a projection of revenues and expenses for future years based on assumed escalation (inflationary) factors. The focus for purposes of rate setting was the next fiveyear period (FY 2026-27 — FY 2030-31).
The proper and adequate funding of capital projects is important to maintain the City’s existing saltwater infrastructure and service levels. At the same time, it is important to create a funding plan which maximizes the amount of funds available for capital investment yet minimizes saltwater rates over time if feasible. As part of the City’s proposed capital funding plan, the City is projected to annually fund $120,000 in FY 2025-26 and increases to $350,000 by FY 2030-31; the average is approximately $250,000 per year. In addition to rate funding, it is assumed thatthe City will utilize the annual assessment revenues for capital and a limited amount of available reserves to fund the capital improvement plan. Provided below in Table ES - 1 is a summary of the capital improvement funding plan over the rate setting period (FY 2025-26 through FY 2030— 31).
Table ES—i
Summary of the Capital Improvement Plan ($000)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Total capital Projects $0 $458 $488 $416 $332 $353
Future unidentified Projects o 0 0 0 0 0
To Capital Reserves 150 0 0 0 0 0
Total $150 $458 $488 $416 $332 $353
Less: Other Funding $0 $283 $268 $136 $2 $3
Total Rate Funded Capital $150 $117 $220 $280 $330 $350 The revenue requirement analysis sums the saltwater utility’s operating and capital expenses and compares it to the total saltwater revenues to determine if a rate adjustment is necessary and, if F Executive Summary 2 City of Avalon — Saltwater Rate Study so, at what level. As noted, a rate transition plan was developed to meet the financial needs of the saltwater utility. The summary of the saltwater revenue requirement shown in Table ES — 2 indicates the need for rate adjustments to properly fund the identified expenses of the saltwater utility.
Table ES-2
Summary of the Saltwater Revenue Requirement ($000s)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Revenues
Rate Revenues $845 $845 $845 $845 $845 $845Non-Operating Revenues 126 103 106 111 119 131Total Revenues $971 $948 $951 $956 $964 $976 ExpensesO&M Expenses $817 $855 $895 $937 $982 $1,028
Rate Funded Capital 150 175 220 280 330 350Net Debt Service 0 0 0 0 0 0 To/(From) Reserve Funding 4 (1) 4 3 23 83
Total Expenses $971 $1,029 $1,119 $1,220 $1,334 $1,461Bal./(Def.) of Funds $0 ($80) ($168) ($264) ($370) ($485) Deficiency as % of Rate Revenue 0.0% 9.5% 19.9% 31.3% 43.8% 57.4% Proposed Rate Adjustments 0.0% 9.5% 9.5% 9.5% 9.5% 9.5% Addi Revenue with Rate Adj. $0 $80 $168 $264 $370 $485
The results of the saltwater revenue requirement show the need for annual 6.0% rate adjustments in FY 2026-27 through FY 2030-31. The total deficiency of revenues prior to the proposed rate revenue adjustments ranges from $80,000 in FY 2026-27 to $485,000 by FY 2030-
31. The level of the overall deficit is driven, in part, by the increased funding from rates for capital improvement projects as well as general inflation of annual O&M expenses. The proposed rate adjustments are designed to provide sufficient revenue to fund the annual O&M and capital needs of the saltwater utility, as well as maintaining financial metrics such as reserve balances.
Summary of the Saltwater Cost of Service Analysis
The saltwater cost of service analysis reviewed the current saltwater rates related to the proportionality of the rates. The City does not meter or monitor saltwater use for the customers which makes the assessment less straightforward and more challenging. As a result, the Study reviewed the assumed flow generated by each customer class and their related contribution to flows from saltwater use to flush toilets for the customer types. HDR researched available industry information to review the flow assumptions for toilets for different customer classes.
These estimated flows from each of these sources were used to determine the proportional share of costs related to each customer class. After the review, it is proposed that the current flow ratioassumptions be maintained and only the level of the rates be adjusted to reflect the revenue needs of the utility and the relationship between the customers.
F Executive Summary 3 City of Ava Ion — Saltwater Rate Study Summary of the Saltwater Rate Design Analysis
As mentioned above, the proposed rates maintain the current saltwater fixed rate structure. That is, only the level of the rate revenue has been proposed to be adjusted based on therecommendations of the Study. Provided below in Table ES — 3 are the present and proposed annual saltwater rates.
Table ES—3
Present and Proposed Annual Saltwater Rates
Present FY FY FY FY FY Billing Unit Rates 2026-27 2027-28 2028-29 2029-30 2030-31 Residential Dwelling Unit $300.60 $329.15 $360.40 $394.65 $432.15 $473.20 Commercial Per Toilet 300.60 329.15 360.40 394.65 432.15 473.20 Hotel Per Toilet 165.35 181.05 198.20 217.05 237.70 260.25 Section 4 of this report provides a detailed discussion of the current and proposed saltwater rates along with a component by component summary of the proposed saltwater rates for FY 2026-27 through FY 2030-31.
Summary of the Saltwater Rate Study
The adequacy of the City’s saltwater rates were reviewed by HDR. Based upon the analyses developed herein, HDR has proposed a comprehensive set of rate recommendations for the saltwater utility. The following sections of the report provide a more detailed discussion of the technical analyses undertaken - along with the findings, conclusions, and recommendations ofthe study.
F Executive Summary 4 City of Ava Ion — Saltwater Rate Study 1 Overview of the Rate Setting Process
The primary goal of a rate study is to determine whether existing utility rates are adequate (sufficient) to meet the utility’s operating and capital expenses. Rates set too low may result ininsufficient funds to maintain system integrity. The Study provides a cost-basis and rationale formaking appropriate rate adjustments, as well as maintaining proportionality between the City’s saltwater customers.
1.1 Report Organization
This report is organized in a sequential manner that first provides an overview of utility rate setting principles in this section, foHowed by sections that detail the specific technical and analytical steps used to develop the City’s proposed saltwater rates. The following sections comprise the City’s saltwater rate study report:
• Section 3 reviews the development of the revenue requirement analysis• Section 4 reviews the development of the cost of service analysis• Section 5 reviews the development of the rate design analysis A technical appendix is attached at the end of the report which provides a copy of the technical analyses undertaken in the preparation of this report.
1.2 Overview of the Rate Study Process
A rate study consists of three interrelated analyses, all which were performed for the saltwater utility rate study. Figure 1 - 1 provides an overview of these analyses.
F Overview of the Rate Setting Process City of Ava Ion — Saltwater Rate Study 5 Figure 1—1
Overview of the Comprehensive Rate Analyses
Compares the revenues to the expenses of
the utility to determine the overall level of
rate adjustment required
Distributes the revenue requirement to the
customer classes ofservice in a
proportional manner
Considers both the revenue
Rate Design Analysis requirement and cost ofservice - results to develop the proposed rates A revenue requirement analysis is concerned with the overall funding sources and expenses, operating and capital, of the utility. From this analysis, a determination can be made as to theoverall level of adjustment to rate revenues. Next, a cost of service analysis is performed to proportionally distribute the revenue requirements to the different types of customers served (e.g., residential, commercial). Finally, once an overall level of rate adjustment is determined and a proportional distribution of those costs is completed, the last step of the rate study process is the design of proposed rates to collect the appropriate level of revenues while considering the other rate design goals and objectives of the utility (e.g., revenue stability, conservation). For theCity’s saltwater rate study, all three analyses were conducted. The results from each task of the Study, for the saltwater utility, were used as the basis for establishing cost-based and proportional rates for the City’s customers.In developing the Study, HDR utilized generally accepted rate setting techniques and industry best practices and the saltwater utility specific operating and customer characteristics. Thisreport discusses the methodology, findings and conclusions of the Study. The Study has focused on the level of rate revenue needed to fully fund the utility on a standalone basis, and the rates needed to best generate that level of funding, while meeting the City’s goals and objectives.
1.3 Generally Accepted Rate Setting Principles
As a practical matter, utilities should consider setting their rates around generally accepted orglobal principles and guidelines. Utility rates should be:
• Cost-based, proportional, and set at a level that meets the utility’s full revenue requirement
• Easy to understand and administer• Designed to conform with generally accepted rate setting techniques Stable in their ability to provide adequate revenues for meeting the utility’s financial,operating, and regulatory requirements F Overview of the Rate Setting Process 6 City of Avalon — Saltwater Rate Study Revenue Requirement Analysis
Cost of Service Analysis
I
• Established at a level that is stable from year-to-year from a customer’s perspective • Established in compliance with State law
1.4 Determining the Revenue RequirementMost public utilities use the cash basis1 approach for establishing their revenue requirement and setting rates. This approach conforms to most public utility budgetary requirements and thecalculation is easy to understand and determine. A public utility:
• Totals its cash expenditures for a period of time to determine required revenues • Adds operation and maintenance (O&M) expenses to applicable taxes or transfer payments to determine total operating expenses. Operation and maintenance expensesinclude the materials, electricity, labor, supplies, etc. needed to keep the utility functioning.
Calculates capital costs by adding debt service payments (principal and interest) to capital improvements financed with rate revenues. In lieu of including capital improvements financed with rate revenues, a utility sometimes includes annual depreciation expense to stabilize annual revenue requirement.
Under the cash basis approach, the sum of the capital and operating expenses equals the utility’srevenue requirement during any period of time (see Table 1 -2).
Table 1-2
Cash versus Utility Basis Comparison
Cash Basis Utility Basis (Accrual)
+ O&M Expense + O&M Expense
+ Taxes or Transfer Payments + Taxes or Transfer Payments+ Capital Improvements Financed with Rate + Depreciation Expense Revenues ( Depreciation Exp.)
+ Debt service (Principal + Interest) + Return on Investment = Total Revenue Requirement = Total Revenue Requirement Note that the two portions of the capital expense component (debt service and capitalimprovements financed from rates) are necessary under the cash basis approach because utilities generally cannot finance all their capital facilities with long-term debt. An exception occurs if a public utility provides service to a wholesale or contract customer. In this situation, a public utility could use the utility basis approach (see Table 1 -2) to earn a reasonable return on its investment.1 This is the basis of accounting under which revenues are recorded when cash is received and expenditures are recoded when cash is disbursed.
F Overview of the Rate Setting Process 7 City of Ava Ion — Saltwater Rate Study The analyses developed within this report utilize the cash basis methodology. This is consistent with the City’s past practices of establishing proposed rates.
1.5 Designing Rates
For the Study, rates that meet the utility’s objectives are designed based on the revenue requirement and cost of service analyses. This provides rates that are cost-based (i.e., designed to collect a cost-based level of revenues) and proportional (i.e., reflect the costs placed on the system by a customer class and customers within a class).
1.6 Summary
This report will review and discuss the Study prepared for the City. This report has been prepared utilizing generally accepted rate setting methodologies and techniques to meet the requirements of Proposition 218.
F Overview of the Rate Setting Process 8 City of Avalon — Saltwater Rate Study 12 Saltwater Revenue Requirement
This section of the report provides for the development of the revenue requirement analysis forthe City’s saltwater utility. The saltwater utility is utilized to flush the toilets within the City’s service area to displace the demand for potable water. One of the main objectives of thesaltwater rate study is to develop cost-based and proportional rates. Provided below is a detaileddiscussion of the development of the revenue requirement for the saltwater utility.
2.1 Determining the Saltwater Utility Revenue RequirementIn developing the saltwater revenue requirement, it was assumed that the saltwater utility must financially “stand on its own” and be properly funded. As a result, the saltwater revenue requirement, as developed herein, assumes the full and proper funding needed to operate andmaintain the system on a financially prudent basis.2.1.1 Determining the Time Period and Approach The first step in calculating the revenue requirement for the saltwater utility was to establish atime frame for the revenue requirement analysis. For the Study, the revenue requirement was developed for the time period of FY 2025-26 — FY 2030-3 1.
The second step in determining the revenue requirement for the City was to decide on the basis of accumulating costs. As discussed in the previous section, the saltwater utility’s revenue requirement was established using a cash basis approach, the same methodology that was usedin prior rate studies.
The primary financial inputs in this process were the City’s historic saltwater customer billing records, adopted O&M budget, and capital improvement plan. Presented below is a discussion of the analytical steps and key assumptions contained in the development of the saltwater revenue requirement analysis.2.1.2 Projection of Saltwater Revenues The first step in developing the saltwater revenue requirement was to develop a projection of rate revenues which was based on the customer billing units and current rates. Currently, there are three major saltwater customer classes of service: residential, commercial, and hotel. The majority of the City’s saltwater rate revenues are derived from residential customers. In total, atpresent saltwater rates, the City is projected to receive approximately $845,000 in rate revenue in FY 2025-26. Over the planning horizon of this study no customer growth has been assumed, which reflects the historical growth on the City’s system, the total saltwater rate revenues are expected to remain flat.
In addition to rate revenues, the saltwater utility also receives miscellaneous revenues. The utilityis projected to receive approximately $126,000 in miscellaneous revenues in FY 2025-26.Miscellaneous revenues are projected to decrease slightly to $119,000 in FY 2030-31.
F Saltwater Revenue Requirement 9 City of Avalon — Saltwater Rate Study In total, including both saltwater rate and miscellaneous revenues, the utility’s total projected revenues are expected to be approximately $971,000 in FY 2025-26 and, with the slight decreasein miscellaneous revenues, reducing slightly to $964,000 through FY 2030-31. A summary of theprojection of miscellaneous and rate revenues is included in the Technical Appendix, Exhibit 3.2.1.3 Projection of Saltwater Operation and Maintenance Expenses Operation and maintenance expenses are incurred by the utility to operate and maintain theexisting saltwater utility services. The costs incurred in this area are expensed during the current year are not capitalized or depreciated. To begin the process of projecting O&M expenses overthe planning horizon, escalation factors were developed. Escalation factors were developed forthe basic types of expenses the City incurs: labor, benefits, materials and supplies, utilities, insurance, and miscellaneous expenses. The escalation factors generally range from 3.5% to 5.0%per year based on historic inflationary factors. These escalation factors are shown in Exhibit 2 of the Technical Appendix.
Starting with the adopted FY 2025-26 budget, O&M expenses were projected over the five-year period (FY 2026-27 — FY 2030-31) based on the escalation factors described above. The total operation and maintenance expenses for the utility in FY 2025-26 are approximately $816,000and increase to $1.0 million by FY 2030-31. The detail of these expenses is shown in Exhibit 3 of the Technical Appendix.
2.1.4 Projection of Saltwater Capital Improvement Projects and Funding The City’s saltwater utility has several capital improvement projects planned over the study’s time horizon. Over the planning period of FY 2025-26 — FY 2030-31, there is approximately $2.2 million in projected capital projects averaging $366,000 annually. A summary of the capital funding plan developed for the saltwater utility is shown in Table 2-1, including assumed fundingsources for the capital plan. This can be found in further detail in Exhibit 4 of the Technical Appendix.
F Saltwater Revenue Requirement 10 City of Ava Ion — Saltwater Rate Study Table 2—1
Summary of the Capital Improvement Plan ($000)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Total Capital Projects $0 $458 $488 $416 $332 $353
Future Unidentified Projects 0 0 0 0 0 0
To Capital Reserves 150 0 0 0 0 0
Total $150 $458 $488 $416 $332 $353
Less: Other Funding
Saltwater Fund - 112 $0 $0 $118 $136 $0 $3Saltwater Reserve Fund - 113 0 283 150 0 2 0 NewRevenueBonds 0 0 0 0 0 0Total $0 $283 $268 $136 $2 $3 Total Rate Funded Capital $150 $175 $220 $280 $330 $350 There are numerous funding sources that can be used to fund the capital projects. Among the methods that may be used to finance these saltwater capital improvement projects are longterm debt, reserves, and rates. Historically the City has primarily utilized rates and reserves to fund annual capital improvements and the City is projected to continue to providing funding in this way. Provided below is a summary of the typical funding sources the City has used, and will continue to use, to fund the capital improvements over the next five year period.
