City of Gonzales
PUBLIC WORKS / CITY ENGINEER DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: August 7, 2023
FROM: Patrick Dobbins, Public Works Director/City Engineer THROUGH: Carmen Gil, City Manager
SUBJECT: Water and Sewer Rate Study Workshop
RECOMMENDATION
It is recommended that the City Council receive a presentation on the Water and Sewer Rate Study and provide comments and feedback.
BACKGROUND
Following accepted best Governance Accounting practices, the City uses enterprise funds to cover the costs of operating and maintaining the Water and Wastewater systems. The enterprise funds are funded through user rates and connections fees which are separate from the General Fund. The water and sewer rates are included in the city’s annual “Cost of Services Fee Schedule” and are adjusted each year based on the Consumer Price Index.
To meet its obligation of protecting public health and supporting economic growth, the city should review the rate structure to make sure they are generating the necessary capital to cover the costs to run each system. From staff’s research, the last time the City did a formal rate review and adoption was in 1986 for water and 1990 for wastewater (Water Resolution 1986-62 and Wastewater Resolution 1990-62).
Therefore, a rate review is long overdue.
The objectives of the Water and Sewer Rate Studies are to:
• Provide recommendations to adequately fund the city’s current and projected water and sewer operations, maintenance, and capital improvements.
• Ensure that revenues are adequate to meet any debt used to finance capital improvements. • Address funding maintenance of infrastructure by incorporating reasonable projections for facility replacement within the revenue requirements and rate calculations.
AGENDA
ITEM
13 • Review city financial policies and make recommendations where appropriate with respect to adequate reserves for operations, rate stabilization, and capital improvements. • Affirm the appropriateness of existing user categories and/or develop new or combine categories to simplify rates and ensure equity among users.
• Provide recommended rate structures based on the cost of service and State requirements. • The rate structures shall follow State Proposition 218. o Five-year projection of capital improvements, utility costs, debt payments and expected revenues.
o Proposed rate increases entail mailing a notice to property owners, holding a public hearing and mailing “protest vote” ballots to all effected property owners.
REVIEW & ANALYSIS
After completing the competitive selection process, The Council accepted staff’s recommendation and approved a contract with Lechowicz & Tseng to prepare a Water and Sewer Rate Study at their November 21, 2022 meeting. The contract was executed, and a kick-off meeting was held on December 6, 2022. Over the last eight months, Lechowicz & Tseng received and analyzed the following information:
Financial Information
• Annual revenue by customer class for 2020 through 2022 • Water and sewer cash balances as of July 1, 2022
• Updated water and sewer capital improvement plans
• Secured or expected grants or loans for capital projects • Payment schedules for outstanding debt obligations
Customer and Usage Information
• Number of residential, commercial, industrial, and lift station customers • Projected new development over the next 10 years to estimate new customers • Large industrial customers use data
• Detailed Billing data by month for the past 3 years
• Example utility bill from a typical customer
• Billing data for customers not included in the City’s billing software (ie, Gonzales School District for sewer use)
Based on Lechowicz & Tseng’s analysis of the provided information and input from City staff they are recommending changes to the City’s rate structure. The following sections describe those changes.
WATER FEES - The city’s water rates are comprised of a monthly meter fee plus the amount of water used (aka consumed). The current and proposed water rates are in the following two tables. We are recommending annual seven percent increases.
MONTHLY WATER METER FEE
Proposed
2023/24 2024/25 2025/26 2026/27 2027/28
Effective Date Current Jan. 1, 2024 Jan. 1, 2025 Jan. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Meter Size +7% +7% +7% +7% +7%
5/8" $22.12 $23.06 $24.68 $26.40 $28.25 $30.22
1" $23.50 $23.50 $24.68 $26.40 $28.25 $30.22
1-1/2" $24.86 $46.12 $49.36 $52.80 $56.50 $60.44
2" $26.26 $73.79 $78.98 $84.48 $90.40 $96.70
2-1/2" $27.28 $110.69 $118.46 $126.72 $135.60 $145.06
3" $29.12 $147.58 $157.95 $168.96 $180.80 $193.41
4" $30.53 $230.60 $246.80 $264.00 $282.50 $302.20
6" $31.94 $461.20 $493.60 $528.00 $565.00 $604.40
MONTHLY WATER CONSUMMATION FEE
Proposed
2023/24 2024/25 2025/26 2026/27 2027/28
Jan. 1, 2024 Jan. 1, 2025 Jan. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Volume Rates ($/ccf charged to all usage)
Residential/Commercial Current +7% +7% +7% +7% +7%
0 - 25 ccf $2.27 $2.41 $2.58 $2.76 $2.95 $3.16
26 - 30 ccf $2.35 $2.41 $2.58 $2.76 $2.95 $3.16
31 - 49 ccf $2.56 $2.41 $2.58 $2.76 $2.95 $3.16
50+ ccf $2.84 $2.41 $2.58 $2.76 $2.95 $3.16
Industrial Users
All use $2.27 $2.41 $2.58 $2.76 $2.95 $3.16
SEWER RATES – The current and proposed sewer rates are in the following table. The recommended increases are shown in the table.
Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date July 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge per Month ($/account)
Adjustment
varies +27% +27% +3% +3%
Residential $31.77 $39.48 $50.13 $63.67 $65.58 $67.55
Commercial $15.18 $11.30 $14.35 $18.22 $18.77 $19.33
Industrial $312.62 $11.30 $14.35 $18.22 $18.77 $19.33
Schools $0.91 $1.04 $1.32 $1.68 $1.73 $1.78
Commercial & Industrial Volume Rate ($/ccf) (in addition to fixed charge) $2.40 $3.38 $4.29 $5.45 $5.61 $5.78
Note: Schools are billed annually rather than monthly based on reported average daily attendance.
To follow the process mandated by Proposition 218, the schedule to discuss and adopt new rates is:
August 7, 2023 Present initial rate recommendations at City Council meeting September 18, 2023 Community Outreach Meeting including Industrial Facilities October 2, 2023 Present follow-up report at City Council meeting October 20, 2023 Mail Prop 218 notice of rate hearing to customers October/November 2023 45-day Prop 218 waiting period; conduct ratepayer outreach December 4, 2023 City Council meeting for Proposition 218 hearing January 1, 2024 Implement new rates absent a majority protest The presentation that staff and consultant will make at the Council meeting is attached for your reference.
How Recommendation Supports the Vision
Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small town charm.
Explain: Completing the rate study and adjusting rates to adequately fund the operations and maintenance of each system is fundamental to maintaining a safe and clean community for all residents and businesses.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment and resources necessary to provide excellent services that enhance the quality of life of our diverse community. X Yes ____ No____ N/A
Explain: The recommended rate structures will be based on the cost of service and State requirements.
City services will be delivered in a cost-effective, respectful and friendly manner to insure the safety and well being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner. X Yes ____No ____ N/A Explain: See Vision explanation above.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety Yes X No N/A
• Housing X Yes No N/A
• Recreation Yes X No N/A
• Environment Yes X No N/A
• Education Yes X No N/A
Explain: See Vision above.
ALTERNATIVES
Alternatives include:
• Adjust the proposed increases to the water or sewer rates. • Provide comment and feedback on the various planned Capital Improvement Project.
BUDGET IMPACT
There is no budget impact to this evening’s presentation.
CONCLUSIONS
It is recommended that the City Council receive a presentation on the Water and Sewer Rate Study and provide comments and feedback.
Attachments:
1. Presentation