Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: Review of Proposed Sonoma Water Transmission System Budget for Fiscal Year 2023-24
Date: March 14, 2023
Written by: Craig Scott, Director of Public Works/City Engineer Recommendation
It is recommended the City Council adopt a motion providing direction to the City's Water Advisory Committee Member to endorse the proposed Sonoma County Water Agency FY 2023- 24 Water Transmission System Budget.
Background
The Sonoma County Water Agency (Sonoma Water) has a Technical Advisory Committee (TAC) comprised of staff from the prime water contractors (specific cities and water districts that purchase water from Sonoma Water, as named in the Restructured Agreement for Water Supply), and a Water Advisory Committee (WAC) comprised of designated elected officials from these same prime water contractors.
At the TAC meeting on March 6, 2023, Sonoma Water is to present the attached draft budget for the TAC consideration and recommendation to the WAC. At the prior joint WAC/TAC meeting on February 6, 2023, the WAC chair set April 3, 2023 as the special meeting date to have the WAC vote on the proposed FY 23/24 Water Agency water transmission system budget.
Analysis/Discussion
In accordance with the Restructured Agreement for Water Supply (the wholesale water supply agreement for the prime water contractors, including Cotati), the City’s wholesale water rate is tied to the Petaluma Aqueduct rate. The proposed overall increase to the wholesale water rate for FY 22/23 is 9.42 percent. Based on the Restructured Agreement for Water Supply, the rates are based on budgeted deliveries of 41,847 Acre-Feet (AF) which is the total actual water deliveries for the last twelve months. The proposed Budget package prepared by Sonoma Water is attached and contains a summary, table of contents and budget detail sheet.
The elements of the budget are further described below:
OPERATIONS AND MAINTENANCE (O&M) CHARGE. This charge consists of a base O&M charge and four sub-charges that together make up the “Total O&M Charge”.
The base O&M charge would increase by $87.28/AF (10.7%) due to a lower than budgeted water sales resulting in a lower delivery figure for budgeting.
A summary of the O&M fund changes for FY23/24 compared to the FY22/23 adopted budget is shown on page i, and changes to the O&M rate, revenues and expenditures are shown on page ix of the attached document.
OPERATIONS AND MAINTENANCE SUB-CHARGES The
four sub-funds within the Total O&M Charge are as follows:
1. Water Management Planning. This sub-charge is used primarily to fund the Urban Water Management Plan and related activities. The plan is required by the State for years ending in zero and five. Past rate increases have accumulated the fund balance and has enabled the proposed FY23/24 rate to be zero. The current UWMP was submitted in FY 2021.
2. Watershed Planning/Restoration. This sub-charge is used primarily to fund activities required for the implementation of the Biological Opinion. This subcharge would increase by $3.25/AF (9.9%). The rate increase is primarily due to an 8.5% decrease in deliveries despite using $3.5 million in fund balance.
3. Recycled Water & Local Supply. This sub-charge is used primarily for funding recycled water and local supply projects. Fiscal Year 2023/24 rate is a decrease of $0.50/AF which is a 100 percent decrease. Past rate increases have accumulated sufficient fund balance for this fund.
4. Water Conservation. This sub-charge is used for funding regional water conservation efforts, such as regional media ads and supporting the regional Sonoma-Marin Water Saving Partnership. This sub-charge is to increase by $6.58/AF (13.8%). The rate increase is primarily a result in the 8.5% decrease in deliveries despite using $418,000 in fund balance to moderate the increase.
Summaries of the major expenses in each of these sub-funds can be found on pages 25-34 of the attached Proposed Sonoma Water FY 23/24 Transmission System Budget.
Financial Considerations
Approval of the budget is expected to result in an increase of 9.42 percent to the wholesale rate of water that the City purchases from Sonoma Water. The City’s 5-Year rate model, includes a 6 percent wholesale water rate increase for years 2022 and 2023, and a 5.5 percent increase for years 2024, 2025, and 2026. The difference of the rate model rate and the proposed Sonoma Water rate increase of 3.42% represents approximately $68,000 of increased operations costs to the City. This increase can be offset by increasing City local groundwater pumpage and by finding operational savings. Continued disparities between the City’s rate model and actual wholesale increases over several years may prompt the need for an early reevaluation of the City’s 5-year rate program.
The City, Rohnert Park and Petaluma TAC representatives all agreed to reduce the discretionary Capital Charge from $12/AF to zero to lower the rate from 10.53% to 9.42%. The Capital Charge is to steadily build up a fund for capital projects. A one-year pause may be justified due to the extenuating circumstances of the drought, which led to a dramatic decrease in water deliveries, and this rate can be replenished once demands increase above drought levels.
comparison as the water usage varies. Because water usage has steadily increased over this period, the City’s purchased water costs to Sonoma Water have increased.
Slide 15 of the attached power point, is a chart comparing the proposed Sonoma Water rate increase to other wholesale water agencies. Even with the proposed rate increase, Sonoma Water’s rate remains well below those of other wholesale water agencies.
As with the City’s financial planning, the Sonoma Water long range financial model’s goal is to provide long term rate stability while preparing for long range capital projects. The goal is to build up capacity for future projects, while avoiding large year-over-year rate increases.
Environmental Issues
Council action on this item is exempt from the California Environmental Quality Act (CEQA) because it does not constitute a project as defined by CEQA Guidelines Section 15378.
Attachments:
FY23-24 Water Transmission Budget (PDF)
FY 23-24 Draft WT Budget TAC Bookmarked (PDF)