2.1.4.1 Rate Funding
A general financial guideline states that, at a minimum, a utility should fund an amount equal to or greater than annual depreciation through rates. Annual depreciation expense reflects thecurrent investment in saltwater plant being depreciated or “losing” its useful life. Therefore, this portion of plant investment needs to be replaced to maintain the existing level of infrastructure.
While the general financial guideline suggests funding an amount at least equal to the depreciation expense, consideration should also be given to funding within rates some amount greater than the annual depreciation expense to reflect the cost of replacement. Annual depreciation expense reflects the cost of infrastructure that was constructed, on average, 15 to 20 years ago. Funding for the replacement cost is prudent and minimizes costs/rates over time.
As a point of reference, the City’s current annual depreciation expense for the saltwater system is approximately $52,000 as provided in the City’s financial records for FY 2024-25. The City has made commitments recently to cash fund capital projects. As a result, rate funded capital isincreased from $150,000 in FY 2025-26 to $350,000 in FY 2030-31 and averages $250,000 per year over the review period.2.1.4.2 Reserve FundingAvailable reserve funds are another method of funding capital improvements. Reserve funds are typically funded by annual surpluses or strategic planning to proactively enhance reserve balances. This allows the City to reserve funds for projects in later years when more or largerprojects are undertaken. This approach helps to mitigate future rate adjustments and smoothrates overtime. During the review period, approximately $692,000 in available reserves are used F Saltwater Revenue Requirement 11 City of Avalon — Saltwater Rate Study to fund capital projects. Over the planning horizon, close attention should be given to the reserve balance as to not reduce fund balances below minimum targets described below.
2.1.4.3 Long-Term Debt
Another potential funding source for capital projects is the issuance of long-term debt. Whilethere are certain advantages and disadvantages with the issuance of long-term debt, it is important to weigh them when deciding whether to issue or not. Long-term debt is typically notissued to fund renewal and replacement projects similar to those being proposed during this time period. Rather, long-term debt is often issued for major capital projects which have an immediateimpact on rates and long-term debt is a financing mechanism to smoothly finance/fund the major capital project. For this analysis, there is no assumed new debt issuances over the review periodof FY 2025-26 through FY 2030-31.
2.1.5 Projection of Debt Service
The final component of the saltwater revenue requirement is debt service. At the present time,the City has no outstanding debt obligations. As mentioned, no long-term debt issuances were projected or anticipated within the saltwater capital improvement plan.
2.1.6 Reserve Funding
The Study has used reserve funding - or the transfer to/from reserve funds - to smooth and mitigate the rate adjustments in any particular year. Reserve funding can also be used to helpbuild or replenish reserves if they have been drawn down in prior years. In this analysis, change in working capital is primarily used to balance revenue requirements to the proposed rate adjustments.
2.1.7 Summary of the Saltwater Revenue Requirement
Given the above projections of revenues and expenses, a summary of the revenue requirement for the saltwater utility can be developed. In developing the final revenue requirement, consideration was given to the financial planning considerations of the City. In particular,emphasis was placed on attempting to minimize rates, yet still have adequate funds to support the operational and capital expenses throughout the projected time period. Presented in Table 2 - 2 is a summary of the saltwater revenue requirement. A detailed analysis of the saltwater revenue requirement can be found in Exhibit 3 of the Technical Appendix.
F Saltwater Revenue Requirement 12 City of Ava Ion — Saltwater Rate Study Table 2-2
Summary of the Saltwater Revenue Requirement ($0005)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Revenues
Rate Revenues $845 $845 $845 $845 $845 $845
Non-Operating Revenues 126 103 106 111 119 131Total Revenues $971 $948 $951 $956 $964 $976 ExpensesO&M Expenses $817 $855 $895 $937 $982 $1,028
Rate Funded Capital 150 175 220 280 330 350
Net Debt Service 0 0 0 0 0 0Reserve Funding 4 (1) 4 3 23 83Total Expenses $971 $1,029 $1,119 $1,220 $1,334 $1,461Bal./(Def.) of Funds $0 ($80) ($168) ($264) ($370) ($485)BaI./(Def.) as % of Rate Revenue 0.0% 9.5% 19.9% 31.3% 43.8% 57.4% Proposed Rate Adjustments 0.0% 9.5% 9.5% 9.5% 9.5% 9.5% Adcl’l Revenue with Rate Adj. $0 $80 $168 $264 $370 $485 It is important to note the annual deficiencies shown in Table 2 - 2 are cumulative. That is, anyrate adjustments in the initial years will reduce the overall deficiency in the remaining years. Theresults of the revenue requirement analysis indicate, absent the proposed rate adjustments, a deficiency of funds over the review period (FY 2025-26 — FY 2030-31). The deficiency ranges fromapproximately $80,000 in FY 2025-26 to $485,000 in FY 2030-31. Over this time period, theoverall deficiency in rates is 57.4%. The level of this overall deficiency in rates is being driven by investments in capital infrastructure (i.e., annual renewal and replacement capital funding) as well as inflationary increases in O&M expenses. Based on the City’s saltwater revenue requirement analysis, annual rate adjustments have been proposed over the five-year period.
The proposed rate transition plan in Table 2 - 2 is projected to adequately fund the City’s saltwater O&M, along with the planned capital improvement projects identified as part of thisstudy. At the same time, these proposed rate adjustments will strengthen the overall financial health of the saltwater utility.
2.1.8 Review of the Saltwater Reserve Levels
F Saltwater Revenue Requirement 13 City of Ava Ion — Saltwater Rate Study Reserves are an important part of a utility’s financial picture. There can be many different purposes for reserves. They are also an indicator of the long-term financial health of the utility.
The reserve fund has a minimum ending fund balance target of 180 days of O&M expenses, which is approximately $522,000 for FY 2025-26. Over this planning period, the City is projected tomaintain reserve levels above this minimum target. $1200000$1,000,000
$800,000$600,000$400,000 - $200,000
Saltwater Utility - Reserve Funds
$0
FY 2020-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Saltwater Fund - 112 Saltwater Reserve Fund - 113 — — — TareI 180 days of O&M
2.1.9 Consultant’s Conclusions
Based on the City’s revenue requirement analysis the proposed overall saltwater rate adjustmentis 6.0%, annually, in FY 2026-27 through FY 2030-31. These proposed rate adjustments areneeded to fully fund the projected operating costs of the utility, along with the capitalimprovement plan as outlined in this report. j Saltwater Revenue Requirement City of Avalon — Saltwater Rate Study 14 13 Saltwater Cost of Service
In the previous section, the revenue requirement analysis focused on the total revenues required to adequately fund the City’s saltwater utility. This section will provide an overview of the second step in a comprehensive saltwater rate study; the cost of service analysis developed for the City’ssaltwater utility.
A saltwater cost of service analysis determines the proportional distribution of the total revenue requirement to the rate structure components. The previously developed revenue requirement (Section 2) for FY 2026-27 (test year) was utilized in the development of the cost of service analysis.3.1 Objectives of a Cost of Service Analysis
There are two primary objectives in conducting a cost of service analysis:
• Allocate and proportionally distribute the City’s saltwater revenue requirement, and• Derive the cost basis for subsequent rate designs by customer class of service The objectives of the cost of service analysis are different from determining a revenue requirement. As noted in the previous section, a revenue requirement analysis determines theutility’s overall financial needs, while the cost of service analysis determines the proportional manner to collect the calculated revenue requirement.
3.2 Development of the Saltwater Cost of Service
The saltwater cost of service analysis was reviewed with regards to cost basis and the proportionality. Saltwater services are not metered by the City. Given this, an approach was developed to review the estimated flows by customer type. The assumed flow generated by each customer class and their related contribution to flows from saltwater use to flush toilets was reviewed. Based on industry sewer flow information, as saltwater flow data is not available as it is not widely used for these types of services, the flow assumptions for the different customer classes were developed.
3.3 Consultant’s Conclusions
The City has an established rate for residential customers (per account), and commercial and hotels (per toilet). Given the current flow assumptions, which reflect industry standard sewer flow ratios, the current relationships were maintained. Given this, the City’s proposed saltwater rates can be developed.
j Saltwater Cost of Service 15 City of Avalon — Saltwater Rate Study Saltwater Rate Design
The final step of the City’s comprehensive saltwater rate study is the design of proposed rates to collect the appropriate levels of revenues, based on the results of both the revenue requirement and the cost of service analyses. In developing the City’s proposed saltwater rates, consideration is given to the level of the rates as well as the structure of the rates. The level of rates reflects the amount of revenues that should be collected while the structure of the rates is how it is collected (i.e., component charges) from the customers.
The overall revenue level for the City’s has been established in the revenue requirement analysis (Section 2) while the proportional distribution of costs has been developed in the cost of service analysis (Section 3) which provides the revenue levels to be collected based on cost causationand the cost basis for each rate component.
4.1 Rate Design Criteria and Considerations
Prudent rate administration dictates that several criteria that are considered when setting utility rates. Some of these rate design criteria are listed below:
• Rates which are easy to understand from the customer’s perspective• Rates which are easy for the City to administer• Consideration of the customer’s ability to pay • Cost-based and proportional• Continuity, overtime, of the rate making philosophy• Policy considerations (encourage efficient use, economic development, etc.)• Provide revenue stability from month to month and year to year• Promote efficient allocation of the resource• Proportional and non-discriminatory (cost-based)• Meet the requirements of Proposition 218 Given the requirement and intent of Proposition 218, the last consideration, cost-based rates, should be of paramount importance and provide the primary guidance to utilities on ratestructure and policy. However, it is important that the City provides its customers with a proper price signal as to what the service is costing. This goal may be approached through rate level and structure. When developing the proposed rate designs, all the above-listed criteria can be taken into consideration. However, it should be noted that it is difficult, if not impossible, to design arate that meets all the goals and objectives listed above. For example, it may be difficult to design a rate that takes into consideration the customer’s ability to pay, and one which is cost-based. Indesigning rates, there are always trade-offs between the goals and objectives and a delicate balance must always be struck.
The establishment of cost-based and proportional rates was of paramount importance in the development of the City’s saltwater rate study. Meeting the requirements and documenting the steps taken to develop cost-based and proportional rates has been in the forefront with the legal challenges in the State of California on utility rates. A focus has been given to meeting the requirements of California Constitution article XIII D, section 6 (Article XIII D). A key component F Saltwater Rate Design 16 City of Avalon —SaitwaterRate Study of Article XIII D is the development of rates which reflect the cost of providing service and are proportionally distributed between the customer classes of service, and the customers within each class. HDR would point out that there is no single methodology for proportionally assigning costs to the customer classes. The Water Environment Federation Manual of Practice #27 provides methodologies which may be used to establish cost-based rates. Unfortunately, Article XIII D is not prescriptive and does not provide a specific methodologyfor establishing cost-based rates.HDR is of the opinion that the proposed rates meet the legal requirements of Article XIII D. HDR reaches this conclusion based upon the following:
• The revenue derived from saltwater rates does not exceed the funds required to provide the property related service (i.e., saltwater service). The proposed rates aredesigned to collect the overall revenue requirement of the City’s saltwater system. • The revenues derived from saltwater rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the City’s saltwater rates are used exclusively to fund the City’s saltwater system O&M and provide adequate funding for capital improvement, repair, and replacement. • The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel. The Study has appropriately grouped customers into customer classes of service (residential, etc.) that reflect the customer usage patterns and system requirements (i.e., the benefits they receive from and burdens they place on the system) of each customer class of service. The grouping of customers and rates into these classesof service creates the proportionality expected under Article XIII D by having differing rates by customer classes of service which reflect both the level of revenue to be collectedby the utility, and the manner in which these costs are incurred and assigned to customer classes of service based upon their proportional impacts.
4.2 Overview of the Proposed Rate Structures
In discussion with City staff several of the above goals and objectives were highlighted as key elements to be included within the proposed rate structure. These were:
• Proportional, and cost-based• Revenue stability
The main goal was to provide the cost-basis, or justification, for the proposed rates to reflect the rate setting requirements in California. This was accomplished through the development of the cost of service analysis using industry standard approaches (for example, the Water Environment Federation Manuel of Practice No. 27) and the City’s system and customer characteristics. The cost of service analysis provided the allocation and proportional distribution of costs asdeveloped in the cost basis for purposes of final proposed rates.
4.3 Present and Proposed Saltwater Rates
The proposed rates for the City’s saltwater utility were designed to meet the total system revenue needs discussed in Section 2 and the cost of service results, shown in Section 3. The F Saltwater Rate Design 17 City of Ava Ion — Saltwater Rate Study City’s current saltwater rate structure is relatively straight-forward. It is composed of an annual fixed rate based on the customers’ class of service. The City has specific service areas forsaltwater service and so it is only available to a limited number of customers. Given the average rate per billing unit, the proposed rates can be developed. However, as noted in the cost of service discussion, the current ratios have been maintained. Presented below in Table 4 - 1 is asummary of the present and proposed annual saltwater rates.
Table 4—1
Present and Proposed Annual Saltwater Rates
Present FY FY FY FY 2029- FY 2030- Billing Unit Rates 2026-27 2027-28 2028-29 30 31 Residential Dwelling Unit $300.60 $318.65 $337.75 $358.00 $379.50 $402.25 Commercial Toilet/Urinal 300.60 318.65 337.75 358.00 379.50 402.25 Hotel Toilet/Urinal 165.35 175.25 185.75 196.90 208.75 221,25
4.4 Summary of the Saltwater Rate Study
This completes the analysis for the City’s saltwater rate study. The proposed rates were developed using generally accepted rate making methods and principles. As noted, the data typically used to establish customer relationships, in this case metered saltwater consumption, is not available. Given this, industry standard sewer flow rates were used to establish therelationships between the customer classes of service. The proposed saltwater rates for FY 2026- 27 through FY 2030-31 are necessary to adequately support the operating and capital needs of the City’s saltwater system. Adoption of the proposed rates are projected to provide adequatefunding for the saltwater utility over the planning period, while positioning the utility financiallyfor anticipated future capital and operation needs. Even with these proposed annual adjustments, it is prudent for the City to annually evaluate the saltwater rates to confirm theirability to prudently fund O&M expenses and maintain key financial metrics.
