Healdsburg City Council
May 20, 2024

CITY OF HEALDSBURG

CITY COUNCIL/REDEVELOPMENT SUCCESSOR AGENCY

REGULAR MEETING AGENDA
City Hall Council Chamber Meeting Date: May 20, 2024
401 Grove Street Time: 6:00 PM
Healdsburg, CA 95448 Date Posted: May 15, 2024
(707) 431-3317
To join by computer, tablet, or mobile device:

Go to https://zoom.us/join and type in the Webinar ID: 815 8894 3494 or follow this link:
healdsburg.gov/zoom (Pre-registration for the meeting is not required.) Council Member Ariel Kelley will be participating in the meeting remotely from the Monarch Beach Resort, Business center
1 Monarch Beach Resort
Dana Point, California 92629
The agenda shall be posted at this location.
.

1. CALL TO ORDER/ROLL CALL
A. Pledge of Allegiance
B. Approval of Agenda

2. REPORT ON CLOSED SESSION(S)

3. ANNOUNCEMENTS/PRESENTATIONS
A. Introduction of the Model TT Healdsburg Fire Truck
B. Pride in Public Service Award Recipient Recognition
C. Proclamation Recognizing the 75th Anniversary of the Healdsburg Future Farmers Country Fair
D. Proclamation Recognizing SingleThread for Receiving Three Michelin Stars and Keys and for their Contributions to the Community
E. Proclamation Recognizing May 2024 as Affordable Housing Month F. Update from Library Commissioner Andy Elkind and Library Director Erika Thibault on the Healdsburg Library

4. CITY MANAGER REPORTS
City Council/RSA Regular Meeting Agenda
May 20, 2024

5. PUBLIC COMMENTS ON ITEMS ON THE CONSENT CALENDAR AND NON

AGENDA ITEMS
This time is set aside to receive comments from the public regarding matters of general interest not on the agenda, but related to City Council business. Pursuant to the Brown Act, however, the City Council cannot consider any issues or take action on any requests during this comment period.

Public comment on non-agenda items is limited to thirty (30) minutes total for all speakers, with each speaker given no more than three (3) minutes. If there are more than ten (10) audience/public comment speakers, the Mayor may reduce each speaker’s time from three (3) minutes so that all speakers have an equal time to speak. At the Mayor’s discretion, the public comment period may be extended past 30 minutes. Members from the public wishing to speak on a Consent Agenda item should notify the Mayor during Public Comments.

6. CONSENT CALENDAR
The following items listed on the Consent Calendar are considered routine in nature or have been previously reviewed by the Council and require little or no further discussion by the Council, public, or applicant and action will be taken by the City Council by a single motion. A Councilmember may request that an item be removed from the Consent Calendar and action taken separately. Consent by a majority of the Councilmembers present will be required in order to remove the item. In the event an item is removed, the matter will be considered immediately following the adoption of the Consent Calendar.

A. List of Projects to be Funded by Senate Bill 1 - "The Road Repair and Accountability Act"
Adopt a Resolution listing projects for Fiscal Year 2024-25 to be funded by Senate Bill 1 - "The Road Repair and Accountability Act".

B. Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1
Adopt a Resolution accepting the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 as complete and authorizing staff to file a Notice of Completion with the County Recorder's Office.

C. Authorize Collection of Voter Approved 2% Transient Occupancy Tax Adopt a Resolution reauthorizing collection of a voter approved 2% increase to the City’s Transient Occupancy Tax effective June 1, 2024 with a requirement to review financial need every two years with reauthorization provisions.

City Council/RSA Regular Meeting Agenda
May 20, 2024

D. Bid Award the Defensible Space Creation at Iverson-Gauntlett Mitigation Project Adopt a Resolution conditionally awarding the Defensible Space Creation at IversonGauntlett Mitigation Project to Tree Pro Tree Services, Inc. for an amount not to exceed $85,240 and authorize the City Manager to execute the contract and approve change orders up to $19,160.

E. City Municipal Airport Contract Award for Aviation Fuel Adopt a Resolution awarding a contract to EPIC Aviation, LLC, for the purchase and delivery of aviation fuel to the City Municipal Airport for a five-year contract term in an amount not to exceed $675,000 and authorizing the City Manager to execute the contract.

F. Town of Windsor Biosolids Collaborative Memorandum of Agreement.

Adopt a Resolution authorizing the City Manager to sign a Memorandum of Agreement (MOA) for the Windsor Biosolids Collaborative.

