Public Hearing Item 5b
STAFF REPORT
City Council Business Item
DATE: July 1, 2024
TO: Honorable Mayor and Council Members
FROM: Brendan Byrd, Public Works Director/City Engineer THROUGH: Merritt Perry, City Manager
SUBJECT: Public Hearing: Proposition 218 Majority Protest Process Relative to Proposed Increase to Wastewater (Sewer) Rates
STAFF RECOMMENDATION:
Open and conduct a public hearing to receive all written and verbal testimony regarding the proposed wastewater (sewer) rates and consider the results of protest proceedings in accordance with Proposition 218; adopt a resolution certifying the protest results.
EXECUTIVE SUMMARY:
The City of Fortuna owns and operates a municipal wastewater conveyance and treatment system comprised of over 50-miles of sanitary sewer collection mains, numerous wastewater lift stations, and a wastewater treatment plant. The operation, maintenance, and improvement of these systems is funded by user rates, which are collected through monthly bills to the City’s customers. As the Council is aware, in recent years operational and maintenance costs are beginning to exceed revenues. Additionally, the City is under compliance schedules with the State Water Board that will require large and expensive improvements to the City’s infrastructure, much of which will need to be funded through wastewater user rates. Understanding the need to adjust rates to cover current and projected future operations, maintenance, and improvement costs, staff in late 2023 began the rate study process.
This process began by retaining Jacobs Engineering, the City’s engineering consultant on the NPDES Compliance Project (CIP 0171), to complete the rate study. At the April 15th 2024 regular City Council meeting, City and Jacobs staff presented the draft proposed rate adjustments that are required to cover anticipated expenses over the next five years. The approach presented at that meeting was based on performing a large year-one adjustment, followed by more modest adjustments in the subsequent four years. After a comprehensive discussion, the Council directed staff to revise the proposed adjustment strategy to lower the initial year increase as much as feasible, and spread the adjustments out more evenly over the five-year period. A revised rate adjustment approach was then presented to the Council at the May 6th 2024 regular City Council meeting, and Council provided direction to staff to begin the Proposition 218 (Prop 218) noticing process with the revised rate adjustment approach. A table showing the original and revised sewer rate adjustment percentages is included in Attachment A.
Public Hearing Item 5b
Immediately following the May 6th meeting, staff worked with the City’s rate study consultants to finalize a Prop 218 Mailer and Frequently Asked Questions (FAQ) handout, which provided to the City’s customers and property owners information regarding the proposed rate increases, the purpose and need for performing increases, and the methods to protest the proposed increases. The mailers were sent out to all parcels identified in the most current County Property Tax Roll, in additional to all customers associated with the City’s wastewater billing system. The mailers where generated and processed by UBEO, a business services company retained by the City, and the mailers where sent on Friday May 17th. The public hearing date for the proposed rate increases was set for the July 1st regular City Council meeting, which provided for the required 45-day noticing period pursuant to Prop 218.
Since distributing the mailers, the City Clerks staff have been collecting and filing any and all protests received from property owners and rate payers in the City of Fortuna. To date the City has received approximately 200 verified protests meeting the City’s protest procedure requirements.
The City’s protest procedure requirements are included as Attachment B and have been made available on the City’s website. Pursuant to Prop 218, written protests can be received all the way through the closure of the public hearing for this item. Citizens can also attend the public hearing and provide verbal comments or protests, but it should be noted that only signed, written protests meeting the City’s established requirement will be accounted for in the Prop 218 protest tally.
Upon closure of the public hearing associated with this item, the City Clerk will provide a count of the unverified protests and report to the Council the number. Overall, for the proposed rate increases to be rejected by the properties assessed within the City’s wastewater service area, a majority (50% plus one vote) must be received and verified as valid. The City has approximately 4,630 parcels connected to the City’s wastewater system, and therefore approximately 2,315 verified protests would need to be received to reject the increases. If the number of protests received at the closure of public hearing remains below the 50% threshold, the final protest count can be reported as an unverified total. Should the number of protests exceed the 50% threshold, staff would recommend continuing the public hearing to a special meeting in the days following, given that protest verification would need to take place to substantiate protests, which will take additional time.
After closure of the public hearing and a count of the protests is given by the City Clerk, the Council will be asked to adopt one of two resolutions certifying the results of the Prop 218 protest process.
The first Resolution, 2024-22C, certifies a non-majority protest result, while 2024-22D would certify a majority protest vote. The protest number in either resolution would be included prior to final signature, and both versions of the resolution are included as Attachments C and D.
FINANCIAL IMPACT:
The financial impact of this hearing will be dependent on the number of valid written protests received. If a non-majority of protests are received and Resolution 2024-22C is adopted, then the wastewater rates increases for the following fiscal year budget will be considered in a subsequent business item. If a majority of valid written protests are received and Resolution 2024-22D is adopted then there would be no change to the wastewater rates in the coming fiscal year.
RECOMMENDED COUNCIL ACTION:
1. Receive staff presentation
Public Hearing Item 5b
2. Open and conduct a public hearing to receive all written and verbal testimony regarding the proposed water rates and consider the results of the protests proceedings in accordance with Proposition 218;
3. Close the public hearing;
4. Adopt one of the following resolutions certifying the protest results:
a. For a non-majority protest – Resolution 2024-22C certifying that the number of valid written protests were not received from property owners representing a majority of the parcels subject to the proposed rate increase. b. For a majority protest - Resolution 2024-22D certifying that the number of valid written protests were received from property owners representing a majority of the parcels subject to the proposed rate increase.
Attachments:
Attachment A – Initial and Revised Proposed 5-year Wastewater (Sewer) Rate Increases Attachment B – City Prop 218 Protest Procedures
Attachment C – Resolution 2024-22C
Attachment D – Resolution 2024-22D