F Saltwater Rate Design 18 City of Ava Ion — Saltwater Rate Study Technical Appendix
F Technical Appendix City of Ava Ion — Saltwater Rate Study 19 City of Ava Ion
Saltwater Rate Study
Revenue Requirement Summary
Exhibit 1
FY 202 5-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenue
Rate Revenues $845,138 $845,138 $845,138 $845,138 $845,138 $845,138 Non-Operating Revenues 126,000 103,342 105,850 110,628 119,085 130,587 Total Revenues $971,138 $948,480 $950,988 $955,765 $964,223 $975,724 Expenses
Total Operations & Maintenance $816,804 $855,177 $895,366 $937,456 $981,539 $1,027,708 Taxes/Transfers 0 0 0 0 0 0
Net DebtService 0 0 0 0 0 0
Rate Funded Capital 150,000 175,000 220,000 280,000 330,000 350,000 Reserve Funding 4,334 (1,409) 3,825 2,780 22,568 83,327 Total Revenue Requirement $971,138 $1,028,768 $1,119,191 $1,220,236 $1,334,107 $1,461,035 Balance/(Deficiency) of Funds $0 ($80,288) ($168,204) ($264,471) ($369,884) ($485,311) Bal/(Def.) as a % of Rate Rev. 0.0% 9.5% 19.9% 3 1.3% 43.8% 57.4% Proposed Rate Adjustment 0.0% 9.5% 9.5% 9.5% 9.5% 9.5%
Addl Revenue from Adj. $0 $80,288 $168,204 $264,471 $369,884 $485,311 Total Bal/(Def.) of Funds $0 ($0) $0 $0 $0 $0
Additional Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% DSC
Before
Ratio
Rate Adjustment N/A N/A N/A N/A N/A N/A
After Rate Adjustment N/A N/A N/A N/A N/A N/A
Monthly Res Bill $25.05 $27.43 $30.04 $32.89 $36.01 $39.43 Total Ending Balance $1,103,033 $818,811 $554,586 $421,490 $442,097 $522,389 1 of 9 03/12/2026
City of Avalon
Saltwater Rate Study
Exhibit 2
Escalation Factors
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenues
Customer Growth Calculated 0.0% 0.0% 0.0% 0.0% 0.0%
Consumption Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Miscellaneous Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expenses
Labor Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits - Medical Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits -Other Budget 3.5% 3.5% 3.5% 3.5% 3.5%
Materials & Supplies Budget 3.5% 3.5% 3.5% 3.5% 3.5%
Equipment Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Miscellaneous Budget 3.0% 3.0% 3.0% 3.0% 3.0%
Utilities Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Insurance Budget 4.0% 4.0% 4.0% 4.0% 4.0%
PERC Budget 4.7% 4.7% 4.7% 4.7% 4.7%
Rate Adjustment 0.0% 9.5% 9.5% 9.5% 9.5% 9.5%
Flat Budget 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
New Debt Service
Low Interest Loans
TerminYears 20 20 20 20 20 20
Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Bond
Term in Years 20 20 20 20 20 20
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
2 of 9 03/12/2026
City of Ava Ion
Saltwater Rate Study
Exhibit 3
Revenue Requirement
Budget
FY 2025-26 FY 2026-27
Projected
FY 2027-28 FY 2028-29 FY 2029-30
Rate
Total
Revenues
Rate Revenues $845,138 $845,138 $845,138 $845,138 $845,138 $845,138 As Customer Growth Non-Operating Revenues
Harbor
Interest
Enterprise Fund
Miscellaneous Revenue
Total Non-Operating Revenues
$18,000 $19,218 $13,734 $9,761 $8,636 $9,645
108,000 84,124 92,116 100,867 110,449 120,942
0 0 0 0 0 0
$126,000 $103,342 $105,850 $110,628 $119,085 $130,587
Calcd on Oper. Balance
As Rate Adjustment
As Miscellaneous Revenues
Total Revenues $971,138 $948,480 $950,988 $955,765 $964,223 $975,724 Salt Water Administration
Salaries & Benefits
Maintenance & Operations
Special Dept. Expense
Emergency Maintenance
Communications
$48,220 $50,631 $53,163
7,189 7,441 7,701
207 214 221
1,115 1,170 1,229
3,388 3,557 3,735
129 134 139
0 0 0
$54,844 $57,481 $60,247 $63,147 $66,188
As Labor
As Benefits -Other
As Benefits - Other
As Benefits -Medical
As Benefits -Medical
As Insurance
As Benefits -Other
As Miscellaneous
As Materials & Supplies
As Materials & Supplies
Revenues
FY 2030-31 Notes
Salaries Regular
FICA Retirement
CALPer5 Unfunded Liability PMT
Health / Life Insurance
Workers Comp
Unemployment Ins
Other Personnel Expenses
Total Salaries & Benefits
$43,737
6,711
193
3,073
1,011
119
0 $45,924
6,946
200
3,227
1,062
124
0 Total Maintenance & Operations
$1,000
0 500
$1,500
$55,821
7,971
229
3,922
1,290
145
0 $69,378
$1,159
0 594
$1,753
$1,030
0 518
$1,548
$1,061
0 536
$1,597
$1,093
0 554
$1,647
$1,126
0 574
$1,699
3 of 9 03/12/2026
City of Ava Ion
Saltwater Rate Study
Exhibit 3
Revenue Requirement
Contract Services
Internal Services
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31
Notes
Salaries Regular
Overtime Regular
FICA Retirement
CALPer5 Unfunded Liability PMT
Health / Life Insurance
Workers Comp
Unemployment Ins
Clothing Allowance
Total Salaries & Benefits
$21,558 $22,421 $23,317 $24,250 $25,220 $26,229
87,788 92,177 96,786 101,626 106,707 112,042
$109,346 $114,598 $120,104 $125,876 $131,927 $138,271
$624,477 $653,995 $684,911 $717,293 $751,210 $786,735
$104,883 $110,127 $115,634 $121,415 $127,486 $133,860
2,956 3,104 3,259 3,422 3,593 3,773
18,866 19,526 20,210 20,917 21,649 22,407
23,030 23,836 24,670 25,534 26,427 27,352
27,380 28,749 30,186 31,696 33,281 34,945
7,439 7,811 8,201 8,612 9,042 9,494
288 302 318 333 350 368
935 968 1,002 1,037 1,073 1,110
$185,777 $194,423 $203,480 $212,965 $222,901 $233,309
As Labor
As Labor
As Benefits -Other
As Benefits -Other
As Benefits - Medical
As Benefits -Medical
As Benefits -Medical
As Benefits -Other
Maintenance & Operations
Special Dept. Expense
Total
Communications
Maintenance & Operations
$1,550 $1,597 $1,644 $1,694 $1,745 $1,797
2,500 2,575 2,652 2,732 2,814 2,898
$4,050 $4,172 $4,297 $4,426 $4,558 $4,695
As Miscellaneous
As Miscellaneous
Internal Services
Admin Overhead Allocation
Total Internal Services
Total Salt Water Admin Public Works
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$189,827 $198,595 $207,776 $217,391 $227,460 $238,004
As Labor
Professional Services $6,000 $6,300 $6,615 $6,946 $7,293 $7,658 As Labor City Attorney Retainer 0 0 0 0 0 0 As Labor
PERC Strategy Consultants 452,787 474,068 496,349 519,678 544,102 569,675 As PERC PERC Contract -OT 0 0 0 0 0 0 As Labor
PERC -Maintanance 0 0 0 0 0 0 As Materials & Supplies
Total Contract Services $458,787 $480,368 $502,964 $526,623 $551,395 $577,333 General Insurance
Admin Overhead
Total Internal Services
Total Salt Water Administration
Salt Water Admin Public Works
Salaries & Benefits
As Insurance
As Labor
4 of 9 03/12/2026
City of Avalon
Saltwater Rate Study Page 3 of 4
Exhibit 3
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Salt Water Maint & Development
Salaries & Benefits
Maint. & Repair of Bldg Grnds $2,500 $2,588 $2,678 $2,772 $2,869 $2,969 As Materials & Supplies Total Salaries & Benefits $2,500 $2,588 $2,678 $2,772 $2,869 $2,969 Total Salt Water Maint & Development $2,500 $2,588 $2,678 $2,772 $2,869 $2,969 Total Operations & Maintenance $816,804 $855,177 $895,366 $937,456 $981,539 $1,027,708 Taxes / Transfers
$0 $0 $0 $0 $0 $0 As Miscellaneous
Total Taxes / Transfers $0 $0 $0 $0 $0 $0
Debt Service
Interfund Loan $0 $0 $0 $0 $0 $0 Debt Schedule
New SRF Loans 0 0 0 0 0 0 CaIc @ 3% for 20 Yrs
New Revenue Bonds 0 0 0 0 0 0 CaIc @5% for 20 Yrs
Total Debt Service $0 $0 $0 $0 $0 $0
Less Connection Fees $0 $0 $0 $0 $0 $0
Net Debt Service $0 $0 $0 $0 $0 $0
Rate Funded Capital $150,000 $175,000 $220,000 $280,000 $330,000 $350,000 $51,571 FY 2024-25 Depr.
Reserve Funding
To / (From) Saltwater Fund -112 $4,334 ($1,409) $3,825 $2,780 $22,568 $83,327 To! (From) Saltwater Reserve Fund - 113 0 0 0 0 0 0
Total Reserve Funding $4,334 ($1,409) $3,825 $2,780 $22,568 $83,327 Total Revenue Requirement $971,138 $1,028,768 $1,119,191 $1,220,236 $1,334,107 $1,461,035 Bal./)Def.) of Funds $0 ($80,288) ($168,204) ($264,471) ($369,884) ($485,311) Rate Adj. as a % of Rate Rev. 0.0% 9.5% 19.9% 31.3% 43.8% 57.4% Proposed Rate Adjustment 0.0% 9.5% 9.5% 9.5% 9.5% 9.5%
Months of Adjustment 12 12 12 12 12 12
AddI Revenue from Adj. $0 $80,288 $168,204 $264,471 $369,884 $485,311 Total Bal/)Def.) of Funds $0 ($0) $0 $0 $0 $0
Additional Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5of9 03/12/2026
City of Avalon
Saltwater Rate Study
Exhibit 3
Revenue Requirement
Projected
FY 2025-26 I FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Before Rate Adjustment
After Rate Adjustment
Reserve Funds
Total Beginning Balance
Saltwater Fund - 112
Beginning Balance
Plus: Additions
Interfund Loan Proceeds
Less: Uses of Funds
Ending Balance
Target: 180 days of O&M
Saltwater Reserve Fund - 113
Beginning Balance $287,565 $437,565 $154,753 $4,753 $4,753 $2,792 Plus: Additions 150,000 0 0 0 0 0
Less: Uses of Funds 0 (282,813) (150,000) 0 (1,961) 0
Ending Balance $437,565 $154,753 $4,753 $4,753 $2,792 $2,792 Total Ending Balance $1,103,033 $818,811 $554,586 $421,490 $442,097 $522,389 DSC Ratio
Budget
Monthly Res Bill
N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A N/A
$25.05
After Proposed Rate Adjustment $25.05 $27.43 $30.04 $32.89 $36.01 $39.43 Annual $ Change 2.38 2.61 2.85 3.12 3.42
Cumulative Change 2.38 4.99 7.84 10.96 14.38
$948,699 $1,103,033 $818,811 $554,586 $421,490 $442,097 $661,134 $665,467 $664,059 $549,833 $416,737 $439,305
4,334 0 3,825 2,780 22,568 83,327
0 0 0 0 0 0
0 (1,409) (118,051) (135,876) 0 (3,035)
$665,467 $664,059 $549,833 $416,737 $439,305 $519,597
$402,808 $421,731 $441,550 $462,307 $484,046 $506,815
6 of 9 03/12/2026
City of Avalon
Saltwater Rate Study
Exhibit 4
Inflation 3.5%
Capital Improvement Plan
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Collection and Distribution System (25%) $0 $107,813 $114,934 $97,937 $78,175 $83,138 Treatment Plant (40%) 0 350,000 373,118 317,940 253,786 269,897 Total Capital Projects $0 $457,813 $488,051 $415,876 $331,961 $353,035 Future Unidentified Projects $0 $0 $0 $0 $0 $0
To Capital Reserves $150,000 $0 $0 $0 $0 $0
Total Capital Improvement Projects $150,000 $457,813 $488,051 $415,876 $331,961 $353,035 Less: Outside Funding Sources
Saltwater Fund -112 $0 $0 $118,051 $135,876 $0 $3,035
Saltwater Reserve Fund - 113 0 282,813 150,000 0 1,961 0 NewSRFLoans 0 0 0 0 0 0
NewRevenueBonds 0 0 0 0 0 0
Total Outside Funding Sources $0 $282,813 $268,051 $135,876 $1,961 $3,035 Rate Funded Capital $150,000 $175,000 $220,000 $280,000 $330,000 $350,000 7 of 9 03/12/2026
City of Avalon
Saltwater Rate Study Page 1 of I
Exhibit 5
Revenues at Present Rates
Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Total Fixed Charge Unit $/Acct./Yr.
Residential (DU) $300.60 1,879 1,879
Commercial (per toilet) 300.60 493 493
Hotel (per toilet) 165.35 799 799
3,171 0 0 0 0 0 0 0 0 0 0 0 3,171
Total Fixed Charge Revenue $845,138 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $845,138 Total Revenue $845,138 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 SO $845,138 Customer
Summary
Residential 1,879 0 0 0 0 0 0 0 0 0 0 0 157
Commercial 493 0 0 0 0 0 0 0 0 0 0 0 41
Hotel 799 0 0 0 0 0 0 0 0 0 0 0 67
Total Revenue
Residential $564,827 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $564,827 Commercial 148,196 0 0 0 0 0 0 0 0 0 0 0 148,196
Hotel 132,115 0 0 0 0 0 0 0 0 0 0 0 132,115
$845,138 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $845,138
FY 2024-25 Budget $902,325
Difference ($57,187)
Percent -6.3%
FY 2025-26 Budget $924,883
Difference ($79,745)
Percent -8.6%
8 of 9 03/12/2026
Present Proposed Rates
Rates FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Residential $300.60 $329.15 $360.40 $394.65 $432.15 $473.20 Commercial 300.60 329.15 360.40 394.65 432.15 473.20
Hotel 165.35 181.05 198.20 217.05 237.70 260.25
9 of 9 03/12/2026
REDUCE
REUSERECYCLE
CATALI NA
ISLAND
I Draft Report
1.—fl
Comprehensive Solid Waste
Draft Rate Study
March 2026
I
FY
FY
March 13, 2026Mr. Matt Baker
Finance Director
City of Ava Ion
410 Avalon Canyon Road
Avalon, California 90704Subject: City of Avalon Draft Solid Waste Rate Study Report Dear Mr. Baker:HDR Engineering, Inc. (HDR) is pleased to present the draft report for the solid waste rate study conducted for the City of Avalon (City). The primary objective in conducting a rate study is toestablish cost-based and proportional utility rates, for a five-year period, which are intended to provide adequate and sustainable funding for the solid waste utility’s operational and capitalneeds. This report outlines the approach, methodology, findings, and conclusions of the rate study process undertaken for the solid waste utility.
This report was developed utilizing the City’s accounting, operating, and customer billing records.
HDR has relied on this information to develop the rate study which formed our findings, conclusions, and recommendations. At the same time, the rate study was developed utilizing generally accepted rate setting principles. The conclusions and recommendations containedwithin this report are intended to provide the City with cost-based and proportional solid waste rates for its customers.
We appreciate the assistance provided by the City staff, management, and the City Council in the development of the rate study.
Sincerely,
HDR Engineering, Inc.
Josiah Close
Utility Rates Project Manager
1 Tate of Contents
Executive Summary 11 Overview of the Rate Setting Process 5
1.1 Report Organization 51.2 Overview of the Rate Study Process 51.3 Generally Accepted Rate Setting Principles 61.4 Determining the Revenue Requirement 71.5 Designing Rates 8
1.6 Summary 8
2 Solid Waste Revenue Requirement 9
2.1 Determining the Solid Waste Utility Revenue Requirement 9
2.1.1 Determining the Time Period and Approach 92.1.2 Projection of Solid Waste Revenues 92.1.3 Projection of Solid Waste Operation and Maintenance Expenses 102.1.4 Projection of Solid Waste Capital Improvement Projects and Funding 112.1.5 Projection of Taxes and Transfer Payments 12
2.1.6 Projection of Debt Service 122.1.7 Reserve Funding 122.1.8 Summary of the Solid Waste Revenue Requirement 122.1.9 Review of the Solid Waste Reserve Levels 132.1.10 Consultant’s Conclusions 14 3 Solid Waste Cost of Service 15
3.1 Objectives of a Cost of Service Analysis 153.2 Development of the Solid Waste Cost of Service 15 4 Solid Waste Rate Design 16
4.1 Rate Design Criteria and Cbnsiderations 164.2 Present and Proposed Solid Waste Rates 174.3 Summary of the Solid Waste Rate Study Update 18 Technical Appendix 19
F Table of Contents City of Avalon — Comprehensive Solid Waste Rate Study F
)I Table of Contents City of Avalon — Comprehensive Solid Waste Rate Study I ExecuUve Summary
HDR was retained by the City of Avalon to conduct a comprehensive solid waste rate study (Study). The objective of the Study was to review the City’s solid waste utility operating and capital costs to develop proposed solid waste rates which are proportional to the City’scustomers. The Study determined the adequacy of the existing solid waste rates and provides the framework for cost-based and proportional proposed solid waste rates.
