Agenda Item No. 9
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: June 10, 2024 FROM: Matthew Bronson, City Manager
PREPARED BY: Robert Lomeli, City Attorney
Kristin Eriksson, Assistant City Manager
Greg Ray, Public Works Director
Nick Szamet, Administrative Services Director
SUBJECT: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures and Resolution to Call an Election
RECOMMENDATION
Accept the fiscal impact report prepared by staff on a proposed citizen initiative to repeal the City’s water and wastewater rate structures and adopt a resolution calling an election to submit the initiative to the voters at the next general municipal election on November 5, 2024.
BACKGROUND
Overview of Water and Wastewater Rate Structures
On December 11, 2023, Council adopted water and wastewater rate structures to provide needed funding for increased operations and maintenance costs, as well as planned capital projects for each system. This approval came after a Proposition 218 process was conducted where less than 50% of water and wastewater customers within the city submitted protests opposing the rates which enabled the Council to approve the rate structures. Attachment 1 shows Resolution 23-37 adopted by the Council to enact the rate structures. These adopted rate structures superseded the previous rate structures adopted by the Council on May 10, 2021 which covered a five-year period from FY 2021-22 through FY 2025-26.
On April 22, 2024, the Council received an update on the City’s water supply which detailed the City’s current and future water supply needs, alternatives for obtaining additional water supply, and options for adjusting water rates in light of unanticipated cost increases for the Central Coast Blue (CCB) recycled water project. Council subsequently directed staff to return with an agenda item to withdraw from the CCB project and related Joint Powers Authority and adjust water rates to remove all costs associated with the CCB project and allocate one-time funds in FY 2024-25 to support the City’s water resiliency efforts. The wastewater rates were not recommended to be adjusted as that rate structure is not impacted by the CCB project.
At the May 13, 2024 meeting, the Council received this information from staff and subsequently took action to lower the water rates to the previous rate structure adopted on May 10, 2021. The Council did not take similar action to adjust wastewater rates thus leaving this rate structure as adopted in December 2023.
Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 2 June 10, 2024
Submitted Initiative
On January 8, 2024, the City received a Notice of Intention to Circulate Petition for a proposed ballot initiative measure to repeal City Resolution No. 23-37 and a request that the City Attorney prepare a Ballot Title and Summary. The City Clerk transmitted that request to the City Attorney in accordance with Elections Code Section 9203(a) and the City Attorney provided the Ballot Title and Summary on January 23, 2024 as shown Attachment 2. The Summary noted that the proposed measure would necessitate a reevaluation of the City’s financial ability to complete planned infrastructure improvements for both water and wastewater systems. On March 11, 2024, proponents of the initiative submitted signed petitions. In accordance with the Elections Code, the City Clerk reviewed the petitions, did a prima facie count of signatures and filed the petition with the County on March 14, 2024. The City Clerk then verified the requisite number of signatures (235 registered voters) and certified the petition on April 25, 2024. A corrected certification was subsequently completed on May 9, 2024, to ensure compliance with the Elections Code.
The Council considered the initiative at the May 13, 2024 meeting. Pursuant to California Elections Code Section 9215, the Council was required to take one of the following actions:
1. Adopt the proposed ordinance, without alteration, thus reducing both water and wastewater rates to the structure adopted in 2021;
2. Adopt a resolution calling an election to submit the initiative measure to the voters at the next general municipal election on November 5, 2024;
3. Order City staff to provide a report, as specified in Elections Code Section 9212 and direct that the City Attorney also prepare an impartial analysis of the initiative. Such a report would then be required to be presented to the Council within 30 days, on or before June 12, 2024.
The Council directed staff to provide a report on the impacts of the proposed initiative and directed the City Attorney to prepare an impartial analysis of the initiative. Upon presentation of the report to the Council, the Council must either adopt the ordinance within 10 days or submit the proposed Initiative Measure to the voters at the general municipal election on November 5, 2024.
Impacts of the Proposed Initiative
The following information provides a summary of the impacts of the proposed initiative on the City’s water and wastewater systems including operations, maintenance, and capital projects.
Water System Impacts
Operations and Maintenance Funding Impacts. Based on an estimate of operations and maintenance costs in future years including debt service on the existing 2020 revenue bond issued to fund capital improvements, there would be insufficient revenue to fund water system operations and maintenance beginning in FY 2026-27 in addition to a lack of funding for recommended capital projects. To balance cost and revenue, the City’s options would be to deplete the operations and capital reserves or to reduce operations and maintenance costs, which have already been reduced significantly due to limited income in the system over the past 20 years. The most likely result would be a reduction in water system reserves below the minimum amount required for bond coverage by FY 2028-29 which could subject the City to legal action by bondholders and a subsequent court order implementing a mandatory rate increase to provide a sufficient bond coverage reserve amount.
Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 3 June 10, 2024
System Reliability Impacts. The majority of the existing water system was constructed in the 1960s. This includes pumps, wells, booster stations, water tanks, water lines, and valves.
Historically, due to a lack of sufficient funding, major maintenance was deferred and replacements and upgrades only occurred after system components failed. In 2010, staff developed a 10-year Capital Improvement Program (CIP) for the water system to begin maintenance and replacement of aging system components which were long overdue. In addition, given the recommendations in the 2010 Water Master Plan to upsize certain water mains, valves and pumps for existing and future development, staff also proposed capital projects for water system capacity upgrades. To minimize impacts to ratepayers at the time, the 10-year CIP was modified and spread across a 20-year period resulting in greater risk of system failures and loss of service.
