City of Gonzales
PUBLIC WORKS / CITY ENGINEER DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: November 20, 2023
FROM: Patrick Dobbins, Public Works Director/City Engineer THROUGH: Carmen Gil, City Manager
SUBJECT: Resolution No. 2023-67 Water/Sewer Rate Study Prop. 218 Public Hearing
RECOMMENDATION
It is recommended that the City Council:
• Hold a public hearing;
• Consider all comments and protests; and
• Adopt Resolution No. 2023-67, A Resolution of the City Council of the City of Gonzales Establishing New Water and Sewer Rates for Calendar Years 2024 Through 2028.
BACKGROUND
At the August 7, 2023 Council meeting, staff and our consultant presented the draft Water and Sewer Rate Study. At the September 18, 2023 Council meeting, staff and our consultant presented the final Water and Sewer Rate Study. At the September 18, 2023 meeting, the Council directed staff to initiate the Proposition 218 Process and set the public hearing for this evening’s Council meeting.
AGENDA
ITEM
19 REVIEW & ANALYSIS
Lechowicz & Tseng is the city’s Rate Consultant and they received and analyzed the following data:
Financial Information
• Annual revenue by customer class for 2020 through 2022 • Water and sewer cash balances as of July 1, 2023
• Water and sewer enterprise operating budgets
• Updated water and sewer capital improvement plans
• Secured or expected grants or loans for capital projects • Payment schedules for outstanding debt obligations (ie 2006 Bond Debt for the Water and Sewer Systems)
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)
The following is the overview of the rate study process:
o Revenue Requirements - Revenue requirements are analyzed via financial plans developed from the Water and Sewer Fund budgets. Based on the best information currently available, the financial plans incorporate projected operation and maintenance costs, capital expenditures, debt service, and growth to estimate annual revenue requirements. The plans serve as a roadmap for funding the City’s future operating and capital programs while maintaining long-term fiscal stability. o Cost of Service Allocation - The cost-of-service process builds on the financial plan analysis and assigns water and sewer system costs to functional cost components: metering and customer service, base, and extra for water, and customer service, flow, BOD, and TSS for sewer. o Rate Design - Rate design involves developing a rate structure that proportionately recovers costs from customers. Final rate recommendations are designed to (a) fund the utilities’ short- and longterm costs of providing service; (b) proportionately allocate costs to all customers and customer classes; and (c) comply with the substantive requirements of Proposition 218.
The new water and sewer rates are based on information gathered from City budgets, audits, and input from staff. The cost allocations are based on American Water Works Association methodologies and industry standard practice. The proposed rates are based on the reasonable cost of providing service and are proportional to the benefits received by each customer.
PROPOSED WATER RATES – NORMAL WATER YEAR
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 METER CHARGE
Meter Size +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 $604.40
CONSUMPTION FEES ($/ccf)
Residential/Commercial
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
All use $2.27 $2.41 $2.58 $2.76 $2.95 $3.16
1 - One unit = 100 Cubic Feet (ccf) = 748 gallons
PROPOSED DROUGHT CONSUMPTION FEES
PROPOSED
Fiscal Year 2023/24 2024/25 2025/26 2026/27 2027/28
Effective Date Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 CONSUMPTION FEES ($/ccf for all customers at all levels of use) Normal Water Year $2.41 $2.58 $2.76 $2.95 $3.16
10% Water Cutback $2.61 $2.79 $2.98 $3.19 $3.42
25% Water Cutback $3.00 $3.21 $3.43 $3.67 $3.93
40% Water Cutback $3.58 $3.83 $4.10 $4.39 $4.69
1 - One unit = 100 Cubic Feet (ccf) = 748 gallons
SEWER RATES – The current and proposed sewer rates are in the following table.
PROPOSED
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date July 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 FIXED CHARGE PER MONTH ($/account)
+20% +20% +6% +6%
Residential $31.77 $38.83 $46.60 $55.92 $59.28 $62.84
Commercial $15.18 $10.57 $12.68 $15.22 $16.13 $17.10
Industrial $312.62 $10.57 $12.68 $15.22 $16.13 $17.10
Schools $0.91 $1.04 $1.24 $1.49 $1.58 $1.67
COMMERCIAL & INDUSTRIAL VOLUME RATE ($/ccf) (in addition to fixed charge) $/ccf $2.40 $3.39 $4.06 $4.87 $5.16 $5.47
Note: Schools are billed annually rather than monthly based on reported average daily attendance (ADA) PROPOSITION 218 PROCESS - The City must follow the procedural requirements of Proposition 218 for all utility rate increases. These requirements include:
1. Noticing Requirement – On September 29, 2023 the City mailed Proposition 218 notices in English and Spanish of the proposed rate increases to all affected property owners or ratepayers.
The notice specified the new fees, the basis upon which they were calculated, the reason for the fee, and that the public hearing on the proposed rates will be considered/adopted was scheduled for the November 20 Council meeting.
2. While not required, the city included information on the proposed Water/Sewer Rates in the October utility bill to city rate payers.
3. Public Hearing – The City Council must hold a public hearing prior to adopting the proposed rate increases.
4. Rate Increases Subject to Majority Protest – At this evening’s public hearing, the proposed rate increases are subject to majority protest. If more than 50% of affected property owners or ratepayers submit written protests against the proposed rate increases, the increases cannot be adopted. Only one protest per parcel will be counted. The majority protest threshold is 993. If 993 or more valid protests are received, the city cannot adopt the proposed rates.
As of November 14th, the City had received the attached protest letter on October 25th.
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: Adjusting the water and sewer rates to adequately fund the operations and maintenance of each system is fundamental to maintaining a safe and clean community for 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 are based on the cost of service and State requirements.
City services will be delivered in a cost-effective, respectful and friendly manner to ensure 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
Do not adopt the Water and Sewer rates as of January 1, 2024. Rejection of the rate adjustments will result in loss of revenue collection, resulting in the City’s fiscal inability to constructed needed Capital Improvement Projects to comply with State Permit requirements and expand system capacity to serve residential and industrial development projects.
BUDGET IMPACT
Adopting new Water and Sewer rates as of January 1, 2024 will have a positive impact on the Water and Sewer Enterprise funds.
CONCLUSION
It is recommended that the City Council hold a public hearing; consider all comments and protests; and Adopt Resolution No. 2023-67, A Resolution of the City Council of the City of Gonzales Establishing New Water and Sewer Rates for Calendar Years 2024 Through 2028.
Attachments:
1. Protest Letter
2. Resolution No. 2023-67
3. Consultant Presentation
4. Prop 218 Notice to Property Owners and Utility Customers
5. Legal Notice of Public Hearing