Overview of the Rate Study Process
A solid waste rate study uses three interrelated analyses to address the adequacy and proportionality of a utility’s rates. These three analyses are a revenue requirement analysis, a cost of service analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES-i.
Figure ES—i
Overview of the Comprehensive Rate Analyses
Compares the revenues to the expenses of
Revenue Requirement Analysis the utility to determine the overall level of rate adjustment required
Distributes the revenue requirement to the
customer classes ofservice in a Cost of Service Analysis proportional manner Considers both the revenue
Rate Design Analysis I requirement and cost ofservice
to develop the proposed rates
The results from each of the above tasks were used as the basis for establishing cost-based and proportional rates for the City’s customers.
Key Rate Study Results
The technical analysis for the City’s solid waste rate study was developed based on the operating and capital infrastructure costs identified to provide solid waste service to the City’s customers.
The City’s comprehensive solid waste rate study resulted in the following key findings, conclusions, and recommendations:
• A revenue requirement analysis was developed for the time period of FY 2025-26 — FY 2035-36
• The starting point for the revenue requirement analysis was the City’s adopted FY 2025- 26 O&M budget and capital improvement plan
F Executive Summary City of Avalon — Solid Waste Rate Study • O&M expenses are projected to increase at historical inflationary levels, with no assumed changes to levels of service or anticipated extraordinary expenses • Rate revenues need to be increased to prudently fund the operating and capital needs over the Study time period
• A five-year rate transition plan (FY 2026-27 — FY 2030-31) was developed to adequately fund the operating and capital needs
/ 4.5%, annually, in FY 2026-27 through FY 2030-31
• A review of the proportionality of the rates for the service fees among customers was developed as part of the Study
• The Study developed proposed solid waste rates for the FY 2026-27 through FY 2030-31 based on the overall revenue needs and a proportional allocation of costs • By FY 2030-31, the City should review the financial/rate status and the potential need for additional rate adjustments and/or a rate structure review Summary of the Solid Waste Revenue Requirement Analysis The starting point of the solid waste revenue requirement analysis was the adopted FY 2025-26 budget. HDR developed a projection of revenues and expenses for future years based on assumed escalation (inflationary) factors in collaboration with the City. The focus for purposes of rate setting was the next five-year period (FY 2026-27 — FY 2030-31).
The proper and adequate funding of capital projects is important to maintain the City’s existing solid waste infrastructure and service levels. At the same time, it is important to create a funding plan which maximizes the amount of funds available for capital investment yet minimizes solid waste rates over time. Provided below in Table ES - 1 is a summary of the capital improvement funding plan over the rate setting period (FY 2025-26 through FY 2030—31).
Table ES—i
Summary of the Capital Improvement Plan ($000)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
capital Projects $500 $1,501 $268 $1,663 $111 $861
Unidentified Projects 0 0 0 0 0 (0)
To capital Reserves 175 0 457 0 739 64
Total $675 $1,501 $725 $1,663 $850 $925
Less: Other Funding $0 $841 $0 $868 $0 $0
Total Rate Funded Capital $675 $660 $725 $795 $850 $925 Within the City’s proposed capital funding plan, the City is projected to fund $660,000 in FY 2025- 26 increasing to $925,000 by FY 2030-31; the average is approximately $791,000 per year. In addition to rate funding, it is assumed that the City will utilize the annual assessment revenues for capital and a limited amount of reserves to fund the capital improvement plan.
F Executive Summary 2 City of Ava Ion — Solid Waste Rate Study The revenue requirement analysis sums the solid waste utility’s operating and capital expenses and compares it to the total solid waste revenues to determine if a rate adjustment is necessaryand, if so, at what level. As noted, a rate transition plan was developed to meet the financial needs of the solid waste utility.
TableES-2
Summary of the Solid Waste Revenue Requirement ($000s)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
RevenuesRate Revenues $3,108 $3,108 $3,108 $3,108 $3,108 $3,108Non-Operating Revenues 355 360 365 370 379 397Total Revenues $3,464 $3,469 $3,474 $3,479 $3,487 $3,506 Expenses
O&M Expenses $2,702 $2,859 $2,944 $3,031 $3,118 $3,211
Taxes & Transfers 80 82 85 87 90 93
Rate Funded Capital 675 660 725 795 850 925Net Debt Service 0 0 0 0 0 0 To/(From) Reserve Funding 6 7 6 4 27 43
Total Expenses $3,464 $3,609 $3,760 $3,918 $4,086 $4,271Bal./(Def.) of Funds $0 ($140) ($286) ($439) ($598) ($765)Bal./(Def.) as % of Rate Rev 0.0% 4.5% 9.2% 14.1% 19.3% 24.6% Proposed Rate Adjustments 0.0% 4.5% 4.5% 4.5% 4.5% 4.5% Addi Revenue with Rate Adj. $0 $140 $286 $439 $598 $765 The results of the solid waste revenue requirement show the need for annual 4.5% rate adjustments from FY 2026-27 through FY 2030-3 1. The total deficiency of revenues before the proposed rate adjustments ranges from $140,000 in FY 2026-27 to $765,000 by FY 2030-31. Thelevel of the deficiency is driven, in part, by the funding of capital improvement projects and annual inflation of O&M expenses over the Study period. The proposed rate adjustments aredesigned to provide sufficient revenue to fund the identified annual O&M and capital needs of the solid waste utility and maintaining strong financial metrics for debt service coverage ratios and reserve balances.
Summary of the Solid Waste Cost of Service Analysis
HDR reviewed the solid waste rates with regards to cost basis and proportionality. The City contracts for solid waste collection and disposal services. In addition, the City does not have anaccount by account record of the size if container or type of waste collection for all of thecustomers. The proposed rate schedule does not include any changes or adjustments to thecurrent rate structure and maintains the current relationships between customer types.Summary of the Solid Waste Rate Design Analysis The last step of the rate study is the development of rates which reflect the overall revenue needs, as developed in the revenue requirement analysis. At this time, HDR is not recommending F Executive Summary 3 City of Ava Ion — Solid Waste Rate Study rate structure changes. After review, it appears that the current rate structure for the solid waste utility is reasonable. Table ES -3 summarizes the present and proposed solid waste rates.
Table ES—3
Present and Proposed Annual Solid Waste Rates
Customer . Present FY FY FY FY FYClass Billing Unit Rates 2026-27 2027-28 2028-29 2029-30 2030-31 Residential (per DU) $928.20 $969.95 $1,013.60 $1,059.20 $1,106.85 $1,156.65Res> 10 Units (per DU) 742.75 776.15 811.10 847.60 885.75 925.60 Shops / Office ($1 1000 sq ft) 1,466.75 1,532.75 1,601.70 1,673.80 1,749.10 1,827.80Grocer ($1 1000 sq ft) 4,400.25 4,598.25 4,805.15 5,021.40 5,247.35 5,483.50Gathering Space ($/ 1000 sq ft) 733.35 766.35 800.85 836,90 874.55 913.90 Restaurants< 100 (per acct) 5,866.95 6,130.95 6,406.85 6,695.15 6,996.45 7,311.30 seatsRestaurants> 100 (per acct) 11,733.80 12,261.80 12,813.60 13,390.20 13,992.75 14,622.40 seatsRestaurants - (per acct) 2,933.45 3,065.45 3,203.40 3,347.55 3,498.20 3,655.60 Take Out Hotel Room (per room) 353.75 369.65 386.30 403.70 421.85 440.85 Grease Removal (per gallon) $4.25 $4.45 $4.65 $4.85 $5.05 $5.30 The proposed annual solid waste rates maintain the current solid waste rate structure and only the level of the rate was adjusted.
Summary of the Solid Waste Rate Study
HDR completed a solid waste rate study based on the identified operating and capital expenses.Based on the technical analyses developed herein, HDR has proposed a comprehensive set ofrate recommendations for the solid waste utility. The following sections of the report provide amore detailed discussion of the technical analyses undertaken - along with the findings, conclusions, and recommendations of the study.
F Executive Summary 4 City of Ava Ion — Solid Waste Rate Study 1 Overview of the Rate Setting Process
The City of Avalon retained HDR Engineering, Inc. to perform a rate study for its solid waste utility.The rate study is designed to determine the adequacy of the existing rates and provide the basis for any adjustments to establish cost-based and proportional rates. This report describes the methodology, findings, and conclusions of the rate study process.
The study determined whether existing rates are adequate (sufficient) to meet each of the utility’s operating and capital expenses with revenues received from customers. Rates set too low may result in insufficient funds to maintain system integrity. The Study provides a cost-basis and rationale for making appropriate rate adjustments, as well as identifying issues of proportionality.
1.1 Report Organization
This report is organized in a sequential manner with this section providing an overview of utility rate setting principles, followed by sections that detail the specific technical and analytical stepsused to develop the City’s proposed solid waste rates. The following sections comprise the City’s solid waste rate study report:
• Section 2 reviews the development of the revenue requirement analysis • Section 3 reviews the development of the cost of service analysis• Section 4 reviews the development of the rate design analysis A technical appendix is attached at the end of the report which provides a copy of the analyses undertaken in the preparation of this report.
1.2 Overview of the Rate Study Process
A rate study consists of three interrelated analyses and Figure 1- 1 provides an overview of these analyses.
F Overview of the Rate Setting Process 5 City of Avalon — Solid Waste Rate Study Figure 1—1
Overview of the Comprehensive Rate Analyses
Compares the revenues to the expenses ofthe utility to determine the overall level of rate adjustment required
Distributes the revenue requirement to the
customer classes ofservice in a
proportional manner
Considers both the revenue
requirement and cost ofservice
results to develop the proposed rates
Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
The revenue requirement analysis is concerned with the overall revenues and expenses of the utility. From this analysis, a determination can be made as to the overall level of adjustment to rates. Next, a cost of service analysis is performed to proportionally distribute the revenue requirement to the customers classes served (e.g., residential, commercial). Finally, once an overall level of rate adjustment is determined and a proportional distribution of those costs iscompleted, the last step of the rate study process is the design of rates to collect the appropriate level of revenues while considering the other rate design goals and objectives of the utility (e.g.,revenue stability). For the City’s Study, all three analyses were conducted. The results from each task of the rate study were used as the basis for establishing cost-based and proportional solidwaste rates for the City’s customers.
In developing the Study, HDR utilized generally accepted rate setting techniques and industrybest practices for the development of the City’s solid waste utility rate study. This report discusses the methodology, findings and conclusions of the rate study analysis. The Study has focused on the level of rate revenue needed to fully fund the utility on a standalone basis, andthe rates needed to best generate that level of funding, while meeting the City’s goals and objectives.
1.3 Generally Accepted Rate Setting Principles
As a practical matter, utilities should sett rates around generally accepted or global principles and guidelines. Utility rates should be:
• Cost-based, proportional, and set at a level that meets the utility’s full revenue requirement
• Easy to understand and administer• Designed to conform with generally accepted rate setting techniques F Overview of the Rate Setting Process 6 City of Ava Ion — Solid Waste Rate Study • Stable in their ability to provide adequate revenues for meeting the utility’s financial, operating, and regulatory requirements
• Established at a level that is stable from year-to-year from a customer’s perspective• Established in compliance with State and local legislative requirements
1.4 Determining the Revenue Requirement
Most public utilities use the cash basis1 approach for establishing the revenue requirement and setting rates. This approach conforms to most public utility budgetary requirements and thecalculation is easy to understand and determine. A public utility:
• Totals its cash expenditures for a period of time to determine required revenues• Adds operation and maintenance (O&M) expenses to applicable taxes or transfer payments to determine total operating expenses. Operation and maintenance expensesinclude the materials, electricity, labor, supplies, etc. needed to keep the utility functioning.
• Calculates capital costs by adding debt service payments (principal and interest) to capital improvements financed with rate revenues. In lieu of including capitalimprovements financed with rate revenues, a utility sometimes includes depreciation expense to stabilize annual revenue requirement.
Under the cash basis approach, the sum of the capital and operating expenses equals the utility’srevenue requirement during any period of time (see Table 1 - 2).
Table 1-2
Cash versus Utility Basis Comparison
Cash Basis Utility Basis (Accrual)
+ O&M Expense + O&M Expense+ Taxes or Transfer Payments + Taxes or Transfer Payments+ Capital Improvements Financed with Rate + Depreciation Expense Revenues ( Depreciation Exp.)
+ Debt service (Principal + Interest) + Return on Investment= Total Revenue Requirement = Total Revenue Requirement Note that the two portions of the capital expense component (debt service and capitalimprovements financed from rates) are necessary under the cash basis approach because utilities generally cannot finance all capital facilities with long-term debt. An exception occurs if a public utility provides service to a wholesale or contract customer. In this situation, a public utility could 1 This is the basis of accounting under which revenues are recorded when cash is received and expenditures arerecorded when cash is disbursed.
F Overview of the Rate Setting Process 7 City of Avalon — Solid Waste Rate Study use the utility basis approach (see below) to earn a fair return on its investment. The analyses developed within this report utilize the cash basis methodology. This is consistent with past practices in the City’s utility rate-setting process.
1.5 Designing Rates
For the Study, rates that meet the utility’s objectives are designed based on the revenuerequirement analysis and cost of service analysis. This provides rates that are cost-based (i.e., designed to collect a cost-based level of revenues) and proportional (i.e., reflect the costs placedon the system by a customer class and customers within a class).
1.6 Summary
This report will review and discuss the Study prepared forthe City. This report has been prepared utilizing generally accepted solid waste rate setting methodologies and techniques to meet therequirements of Proposition 218.
F Overview of the Rate Setting Process 8 City of Ava Ion — Solid Waste Rate Study .2 Solid Waste Revenue Requirement
The development of the revenue requirement analysis is the first analytical step in the three-step comprehensive rate study process as described in Section 1. This section of the report describes the development of the revenue requirement analysis for the City’s solid waste utility. The City provided HDR with detailed revenue, expense, and customer billing data for the solid waste system that allowed for the development of the revenue requirement analysis.
The revenue requirement analysis, as developed for the City’s solid waste utility, determines the adequacy of solid waste rates at current rate levels. From this analysis, a determination can be made as to the overall level of rate revenue adjustment needed to provide adequate and prudent funding for both operating and capital expenses. HDR has developed an independent analysis based on the data and information provided by the City.
2.1 Determining the Solid Waste Utility Revenue RequirementIn developing the revenue requirement, it was assumed the solid waste utility must financially“stand on its own” and be properly funded. As a result, the revenue requirement as developedherein assumes the full and proper funding needed to operate and maintain the system on a financially sound and prudent basis. This includes maintaining adequate reserve levels, prudently funding annual repair and replacement needs (rate-funded capital), and meeting other industry standard financial metrics (e.g., debt service coverage), where applicable. Provided below is a more detailed discussion of the development of the revenue requirement analysis for the City’s solid waste utility.
2.1.1 Determining the Time Period and Approach
The first step in calculating the revenue requirement for the solid waste utility was to establish atime frame for the revenue requirement analysis. For the Study, the revenue requirement was developed for the time period of FY 2025-26 — FY 2035-36 with a focus on the next five-year period for rate setting purposes.
The second step in determining the revenue requirement for the City was to decide on the basis of accumulating costs. As discussed in the previous sections, the solid waste utility’s revenue requirement was established using a cash basis approach, the same methodology that was usedin prior rate studies and in the sewer and salt water utilities.
The primary financial inputs in this process were the City’s historic solid waste customer billing data, adopted O&M budget, and capital improvement plan. Presented below is a discussion of the analytical steps and key assumptions contained in the development of the solid waste revenue requirement analysis.