G. Cal Fire Urban Forestry Grant Application
Adopt a Resolution authorizing the City's application to the Cal Fire Urban Forestry Grant for Urban Forest Management Activities.

H. Annual Review of Good Faith Compliance with the Terms and Conditions of Development Agreements for the following Projects: 1. Mill District Project (Replay Healdsburg, LLC; Eden Mill District, LP) 2. North Village Project (CCS Healdsburg, LLC; Kendal at Sonoma, A Zen Inspired Community; BHDC North Village, LLC) 3. Saggio Hills Affordable Housing Project (Freebird Development Company, LLC)
Adopt a Resolution finding that Replay Healdsburg LLC, Eden Mill District LP, CCS Healdsburg LLC, Kendal at Sonoma, A Zen Inspired Community, BHDC North Village, LLC, and Freebird Development Company, LLC are in good faith compliance with the terms and conditions of their respective Development Agreements.

I. Second Reading of an Ordinance establishing Water and Wastewater Rates for Fiscal Years 2024-25, 2025-26 and 2026-27
Pass an Ordinance of the City Council of the City of Healdsburg adopting water and wastewater rates for fiscal years 2024-25, 2025-26, and 2026-27.

7. PUBLIC HEARINGS
None.

City Council/RSA Regular Meeting Agenda
May 20, 2024

8. OLD BUSINESS
A. Fiscal Year 2023-24 Third Quarter Financial Update

1. Receive a presentation on the FY 2023-24 City financials through March 31, 2024; and

2. Adopt a Resolution approving a budget amendment for the FY 2023-24.

9. NEW BUSINESS
A. Discussion and Direction Regarding Use of 217 Healdsburg Ave (former Chamber of Commerce Building)
Receive a presentation and provide direction to staff on proposed use of 217 Healdsburg Avenue.

B. Home Energy Load Management Program
Adopt a Resolution authorizing the City Manager to execute a professional services agreement with Compass Global Inc. DBA Optiwatt to offer the load management services for Healdsburg Electric Customers.

C. Resolution Setting the Time and Place for Hearing Protests to Weed Abatement Adopt a Resolution declaring a public nuisance to exist within certain parcels in the City and setting the time and place for hearing protests to weed abatement.

D. Appoint Council Subcommittee to Interview Planning Commission Applicants Consider appointing a Council subcommittee to interview the applicants for the Planning Commission.

10. COUNCIL REPORTS ON MATTERS OF INTEREST OCCURRING SINCE

PREVIOUS REGULAR MEETING/EXPENSE REIMBURSEMENT REPORTS

11. WRITTEN COMMUNICATIONS

12. ADJOURN CITY COUNCIL / RSA MEETING

13. FUTURE AGENDA ITEMS
A. Future Agenda Items for 2024
City Council/RSA Regular Meeting Agenda
May 20, 2024

SB 343 - DOCUMENTS RELATED TO OPEN SESSION AGENDAS: Any writings or documents provided to a majority of the City Council/Redevelopment Successor Agency Board regarding any item on this agenda after the posting of this agenda and not otherwise exempt from disclosure, will be made available for public review in the City Clerk's Office located at City Hall, 401 Grove Street, Healdsburg, during normal business hours. If supplemental materials are made available to the members of the City Council/Redevelopment Successor Agency Board at the meeting, a copy will be available for public review at the City Hall Council Chambers, 401 Grove Street, Healdsburg, CA 95448.

These writings will be made available in appropriate alternative formats upon request by a person with a disability, as required by the Americans with Disabilities Act.

DISABLED ACCOMMODATIONS: The City of Healdsburg will make reasonable accommodations for persons having special needs due to disabilities. Please contact Raina Allan, City Clerk, at Healdsburg City Hall, 401 Grove Street, Healdsburg, California, 431-3317, at least 72 hours prior to the meeting, to ensure the necessary accommodations are made.

CIUDAD DE HEALDSBURG

CONSEJO MUNICIPAL/AGENCIA DE DESARROLLO SUCESORA
ORDEN DEL DÍA DE LA REUNIÓN ORDINARIA
Cámaras del Consejo Municipal Fecha de reunión: 20 de mayo de 2024 401 Grove Street Hora: 6:00 PM
Healdsburg, CA 95448 Fecha de publicación: 15 de mayo de 2024 (707) 431-3317
Para participar por computadora, tableta o dispositivo móvil:

Vaya a https://zoom.us/join y teclee el número de identificación (ID) del seminario web: 815 8894 3494 o siga este enlace: healdsburg.gov/zoom (No es necesario inscribirse previamente a la reunión).