The reduction in water rates in the citizen initiative would result in a near-total loss of funding for water system capital improvements resulting in further delays of necessary replacements and upgrades. The City has already seen a number of failures in the water system in recent years related to the aging water system components. The likely outcome of not adequately funding the recommended CIP is a higher frequency of water system failures and resulting water service interruptions to City residents and businesses as well as higher costs for emergency repairs.
Certain street repair projects would need to be delayed in order to avoid cutting into freshly paved streets unless the Council revised its policy direction of upgrading underground utilities ahead of street projects to avoid pavement cuts after the paving projects are complete.
Below is a list of water projects identified in the five-year CIP that would be delayed as a result of the loss of revenue:
• Water Main Zone Valves - Replacement of existing zone valves and installation of additional zone valves are necessary in order to reduce the scope of water shutdowns for water repairs. Currently the system has a number of valves that have failed and with a relatively small number of valves, most shutdowns involve multiple blocks. • Well Facility Improvements - The City's aging well field and well field components need to be analyzed to determine if they can still deliver their original capacity and if improvements are needed in order to continue to assure a continuous supply of groundwater to the City. • 16th Street Booster Station Pump and Equipment Upgrades – This project ensures approximately 25% of residential water accounts (approximately 1,300 accounts) including at Grover Heights Elementary School have adequate water pressure and to ensure fire flow protection.
• Water Meter Replacement Program - More than 50% of the City’s existing water meters are older than 10 years old. As water meters approach 10 years of age, they begin failing and underreporting the amount of water used. The result is a loss in income to the water system further depleting revenue needed for operations maintenance and upgrades. • Automated Meter Reading - The current manual read system allows system errors such as failed meters and significant leaks to remain undetected for up to two months resulting in either significant costs to residents or significant loss of revenue to the water system.
The automated read system would provide instantaneous feedback regarding errors. • Upsizing Water Mains – There are a number of water main segments that required upsizing in order to provide adequate fire flow to certain areas of the City. Without these upgrades, there could be insufficient pressure or flow to provide adequate fire suppression. • Nitrate Plant De-commissioning - The City’s existing nitrate treatment plant is no longer needed and should be decommissioned and removed.
• Reservoir Maintenance - A recent analysis of the condition of the City's water reservoirs indicated that significant coating maintenance and other upgrades are needed in order to keep the tanks in service.
Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 4 June 10, 2024
Drought Preparedness and Growth Impacts. The loss of revenue resulting from the reduction in water rates would eliminate funding to identify and secure an additional source of water supply.
Staff has estimated that during times of extended drought, the current water supply could be insufficient to serve existing water customers resulting in a need for severe cutbacks in water use.
In addition, a number of building permits and development projects have been approved but not yet built resulting in an additional demand for water which further would strain long-term supplies unless additional water was secured. With continued population growth, the City's water demand may exceed its available supply by 2030 even during normal rainfall years with no supply buffer available to address drought or water system emergencies.
Sewer System Impacts
Operations and Maintenance Funding Impacts. Based on an estimate of operation and maintenance costs in future years, the proposed initiative would result in insufficient revenue to fund operations and maintenance for the wastewater system beginning next fiscal year (FY 2024- 25). In order to balance cost and revenues, the only options similar to the water system would be to deplete the operations and capital reserves below recommended values or to reduce operations and maintenance costs which have already been reduced significantly due to limited income in the system over the past 20 years. The most likely result would be a reduction in reserves funds below the minimum amount. The capital reserves currently have sufficient funds to complete a portion of the proposed capacity upgrades to sewer mains to account for existing demands and demands from building permits and approved development projects. However, beyond FY 2024-25 there would be insufficient funds to complete any proposed capital projects.
System Reliability Impacts. Similar to the water system, the majority of the components of the existing sewer system were constructed in the 1960s. This includes lift stations, sewer mains and manholes. The City also developed a 10-year capital improvement program for the wastewater system in 2010 and adopted a Sewer Master Plan in 2019 which recommended upsizing certain sewer mains for existing and future development, rehabilitating a number of failing sewer mains, and completing long overdue maintenance and upgrades to the City's existing lift stations. To minimize impacts to ratepayers at the time, the 10-year capital improvement program was modified and spread across a 20-year period resulting in greater risk of system failures and loss of service.
The reduction in sewer rates in the citizen initiative would eliminate funding for any recommended sewer system capital improvements beyond fiscal year 2024-25 resulting in further delays of necessary replacements and upgrades. The City has already seen a number of wastewater system failures in recent years related to the aging sewer system components. The likely outcome of failing to adequately fund the recommended capital program is a higher frequency of system failures and resulting sewer service interruptions to residents and businesses, sewer system overflows and higher costs for emergency repairs with no identified funding to cover those costs.
Certain street repair projects would need to be delayed in order to avoid cutting into freshly paved streets unless the Council revised its policy direction of upgrading underground utilities ahead of street projects to avoid pavement cuts after the paving projects are complete.
The following page shows a list of wastewater projects identified in the five-year CIP that would be delayed as a result of the loss of revenue:
• Sewer Upgrade Projects – To meet capacity needs for existing demands and approved development, the City developed two upgrade projects to address a number of existing capacity deficiencies and to provide adequate capacity for development projects approved or anticipated to be approved in the next couple of years. The project scope will need to Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 5 June 10, 2024
be reduced based on available funding and will only be sufficient to provide capacity upgrades for development currently in construction. The deferred scope of work will result in delays to street rehabilitation projects as identified below and it is likely that future development that impacts the sewer mains outside of the reduced project scope would also be delayed.