2.1.2 Projection of Solid Waste Revenues
The City receives revenue from two primary sources, rate revenue and miscellaneous revenue.The solid waste rate revenues are based on the current rate structure and collected on an annual F Solid Waste Revenue Requirement 9 City of Ava Ion — Solid Waste Rate Study basis. Other miscellaneous revenue includes items such as construction debris, grease removal, harbor fund contribution, and other revenues.
The first step in developing the revenue requirement was to develop a projection of solid waste rate revenues, at present rate levels, which was taken from the City’s FY 2025-26 budget. In total,using the present solid waste rates, the City is projected to receive approximately $3.1 million annually in rate revenues in FY 2025-26 through FY 2030-31 based on flat annual customer growth.
In addition to rate revenues, the City also receives miscellaneous revenues. For FY 2025-26, theprojected miscellaneous revenues are approximately $355,000. Miscellaneous revenues areprojected to increase slightly over the review period and are estimated to be approximately $397,000 by FY 2030-31. This increase is the result of an estimated increase in harbor enterprise fund revenues. The transfer from the harbor enterprise fund is based on the number of moorings and public trash cans and calculated at the present rates. Revenues will increase as the solid waste rate adjustment to keep the appropriate relationship to the level of service provided.On a combined basis, considering the rate revenues along with miscellaneous revenues, the City’s total projected solid waste revenues are expected to be approximately $3.5 million in FY 2025- 26 remaining flat through FY 2030-31. Exhibit 3 of the Technical Appendix provides the detail of the various sources of revenues for the City’s Solid Waste utility.
2.1.3 Projection of Solid Waste Operation and Maintenance ExpensesOperation and maintenance expenses are incurred by the City to operate and maintain the solid waste system. The costs incurred in this area are expensed during the current year and are not capitalized or depreciated. In general, O&M expenses are grouped into a number of different functional categories. To begin the process of projecting O&M expenses over the planning horizon, escalation factors were developed. Escalation factors were developed to projectincreases in the basic types of expenses incurred by the solid waste utility— e.g., labor, benefits,materials and supplies, utilities, equipment, insurance—and other miscellaneous expenses.
These escalation factors were based on historical increases in City costs forthe solid waste utility.
For the Study review period, the escalation factors were assumed to be approximately 2.7% - 5.0% per year, depending upon the specific cost incurred.
The escalation of costs, using the escalation factors, assumes no changes in the current levels of service, meaning, no extraordinary changes in O&M levels were assumed. Given the City’s adopted budgeted for FY 2025-26 O&M expenses, HDR escalated the O&M expenses based on the previously mentioned escalation factors. Total solid waste O&M expenses for the City are projected to be approximately $2.7 million in FY 2025-26. Solid waste O&M expenses areprojected to increase to approximately $3.2 million in FY 2030-31 as a result of the assumed escalation factors over the time period. The budgeted and projected O&M expenses are shown in detail in Exhibit 3 of the Technical Appendix.
F Solid Waste Revenue Requirement 10 City of Ava Ion — Solid Waste Rate Study
2.1.4 Projection of Solid Waste Capital Improvement Projects and Funding The City has a long-term solid waste capital improvement plan that was utilized forthe rate study.The City’s solid waste capital improvement plan averages approximately $881,000 annually overthe next five-year period of FY 2026-27 through FY 2030-31. Provided in Table 2 - 1 is the solid waste capital improvement funding plan for the period of FY 2025-26 — FY 2030-31. The actualcapital projects completed during the time period will depend on available funding sources and priority of the projects. The primary funding sources for these projects are assumed to be fromrate funding of capital and available reserves. A significant capital expense during the reviewperiod is the landfill expansion which will provide additional capacity for the City.
TabIeZ—1
Summary of the Capital Improvement Funding Plan ($000)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
capital Projects $500 $1,501 $268 $1,663 $111 $861
Future Unidentified Projects 0 0 0 0 0 (0)
To capital Reserves 175 0 457 0 739 64
Total $675 $1,501 $725 $1,663 $850 $925
Less: Other Funding
Solid WasteFund-131 $0 $841 $0 $868 $0 $0
New Revenue Bonds 0 0 0 0 0 0
Total $0 $841 $0 $868 $0 $0
Total Rate Funded Capital $675 $660 $725 $795 $850 $925 There are numerous funding sources that can be used to fund the capital projects. Among the methods that may be used to fund solid waste capital improvement projects are long-term debt,reserves, and rates. Historically the City has utilized rates and reserves to fund the capitalimprovements. Based on the rate transition plan developed as part of this revenue requirement, the City is projected to have adequate resources to provide funding for these capital projects.
Provided below is a summary of the typical funding sources the City has used, and will continue to use, to fund the capital improvements over the next five year period.
2.1.4.1 Rate Funding
A general financial guideline states that, at a minimum, a utility should fund an amount from rates which is equal to or greater than the annual depreciation expense. Annual depreciation expense reflects the current investment in plant being depreciated or “losing” its useful life.
Therefore, this portion of plant investment needs to be annually funded to maintain the existing level of infrastructure. In addition, consideration should be given to using rate revenues to fund an amount greater than the annual depreciation expense for repairs and replacements as costsescalate over time and replacement cost is generally greater than the original cost. Whenever possible, the City should be funding capital projects from rates in an amount greater than annual depreciation expense to better reflect replacement costs. At the present time, the annualdepreciation expense of the solid waste utility is approximately $46,000 based on the City’s F Solid Waste Revenue Requirement 11 City of Ava Ion — Solid Waste Rate Study financial statements. Over the course of the six-year review period, the City is funding a total of $4.6 million via rates, or an average of $770,000 per year. With the proposed rate funding included within the Study, the solid waste utility has made significant strides toward adequate funding for the repair and replacement of the existing solid waste system infrastructure.
2.1.4.2 Reserve Funding
The use of reserves to fund capital improvements is another method available to the City, when and if reserves are available. During the review period of the rate study, there will be approximately $1.7 million in reserves used as a funding source for capital improvement projectsover the review period. The solid waste utility reserve fund has historically been established byannual surpluses in years where revenues may be greater than the annual expenses of the solid waste utility. This allows the City to reserve funds for projects in later years when more or larger projects are undertaken. This approach helps to mitigate future rate adjustments and smoothrates overtime. However, close attention should be given to the reserve balance as to not reduceit below the minimum target.2.1.4.3 Long-Term Debt At the present time, there are no outstanding solid waste debt service obligations. Additionally, no new debt issues are projected during the projected time period.2.1.5 Projectiàn of Taxes and Transfer Payments The City has an obligation to transfer funds on average $86,000 annually from FY 2025-26 through FY 2030-31 to the solid waste infrastructure fund in anticipation of costs for the closure of their landfill. There are no other taxes or transfer payments included in the study.2.1.6 Projection of Debt Service The final component of the solid waste revenue requirement is debt service. At the present time,the City has no outstanding debt obligations and no additional long-term borrowing has been identified in the Study.2.1.7 Reserve Funding
This study has used reserve funding - or the transfer to/from reserve funds - to smooth and mitigate the rate adjustments over the Study time period. Reserve funding can also be used tohelp build or replenish reserves if they have been drawn down in prior years. In this analysis, change in working capital is primarily used to balance the revenue requirement to the proposed rate adjustments.2.1.8 Summary of the Solid Waste Revenue Requirement Given the above projections of revenues and expenses, a summary of the revenue requirement for the solid waste utility can be developed. In developing the final revenue requirement, consideration was given to the financial planning considerations of the City. In particular,emphasis was placed on attempting to minimize rates, while maintaining adequate funds to support the operational and capital expenses throughout the projected time period. PresentedF Solid Waste Revenue Requirement 12 City of Ava Ion — Solid Waste Rate Study in Table 2 - 2 is a summary of the solid waste revenue requirement. A detailed analysis of the solid waste revenue requirement can be found in Exhibit 3 of the Technical Appendix.
Table2-2
Summary of the Solid Waste Revenue Requirement ($000s)
FY FY FY FY FY FY
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Revenues
Rate Revenues $3,108 $3,108 $3,108 $3,108 $3,108 $3,108Non-Operating Revenues 355 360 365 370 379 397Total Revenues $3,464 $3,469 $3,474 $3,479 $3,487 $3,506 Expenses
O&M Expenses $2,702 $2,859 $2,944 $3,031 $3,118 $3,211
Taxes&Transfers 80 82 85 87 90 93
Rate Funded Capital 675 660 725 795 850 925Net Debt Service 0 0 0 0 0 0 To/(From) Reserve Funding 6 7 6 4 27 43
Total Expenses $3,464 $3,609 $3,760 $3,918 $4,086 $4,271BaI./(Def.) of Funds $0 ($140) ($286) ($439) ($598) ($765)Deficiency as % of Rate Revenue 0.0% 4.5% 9.2% 14.1% 19.3% 24.6% Proposed Rate Adjustments 0.0% 4.5% 4.5% 4.5% 4.5% 4.5% AddI Revenue with Rate Ad]. $0 $140 $286 $439 $598 $765 It is important to note the annual deficiencies shown in Table 2 - 2 are cumulative. That is, rate adjustments in the initial years will reduce the overall deficiency in the remaining years. The results of the revenue requirement analysis indicate, absent rate revenue adjustments, there is a deficiency of funds over the review period (FY 2025-26 — FY 2030-31). The deficiency ranges from approximately $140,000 in FY 2025-26 to $765,000 in FY 2030-31. Over this time period,the overall deficiency in rates is approximately 24.6%. The level of this overall deficiency in rates is being driven by a variety of factors, but in large part it is a function of the need to strengthen the rate funding for capital infrastructure (i.e., annual renewal and replacement capital funding), as well as annual inflationary increases in O&M expenses. Based on the City’s solid waste revenue requirement analysis, annual rate adjustments have been proposed over the five-year period.
The proposed rate transition plan in Table 2-2 is projected to adequately and fully fund the City’s solid waste O&M, along with the planned capital improvement projects. At the same time, these proposed rate adjustments will strengthen the overall financial health of the solid waste utility.2.1.9 Review of the Solid Waste Reserve LevelsReserves are an important part of a utility’s financial picture. There can be many differentpurposes for reserves. Currently, the solid waste reserve fund has a minimum target balance of $1.3 million; this is calculated as approximately 180 days of O&M expenses, which is a typical industry standard level. The graphic of the solid waste reserve levels shows the balance of F Solid Waste Revenue Requirement 13 City of Ava Ion — Solid Waste Rate Study reserves for the City’s solid waste utility over the review period after the rate adjustments have been implemented.
$2,500,000
$2,000,000$1,500,000$1,000,000
$500,000
$0
Solid Waste Utility - Reserve Funds
Solid Waste Fund - 131 — — — Target: 180 days of O&M
The City should also routinely analyze the reserve funds to maintain adequate levels. As stated earlier, the reserve fund is used to help pay for large capital infrastructure projects that require funding above the level of annual rate funding. To ensure that functionality, additional funding of the reserve fund may be required in the future.
2.1.10 Consultant’s ConclusionsBased on the City’s revenue requirement analysis the proposed overall solid waste rate adjustments are 4.5% annually in FY 2025-26 through FY 2030-31. These proposed rateadjustments are needed to fully fund the projected operating costs of the utility, along with thecapital improvement plan.
F Solid Waste Revenue Requirement City of Ava Ion — Solid Waste Rate Study 14 //
FY 2025-26 FY 2026-27 FY 2027-2 8 FY 2028-29 FY 2029-30 FY 2030-3 1 Solid Waste Cost of Service
In the previous section, the revenue requirement analysis focused on the total revenues required to adequately fund the City’s solid waste utility. This section will provide an overview of the second step in a comprehensive solid waste rate study; the cost of service analysis developed for the City’s solid waste utility.
The objective of the cost of service analysis is different from determining the revenue requirement. Whereas the revenue requirement analysis determines the utility’s overall revenue needs, the cost of service analysis determines the proportional distribution of the revenue requirement to establish proposed rates for the proposed time period. In this case, the revenuerequirement for FY 2026-27, the first year of the proposed rate transition plan, was used for establishing the cost of service analysis.
3.1 Objectives of a Cost of Service Analysis
There are two primary objectives in conducting a cost of service analysis:
• Proportionally distribute the City’s solid waste revenue requirement, and• Derive the cost basis for subsequent rate designs by customer class of service The objectives of the cost of service analysis are different from determining a revenue requirement. As noted in the previous section, a revenue requirement analysis determines theutility’s overall financial needs, while the cost of service analysis determines the proportional manner to collect the calculated revenue requirement.
3.2 Development of the Solid Waste Cost of ServiceIt is important to note, the City contracts for solid waste collection and disposal services.
Consequently, the City does not have information available on customers in regards to the sizeof the solid waste container, the frequency of service for each customers, or the number of pickups. Given this, the information necessary to identify the cost components related to providing service to the City’s customers is unavailable. It should also be noted that information on actual waste generation by customer type is limited, as most collection and disposal practices do notseparate by customer type in a similar way to how the City charges for solid waste service. For example, a utility typically does not have information on the average tonnage collected from an individual restaurant or grocery store. At best, some utilities may have total tonnage collected byresidential or commercial in aggregate.
The City’s solid waste rate structure is further complicated by the fact that a customer may not have a specified, or individual, solid waste disposal container. In many cases, multiple customers dispose of their waste in a single solid waste disposal container. As such, the solid wastecontractor may collect waste multiple times a week, or even multiple times a day depending on the need and activities in the area. Given this, it is difficult, if not impossible, to determine those customers that benefit from a specific container or need at the current time. As a result, thecurrent rate structure relationships were maintained.
F Solid Waste Cost of Service 15 City of Ava Ion —Solid Waste Rate Study 4 Solid Waste Rate Design
The final step of the City’s comprehensive solid waste rate study is the design of proposed ratesto collect the appropriate levels of revenues, based on the results of both the revenue requirement and the cost of service analyses. In developing the City’s proposed solid waste rates, consideration is given to the level of the rates as well as the structure of the rates. The level of rates reflects the amount of revenues that should be collected while the structure of the rates ishow it is collected (i.e., component charges) from the customers.
4.1 Rate Design Criteria and Considerations
Prudent rate administration dictates that several criteria should be considered when settingutility rates. Some of these rate design criteria are listed below:
• Rates which are easy to understand from the customer’s perspective• Rates which are easy for the City to administer• Consideration of the customer’s ability to pay• Cost-based• Continuity, overtime, of the rate making philosophy • Policy considerations• Provide revenue stability from month to month and year to year• Proportional and non-discriminatory (cost-based)• Defensible (Proposition 218 compliant) Given the requirement and intent of Proposition 218, the last consideration, cost-based rates,should be of paramount importance and provide the primary guidance to utilities on ratestructure and policy. However, it is important that the City provides its customers with a proper price signal as to what their consumption is costing. This goal may be approached through rate level and structure. When developing the proposed rate designs, all the above-listed criteria canbe taken into consideration. However, it should be noted that it is difficult, if not impossible, to design a rate that meets all the goals and objectives listed above. For example, it may be difficult to design a rate that takes into consideration the customer’s ability to pay, and one which is costbased. In designing rates, there are always trade-offs between the goals and objectives and a delicate balance must always be struck.
The establishment of cost-based and proportional solid waste rates was of paramount importance in the development of the City’s Study. Meeting the requirements and documenting the steps taken to develop cost-based and proportional rates has been in the forefront with the legal challenges in the State of California on utility rates. A focus has been given to meeting therequirements of California Constitution article XIII D, section 6 (Article XIII D). A key component of Article XIII D is the development of rates which reflect the cost of providing service and are proportionally distributed between the customer classes of service, and the customers within each class. HDR would point out that there is no single methodology for proportionally assigning costs to the customer classes. Unfortunately, Article XIII D is not prescriptive and does not provide a specific methodology for establishing cost-based rates.