El concejal Ariel Kelley participará en la reunión a distancia desde el centro de negocios de Monarch Beach Resort
1 Monarch Beach Resort
Dana Point, California 92629
El orden del día se publicará en este lugar.
.

1. LLAMADA AL ORDEN/PASAR LISTA
A. Juramento a la bandera
B. Aprobación del orden del día

2. INFORME SOBRE LA SESIÓN/LAS SESIONES A PUERTA CERRADA

3. ANUNCIOS/PRESENTACIONES
A. Presentación del Camión de bomberos modelo TT de Healdsburg B. Reconocimiento al Galardonado con el Premio Orgullo en el Servicio Público C. Proclamación de Reconocimiento del 75º Aniversario de la Feria Campestre de los Futuros Agricultores de Healdsburg
D. Proclamación de reconocimiento a SingleThread por recibir tres estrellas y llaves Michelin y por sus contribuciones a la comunidad
E. Proclamación por la que se reconoce mayo de 2024 como el Mes de la Vivienda Asequible en la ciudad de Healdsburg
F. Actualización del comisionado de la Biblioteca Andy Elkind y la directora de la Biblioteca Erika Thibault sobre la Biblioteca de Healdsburg Orden del día de la Reunión Ordinaria del Consejo Municipal /RSA 20 de mayo de 2024
Página 7

4. INFORMES DEL GERENTE DE LA CIUDAD

5. COMENTARIOS PÚBLICOS SOBRE LOS PUNTOS EN EL CALENDARIO ACORDADO Y LOS PUNTOS NO INCLUIDOS EN EL ORDEN DEL DÍA
Este tiempo se reserva para recibir comentarios del público sobre asuntos de interés general no incluidos en el orden del día, pero relacionados con los asuntos del Consejo Municipal/RSA. Sin embargo, conforme la Ley Brown, el Consejo Municipal no puede considerar temas o tomar medidas sobre cualquier solicitud hecha durante este período de comentario. Los comentarios del público sobre los puntos no incluidos en el orden del día están limitados a treinta (30) minutos en total para todos los oradores, concediéndose a cada orador un máximo de tres (3) minutos. Si hay más de diez (10) comentarios públicos, el alcalde puede reducir el tiempo de tres (3) minutos de cada orador para que así todos los oradores tengan el mismo tiempo para hablar. A discreción del alcalde, el periodo de comentarios del público podrá prolongarse más de 30 minutos. Los miembros del público que deseen hablar sobre un asunto en el orden del día acordado deben notificárselo al alcalde durante los comentarios públicos.

6. CALENDARIO ACORDADO
Los siguientes puntos enumerados en el orden del día acordado se consideran rutinarios o han sido revisados previamente por el Consejo y requieren poca o ninguna discusión por parte del Consejo, el público o solicitante y el Consejo Municipal tomará medidas en una sola moción. Un miembro del consejo puede solicitar que se excluya un punto del calendario acordado y se pueden tomar medidas por separado. Para excluir un punto, se requiere el consentimiento de una mayoría de los miembros del consejo presentes. En caso de que se excluya un punto, el asunto se considerará de inmediato después de la adopción del orden del día acordado.

A. Lista de proyectos que serán financiados por el Proyecto de Ley del Senado 1 - "Ley de Reparación y Responsabilidad de Carreteras"
Adoptar una Resolución en la que se enumeren los proyectos para el Año Fiscal 2024-25 que serán financiados por Ley del Senado 1 - "Ley de Reparación y Responsabilidad de Carreteras”.

B. Aceptación de la Fase 1 del Proyecto de Reconfiguración de la Pista de Rodaje del Aeropuerto Municipal de Healdsburg
Adoptar una Resolución por la que se acepta como completa la Fase 1 del Proyecto de Reconfiguración de la Pista de Rodaje del Aeropuerto Municipal de Healdsburg y se autoriza al personal a presentar una Notificación de Finalización en la Oficina del Registrador del Condado.