• Front Street Lift Station Upgrades - The Front Street lift station is at the end of its service life and many of the components have begun to fail. Without the necessary upgrades, the lift station may fail unexpectedly resulting in sewer overflows and require emergency upgrades without a source of identified funding.
• South Oak Park Lift Station Upgrades - The lift station is approaching the end of its useful service life and needs significant maintenance and upgrades in order to assure reliable service without sewer overflows in the future.
• Storm Drain Repair at Railroad Tracks - The existing storm drain culvert that allows runoff from the Front Street area to flow to Meadow Creek has reached the end of its useful service life and has begun to fail. Further failure could result in significant flooding during large storms.
• Citywide Sewer Lining - The City recently completed a citywide sewer video project that identified a number of failing city sewer mains. These mains need to be replaced or lined in order to avoid sewer spills and possible system backups resulting in sewer overflows. • Measure K-14 Street Repair Project 17 - The project includes North 9th from West Grand to Atlantic City, North 11th from West Grand to Ramona, North 12th from West Grand to Newport, Brighton from North 10th to North 13th, Ramona from 16th to Oak Park, Alma Ct, and Moss Ct. This project would be delayed to corresponding delays in the sewer infrastructure projects on affected streets due to lack of funding.
Growth Impacts. The Sewer Master Plan identified a number of sewer mains with insufficient capacity to serve existing residences, approved developments, and future development. The loss of capital reserves to complete sewer main upgrades given a lack of wastewater rate funding means that only a small number of sewer mains can be upgraded with remaining reserve funds.
Development projects resulting in sewer flows in excess of downstream sewer main capacity will either have to construct the upgraded sewer mains themselves at a significant cost or delay advancing projects until there is sufficient funding to construct the upgraded mains from capital reserves. This will likely create a significant barrier for future development opportunities including both commercial and residential developments.
FISCAL IMPACT
Staff has worked with the City’s utility rate consultant to prepare Fiscal Impacts Report consisting of financial plans for both Water and Wastewater Funds based on passage of the proposed ballot initiative. These reports are shown in Attachment 3.
The results to the Water Fund would not be significantly more impactful given Council has already reduced water rates to levels approved in 2021 as noted previously. However, the result of this reduction as shown in the Proposed Budget for FY 2024-25 presented to the Council in an earlier agenda item is the elimination of all the capital projects planned for the water system except $25,000 for valve replacement in FY 2024-25. The reduction in capital investment for the City’s water system is necessary to ensure sufficient reserves are maintained to provide enough funds for operating and maintenance while being able to address unforeseen capital expenses in the event of an emergency. This funding recommendation also provides necessary funding to pay Pismo Beach for preconstruction costs incurred from the Central Coast Blue recycled water project. Under these circumstances, the Water Fund will remain solvent for the foreseeable future Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 6 June 10, 2024
but is already short of its reserve target by $800,000. In sum, the rate structure approved in 2021 provides for a 4% increase in July 2024 and 4% increase in July 2025 before the rate structure expires and will maintain the system in its current state without further investments in replacing critical infrastructure.
As for the Wastewater Fund, the Council has maintained the December 2023 rates which was tied to financing needed for critical sewer improvements through debt issuance. The citizen initiative would deplete the revenue capacity of the Wastewater Fund to the point where resources would be best placed in maintaining sufficient reserves for continuing operations as shown in the Fiscal Impact Report. To illustrate this point, the report models the maintenance of proposed necessary capital investment but removes the rate increases. The result shown is Wastewater Fund insolvency by the end of FY 2024-25 unless capital projects were reduced or eliminated.
Furthermore, the citizen initiative would negatively impact both the Water and Wastewater Funds’ ability to finance future projects. If either fund were to seek a loan, it is unlikely the City’s enterprise revenues would be deemed a worthy credit risk given insufficient revenue capacity to meet a debt repayment schedule. It should also be noted that the Council retains the authority to set water and wastewater rates up to the limits approved for year-over-year increases through the adopted December 2023 rate structure. However, by repealing that rate structure the proposed initiative would remove Council’s authority to increase either rate beyond what was set in 2021 absent another Proposition 218 process.
From a revenue standpoint, staff estimates that adoption of the proposed ordinance by the citizen initiative would reduce revenue for the Water Fund by $10,362,172 through FY 2023-2028 and for the Wastewater Fund by $3,197,924 through that same period. If the ordinance was adopted, staff would need to bring an item to the Council to reevaluate the fiscal health and capacity of the Water and Wastewater Funds to meet the City’s needs.
CITY ATTORNEY’S IMPARTIAL ANALYSIS
The City Attorney has prepared an impartial analysis of the effect of the proposed initiative measure as shown in Attachment 6. This impartial analysis will be included after any applicable arguments and rebuttals submitted and pertaining to the ballot measure. Upon consideration of this report and the City Attorney’s analysis, the Council must either:
1) Adopt the ordinance proposed by the initiative, without alteration, thus repealing the water and wastewater rate structure and reduce both water and wastewater rates to the structure adopted in 2021; or
2) Adopt a resolution calling an election to submit the initiative measure to the voters at the next general municipal election on November 5, 2024.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Accept the fiscal impact report prepared by staff; and either
2. Adopt the proposed ordinance, without alteration, thus reducing both water and wastewater rates to the structure adopted in 2021 (Attachment 4); or
3. Adopt a resolution calling an election to submit the initiative measure to the voters at the next general municipal election on November 5, 2024 (Attachment 5).