F Solid Waste Rate Design 16 City of Avalon — Solid Waste Rate Study HDR is of the opinion that the proposed rates meet the legal requirements of Article XIII D. HDR reaches this conclusion based upon the following:
• The revenue derived from solid waste rates does not exceed the funds required to provide the property related service (i.e., solid waste service). The proposed rates aredesigned to collect the overall revenue requirement of the City’s solid waste utility. • The revenues derived from solid waste rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the City’s solid waste rates are used exclusively to fund the City’s solid waste utility O&M and provide adequate funding for capital improvement, repair, and replacement. • The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel. The Study has appropriately grouped customers into customer classes of service (residential, restaurants, hotel, etc.) that reflect the customer usage patterns andsystem requirements (i.e., the benefits they receive from and burdens they place on the utility) of each customer class of service. The grouping of customers and rates into these classes of service creates the proportionality expected under Article XIII D by havingdiffering rates by customer classes of service which reflect both the level of revenue to be collected by the utility, and the manner in which these costs are incurred and assigned to customer classes of service based upon their proportional impacts.
4.2 Present and Proposed Solid Waste Rates
In developing the proposed rate designs, and as noted previously, the City’s existing solid wasterate structure was examined and analyzed. Based on the analyses completed, rates were developed for FY 2026-27 to FY 2030-31 for each class of service. Provided in Table 4 - 1 is a summary of the present and proposed annual solid waste rates.
Table4—1
Present and Proposed Annual Solid Waste Rates
Present FY FY FY FY FY Customer Class Billing Unit Rates 2026-27 2027-28 2028-29 2029-30 2030-31 Residential (per DU) $928.20 $969.95 $1,013.60 $1,059.20 $1,106.85 $1,156.65Res > io units (per DU) 742.75 776.15 811.10 847.60 885.75 925.60 Shops / Office ($1 1000 sq ft) 1,466.75 1,532.75 1,601.70 1,673.80 1,749.10 1,827.80 Grocer ($/ 1000 sq ft) 4,400.25 4,598.25 4,805.15 5,021.40 5,247.35 5,483.50Gathering Space ($/ 1000 sq ft) 733.35 766.35 800.85 836.90 874.55 913.90 Restaurants (per acct) 5,866.95 6,130.95 6,406.85 6,695.15 6,996.45 7,311.30 <100 seatsRestaurants (per acct) 11,733.80 12,261.80 12,813.60 13,390.20 13,992.75 14,622.40 > 100 seats
Restaurants (per acct) 2,933.45 3,065.45 3,203.40 3,347.55 3,498.20 3,655,60 -TakeOutHotel Room (per room) 353.75 369.65 386.30 403.70 421.85 440.85 Grease Removal (per gallon) 4.25 4.45 4.65 4.85 5.05 5.30 F Solid Waste Rate Design 17 City of Ava Ion — Solid Waste Rate Study
4.3 Summary of the Solid Waste Rate Study Update
This completes the analysis for the City’s solid waste utility. The solid waste utility rate study has developed a financial plan for the full funding of operating and capital needs. The recommendedannual rate adjustments are 4.5% annually from FY 2026-27 through FY 2030-31. The technicalanalysis completed for the development of the comprehensive solid waste rate study and the proposed rate adjustments can be found in the Technical Appendix of this report.
F Solid Waste Rate Design 18 City of Ava Ion — Solid Waste Rate Study •li Technical Appendix
F Technical Appendix City of Ava Ion — Comprehensive Solid Waste Rate Study 19 Solid Waste Rate Study
Revenue Requirement Summary
Exhibit 1
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenue
Rate Revenues $3,108,472 $3,108,472 $3,108,472 $3,108,472 $3,108,472 $3,108,472 Non-Operating Revenues 355,086 360,302 365,217 370,219 378,661 397,239 Total Revenues $3,463,558 $3,468,774 $3,473,690 $3,478,691 $3,487,134 $3,505,711 Expenses
Total Operations & Maintenance $2,702,466 $2,859,468 $2,943,998 $3,031,140 $3,118,068 $3,210,590 Taxes I Transfers 80,000 82,400 84,872 87,418 90,041 92,742 Rate Funded Capital 675,000 660,000 725,000 795,000 850,000 925,000 Net Debt Service 0 0 0 0 0 0
Reserve Funding 6,092 6,788 5,877 3,944 27,464 42,629
Total Revenue Requirement $3,463,558 $3,608,656 $3,759,747 $3,917,502 $4,085,572 $4,270,961 Balance/(Deficiency) of Funds $0 ($139,881) ($286,057) ($438,811) ($598,439) ($765,250) Bal/(Def.) as a % of Rate Rev. 0.0% 4.5% 9.2% 14.1% 19.3% 24.6% Proposed Rate Adjustment 0.0% 4.5% 4.5% 4.5% 4.5%
AddI Revenue from Adj. $0 $139,881 $286,057 $438,811 $598,439 $765,250 Total Bal/(Def.) of Funds $0 ($0) $0 $0 $0 ($0)
AddI Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Avg Res Annual Bill $928.20 $969.97 $1,013.62 $1,059.23 $1,106.90 $1,156.71 Total Ending Balance $5,979,529 $5,227,966 $5,775,909 $4,999,195 $5,855,827 $6,055,556 1 of 9 03/12/2026
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Solid Waste Rate Study
Exhibit 2
Escalation Factors
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenues
Customer Growth Calculated 0.0% 0.0% 0.0% 0.0% 0.0%
Consumption Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Miscellaneous Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expenses
Labor Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits -Medical Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits -Other Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Materials & Supplies Budget 3.5% 3.5% 3.5% 3.5% 3.5%
Equipment Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Miscellaneous Budget 3.0% 3.0% 3.0% 3.0% 3.0%
Utilities Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Insurance Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Sanitation Contract Budget 2.7% 2.7% 2.7% 2.7% 2.7%
Rate Adjustment 0.0% 4.5% 4.5% 4.5% 4.5% 4.5%
Flat Budget 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
New Debt Service
Low Interest Loans
TerminYears 20 20 20 20 20 20
Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Bond
Term in Years 20 20 20 20 20 20
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
2 of 9 03/12/2026
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Solid Waste Rate Study Page 1 of 4
Exhibit 3
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Rate
Revenues
Total
Revenues
Rate Revenues $3,108,472 $3,108,472 $3,108,472 $3,108,472 $3,108,472 $3,108,472 As Customer Growth Non-Operating Revenues
Interest $71,500 $33,947 $30,238 $26,228 $25,252 $33,988 Calcd on Oper. Balance Harbor Enterprise Fund 55,000 191,649 200,273 209,285 218,703 228,544 As Rate Adjustment Oil Recycling Grant 103,880 10,000 10,000 10,000 10,000 10,000 As Miscellaneous Revenues Construction Debris 70,000 70,000 70,000 70,000 70,000 70,000 As Miscellaneous Revenues Grease Removal 54,706 54,706 54,706 54,706 54,706 54,706 As Customer Growth Total Non-Operating Revenues $355,086 $360,302 $365,217 $370,219 $378,661 $397,239 Total Revenues $3,463,558 $3,468,774 $3,473,690 $3,478,691 $3,487,134 $3,505,711 Solid Waste Admin
Salaries & Benefits
Salaries Regular $16,859 $17,702 $18,587 $19,516 $20,492 $21,517 As Labor Overtime Regular 633 665 698 733 769 808 As Labor
FICA Retirement 3,045 3,167 3,293 3,425 3,562 3,705 As Benefits -Other Calpers Unfunded Liab Pmt 3,875 4,030 4,191 4,359 4,533 4,715 As Benefits -Other Health/Life Insurance 3,334 3,501 3,676 3,860 4,052 4,255 As Benefits -Medical Workers Comp 1,230 1,279 1,330 1,384 1,439 1,496 As Benefits - Other Unemployment Ins 48 50 52 54 56 58 As Insurance
Uniforms 60 62 64 67 69 71 As Materials & Supplies
Special Dept. Expense 500 518 536 554 574 594 As Materials & Supplies Communications 500 518 536 554 574 594 As Materials & Supplies Total Salaries & Benefits $30,084 $31,490 $32,963 $34,506 $36,121 $37,813 3of9 03/12/2026
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Solid Waste Rate Study Page 2 of 4
Exhibit 3
Revenue Requirement
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Maintenance & Operations
Rent -General $16,000 $16,560 $17,140 $17,739 $18,360 $19,003 As Materials & Supplies Anaerobic Digester Maintenance 0 0 0 0 0 0 As Materials & Supplies Total Maintenance & Operations $16,000 $16,560 $17,140 $17,739 $18,360 $19,003 Contract Services
Professional Services $5,000 $5,250 $5,513 $5,788 $6,078 $6,381 As Labor City Attorney Retainer 10,000 10,500 11,025 11,576 12,155 12,763 As Labor Used Oil 0 0 0 0 0 0 As Labor
Household Hazardous Waste 0 0 0 0 0 0 As Materials & Supplies Hazardous Waste Disposal 140,000 144,900 149,972 155,221 160,653 166,276 As Materials & Supplies Sanitation Contract 2,285,000 2,346,695 2,410,056 2,475,127 2,541,956 2,610,589 As Sanitation Contract SWRCB Annual Permit 10,000 10,350 10,712 11,087 11,475 11,877 As Materials & Supplies Citywide Trash Roundup 0 0 0 0 0 0 As Materials & Supplies Recycling Program Expansion 0 77,625 80,342 83,154 83,154 86,064 As Miscellaneous Total Contract Services $2,450,000 $2,595,320 $2,667,619 $2,741,953 $2,815,471 $2,893,950 Internal Services
General Insurance $39,391 $40,966 $42,605 $44,309 $46,081 $47,925 As Insurance Admin Overhead 156,492 164,316 172,532 181,159 190,217 199,727 As Labor Total Internal Services $195,882 $205,282 $215,137 $225,468 $236,298 $247,652 Total Solid Waste Admin $2,691,966 $2,848,653 $2,932,859 $3,019,666 $3,106,250 $3,198,418 Solid Waste Infrastructure
Maintenance & Operations
Brown Bags $10,500 $10,815 $11,139 $11,474 $11,818 $12,172 As Miscellaneous Total Maintenance& Operations $10,500 $10,815 $11,139 $11,474 $11,818 $12,172 Total Solid Waste Infrastructure $10,500 $10,815 $11,139 $11,474 $11,818 $12,172 Solid Waste Landfill Expansion $0 $0 $0 $0 $0 $0
Total Operations & Maintenance $2,702,466 $2,859,468 $2,943,998 $3,031,140 $3,118,068 $3,210,590 4of9 03/12/2026
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Solid Waste Rate Study
Exhibit 3
Revenue Requirement
Taxes I Transfers
Budget Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31
Notes
Post Closure Funding
Total Taxes! Transfers
Rate Funded Capital
Debt Service
$80,000 $82,400
$80,000 $82,400
$675,000 $660,000
$84,872 $87,418 $90,041 $92,742
$84,872 $87,418 $90,041 $92,742
$725,000 $795,000 $850,000 $925,000
As Miscellaneous
$46,463 FY 2023-24 Depr.
New SRF Loans
New Revenue Bonds
Total Debt Service
Less Connection Fees
Net Debt Service
$0 $0
0 0
$0 $0
$0 $0
$0 $0
$0 $0 $0 $0
0 0 0 0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
CaIc @ 3% for 20 Yrs
CaIc @ 5% for 20 Yrs
$6,092 $6,788
0 0
$6,092 $6,788
$3,463,558 $3,608,656
Reserve Funding
To! (From) Solid Waste Fund - 131
To! (From) Solid Waste Infrastructure Fund - 132
Total Reserve Funding
$5,877 $3,944 $27,464 $42,629
0 0 0 0
$5,877 $3,944 $27,464 $42,629
$3,759,747 $3,917,502 $4,085,572 $4,270,961 Total Revenue Requirement Bal./(Def.) of Funds $0 ($139,881) ($286,057) ($438,811) ($598,439) ($765,250) Rate Adj. as a % of Rate Rev. 0.0% 4.5% 9.2% 14.1% 19.3% 24.6% Proposed Rate Adjustment 0.0% 4.5% 4.5% 4.5% 4.5% 4.5%
Months ofAdjustment 12 12 12 12 12 12
Add’I Revenue from Adj. $0 $139,881 $286,057 $438,811 $598,439 $765,250 Total BaI/(Def.) of Funds $0 ($0) $0 $0 $0 ($0)
Addi Rate Increase Needed 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5 of 9 03/12/2026
City of Ava Ion
Solid Waste Rate Study
Exhibit 3
Revenue Requirement
Avg Res Annual Bill
After Proposed Rate Adjustment
Annual $ Change
Cumulative Change
Reserve Funds
Total Beginning Balance $5,718,436 $5,979,529 $5,227,966 $5,775,909 $4,999,195 $5,855,827 Solid Waste Fund - 131
Beginning Balance
Plus: To Reserves
Less: Uses of Funds
Ending Balance
Target: 180 days of O&M
Solid Waste Infrastructure Fund -132
Beginning Balance $3,785,183 $3,865,183 $3,947,583 $4,032,455 $4,119,873 $4,209,914 Plus: To Reserves 0 0 0 0 0 0
Less: Uses of Funds 0 0 0 0 0 0
Landfill Closure 80,000 82,400 84,872 87,418 90,041 92,742 Ending Balance $3,865,183 $3,947,583 $4,032,455 $4,119,873 $4,209,914 $4,302,656 Total Ending Balance $5,979,529 $5,227,966 $5,775,909 $4,999,195 $5,855,827 $6,055,556 Budqet I
Page4of4
$928.20
Projected
FY 2025-26 FY 2026-27 FY2027-28 2028-29 FY 2029-30 FY 2030-31 Notes $928.20 $969.97 $1,013.62 $1,059.23 $1,106.90 $1,156.71
41.77 43.65 45.61 47.67 49.81
41.77 85.42 131.03 178.70 228.51
$1,933,253 $2,114,346 $1,280,383 $1,743,454 $879,321 $1,645,913 181,092 6,788 463,071 3,944 766,592 106,987
0 (840,750) 0 (868,077) 0 0
$2,114,346 $1,280,383 $1,743,454 $879,321 $1,645,913 $1,752,900 $1,332,723 $1,410,149 $1,451,835 $1,494,809 $1,537677 $1,583,305 6 of 9 03/12/2026
City of Avalon
Solid Waste Rate Study
Capital
Exhibit4
Improvement Plan
Inflation 3.5%
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Future Unidentified Projects ($0)
To Capital Reserves $175,000 $0 $457,194 $0 $739,128 $64,358 Total Capital Improvement Projects $675,000 $1,500,750 $725,000 $1,663,077 $850,000 $925,000 Less: Outside Funding Sources
Solid Waste Fund - 131 $0 $840,750 $0 $868,077 $0 $0
NewSRF Loans 0 0 0 0 0 0
New Revenue Bonds 0 0 0 0 0 0
Total Outside Funding Sources $0 $840,750 $0 $868,077 $0 $0 Rate Funded Capital $675,000 $660,000 $725,000 $795,000 $850,000 $925,000 Capital Projects
Fuel Tank Replacement
Grinder/Chipper Replacement
Pebbly Beach Landfill Life Project
Retaining Wall Stall Repair
Warehouse Concrete Flooring
Warehouse Roof Replacement
Pebbly Beach Landfill Wall
Anerobic Digester
Total Capital Projects
$0 $0 $53,561 $0 $0 $0
0 465,750 0 0 0 0
0 1,035,000 0 1,385,897 0 860,642
0 0 0 0 110,872 0
0 0 0 277,179 0 0
0 0 214,245 0 0 0
500,000 0 0 0 0 0
0 0 0 0 0 0
$500,000 $1,500,750 $267,806 $1,663,077 $110,872 $860,642 $0 $0 $0 $0 $0
7 of 9 03/12/2026
City of Avalon
Solid Waste Rate Study Page 1 of 1
Exhibit 5
Revenues at Present Rates
Effective 7/1/25 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-26 Aug-26 Sep-26 Oct-26 Nov-26 Dec-26 Total Fixed Charge Unit Rate
Residential (per DU( $928.20 1,492 1,492
Res> 10 Units (per DU( 742.75 607 607
Shops! Office ($1 1000 sq ft) 1,466.75 289 289
Grocer (S / 1000 sq ft) 4400.25 24 24
Gathering Space (5/ 1000 sq ft) 73335 232 232
Restaurants < 100 seats (per acct) 5,86695 15 15
Restaurants> 100 seats (per acct) 11,733.80 11 11
Restaurants - Take Out (per acct( 2,933.45 23 23
Hotel Room (per room) 353.75 823 823
3,515 0 0 0 0 0 0 0 0 0 0 0 3,515
Total Fixed Charge Revenue $3,108,472 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,108,472 Variable Charge Unit $1 gallon
Grease Removal (per gallon) $4.25 12,872 0 0 0 0 0 0 0 0 0 0 0 12,872 Total Variable Charge Revenue $54,706 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $54,706 Total Revenue $3,163,178 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,163,178 Revenue
Summary
Residential $1,384,874 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,384,874 Res> 10 Units 450,849 0 0 0 0 0 0 0 0 0 0 0 450,849
Shops / Office 423,891 0 0 0 0 0 0 0 0 0 0 0 423,891
Grocer 103,406 0 0 0 0 0 0 0 0 0 0 0 103,406
Gathering Space 169,771 0 0 0 0 0 0 0 0 0 0 0 169,771
Restaurants< 100 seats 88,004 0 0 0 0 0 0 0 0 0 0 0 88,004 Restaurants> 100 seats 129,072 0 0 0 0 0 0 0 0 0 0 0 129,072 Restaurants - Take Out 67,469 0 0 0 0 0 0 0 0 0 0 0 67,469 Hotel Room 291,136 0 0 0 0 0 0 0 0 0 0 0 291,136
Grease Removal 54,706 0 0 0 0 0 0 0 0 0 0 0 54,706
$3,163,178 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,163,178
FY 2024-25 Budget $2,900,073
Difference $263,105
Percent 9.1%
FY 2025-26 Budget $3,110,561
Difference $52,617
Percent 1.7%
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Present Proposed Rates
Rates FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Residential (perDU) $928.20 $969.95 $1,013.60 $1,059.20 $1,106.85 $1,156.65 Res>l0Units (perDU) 742.75 776.15 811.10 847.60 885.75 925.60 Shops/Office ($/l000sqft) 1,466.75 1,532.75 1,601.70 1,673.80 1,749.10 1,827.80 Grocer ($/l000sqft) 4,400.25 4,598.25 4,805.15 5,021.40 5,247.35 5,483.50 GatheringSpace ($/l000sqft) 733.35 766.35 800.85 836.90 874.55 913.90 Restaurants < 100 seats (per acct) 5,866.95 6,130.95 6,406.85 6,695.15 6,996.45 7,311.30 Restaurants> 100 seats (per acct) 11,733.80 12,261.80 12,813.60 13,390.20 13,992.75 14,622.40 Restaurants -Take Out (per acct) 2,933.45 3,065.45 3,203.40 3,347.55 3,498.20 3,655.60 Hotel Room (per room) 353.75 369.65 386.30 403.70 421.85 440.85 Grease Removal (per gallon) 4.25 4.45 4.65 4.85 5.05 5.30 9 of 9 03/12/2026
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: _______ ORIGINATING DEP: Fire CITY MANAGER: _______ PREPARED BY: Michael Alegria, Fire Chief SUBJECT: First Reading of an Ordinance Prohibiting Fireworks in the City of Avalon
RECOMMENDED ACTION(S): Introduce and waive all further readings of an ordinance prohibiting the use, possession, sale and discharge of fireworks within the City of Avalon.REPORT SUMMARY: Every year City of Avalon, LA County Fire and Sherriff personnel haveproblems with illegal fireworks. Though the City has already adopted the Los Angeles County Fire Code — which prohibits fireworks — in order to simplify enforcement, staff recommends adoption of a basic ordinance that prohibits the use, possession, sale and discharge of fireworks within the city.
