Agenda Report
Fullerton City Council
MEETING DATE: APRIL 5, 2022
TO: CITY COUNCIL / CITY MANAGER
SUBMITTED BY: JEFFREY W. COLLIER, ACTING CITY MANAGER
PREPARED BY: MEG McWADE, PUBLIC WORKS DIRECTOR
SUBJECT: WATER RATE PROGRESS REPORT 2021
SUMMARY
Receive and file 2021 Water Rate Progress Report, as approved by the Infrastructure and Natural Resources Advisory Committee, providing information about the implementation of water improvement projects funded with revenue from water rates approved in 2019.
RECOMMENDATION
Receive and file.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
The City adopted a five-year series of water rate increases in June 2019 to provide for operational expenses and high priority reservoir, well and pump replacements / upgrades, as well as pipeline replacement. The City set an initial annual goal for pipeline replacement of three miles under construction in 2020, three miles in 2021 and increasing the goal until it reaches an annual replacement goal of nine miles of pipeline by 2023.
DISCUSSION
The City serves over 31,900 connections, providing potable water to our customers delivered to homes and businesses 24 hours a day, 365 days a year. To do this, Fullerton has an extensive and complex water system including eight active groundwater wells, 14 pump stations, seven active Metropolitan Water District (import water) connections, 15 reservoirs (67.5 million gallons), four primary pressure zones (with 12 sub-zones) and over 423 miles of distribution pipes (over half exceed 50 years in age) intended to provide a safe and reliable water supply. The City operates, maintains and improves this water system through water rate revenues. The City sets water rates with the intent to meet anticipated ongoing maintenance and operation costs and provide sufficient funding for water system upgrades and replacement projects.
The City developed the five-year water rates adopted by City Council in 2019 in concert with an engaged citizen’s committee that held public meetings over an approximate one-year timeframe. The water rate study identified an aging infrastructure and a need to fund water system upgrades and pipeline replacements, with an initial goal of three miles of pipeline and an annual goal of nine miles of pipeline replaced by 2023-24. The remaining rate increases based on the 2019 Cost-of-Service study (operational needs and capital funding) are 5% in FY 2022-23 and 4% in FY 2023-24.
As part of the water rate discussion, the Infrastructure and Natural Resources Advisory Committee (INRAC) and City Council directed staff to develop a water rates annual report. Staff developed the 2021 Water Rate Progress Report (after audited numbers became available in 2022) with feedback from INRAC. INRAC reviewed the report at its February 28, 2022 meeting and provided comments. Staff updated the report and INRAC approved the report at its March 21, 2022 meeting with a recommendation to forward the report to City Council for consideration. The report discusses rate revenue as well as successful implementation of projects to provide for the replacement of six miles of pipeline (2.24 miles replaced in FY 2019-20, 2.75 miles replaced in FY 2020-21, and 1.82 miles in construction) and other water system improvement projects during FY 2020-21.
The series of rate adjustments adopted in June 2019 occurred in advance of the per- and poly-fluoroalkyl substances (PFAS) regulations implemented by the California Division of Drinking Water. The City of Fullerton has one PFAS treatment system completed and operational with others currently under development by the Orange County Water District (OCWD) in conjunction with the City. The City continuously analyzes the ongoing cost impacts to operate these systems. Additional impacts not considered for the rate adjustments include the COVID-19 pandemic and the subsequent price increases to construction costs. Staff does not yet know the final impact of these increases as costs continue to rise.
Staff recommends City Council receive and file the 2021 Water Rate Progress Report.
Attachments:
Attachment 1 - 2021 Water Rate Progress Report
Water Rate Progress Report 2021
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