Staff Report: Report on Citizen Initiative to Repeal Water and Wastewater Rate Structures Page 7 June 10, 2024
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.
Attachments
1. Resolution No. 23-37
2. Ballot Title and Summary
3. Fiscal Impacts Report
4. Resolution Adopting the Proposed Ordinance
5. Resolution Calling for an Election to Submit the Initiative Measure to the Voters at the next General Election on November 5, 2024.
6. City Attorney’s Impartial Analysis
RESOLUTION NO. 23-37
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER BEACH,
CALIFORNIA, AMENDING THE MASTER FEE SCHEDULE FOR WATER AND
WASTEWATER RA TES
WHEREAS, the City Council of the City of Grover Beach has created a Master Fee Schedule by adopting Resolution No. 23-37; and
WHEREAS, notice of the Public Hearing to consider proposed adjustments to the Master Fee Schedule for Water and Wastewater Rates was mailed at least 45 days prior to the scheduled Public Hearing as required by state law (Cal. Const. art. XIIID, §6); and WHEREAS, on December 11 , 2023, the City Council conducted a Public Hearing, considered testimony, and at the conclusion of the protest hearing determined that the number of valid written protests received was less than 50% plus one of the total number of water and wastewater customers or property owners subject to the fee in the City and approved the recommendations in the Utility Rate Study regarding adjustments to the Water and Wastewater Rates.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GROVER BEACH, CALIFORNIA, DOES DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
THAT the Master Fee Schedule be amended as set forth in Exhibit "A" attached to this Resolution; and
THAT the fees listed in Exhibit "A" of this Resolution shall become effective as on the various dates as listed.
On motion by Council Member Zimmerman, seconded by Council Member Rushing, and on the following roll-call vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Council Members - Rushing, Zimmerman and Mayor Bright
Council Members -Weirick and Mayor Pro Tern Robert
Council Members - None.
Council Members - None.
Council Members - None.
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a regular meeting of the City Council of the City of Grover Beach, California this 11TH day of December 2023. u~ .LA;-
KAREN BRIGHT, M)YOR
Attest:
WENDI
~~~~ B. SIMS, CITY CLERK
Attachment 1
CITY OF GROVER BEACH
MASTER FEE SCHEDULE
ADMINISTRATIVE SERVICES DEPARTMENT
Rates Effective
Descri tion Februa 1, 2024 Janua 1,2025 Janua 1, 2026 Janua Water Rates (Monthly)
Residential Base Charges
5/8" - Meter $ 17.91 $ 21.44 $ 25.67 $
3/4" - Meter $ 17.91 $ 21.44 $ 25.67 $
1.0" - Meter $ 17.91 $ 21.44 $ 25.67 $
1.5" - Meter $ 59.70 $ 71.47 $ 85.55 $
2.0" - Meter $ 95.52 $ 114.34 $ 136.87 $
3.0" - Meter $ 191 .04 $ 228.68 $ 273.73 $
4.0" - Meter $ 298.50 $ 357.31 $ 427.71 $
Residential Volume, in addition to Base Charge (per 100 Cubic Feet):
0-1 ,000CF $ 4.20 $ 5.03 $ 6.03 $
1,000 to 2,200 CF $ 8.51 $ 10.19 $ 12.20 $
>2,200 CF $ 11 .91 $ 14.26 $ 17.07 $
Non-Residential Base Charges
5/8" - Meter $ 17.91 $ 21 .44 $ 25.67 $
3/4" - Meter $ 26.87 $ 32.17 $ 38.51 $
1.0" - Meter $ 29.85 $ 35.74 $ 42.79 $
1.5" - Meter $ 59.70 $ 71.47 $ 85.55 $
2.0" - Meter $ 95.52 $ 114.34 $ 136.87 $
3.0" - Meter $ 191 .04 $ 228.68 $ 273.73 $
4.0" - Meter $ 298.50 $ 357.31 $ 427.71 $
Landscape Volume, in addition to Base Charge (per 100 Cubic Feet):
All Usage $ 9.11 $ 10.91 $ 13.06 $
All Other Volume, in addition to Base Charge (per 100 Cubic Feet):
All Usage $ 7.90 $ 9.46 $ 11 .33 $
Revised 12/7/2023
1, 2027 Janua 1, 2028
30.73 $ 31 .96
30.73 $ 31 .96
30.73 $ 31 .96
102.41 $ 106.51
163.84 $ 170.40
327.66 $ 340.77
511 .97 $ 532.45
7.22 $ 7.51
14.61 $ 15.20
20.44 $ 21 .26
30.73 $ 31 .96
46.10 $ 47.95
51.22 $ 53.27
102.41 $ 106.51
163.84 $ 170.40
327.66 $ 340.77
511 .97 $ 532.45
15.64 $ 16.27
13.57 $ 14.12
CITY OF GROVER BEACH
MASTER FEE SCHEDULE
ADMINISTRATIVE SERVICES DEPARTMENT
Rates Effective
Descri lion Februa 1, 2024 Janua 1, 2025 Janua 1, 2026
Wastewater Rates (Monthly)
Boarding house (per unit) $ 18.57 $ 22.19 $ 26.52