The intent of the new ordinance is to reasonably regulate the possession, sale, use or discharge of dangerous fireworks within the city to protect the public health, safety, property and general welfare of its residents and visitors alike. Avalon is located in a “Very High Fire Severity Zone.” Illegal discharge of fireworks can easily lead to a large-scale fire within the City.
The ordinance makes it unlawful for any person or responsible party to possess, sell, use ordischarge dangerous fireworks unless a permit authorizing such possession, sale, use ordischarge has been issued by the Fire Chief to the person or responsible party using, selling, or discharging or found in possession of said fireworks, and unless such person is in possession of a valid pyrotechnic operator’s license issued by the Office of the State Fire Marshal. The Fire Chief may establish reasonable rules and regulations for governing issuance of a firework permit and may issue the same subject to payment of a fee as established by the City Council.
In addition to prohibiting fireworks in Avalon, the proposed ordinance establishes penalties from $250 to $1,000 for each violation of the ordinance.
Additionally, if fireworks cause a fire or emergency response the person responsible will be heldfinancially responsible for the cost of fire suppression, emergency medical services, law enforcement response, evacuation, and any related damages to the extent permitted by law.
CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: Increased risk of wildland and structure fires, serious injuries or fatalities to residents, visitors, pets and emergency responders, Property damage to homes, businesses, vehicles, docks, andsurrounding natural areas.
FOLLOW UP ACTION: Implementation of City Council direction.
FISCAL IMPACTS: Undetermined.
ADVERTISING, NOTICE AND PUBLIC CONTACT: Pursuant to the Brown Act.ATTACHMENTS: Ordinance.
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AVALON
PROHIBITING THE USE, POSSESSION, SALE, AND DISCHARGE OF
FIREWORKS WITHIN THE CITY OF AVALON
WHEREAS, the California Legislature has declared in Government Code Section 51175, subdivision (a): (1) that fires are extremely costly, not only to property owners and residents, but also to local agencies; (2) that fires pose a serious threat to the preservation of public peace, health, and safety; (3) that it is necessary that cities, counties, specialdistricts, state agencies, and federal agencies work together to bring raging fires undercontrol; and (4) that preventative measures are needed to ensure the preservation of the public peace, health, and safety; and
WHEREAS, California Government Code Section 51178 requires the California Department of Forestry and Fire Protection (‘CalFire”) to periodically identify,recommend, and map fire hazard areas statewide, referred to as” Fire Hazard Severity Zones” (“FHSZ”); and
WHEREAS, the FHSZ Map depicts the entire City to be in a Very High Fire Hazard Severity Zone; and
WHEREAS, the use, possession, sale, and discharge of fireworks within the City poses a significant threat to public health, safety, and welfare due to the City’s unique island environment, wildfire risk, limited emergency access, and dense residential and visitor populations; and
WHEREAS, prohibiting fireworks is necessary to reduce the risk of fires, injuries, and disturbances to residents, visitors, wildlife, and emergency services personnel.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF AVALON DOES ORDAIN AS FOLLOWS:
Section 1. The City Council hereby finds that the foregoing recitals are true and correctand are incorporated herein as substantive findings of this Ordinance.Section 2. Title 4, Section 4-16 Fireworks is hereby added to the City’s Municipal Codeand will read as follows:
4-16.01 — Purpose and FindingsThe use, possession, sale, and discharge of fireworks within the City of Avalon pose a significant threat to public health, safety, and welfare due to the City’s unique island environment, wildfire risk, limited emergency access, and denseresidential and visitor populations.
Prohibiting fireworks is necessary to reduce the risk of fires, injuries, and disturb ances to residents, visitors, wildlife, and emergency services personnel. 4-16.02 — Definition
As used in this Chapter ‘fireworks” means and includes:
(1) Any combustible or explosive composition or any substance or combination of substances or articles prepared for the purpose of producing a visible or an audible effect by combustion, explosion, deflagration or det onation, whether manufactured, homemade or improvised;
(2) Fireworks classified by the State Fire Marshal as “dangerous fireworks” and as “safe and sane fireworks” pursuant to Health and Safety Code Sec tions 12561 and 12562;
(3) Any pyrotechnic devices for which the State Fire Marshal requires a license to manufacture, sell, transport or operate; and(4) Firecrackers, torpedoes, skyrockets, roman candles, cherry bombs, sparklers, chasers, snakes or other fireworks of like or similar constructionand any fireworks containing any explosive or flammable compound orsubstance. 4-16.03 — Fireworks Prohibited
It shall be unlawful for any person to use, give, possess, sell, offer for sale, store, ignite, discharge, or otherwise cause to explode any fireworks within the City of Avalon unless a permit authorizing such possession, sale, use or discharge has been issued by the Fire Chief to the person or responsible party using, selling, or discharging or found in possession of said fireworks, and unless such person is in possession of a valid pyrotechnic operator’s license issued by the Office of theState Fire Marshal. 4-16.04 — Penalties
Whenever a peace officer charged with the enforcement of any provision of the Municipal Code determines that a violation of this chapter has occurred, the peace officer shall have the authority to issue an administrative citation to any person responsible for the violation.
Whenever a peace officer charged with the enforcement of this chapter deter mines that a violation of the chapter has occurred, the peace officer may issue an administrative citation for each violation found to have occurred.
Citations issued pursuant to this chapter shall carry administrative fines as fol lows:
$250 for the first and subsequent violations of having “safe and sane” fireworks
$500 for the first and subsequent violations involving the possession of illegal fireworks
$500 for the violations involving the discharge of fireworks within the city limits of Avalon
$1 000 for violations involving the discharge of fireworks in the Very High Fire Severity Zone
4-16M5 — Cost Recovery
Any person responsible for a fire, emergency response, or public safety incident resulting from the use or discharge of fireworks may be held financiallyresponsible for the costs of fire suppression, emergency medical services, law enforcement response, evacuation, and related damages to theextent permitted by law.
Section 3. The City Council finds that this Ordinance is not subject to the California Environmental Quality Act (“CEQA”) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly, as it only involvesthe designation of Fire Hazard Severity Zones in the Local Responsibility Areas as recommended by the Office of the State Fire Marshal.
Section 4. If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance for any reason is held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remainingportions of this Ordinance. The City Council hereby declares that it would have adopted thisOrdinance, and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, or portions thereof be declared invalid or unconstitutional.Section 5. The City Clerk of the City of Avalon shall certify as to the adoption of thisOrdinance and shall cause the same, or a summary thereof, to be published and or posted in a manner required by law.
INTRODUCED at a regular meeting of the City Council of the City of Avalon on the 1 gth day of May, 2026, by the following vote:
AYES:
NAYS:
ABSENT:ABSTAIN:
PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Avalon on this 2td day of June, 2026, by the following vote:
AYES:
NAYS:
ABSENT:ABSTAIN:
Ann H. Marshall, Mayor
ATTEST:
Gabrielle Morones, City Clerk
APPROVED AS TO FORM:
Scott Campbell
Best Best & Krieger, LLP
CITY OF AVALON CITY COUNCIL
MEETING DATE: May 19, 2026 AGENDA ITEM: _______ ORIGINATING DEP: Administration CITY MANAGER: _________ PREPARED BY: Devin Hart, Senior Management Analyst Scott Campbell, City Attorney
SUBJECT: Contract for Stage 1 Design and Engineering Services Progressive Design-Build Contract for the Cabrillo Mole Revitalization ProjectPhase 2 RECOMMENDED ACTION(S): 1. Waive any minor irregularities in the proposal of Anderson Burton Construction, Inc., for the Cabrillo Mole Revitalization Project Phase 2; 2. Award the Stage I design and engineering services progressive design-build contract for the Cabrillo Mole Revitalization Phase 2 Project to Anderson Burton Construction, Inc., thus affirming the City Manager’s rejection on an appeal filed by Padelford; subject to finalization of such anagreement, 3. Authorize the City Manager or designee to negotiate and bring back a contractagreement with Anderson Burton Construction for City Council approval.
REPORT SUMMARY: Public Contract Code § 22185 et seq. authorizes the City to use progressive design-build contracting for the Progressive Design-Build Cabrillo MoleRevitalization Phase 2 Project (“Project”).
At a high-level, this Project includes two stages: (1) preconstruction design phase services (“Stage 1”); and (2) final design services and construction services to complete the Project(“Stage 2”). The selected design-builder performs the Stage 1 design and engineering services during or after which the design-builder proposes to City a Guaranteed Maximum Price (“GMP”) to construct the Project and, if accepted by City, the parties will enter into an amendment to the contract for design-builder’s performance of Stage 2 services (final designand construction). If the design is not acceptable to the City or the GMP too high, the City has the option of not proceeding with Stage 2.
On November 17, 2025, the City of Avalon published a request for qualifications (RFQ) for the Project. The RFQ provided qualified design-builders (“Proposers”) an opportunity to submit a statement of qualification (“SOQ”) and demonstrate their qualifications, experience,competence, and capacity to design and construct the replacement and expansion of the City’sCabrillo Mole Ferry Intermodal Terminal.
1. Background of Request for Qualifications
The City conducted a mandatory pre-bid conference in person and virtually on December 11, 2025. The meeting included an overview of the requirements set forth in the RFQ, a walk through the City’s design intent, as well and a site visit to the Cabrillo Mole to examine existing conditions and operational expectations. The original SOQ deadline was extended from January 22 to February 5, 2026, to allow potential respondents more time to provide comprehensive responses to the REQ.
The City received three SOQs from Proposers by the stated deadline — A.J. Padelford & Sons, Inc. (“Padelford”), Anderson Burton Construction, Inc. (“Anderson”), and Benchmark Contractors, Inc. (“Benchmark”). City Staff conducted a thorough analysis of the SOQsreceived based on the evaluation criteria specified in the REQ and conducted twomeetings/interviews with each Proposer.
2. Evaluation, Scoring, and Ranking of the Highest Ranked Proposer The SOQs were evaluated on seven factors in accordance with California law for progressivedesign-build projects, including: 1) meeting minimum pass/fail submission requirements, 2) understanding of the project, 3) project experience and references, 4) project team and key personnel, 5) project delivery, cost development, and management approach, 6) fee and rateproposal for Stage 1, and 7) construction cost estimate for Stage 2. Each factor was scored and the total scores were calculated to determine the overall ranking of the Proposers.
While City Staff made the determination that all three firms that responded to the REQ werequalified and capable of completing the Project, Anderson was identified to be the highest ranked Proposer based on City staff’s careful evaluation according to the seven evaluation criteria set forth in the REQ. Anderson consistently received the highest individual scores in each evaluation on most of the factors and was ranked highest overall among the three Proposers. Anderson demonstrated a good understanding of the Project and developed a detailed schedule and narrative plan illustrating how it intended to manage the Project, including its commitment to meet the desired Project schedule, planned construction phasing, and risk management procedures and understanding of the logistics of construction at a remote location like Catalina Island.
Anderson’s project experience and references demonstrated its resume of similar design-build public projects of a relevant size and scale, executed in comparably remote and challenginglocations, and featuring Spanish Heritage style, an aesthetic identified as preferred by the community at large as well as the City Council and business stakeholders. Anderson clearlyshowcased the experience, competencies, and capabilities each key team member brought to each phase of the Project and its potential collaboration with the City, including highlighting its partnership with RRM Design Group and its experience with project demands specific to construction on Catalina Island. Finally, Anderson’s approach to open, substantive, meaningfulpartnership with the City in delivering the City’s goals for the Project was clear throughout theSOQ and its detailed project management plans. Anderson’s proposal was the most consistent with what the City had asked for and the most desired of those presented by the responses to the RPQ.Though Anderson was not the lowest cost Proposer, the evaluation criteria in the REQ clearlyexplained that cost was not the only or most heavily weighted evaluation criteria to determiningthe highest ranked Proposer in this best value procurement. Even so, Anderson’s project budget for Stage 1 and Stage 2 very closely aligned with the City’s expectation of services and was fully explained in their submission.