C. Autorizar la Recaudación del Impuesto de Ocupación Transitoria del 2% Aprobado por los Electores
Orden del día de la Reunión Ordinaria del Consejo Municipal /RSA 20 de mayo de 2024
Página 8
Adoptar una Resolución por la que se reautoriza la recaudación de un aumento del 2% del Impuesto de Ocupación Transitoria de la Ciudad, aprobado por los electores, a partir del 1 de junio de 2024, con el requisito de revisar la necesidad financiera cada dos años con disposiciones de reautorización.

D. Adjudicación de la Licitación del Proyecto de Mitigación de Creación de Espacios Defendibles en Iverson-Gauntlett
Adoptar una Resolución por la que se adjudique condicionalmente el Proyecto de Creación de Espacios Defendibles en Iverson-Gauntlett Mitigation a Tree Pro Tree Services, Inc. por un importe no superior a $85,240 y se autorice al gerente de la Ciudad a ejecutar el contrato y aprobar órdenes de cambio de hasta $19,160.

E. Adjudicación del contrato de combustible de aviación del Aeropuerto Municipal de la Ciudad
Adoptar una Resolución por la que se adjudica un contrato a EPIC Aviation, LLC, para la compra y entrega de combustible de aviación al Aeropuerto Municipal de la Ciudad por un plazo contractual de cinco años, por un importe no superior a $675,000, y por la que se autoriza al gerente de la Ciudad a ejecutar el contrato.

F. Memorándum de Acuerdo de Colaboración sobre Biosólidos de la ciudad de Windsor
Adoptar una Resolución por la que se autoriza al gerente de la Ciudad a firmar un Memorándum de Acuerdo (MOA) para la Colaboración Windsor sobre Biosólidos.

G. Solicitud de Subvención para la Silvicultura Urbana de Cal Fire Adoptar una Resolución por la que se autoriza la solicitud a la Subvención de Silvicultura Urbana de Cal Fire para Actividades de Gestión de Bosques Urbanos.

H. Revisión anual del cumplimiento de buena fe de los términos y condiciones de los Acuerdos de Desarrollo para los siguientes proyectos: 1. Proyecto Mill District (Replay Healdsburg, LLC; Eden Mill District, LP) 2. Proyecto North Village (CCS Healdsburg, LLC; Kendal at Sonoma, A Zen Inspired Community; BHDC North Village, LLC) 3. Proyecto de viviendas asequibles de Saggio Hills (Freebird Development Company, LLC)
Adoptar una Resolución por la que se declare que Replay Healdsburg LLC, Eden Mill District LP, CCS Healdsburg LLC, Kendal at Sonoma, A Zen Inspired Community, BHDC North Village, LLC, y Freebird Development Company, LLC cumplen de buena fe los términos y condiciones de sus respectivos Acuerdos de Desarrollo.

Orden del día de la Reunión Ordinaria del Consejo Municipal /RSA 20 de mayo de 2024
Página 9
I. Segunda Lectura y Ordenanza por la que se establecen las Tarifas de Agua y Aguas Residuales para los años fiscales 2024-25, 2025-26 y 2026-27 Aprobar una Ordenanza por la que se establecen las Tarifas de Agua y Aguas Residuales para los años fiscales 2024-25, 2025-26 y 2026-27.

7. AUDIENCIAS PÚBLICAS
Ninguna.

8. ASUNTOS PENDIENTES
A. Actualización financiera del tercer trimestre del año fiscal 2023-24

1. Recibir una presentación sobre las finanzas de la Ciudad para el año fiscal 2023-24 hasta el 31 de marzo de 2024; y

2. Adoptar una Resolución por la que se aprueba una modificación presupuestaria para el año fiscal 2023-24.

9. ASUNTOS NUEVOS
A. Debate y orientación sobre el uso de 217 Healdsburg Ave (antiguo edificio de la Cámara de Comercio)
Recibir una presentación y dar instrucciones al personal sobre el uso propuesto de 217 Healdsburg Avenue.

B. Programa de Gestión de Carga Energética Doméstica
Adoptar una Resolución por la que se autoriza al gerente de la Ciudad a ejecutar un acuerdo de servicios profesionales con Compass Global Inc. DBA Optiwatt para servicios de gestión de carga energética para los clientes de Healdsburg Electric.

C. Resolución por la que se fijan la hora y el lugar de audiencia de las protestas contra la eliminación de malas hierbas
Adoptar una Resolución por la que se declara la existencia de una alteración del orden público en determinadas parcelas de la Ciudad y se fija la hora y el lugar para oír las protestas contra la eliminación de las malas hierbas.