Plus per bedroom charge $ 11.95 $ 14.28 $ 17.06
Car washes & Laundromats minimum charge $ 7.40 $ 8.84 $ 10.56 Church $ 18.00 $ 21 .51 $ 25.70
Plus per parsonage or dwelling unit $ 15.32 $ 18.31 $ 21 .88 Commercial establishment (Public Place) (Up to 5 Fixtures) $ 17.97 $ 21.47 $ 25.66 Each additional fixture $ 4.92 $ 5.88 $ 7.03
Factories, industrial plants, with 20 or less employees $ 12.09 $ 14.45 $ 17.27 Each additional employee over 20 $ 1.39 $ 1.66 $ 1.98
Hotel, motel, auto court or lodge (per unit) $ 18.46 $ 22.06 $ 26.36 Mobile home (per space) $ 15.32 $ 18.31 $ 21 .88
Restaurants minimum charge $ 2.56 $ 3.06 $ 3.66
Schools minimum annual charge per ADA and employees $ 3.96 $ 4.73 $ 5.65 Schools with Cafeterias additional
Per ADA and employees $ 1.65 $ 1.97 $ 2.35
Single-Family dwelling unit $ 15.32 $ 18.31 $ 21 .88
Theater, clubhouse or place of amusement $ 17.97 $ 21.47 $ 25.66 Travel trailer and recreation vehicle space $ 7.89 $ 9.43 $ 11 .27 Multi-Family, Two or more dwellings (per unit) $ 15.32 $ 18.31 $ 21 .88 Plus Per Each coin-operated washer $ 3.35 $ 4.00 $ 4.78 Excess Discharge per 100 cubic feet (3,000 Cubic Feet
per GBMC 7182) $ 0.48 $ 0.57 $ 0.68
Revised 12/7/2023
Janua 1 2027 Janua 1 2028
$ 31 .69 $ 32.96
$ 20.39 $ 21.21
$ 12.62 $ 13.12
$ 30.71 $ 31 .94
$ 26.15 $ 27.20
$ 30.66 $ 31 .89
$ 8.40 $ 8.74
$ 20.64 $ 21.47
$ 2.37 $ 2.46
$ 31 .50 $ 32.76
$ 26.15 $ 27.20
$ 4.37 $ 4.54
$ 6.75 $ 7.02
$ 2.81 $ 2.92
$ 26.15 $ 27.20
$ 30.66 $ 31.89
$ 13.47 $ 14.01
$ 26.15 $ 27.20
$ 5.71 $ 5.94
$ 0.81 $ 0.84
733 Marsh Street, Suite 200, San Luis Obispo, California 93401 Telephone: (805) 471-7080 Fax: (805) 930-1031
M E M O R A N D U M
By E-Mail: [email protected]
DATE: January 23, 2024 CLIENT/MATTER:
03586-05
TO: Wendi Sims
City Clerk
City of Grover Beach
CC: Matt Bronson, City Manager
FROM: City Attorney's Office
RE: Proposed Initiative Measure to Repeal Resolution No. 23-37 On January 8, 2024, the City received a Notice of Intention to Circulate Petition for a proposed local ballot measure to repeal City resolution 23-36 amending the City’s master fee schedule for water and wastewater rates (“Measure”). Accompanying the Measure was a request to prepare a Ballot Title and Summary. The City Clerk’s office immediately transmitted that request to the City Attorney’s office in accordance with Elections Code Section 9203, subdivision (a).
In accordance with Elections Code Section 9203, subdivision (a), the following is the City Attorney’s Ballot Title and Summary of the Measure.
Pursuant to California Elections Code section 9203, subdivision (a), the City Attorney has prepared the following ballot title and summary of the proposed initiative Measure. The ballot title and summary must be printed across the top of each page of the petition whereon signatures are to appear as required by Elections Code section 9203, subdivision (b).
A Citizen’s Initiative Measure to Repeal Water and Wastewater Rate Increases Enacted by City Council Resolution No. 23-37
The purpose of this measure is to ask registered voters in the City of Grover Beach if they wish to repeal Resolution No. 23-37, adopted by the Grover Beach City Council on December Attachment 2
- 2 -
11, 2023. The resolution authorizes a rate structure allowing for increases in water and wastewater rates over a four-year period beginning February 2024.
Resolution No. 23-37 was enacted to fund water and sewer projects within the City, encompassing various infrastructure improvements, including upgrades to a booster station, reservoir maintenance, increasing sewer line capacity and upgrading aged sewer lines. The water rate increase was also enacted to fund the City’s share of costs for the Central Coast Blue recycled water project, a collaborative project involving the cities of Grover Beach, Arroyo Grande, and Pismo Beach.
Successful passage of this measure would repeal water and wastewater fee increases enacted under City Council Resolution 23-37 and would necessitate a reevaluation of the City’s financial ability to complete planned infrastructure improvements.