City Staff also arranged for the City Council to hear presentations with each team at two Special City Council Meetings held on March 24 and 31, 2026. The Proposers were requested to provide a 30-minute presentation that would recapitulate their SOQs responding to the RFQ, including an introduction of their team and an overview of their understanding of the Project and their intended approach to design and construction. While these interviews did not change the Proposers’ scores or rankings, or City Staffs recommendation, they helped provide the City Council with the opportunity to understand the Proposers’ SOQs at a high level.
Additionally, as the City Council is the final determiner on which Proposal will be accepted, having the presentations before the City Council will assist them in their decision.
3. Rejected Protest to Selection of the Highest Ranked Proposer The City received a protest in response to City Staff’s recommendation to award the contract to Anderson, the highest-ranked proposer. Padelford protested the selection of Anderson on three grounds, arguing that the City treated Padelford unequally from the other Proposers because the Proposers presented their proposals to City Council on different days, the City’s evaluations were flawed, and the City unreasonably evaluated Padelford’s performance andexperience as a design-builder. A copy of Padelford’s protest is enclosed and providesadditional information. The City received a response to the protest from Anderson and it is alsoenclosed. The City has rejected Padelford’s protest as both untimely in part and meritless on the whole. A copy of the City’s determination on the protest is also attached.
Padelford responded to the City’s rejection of its protest via email. Padelford recapitulated several allegations from its protest but did not provide any facts or legal arguments justifying reconsideration or amendment of the City’s determination. The City referred Padelford to itsMay 8, 2026, determination and affirmed that it would proceed with its recommendation to City Council to award the contract to the highest ranked Proposer on May 19, 2016. A copy of Padelford’s email and the City’s response are also attached.
4. Recommendation to Award and Request for Authorization to Negotiate Contract for Stage 1
After completing their evaluations of the three SOQs according to the evaluation criteria, scoring and ranking the Proposers, and interviewing all three Proposers, City Staff recommends that the City Council waive any minor irregularities and award the design and engineering services progressive design-build contract for the Project to Anderson, the highest-ranked Proposer, subject to finalization of an agreement which will be brought to the City Council for approval. By awarding the design to Anderson, the City Council will also be affirming the rejection of Padelford’s protest.City Staff anticipate successfully negotiating contract terms by early June. If the City and Anderson cannot successfully negotiate a contract agreement, City Staff will return to City Council discuss next steps.
City Council will be provided regular updates on the design process as well as retain final approval authority of the architectural design. After the design is approved, City Staff may request authorization to negotiate and award an amendment with Anderson for the Stage 2 final design and construction services.
FISCAL IMPACTS: This Project is budgeted in the FY 25-26 CIP Budget — Project # 18OOO3 1 and will utilize a combination of grant and general funding resources.
GOAL ALIGNMENT: Infrastructure updates.
CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: The City will not have direction on how to proceed with the Cabrillo Mole Revitalization Project.
FOLLOW UP ACTION: Begin negotiations with Anderson and bring back a final contract for City Council consideration.
ADVERTISING, NOTICE AND PUBLIC CONTACT: Pursuant to the Brown Act.
ATTACHMENT:
1. A.J. Padelford & Sons, Inc.’s Protest dated April 21, 2026.
2. Anderson Burton Construction, Inc.’s Response to Padelford’s Protest dated April 28, 2026.
3. Notice of Rejection of Protest dated May 8, 2026.
4. A.J. Padelford & Sons, Inc.’s Email dated May 12, 2026.
5. Response Email dated May 15, 2026.
A. J. Padelford & Son, Inc.
13255 South St., Cerritos, Ca. 90703 • P. 0. Box 185, Artesia, Ca. 90702 (562) 924-3364 / (562) 865-2282 / Fax (562) 924-0521
general contractors developers architects
Cabrillo Mole Revitalization
Official Protest 4-21-2026
Project No. 180005
Mole terminal revitalization team breached three of four grounds for protest during RFP.Grounds for Protest: Challenges fall under:
Unequal treatment: The agency treated bidders differently. • RFQ did not state that interviews with city council or multiple follow up interviews were apart ofthe process as stated in section 7.3. The addition of a council presentation led to an unfair advantage against our team.
• Padelford team was solo presenter a week earlier than the proposed awarded contractor. This was a direct disadvantage to Padelford as all of our strategy, talking points, pricing, schedule and questions from council were memorialized on YouTube for competitors to watch and use.
• Unfair advantage to proposed awarded GC getting to present a week later giving time to increase detail, graphics, talking points and responses to same council questions that were asked of us.
Flawed evaluation: Errors in cost or technical evaluations. • Proposed awarded contractor is a million dollars more in phase 1 design, which is the hard bid contract portion ofproject. • Combined phase 1 bid and phase 2 budget were higher than Padelford’s combined as seen in public record snipits from interviews.
• Padelford is $974,244.00 cheaper on the hard bid portion of this project.
• Padelford is $199,499.00 cheaper on the combined phase 1 and 2 without alternate.
• Padelford is $1,522,149.00 cheaper on combined phase 1 & 2 plus alternate.
High-Level Cost Overview
Stage 1 A’ternate
$1,816,653 $15,624,303 $2,322,650
HIGH LEVEL COST ESTIMATES
Stage I Design Services $ 842,409
Stage 2 Options
Wood Framing $17,117,336 (base price)
Steel Structure, $17,399,048 (add —$300k)
Masonry Wall Construction, $17,552,145 (add —$400k)
Deduct to Exclude South Concourse $ - 1.000,000
• Proposed awarded contractors phase 2 budget is unattainable, unachievable and unrealistic to the requirements of RFP when factoring all that is involved with working in this environment.
• This location with all of its nuances has a learning curve.
You have to factor all that into budgets not just cost per foot from a book and tack on shipping charges.
• Revitalization team stated they “leveled” bids. We did not agree to nor had any discussion about adding dollars to our proposals. Ifthis occurred and our numbers were artificially inflated that was not agreed to and needs to be reassessed with us.
Unreasonable performance assessments: Improper assessment of experience.
• 30+ projects on island for our team only 1 designed on their side with nothing built.
• Proposed awarded contractors phase stated they would use mobile batch plant. Clearly not researched, as the cost and space to set up are not available leading back to our point that their phase 2 cost at 15 million is unrealistic and being overvalued by selection committee. • AJP feels the awarded focused on the words “design build” and “government” work as the two deciding factors here. • We were a union company for over 60 years. We have been in business for over 90 years. We have done every kind ofgovernment build you can list along with every type of contract you can name.., libraries, city halls, parks, etc. For some reason these points seem to still be counted against us. • Most recent “design-build” was 20+ million in 2024 where we carried A&E costs and cut the checks to design teams. o We are doing another project for same client in
Beliflower, CA but he is carrying design cost. We are
still in every design call and meeting like we would be on this one just not cutting the checks.
• The only difference between design build and what 90% of our work is currently, which we call “negotiated” is who cuts the checks for design team. Again 90% of our yearly work starts from day 1 conceptual through permits and buildingfinal. • Is the million-dollar difference on phase] really worth having more experience cutting checks to the design team? Closing:
Mole team never asked us about our experience with either in detail. If we had the added time like our competitors to review their interviews and analyze we would have adjusted our talking points and explained our history more on those subjects but an unfair time advantage was given to the other proposers.
If council follows through with the team recommendation, it issetting the project up immediately for difficulties. Over budget on phase 1 and we are extremely concerned about the phase 2 price put forth by the proposed GC. There is more than likely a BIG surprise budget balloon from contractor once plans are developed to a number more in line with ours. I would not be shocked iftheproject ends up being posted back on public purchase for open GC bidding and that additional million dollars they require in phase 1 would now only add to the deficit on phase 2 when you wouldhave those extra dollars with our low qualified bid for the construction phase.
The added one million dollars you are planning to spend on design should be going straight into your physical project, not into the pockets of a design team and contractor to develop a roll of paper plans.
• Remember phase 1 is the only HARD bid at this point in time.
• The city is not locked into general contractor for phase 2.• You can save the million dollars in this phase as contingency for phase 2.
• Padelford was the low qualified bidder.
• The committee and council considered Padelford a qualified bidder on this project.
• Council has a fiscal responsibility to not spend double the outlined RFP cost of phase 1.
• Council will not be following their SMART goals by
awarding a contract to the highest bidder.
3 RESPONSE TO PROTEST Cfty of Avalon — Cabrillo Mole Revitalization Phase II Project AND NBiRTON Progressive Design-Build RFQ No. 180005
RESPONSE TO PROTEST
City of Avalon — Cabrillo Mole Revitalization Phase II Project Progressive Design-Build RFQ No. 180005
Date: April 28, 2026
To: City Attorney, City of Avalon
Cc: City Manager; Selection Committee
From: Anderson Burton Construction, Inc. and RRM Design GroupINTRODUCTION Anderson Burton Construction, Inc., together with RRM Design Group (collectively, the “Design Build Team”), submits this response to the protest dated April 21, 2026, submitted by A.J.Padelford & Son, Inc. regarding the City of Avalon’s intended selection for the Cabrillo Mole Revitalization Phase II Project.
This response is limited to factual clarification and reference to the RFQ, the public procurement record, and applicable statutory framework. No legal opinions are offered.
A.J. Padelford & Son, Inc. protest letter alleged grounds for protest falls under three (3) categories (Unequal Treatment, Flawed Evaluation, and Unreasonable Performance Assessments)
Before the alleged protest categories are unpackaged, we would like to point out in the RFQ(section 4.6.c) one of the requirements is that the protest must include the name, address and telephone number of the person representing Proposer. In the letter of protest provided this requirement appears to not have been met.
1. ALLEGED UNEQUAL TREATMENT—
The first bullet point alleges that the “RFQ did not state that interviews with city council or multiple follow up interviews were a part of the process as stated in section 7.3. The addition ofa council presentation led to an unfair advantage against our team.” Our response to this allegation is that there was nothing in our presentation other than two forms (A3 Analysis and a Bid Leveling example) that weren’t in the interview PowerPoint Anderson Burton Construction 1121 Nevada Street I Arroyo Grande, CA 93420 www.andersonburton.com I ph. (805) 481-5096 I CLSB #773011 3 RESPONSE TO PROTEST City of Avalon — Cabrillo Mole Revitalization Phase II Project ANDERSON BURTON Progressive Design-Build REQ No. 180005 presentation and printed leave behind documents. There was zero information gleaned and nothing was revised nor utilized in the presentation to the City Council. The two aforementioned documents were discussed in the follow-up interview, and the decision was made to include them in the presentation prior to any presentations given to the City Council.This claim has no merit.
The second bullet point alleges that the Padelford team was solo presenter a week earlier than the proposed awarded contractor. This was a direct disadvantage to Padelford as all of our strategy, talking points, pricing, schedule and questions from council were memorialized on YouTube for competitors to watch and use.”
Our response to this allegation is that there was nothing in our presentation other than two forms (A3 Analysis and a Bid Leveling example) that weren’t in the interview PowerPoint presentation and printed leave behind documents. There was zero information gleaned andnothing was revised nor utilized in the presentation to the City Council. The two aforementioned documents were discussed in the follow-up interview, and the decision was made to include them in the presentation prior to any presentations given to the City Council.This claim has no merit.
The last bullet point states “Unfair advantage to proposed awarded GC getting to present aweek later giving time to increase detail, graphics, talking points and responses to same councilquestions that were asked of us.”Our response to this allegation is that we utilized the same content from our interviews. Our presentation for the City Council was completed in a few hours and was completed prior to the 1st City Council Presentation, and no revisions were made based on any external information.
This claim has no merit.
2. ALLEGED FLAWED EVALUATION
There is no factual evidence provided only opinion on how teams were scored. There are however, allegations and assumptions included which are not facts, but additional opinions and quite frankly are unprofessional.
Due to the aforementioned points, we will not entertain discussing each bullet point since the entirety of the argument is circumstantial, opinion-based and not based on facts which the RFQSection 4.6 outlines as a requirement.
This claim has no merit.
Anderson Burton Construction 1121 Nevada Street Arroyo Grande, CA 93420 www.andersonburton.com I ph. (805) 481-5096 I CLSB #773011 A9 RESPONSE TO PROTEST City of Avalon — Cabrillo Mole Revitalization Phase II Project ANDcTON Progressive Design-Build REQ No. 180005
3. ALLEGED UNREASONABLE PEREORMANCE ASSESSMENT
There is no factual evidence provided only opinion on how teams were scored. There are however, allegations and assumptions included which are not facts, but additional opinions and quite frankly are unprofessional.
Due to the aforementioned points, we will not entertain discussing each bullet point since the entirety of the argument is circumstantial, opinion based and not based on facts which the RFQ Section 4.6 outlines as a requirement.
This claim has no merit.CONCLUSION
The protest does not identify any deviation from the RFQ, unequal application of evaluationcriteria, or procedural irregularity. The Design-Build Team’s SOQ complies fully with the REQand the governing procurement framework.
Respectfully submitted,
Tim Merrill (CEO)
Anderson Burton Construction, Inc.
Anderson Burton Construction 1121 Nevada Street I Arroyo Grande, CA 93420 www.andersonburton.com I ph. (805) 481-5096 I CLSB # 773011 City of Avalon
Fl
, Santa Catalina Island, CA
May 8. 2026
VIA CERTIFIED MAIL AND EMAILMr. Jacob Young
A.J. Padelford & Son, Inc.
13255 South St.
Cerritos, CA 90703SUBJECT: City of Avalon
Request for Qualifications for the Progressive Design-Build Cabrillo Mole RevitalizationPhase II Project; Project No. 180005 Notice of Rejection of Protest
Dear Mr. Young:
The City of Avalon (“City”) has reviewed the protest letter tiled by A.J. Padelford & Son. Inc.(“Padelford”) dated April 2 1, 2026 (“Protest”) with regards to the above captioned project (“Project”).
The City also received and reviewed a response to the Protest from Anderson Burton Construction (“Anderson”) dated April 28, 2026 (“Anderson Protest Response”). As set forth in greater detail below,the City has thoroughly analyzed the Protest and determined that it is without merit and must be rejected in full. City staff will recommend the City Council award the contract for the Project to Anderson, the highest ranked proposer submitting an SOQ in response to the RFQ.
1. BACKGROUND OF RFQ.
On November 17. 2025. the City issued a Request for Qualifications (“RFQ”) seeking Statements of Qualifications (“SOQs”) from qualified design-builders (“Proposers”) to provide progressive design-build services for the Project. The RFQ provided Proposers an opportunity to demonstrate their qualifications. experience, competence. and capacity to design and construct the replacement and expansion of the City’sCabrillo Mole Ferry Intermodal Terminal by submitting an SOQ.l Section 7 of the RFQ set forth certain criteria for evaluation of the SOQs.2 SOQ were evaluated on seven factors, with a total maximum score of 100 assigned based on: minimum requirements (pass/fail):
understanding of the project (20 points); project experience and references (15 points); project team andkey personnel (15 points); project delivery, cost development, and management approach (15 points); fie and rate proposal for Stage 1 (15 points); and construction cost estimate for Stage 2(20 points).3 After the City evaluated SOQs based on the seven factors, Proposers could he invited to participate in a panel interview at the Avalon City Hall.4 Interviews were not considered part of (he scored evaluation criteria I RFQ Introduction.
2 Id. § 7.
Id. § 7.2 (Evaluation Criteria).Id. § 7.3.
65059.0001 I\44950019
Avalon City Hall -410 Avalon Canyon Road -P.O. Box 707 -Avalon, CA- 90704-0707 Telephone: 310-510-0220 - www.CityofAvalon.com
Ma 8. 2026