Orden del día de la Reunión Ordinaria del Consejo Municipal /RSA 20 de mayo de 2024
Página 10
D. Nombrar un Subcomité del Consejo para entrevistar a los solicitantes a la Comisión de Planificación
Considerar la posibilidad de nombrar un subcomité del Consejo para entrevistar a los candidatos a la Comisión de Planificación.

10. INFORMES DEL CONSEJO SOBRE ASUNTOS DE INTERÉS QUE HAN OCURRIDO DESDE LA REUNIÓN ORDINARIA ANTERIOR/INFORMES DE

REEMBOLSO DE GASTOS

11. COMUNICACIONES ESCRITAS

12. LEVANTAR LA REUNIÓN DEL CONSEJO MUNICIPAL/RSA

13. PUNTOS FUTUROS PARA EL ORDEN DEL DÍA
A. Futuros puntos del orden del día para 2024
SB 343 - DOCUMENTOS RELACIONADOS CON EL ÓRDEN DEL DÍA DE LAS SESIONES ABIERTAS: Cualquier escrito o documento provisto a una mayoría de la Junta del Consejo Municipal/Agencia de Desarrollo Sucesora con respecto a cualquier punto en este orden del día después de la publicación de la misma y que no esté exento de divulgación, se pondrá a disposición del público en la Oficina de la Secretaría Municipal ubicada en City Hall, 401 Grove Street, Healdsburg, durante horas hábiles. Si el material complementario se pone a disposición de los miembros de la Junta del Consejo Municipal/Agencia de Desarrollo Sucesora, una copia estará disponible para la revisión pública en las Cámaras del Consejo Municipal, 401 Grove Street, Healdsburg, CA 95448.

Estos escritos se pondrán a disposición en formatos alternativos apropiados a petición de una persona con discapacidad, tal y como exige la Ley de Estadounidenses con Discapacidades.

ADAPTACIONES POR DISCAPACIDAD: La ciudad de Healdsburg realizará adaptaciones razonables para las personas con necesidades especiales debidas a discapacidades. Por favor, contacte a Raina Allan, secretaria municipal, en Healdsburg City Hall, 401 Grove Street, Healdsburg, California, 431-3317, por lo menos 72 horas antes de la reunión para garantizar que se realicen las adaptaciones necesarias.

CITY OF HEALDSBURG

PROCLAMATION

A PROCLAMATION OF THE CITY COUNCIL OF THE CITY
OF HEALDSBURG RECOGNIZING THE 75TH ANNIVERSARY

OF THE HEALDSBURG FUTURE FARMERS COUNTRY FAIR
WHEREAS, the Healdsburg Future Farmers Country Fair was founded in 1950 and celebrates its 75th Anniversary in 2024; and
WHEREAS, the Future Farmers Country Fair forges a link between the past and present, highlighting the importance of agriculture to Healdsburg and the region; and WHEREAS, the Future Farmers Country Fair provides an opportunity for local students to display the many aspects of agriculture in the region including animal raising and care, viticulture, food production, horse mastership, dog handling, and more; and WHEREAS, the culmination of the Fair is the annual Livestock Auction where the generosity of the Healdsburg community is evident with the Auction raising hundreds of thousands of dollars to provide scholarships for students pursuing careers in agriculture; and WHEREAS, the Future Farmers Country Fair partners with local non-profit organizations who have booths at the Fair that raise funds to support local youth programs; and WHEREAS, many volunteer farmers, ranchers, business owners, and community members are involved in the planning and implementation of the Fair each year; and WHEREAS, the Healdsburg Future Farmers Country Fair is one of the long-standing traditions and makes Healdsburg a great place to be.

NOW, THEREFORE, BE IT PROCLAIMED, that the City Council of the City of Healdsburg does hereby recognize the 75th Anniversary of the Healdsburg Future Farmers Country Fair, May 23 – May 26, 2024, and expresses its sincere appreciation, gratitude, and respect to the past, present, and future participants and volunteers who make the Fair a great part of Healdsburg.

