1 STAFF REPORT
D
ATE: September 13, 2022
TO
: Justin Hess, City Manager
F
ROM: Dawn Roth Lindell, General Manager, Burbank Water and Power Ken Berkman, Public Works Director
BY: Bob Liu, Chief Financial Officer, Burbank Water and Power Stephen Walker, Assistant Director, Public Works
John Molinar, Assistant Director, Public Works
S
UBJECT: Establishment of a Bi-A nnual Rates and Budget P rocess for F unds Managed by Burbank Water and Power, and the Wastewater and Refuse Funds Managed by Public Works
RE
COMMENDATION
Authorize the implementation of a bi -annual rates and budget process for all funds managed by Burbank Water and Power (BWP), and the wastewater and refuse enterprise funds managed by Public Works , with a plan to start this practice for f iscal years (FY) 2023-2024 and 2024-2025.
B
ACKGROUND
During the April 26, 2022 m eeting dedicated to the review of FY 2022- 23 budget materials, the City Council asked staff to consider the possibility of implementing a bi - annual process for approving budgets, rates and fee schedules.
T
he City Charter requires that the City Council approve budgets annually. Historically, in the springtime staff presents, and City Council approves, new annual budgets for all funds for the upcoming fiscal year. The City Council also approves rates and fees schedules during the budget process. However, rates and fee schedules are approved at the City Council’s discretion and are not bound to the budget process ; and in some cases, such as when adopting water , wastewater, and refuse rates and fees, a public hearing is required.
T
he management of a department’s budget considers staffing levels, operating and capital budgets, planning for adequate and prudent financial reserve levels, and planned professional service agreements and contractual services. The budget process is a
WATER AND
POWER
PUBLIC WORKS
2 significant, labor resource-consuming process that involves almost every manager and member of their team.
It should also be noted that prior to the City Council considering BWP’s budgets, the Burbank Water and Power Board (BWP Board) meets with BWP staff at least twice to review the utility’s budgets and its proposed rates and rate design. This utility process generally starts each October with internal planning and meetings through January, seeks the input and recommendation of the BWP Board in meetings in February and March, and concludes with at least one budget presentation to the City Council in the spring.
DISCUSSION
As noted above, the City Charter requires that the City Council approve all budgets annually. The city will present budgets annually for non-enterprise funds. For the water, electric, wastewater, and refuse services funds, staff recommends that it prepare for City Council bi-annual budgets, rates and fee schedules this fiscal year for the upcoming even- ending fiscal year 2023-2024; and going forward, for future even- ending fiscal years .
Additionally, for the even-ending fiscal years, any required rates hearings would also be held prior to adopting new bi -annual rates and fee s schedules. Then, for fiscal years ending with odd numbers, such as FY 2024- 2025, staff would prepare and present modifications to the proposed budget a year earlier. The City Council could then approve the odd -ending fiscal year’s budget as required by the C ity Charter with the proposed modifications.
CA Proposition 218 (Prop 218) requires that increasing rates for water, wastewater , and refuse services go through a public hearing process. It should be noted that electric rates are exempt from this requirement. However, Prop 218 allows for multiple year rate setting without a second hearing if rates are based on pass-through costs, such as Metropolitan Water District purchased water costs, and an inflation formula for operating and capi tal expenditures. Staff proposes to incorporate into the even year the rate hearing process for water, wastewater and refuse services and the pass -through costs and an inflation formula in the odd year rates.
BWP has a long history of proactively forecasting and planning , and this work is key to utility budgeting and ratemaking. BWP publishes a five- year forecast for its electric and water operations, including capital, operations and maintenance, staffing, financial reserves, and revenue requirements; and this type of planning and forecasting will continue. These forecasts consider the anticipated future costs related to energy, electric transmission, purchased water, labor, materials, changes in energy and water demand, and anticipated regulatory activity. Proactively addressing projected changes in these costs and resources ha s served the Burbank residents and businesses well, and it is reflected in its competitive rates, and its reliability and safety records.
Public Works conducts a similar effort to capture and forecast all applicable rate- payer costs for the refuse and w astewater funds. For r efuse, this involves projecting and planning for large vehicle purchases that make up a great part of the budget as well as landfill closure costs and projects. For wastewater, this includes operations and maintenance costs, and capital expenditures for both Burbank and the city of Los 3 Angeles, given the 27 -year contract the city has for the portion of wastewater that is conveyed to and treated at the Los Angeles Hyperion Water Reclamation Plant.
There are several benefits associated with implementing bi -annual budgets and rates.
These benefits include: (1) the residents and businesses of Burbank having a better opportunity to plan for the costs associated with utility , wastewater and refuse services, with advanced knowledge of two-year rate plans; (2) the ability to allocate staff resources to other priorities and issues during the odd-ending fiscal years, as staff will focus solely on necessary budget changes and not a comprehensive budget preparation effort ; and (3) reinforcing the city’s commitment to long- term fiscal health by conducting deeper analysis for two fiscal years.
FISCAL IMPACT
The bi-annual budget will allow the enterprise funds to allocate thousands of hours of staff resources to other priorities and issues, instead of a labor -intensive, comprehensive budget process in the odd-ending fiscal years.
CONCLUSION
Staff requests that the City Council authorize the implementation of a bi-annual rates and budget process for all the funds managed by Burbank Water and Power , and the wastewater and refuse enterprise funds, with a plan to start this practice for fiscal years 2023-2024 and 2024-2025.
ATTACHMENTS
None.