Water Financial Plan
Projected
Description FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 Water Fund
Revenue
Revenues from Existing Water Rates [1] $3,876,920 $4,047,181 $4,219,815 $4,230,794 $4,241,765 $4,252,743 Total Additional Water Sales Revenue [2] - - - - - -
Miscellaneous Income 309,555 172,000 173,000 174,000 175,000 176,000 Interest Income [3] 63,300 33,600 38,400 43,300 45,900 46,200 Total Revenues $4,249,775 $4,252,781 $4,431,215 $4,448,094 $4,462,665 $4,474,943 Operating Expenses
Salaries and Benefits $886,590 $916,573 $956,541 $998,703 $1,043,207 $1,090,209 Supplies and Services 980,056 705,540 720,992 736,791 752,946 769,468 Non-Capitalized Equipment 40,000 40,000 40,800 41,616 42,448 43,297 Non-Departmental 473,868 674,822 694,629 715,337 737,004 759,694 Lopez Contract O&M [4] 913,228 979,064 965,046 991,533 1,031,194 1,072,442 Lopez Dam Bonds - 2011A Debt Service [4] 92,602 92,602 92,602 92,602 92,602 92,602 Lopez SRF Loan Debt Service [4] 295,254 295,254 295,254 295,254 295,254 295,254 Lopez Capital Outlay [4] 81,481 54,040 50,331 82,119 80,000 82,000 Total Operation and Maintenance Expenses $3,763,079 $3,757,895 $3,816,195 $3,953,955 $4,074,655 $4,204,966 Capital Expenditures
Capital Improvements [5] 1,600,000 25,000 40,000 20,000 40,000 20,000 2020 Debt Service 280,923 281,294 281,543 281,671 281,678 281,562 Total Capital Expenditures $1,880,923 $306,294 $321,543 $301,671 $321,678 $301,562 Total Revenue Requirements $5,644,002 $4,064,189 $4,137,738 $4,255,626 $4,396,333 $4,506,528 Net Funds Available ($1,394,227) $188,592 $293,477 $192,468 $66,332 ($31,585) Available Reserves
Beginning available reserves [6] $4,738,600 $1,586,897 $1,775,489 $2,068,965 $2,261,433 $2,327,766 Pre-Construction Costs (1,757,476) - - - - -
Ending Available Reserves $1,586,897 $1,775,489 $2,068,965 $2,261,433 $2,327,766 $2,296,180 Target Reserves [7] 2,382,000 2,379,000 2,408,000 2,477,000 2,537,000 2,602,000 Above (below) Target ($795,103) ($603,511) ($339,035) ($215,567) ($209,235) ($305,820) Debt Service Coverage
Total Revenues $4,249,775 $4,252,781 $4,431,215 $4,448,094 $4,462,665 $4,474,943 Total O&M Expenses $3,763,079 $3,757,895 $3,816,195 $3,953,955 $4,074,655 $4,204,966 Net Revenues $486,696 $494,886 $615,020 $494,139 $388,010 $269,977 25% Coverage Factor of Lopez 2011A Bonds $23,151 $23,151 $23,151 $23,151 $23,151 $23,151 Total O&M Expenses for Lopez Coverage $3,786,230 $3,781,046 $3,839,346 $3,977,106 $4,097,806 $4,228,117 Debt Service Payments
2020 Debt Service $280,923 $281,294 $281,543 $281,671 $281,678 $281,562 Total Debt Service for Coverage $280,923 $281,294 $281,543 $281,671 $281,678 $281,562 Lopez Debt Service Coverage [8] 112% 112% 115% 112% 109% 106% Debt Service Coverage [9] 173% 176% 218% 175% 138% 96%
[1] Projected using the May 2021 Proposition 218 rates through and including July 1, 2025. [2] Additional revenue from proposed rate adjustments.
[3] Interest earnings on the average fund balance calculated at 2.0% annually. [4] New debt to finance the Local Street Rehab CIP 2295-21. [4] From SLO County Projections.
[5] From City of Grover Beach projections.
[6] The available beginning FY 23-24 cash balance provided by the City. [7] Includes 6 months of O&M expense and a suggested $500,000 for capital reserve. [8] Minimum coverage on the Lopez 2011A Bonds is 100 percent. [9] Minimum coverage on the 2020 Bonds is 120 percent.
Attachment 3
Wastewater Financial Plan
Projection
Description FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 Sewer Fund
Revenue
Rate-based Revenues, Current Rates [1] $949,446 $971,648 $993,995 $997,196 $1,000,238 $1,003,439 Total Additional Wastewater Revenue [2] - - - - - -
Miscellaneous Income 319,899 308,538 308,630 308,727 308,819 308,916 Interest Income [3] 85,482 36,359 - - - -
Total Revenue $1,354,827 $1,316,545 $1,302,625 $1,305,923 $1,309,057 $1,312,355 Operating Expenses
Operation and Maintenance Expense $1,493,014 $1,480,969 $1,517,826 $1,564,763 $1,613,642 $1,664,560 Minor Capital Outlay - - - - - -
Total Operating Expenses $1,493,014 $1,480,969 $1,517,826 $1,564,763 $1,613,642 $1,664,560 Capital Expenditures
Capital Improvement Funding $0 $4,609,748 $100,000 $300,000 $2,300,000 $700,000 Total Capital Expenditures $0 $4,609,748 $100,000 $300,000 $2,300,000 $700,000 Total Revenue Requirements $1,493,014 $6,090,717 $1,617,826 $1,864,763 $3,913,642 $2,364,560 Net Funds Available ($138,187) ($4,774,172) ($315,201) ($558,840) ($2,604,585) ($1,052,205) Available Reserves
Beginning available reserves [4] $4,343,200 $4,205,013 ($569,159) ($884,360) ($1,443,200) ($4,047,785) Ending available reserves $4,205,013 ($569,159) ($884,360) ($1,443,200) ($4,047,785) ($5,099,990) Target Reserves [5] $1,247,000 $1,240,000 $1,259,000 $1,282,000 $1,307,000 $1,332,000 Above (below) Target $2,958,013 ($1,809,159) ($2,143,360) ($2,725,200) ($5,354,785) ($6,431,990) Debt Service Coverage
Net Revenues [6] ($138,187) ($164,424) ($215,201) ($258,840) ($304,585) ($352,205) Annual Debt Service $0 $0 $0 $0 $0 $0
Coverage [7] n/a n/a n/a n/a n/a n/a
[1] Projected using the May 2021 Proposition 218 rates through July 1, 2025. [2] Additional revenue from rate adjustments.