DATED: May 20, 2024
SO ORDERED:

David Hagele, Mayor

3.C.a
Packet Pg. 11
Attachment: Future Farmers Country Fair 75th Annivesary Proclamation (4436 : Future Farmers Country Fair 75th Anniversary)

CITY OF HEALDSBURG

PROCLAMATION

A PROCLAMATION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG RECOGNIZING SINGLETHREAD FOR

RECEIVING THREE MICHELIN STARS, THREE MICHELIN

KEYS AND FOR THEIR ONGOING CONTRIBUTIONS TO THE

COMMUNITY
WHEREAS, SingleThread Farm is nestled in and amongst the Dry Creek Valley bringing 24 acres of biodiversity to wine country; and
WHEREAS, SingleThread Farm maintains a workforce of 147 dedicated individuals to ensure the smooth operation of their restaurant, inn, and agricultural endeavors; and WHEREAS, SingleThread Farm provided valuable internship experiences to five Healdsburg Highschool Students, as well as interns and employees from the Sonoma Family Meal training program; and
WHEREAS, SingleThread Farm provided over 40,000 meals to our community providing much needed food security during the COVID-19 pandemic; and WHEREAS, SingleThread Farm has led fundraising efforts for Napa and Sonoma Fire Relief, exceeding $1 million in total contributions, which includes proceeds from their benefit dinner with the Soul of Japan; and
WHEREAS, SingleThread Farm provides ongoing support to organizations like Sonoma Family Meal, Corazon Healdsburg, Russian River Keepers, and contributes to student scholarships at the Culinary Institute; and
WHEREAS, SingleThread Farm fosters a strong spirit of entrepreneurship among its alumni including the opening of Molti Amici, Quail and Condor, Troubadour, and Maison Healdsburg; and
WHEREAS, SingleThread Farm has achieved exceptional recognition, securing three Michelin Stars since 2018 – a distinction held by only 13 restaurants in the United States; and WHEREAS, SingleThread Farm was awarded a Green Star in 2021, acknowledging their commitment to sustainable practices; and
WHEREAS, SingleThread Farm holds the rare distinction of securing 3 Michelin Keys, a recognition bestowed upon only 11 restaurants nationwide; and WHEREAS, SingleThread Farm has positioned itself as the only property in the world to be recognized with all three of these prestigious distinctions.

3.D.a
Packet Pg. 12
Attachment: SingleThread Farm Proclamation (4488 : SingleThread Proclamation) NOW, THEREFORE, BE IT PROCLAIMED, that the City Council of the City of Healdsburg hereby recognizes SingleThread for receiving three Michelin Stars, three Michelin Keys and for their contributions to our community.

DATED: May 20, 2024
SO ORDERED:
__________________________________
David Hagele, Mayor

3.D.a
Packet Pg. 13
Attachment: SingleThread Farm Proclamation (4488 : SingleThread Proclamation)

CITY OF HEALDSBURG

PROCLAMATION

A PROCLAMATION OF THE CITY COUNCIL OF THE CITY

OF HEALDSBURG RECOGNIZING THE MONTH OF MAY
2024 AS AFFORDABLE HOUSING MONTH IN THE CITY OF

HEALDSBURG
WHEREAS, the month of May is recognized as National Affordable Housing Month; and WHEREAS, Affordable housing is essential for creating stable, healthy, and vibrant communities, and plays a crucial role in addressing poverty and inequality; and WHEREAS, every individual deserves a safe, decent, and affordable place to call home, regardless of their income or background; and
WHEREAS, the strength of the Healdsburg community and economy depends on providing access to housing options that allow current and future residents of all income levels and ethnicities to live where they work; and
WHEREAS, the City of Healdsburg Housing Element and Housing Action Plan call for an increase in deed-restricted affordable housing, optimization of affordable housing production, and expansion of affordable housing incentives; and
WHEREAS, the City of Healdsburg is committed to providing access to affordable housing for all its residents and has adopted policies and programs to increase the production of affordable housing and expand access to affordable homeownership opportunities; and WHEREAS, Affordable Housing Month provides an opportunity for us to recognize the critical importance of affordable housing, raise awareness about the need for affordable homes, and highlight the work of organizations and individuals who are dedicated to increasing access to affordable housing for all members of our community; and WHEREAS, the City encourages the public to join in the recognition of the importance of affordable housing in our community during Affordable Housing Month.

NOW, THEREFORE, BE IT PROCLAIMED that the City Council of the City of Healdsburg hereby recognizes the month of May 2024 as Affordable Housing Month in the City of Healdsburg.

