Agenda Report
Fullerton City Council
MEETING DATE: MARCH 21, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: STEPHEN BISE, ACTING PUBLIC WORKS DIRECTOR PREPARED BY: YVETTE HANNA, PRINCIPAL WATER ENGINEER
GAR HUANG, ASSOCIATE ENGINEER
SUBJECT: WATER RATE PROGRESS REPORT 2022
SUMMARY
Approve 2022 Water Rate Progress Report, as accepted by the Infrastructure and Natural Resources Advisory Committee, providing information regarding water improvement projects funded with water rates revenue approved in 2019.
RECOMMENDATION
Receive and file 2022 Water Rate Progress Report.
CITY MANAGER REMARKS
The City Manager concurs with recommendation to receive and file the water rate progress report 2022.
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 pay for operational expenses, high priority reservoir, well and pump replacements / upgrades and pipeline replacements. The City set a three-mile annual goal for pipeline replacement under construction in 2020, three miles in 2021 and increasing the goal until it reaches an annual nine miles pipeline replacement goal by 2023.
DISCUSSION
The City serves over 31,900 connections, delivering potable water to customers’ homes and businesses 24 hours a day, 365 days a year. 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 (more than half exceed 50 years in age) intended to provide a safe and reliable water supply. The City uses water rate revenues to operate, maintain and improve this water system. The City sets water rates to meet anticipated ongoing maintenance and operation costs and provide sufficient funding for water system upgrade and replacement projects.
The City developed the five-year water rates adopted by City Council in 2019 in concert with a citizen committee that held public meetings over an approximate one-year timeframe. The water rate study identified an aging infrastructure and 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 a Cost-of-Service study (operational needs and capital funding) equal 4% in FY 2023-24.
The Infrastructure and Natural Resources Advisory Committee (INRAC) and City Council directed staff to develop a water rate annual report. Staff developed the 2022 Water Rate Progress Report (after audited numbers became available in 2023) and presented it to INRAC on February 27, 2023. INRAC accepted the report and recommended the report for City Council approval. The report discusses rate revenue and successful implementation of projects to provide for the eleven-mile pipeline replacement goal (4.17 miles replaced in FY 2021-22 with another 3.57 miles in construction and 4.99 miles replaced in previous years) and other water system improvement projects during FY 2021-22.
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 under development by the Orange County Water District (OCWD) in conjunction with the City. The City continually analyzes the ongoing cost impacts to operate these systems. The City does consider the additional impacts of COVID-19 pandemic and the subsequent price increases to construction costs for the rate adjustments. These increases have unpredictable impact as the market trends remain volatile and labor and material costs continue to rise.
Staff projects seven miles of construction for FY 2022-23, but does not expect to meet the nine-mile goal for FY 2023-24, due in large part to the unanticipated cost increases previously stated. Staff has redirected many of the funds intended for other infrastructure needs over the years to meet the water main replacement goals but this will become impracticable by FY 2023-24. Staff presented this issue to INRAC on February 27, 2023 and INRAC recommended presenting this information to City Council.
Staff recommends City Council receive and file the 2022 Water Rate Progress Report.
Attachment:
Attachment 1 – 2022 Water Rate Progress Report
cc: City Manager Eric J. Levitt
Water Rate Progress Report 2022
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