[3] Interest earnings on the average fund balance calculated at 2.0%. [4] The available FY 23-24 cash balance provided by the City. Includes operating and capital fund reserves. [5] Target reserve estimated at 180 days of operation and maintenance expense plus $500,000 as a capital reserve. [6] Includes revenue from rates, rate adjustments, and miscellaneous revenue. [7] Minimum coverage is 125 percent.
RESOLUTION NO. 24-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER BEACH,
CALIFORNIA, ADOPTING THE PROVISIONS OF AN INITIATIVE MEASURE
AMENDING THE MASTER FEE SCHEDULE TO REPEAL THE WATER AND WASTEWATER RATES ADOPTED ON DECEMBER 11, 2023
WHEREAS, On December 11, 2023, the City Council of the City of Grover Beach approved and adopted Resolution No. 23-37, amending the Master Fee Schedule to increase water and wastewater rates to meet increased operations, maintenance and anticipated capital improvement costs; and
WHEREAS, on January 8, 2024, the proponents of the initiative measure submitted a Notice of Intention to Circulate Petition for a proposed ballot measure to repeal City Resolution No. 23-37; and
WHEREAS, on March 11, 2024, the proponents of the initiative to repeal Resolution No. 23-37 submitted petition signatures to the City Clerk, which signatures the City Clerk accepted on March 14, 2024; and
WHEREAS, on April 25, 2024 and May 9, 2024, the City Clerk certified that the initiative petition qualified with the requisite number of sufficient valid signatures; and WHEREAS, on May 13, 2024, the City Council accepted the Certificate of Sufficiency of the Initiative Petition issued by the City Clerk and directed staff to provide a report on the potential effects of the initiative; and
WHEREAS, on June 10, 2024, the City Council Accepted the report; and WHEREAS, California Constitution Article II, Section 10 and California Elections Code section 9217 authorize the City Council to adopt without alteration the proposed initiative measure to amend the Master Fee Schedule.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GROVER BEACH, CALIFORNIA, DOES DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. Resolution No. 23-37, “A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF GROVER BEACH, CALIFORNIA, AMENDING THE MASTER FEE SCHEDULE FOR WATER AND WASTEWATER RATES”, adopted December 11, 2023, IS HEREBY REPEALED in accordance with Section 3 OF Article XIII C of the Constitution of the State of California.
SECTION 2. This measure may not be amended, except upon voter approval.
On motion by ____________, second by ____________, and on the following roll-call vote, to wit:
AYES: Council Members -
NOES: Council Members -
ABSENT: Council Members -
ABSTAIN: Council Members -
Attachment 4
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a Regular Meeting of the City Council of the City of Grover Beach, California this 10th day of June 2024. _____________________________
KAREN BRIGHT, MAYOR
Attest:
______________________________
WENDI SIMS, CITY CLERK
RESOLUTION NO. 24-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER BEACH,
CALIFORNIA, SUBMITTING TO THE VOTERS AT THE NEXT GENERAL MUNICIPAL ELECTION ON NOVEMBER 5, 2024, AN INITIATIVE MEASURE
TO AMEND THE MASTER FEE SCHEDULE BY REPEALING THE WATER AND WASTEWATER RATES ADOPTED ON DECEMBER 11, 2023
WHEREAS, the City Council of the City of Grover Beach has called a General Municipal Election to be held in the City of Grover Beach on Tuesday, November 5, 2024; and WHEREAS, an initiative petition to amend the City’s Master Fee Schedule and repeal Resolution 23-37 (hereinafter referred to as “Initiative Measure” or “Initiative Petition”) has been submitted to the City in accordance with the requirements of the California Elections Code; and WHEREAS, on May 13, 2024, the City Council accepted the Certificate of Sufficiency of the Initiative Petition issued by the City Clerk and directed staff to provide a report on the potential effects of the initiative; and
WHEREAS, on June 10, 2024, the City Council Accepted the report and voted to submit to the electors of the City of Grover Beach the Initiative Measure at the next general municipal election, scheduled on November 5, 2024.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GROVER BEACH, CALIFORNIA, DOES DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. Initiative Measure Submitted to Voters at General Municipal Election. A regularly scheduled general municipal election has been called for the City of Grover Beach to be held on Tuesday, November 5, 2024. The following question is submitted to the voters at the election:
CITY OF GROVER BEACH
INITIATIVE MEASURE _____
Shall Resolution No. 23-37, “A Resolution of the
City Council of the City of Grover Beach,
California, amending the Master Fee Schedule for
water and wastewater rates”, adopted December
11, 2023, be repealed?