DATED: May 20, 2024
SO ORDERED:
___________________________________
David Hagele, Mayor

3.E.a
Packet Pg. 14
Attachment: Affordable Housing Month Proclamation (4469 : Affordable Housing Month Proclamation)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: List of Projects to be Funded by Senate Bill 1 - "The Road Repair and Accountability Act"
PREPARED BY: Larry Zimmer, Public Works Director
STRATEGIC INITIATIVE(S):

Effective & Efficient Government
Fiscal Responsibility
Infrastructure & Facilities
Maintain and Improve Infrastructure and Facilities
Provide Effective Governance
RECOMMENDED ACTION(S):

Adopt a Resolution listing projects for Fiscal Year 2024-25 to be funded by Senate Bill 1 - "The Road Repair and Accountability Act".

COMMUNITY ENGAGEMENT/OUTREACH:

Action will be approved at a public meeting.

BACKGROUND:

On April 28, 2017, the Governor of California signed Senate Bill 1 (SB1), The Road Repair and Accountability Act to address basic road maintenance, rehabilitation, and critical safety needs on both the state highway and local streets and road systems. As a result, state funding is now available for roads and transportation infrastructure, repairs, and maintenance through the SB1 Road Maintenance and Rehabilitation Account (RMRA). In accordance with the California Transportation Commission’s guidelines for receiving funds from that account, the City Council must adopt a list of projects that are planned to be funded with FY 2024-25 RMRA funds. That list of adopted projects must be submitted to the California Transportation Commission by July 1, 2024.

DISCUSSION/ANALYSIS:

As a result of SB1, the State Controller began depositing various portions of SB1 funding into the newly created RMRA in January 2018. A percentage of this RMRA funding is apportioned by formula to eligible cities and counties pursuant to Streets and Highways Code Section

6.A
Packet Pg. 15
2032(h), for basic road maintenance, rehabilitation, and critical safety projects on local streets and roads systems. To receive funding, cities must apply and include a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the funded work.

The City of Healdsburg is projected to receive an estimated $289,347 in SB1 funding in FY 2024-25. The FY 24/25 RMRA funds will be set aside for the March Avenue Reconstruction Project. The project, which has not yet begun, is expected to be constructed in the summer of 2025. The work from Healdsburg Avenue to University Street will include localized dig-outs to replace failed sections of pavement, then grinding off the entire surface to a depth of approximately 2” and replaced with new asphalt concrete. This type of project has a life expectancy of 15 years. The engineering and design of the project, scheduled to begin in the fall of 2024, will ultimately determine the rehabilitation methodology and amount of sidewalk replacement. The project is estimated to cost over $2 million.

SB1 emphasizes the importance of accountability and transparency in the delivery of California’s transportation programs. Therefore, to be eligible for RMRA funding, cities must annually provide basic project reporting to the California Transportation Commission (CTC) for projects anticipated to be funded through the RMRA. Staff requests the passage of a resolution that incorporates the list of projects to satisfy the CTC’s reporting requirements.

ENVIRONMENTAL STEWARDSHIP:

During the design process recycled in place construction methods will be considered and implemented if of comparable cost.

ALTERNATIVES:

The City Council could choose not to adopt the proposed Resolution and thereby not approve the proposed project list for use of SB1 funding and further direct staff to use the funding on an alternative project.

FISCAL IMPACT:

The March Avenue Reconstruction Project is in the adopted five-year capital improvement program with a total budget of $2,410,300. The current adopted budget includes $235,000 for design costs funded by Measure T and the five-year capital improvement program identified an additional $2,175,300 for construction. This budget may be slightly modified in the upcoming FY 24/25 budget.

Adopting the proposed Resolution and thereby approving the proposed project will demonstrate the City’s compliance with the requirements of SB1 for funding. Using state funds for local road projects reduces pressures facing local streets funding, including Measure T funds, to complete the proposed projects.

ENVIRONMENTAL ANALYSIS:

The recommended action does not constitute a “project” under California Environmental Quality Act (“CEQA”). The future construction projects will be subject to environmental review and pending approval pursuant to CEQA guidelines at a future date.