YES
NO
SECTION 2. Adoption of Measure. The full text of the measure to be submitted to the voters is as follows:
Attachment 5
INITIATIVE MEASURE TO BE SUBMITTED DIRECTLY TO THE VOTERS REPEALING RESOLUTION NO. 23-37 OF THE CITY COUNCIL OF THE CITY
OF GROVER BEACH, CALIFORNIA, AMENDING THE MASTER FEE
SCHEDULE FOR WATER AND WASTEWATER RATES
THE PEOPLE OF THE CITY OF GROVER BEACH DO ORDAIN AS FOLLOWS:
SECTION 1. RESOLUTION NO. 23-37, “A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF GROVER BEACH, CALIFORNIA, AMENDING THE MASTER FEE SCHEDULE FOR WATER AND WASTEWATER RATES”, adopted December 11, 2023, IS HEREBY REPEALED in accordance with Section 3 of Article XIII C of the Constitution of the State of California.
SECTION 2. This measure may not be amended, except upon voter approval.
If a majority of qualified electors voting on such measure shall vote in favor of City of Grover Beach Initiative Measure “____”, it shall be deemed ratified and shall read as provided above.
SECTION 3. Notice of Election. Notice of the time and place of holding the election is hereby given, and the City Clerk is authorized, instructed and directed to give further or additional notice of the election in time, form, and manner as required by law.
SECTION 4. Impartial Analysis. The City Council hereby directs the City Clerk to transmit a copy of the City Attorney’s prepared impartial analysis of the measure, showing the effect of the measure on the existing law and the operation of the measure, and to provide such as required to the San Luis Obispo County Registrar of Voters.
SECTION 5. Ballot Arguments. Arguments in favor of or against the measure shall be submitted to the City Clerk on or before June 24, 2024, at 5:00 p.m. under Elections Code section 9286 et seq. If the City Clerk receives more than one argument for and/or against, the priorities established by Elections Code section 9287 shall control.
SECTION 6. Rebuttal Arguments. Rebuttal arguments shall be controlled by the provisions of Elections Code section 9285. The deadline for filing rebuttal arguments shall be July 1, 2024, at 5:00 p.m.
SECTION 7. Duties of City Clerk. The Grover Beach City Clerk shall do all things required by law to effectuate the November 5, 2024, general municipal election, including but not limited to causing the posting, publication and printing of all notices or other election materials under the requirements of the California Elections and Government Codes.
SECTION 8. Non-substantive Changes. The City Attorney is authorized to make any non-substantive changes and/or to correct minor administrative, procedural and clerical errors necessary to ensure the initiative measure is placed on the ballot for the November 5, 2024, general municipal election.
SECTION 9. Transmittal of Resolution. The City Clerk is hereby directed to submit a certified copy of this resolution to the Board of Supervisors and Registrar of Voters of the County of San Luis Obispo.
On motion by ____________, second by ____________, and on the following roll-call vote, to wit:
AYES: Council Members -
NOES: Council Members -
ABSENT: Council Members -
ABSTAIN: Council Members -
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a Regular Meeting of the City Council of the City of Grover Beach, California this 10th day of June 2024. _____________________________
KAREN BRIGHT, MAYOR
Attest:
______________________________
WENDI SIMS, CITY CLERK
CITY OF GROVER BEACH
INITIATIVE MEASURE ____
CITY ATTORNEY’S IMPARTIAL ANALYSIS
Initiative Measure ___ asks the voters whether City of Grover Beach Resolution No. 23-37, setting new and increased water and wastewater rates, should be repealed.
Background. On December 11, 2023, the Grover Beach City Council approved Resolution No. 23-37 and implemented new water and wastewater rates to address increased operations, maintenance, and planned capital project costs. On April 22, 2024, City Council discussed the increasing costs related to the Central Coast Blue (“CCB”) project, the City’s current water supply, and its future water needs. Council voted to withdraw from the CCB project and reduced water rates to those in effect immediately prior to approval of Resolution No. 23-37.
Proposed Initiative Measure. On January 8, 2024, a citizen’s ballot initiative was proposed to repeal Resolution No. 23-37, thereby reducing water and wastewater rates to the levels in effect prior to the approval of Resolution No. 23-37 on December 11, 2023. The initiative petition gathered sufficient signatures for placement on the ballot and was certified by the City Clerk.
Effect of Measure. If Initiative Measure ___ is approved by a majority of voters, Resolution No. 23-37 will be repealed. The repeal of Resolution No. 23-37 will reduce the City’s water and wastewater rates to the levels in place immediately prior to the adoption of Resolution No. 23-37.
The water and wastewater fees collected by the City are utilized for ongoing costs related to the operation of the City’s water and wastewater systems, including ongoing maintenance, repair, upgrades and replacement. The fees ensure that water and wastewater systems will remain operational, reliable, and compliant with health and environmental standards. Under California law, water and wastewater rates must be based on the cost of service. Any revenue collected from these fees must be allocated to their respective enterprise funds to ensure they are ultimately used for water and wastewater-related services and projects. Revenue from water and wastewater fees is essential for the City to obtain bonding because it provides a reliable source of income to service debt, ensuring investors of the City’s ability to repay bonds used for infrastructure projects. This financial stability and assurance make the bonds more attractive to investors, facilitating the City’s access to necessary funding. Adoption of the initiative measure will reduce the revenues for both water and wastewater funds. Any shortfall in funds within the City’s enterprise funds will require supplementation from the City’s general fund.
THE ABOVE STATEMENT IS AN IMPARTIAL ANALYSIS OF INITIATIVE MEASURE _____. IF YOU DESIRE A COPY OF THE FULL TEXT OF THE MEASURE, PLEASE CALL THE CITY CLERK, WENDI SIMS, AT 805-473-4568 OR EMAIL AT [email protected], AND A COPY WILL BE MADE AVAILABLE TO YOU AT NO COST.
Attachment 6