6.A
Packet Pg. 16
ATTACHMENT(S):

Resolution

6.A
Packet Pg. 17

CITY OF HEALDSBURG
RESOLUTION NO. __-2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG ADOPTING A LIST OF PROJECTS FOR
FISCAL YEAR 2024-25 FUNDED BY SB1: THE ROAD REPAIR
AND ACCOUNTABILITY ACT OF 2017
WHEREAS, Senate Bill 1 (SB1), the Road Repair and Accountability Act of 2017 (Chapter 5, Statutes of 2017) was passed by the Legislature and Signed into law by the Governor in April 2017 to address the significant multi-modal transportation funding shortfalls statewide; and WHEREAS, SB1 includes accountability and transparency provisions that will ensure the residents of our City are aware of the projects proposed for funding in our community and which projects have been completed each fiscal year; and
WHEREAS, the City must adopt by resolution a list of projects proposed to receive fiscal year funding from the Road Maintenance and Rehabilitation Account (RMRA), created by SB1, which must include a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the improvement; and WHEREAS, the City, will receive an estimated $289,347 in RMRA funding in Fiscal Year 2024-25 from SB1; and
WHEREAS, this is the eighth year in which the City is receiving SB1 funding and will enable the City to continue essential road maintenance and rehabilitation projects, safety improvements, repairing and replacing aging bridges, and increasing access and mobility options for the traveling public that would not have otherwise been possible without SB1; and WHEREAS, the City has undergone a robust public process to ensure public input into our community’s transportation priorities/the project list; and WHEREAS, the City used a Pavement Management System to develop the SB1 project list to ensure revenues are being used on the most high-priority and cost-effective projects that also meet the community’s priorities for transportation investment; and WHEREAS, the funding from SB1 will help the City reconstruct pavement on March Avenue from Healdsburg Avenue to University Street and complete similar projects into the future; and
WHEREAS, the 2021 California Statewide Local Streets and Roads Needs Assessment found that the City’s streets and roads are in a “Fair” condition and this revenue will help us increase the overall quality of our road system and over the next decade will bring our streets and roads into a “Good” condition; and

6.A.a
Packet Pg. 18
Attachment: Resolution (4401 : SB1 List of Projects)
Resolution No. -2024

WHEREAS, the SB1 project list and overall investment in our local streets and roads infrastructure with a focus on basic maintenance and safety, investing in complete streets infrastructure, and using cutting-edge technology, materials and practices, will have significant positive co-benefits statewide.

NOW, THEREFORE IT IS HERBY RESOLVED, ORDERED AND FOUND by the City Council of the City of Healdsburg as follows:

1. The foregoing recitals are true and correct.

2. The following previously proposed and adopted project will be funded in-part with Fiscal Year 2024-25 Road Maintenance and Rehabilitation Account revenues in their delivery.

With the relisting of this project the adopted fiscal year resolution, the City is reaffirming to the public and the State our intent to fund this project with Road Maintenance and Rehabilitation Account revenues:

March Avenue Reconstruction Project. The work will include localized dig outs of failed areas, complete removal of pavement surface and replacement of new (or recycled) asphalt concrete pavement from Healdsburg Avenue to University Street

3. The project is scheduled for construction during July 2025 through November 2025.

4. The project has an estimated useful life of ten to fifteen years.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Healdsburg, this 20th day of May 2024, by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
_________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.A.a
Packet Pg. 19
Attachment: Resolution (4401 : SB1 List of Projects)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1
PREPARED BY: Clay Thistle, Senior Engineer
STRATEGIC INITIATIVE(S):

Maintain and Improve Infrastructure and Facilities
RECOMMENDED ACTION(S):

Adopt a Resolution accepting the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 as complete and authorizing staff to file a Notice of Completion with the County Recorder's Office.

COMMUNITY ENGAGEMENT/OUTREACH:

The Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 Contract was advertised for public bidding in the Santa Rosa Press Democrat and on the City’s website.

Prior to beginning construction, advance notices were posted at the airport and provided to airport tenants. Notices advised of potential impacts, runway restrictions, and planned work duration. The City project manager’s direct contact information was provided for additional information and for any concerns that arose during the construction process.

BACKGROUND:

The Healdsburg Municipal Airport (Airport) is a Federal Aviation Administration (FAA) sponsored airport.

The City annually prepares an Airport Capital Improvement Program (ACIP) outlining the proposed maintenance and improvement projects for the next five or more years. The ACIP is reviewed and approved by the FAA allowing the City to be eligible for FAA grant funding. The City routinely receives funding from the FAA for qualifying projects. To plan, develop, and implement the ACIP consultant professional services were required. The Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 is included in the ACIP.

6.B
Packet Pg. 20
City Council awarded the bid for the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase Contract in April of 2023. Construction on the project began in October of 2023.

The project included removing Taxiway A2 to eliminate a direct connection of apron and hangar areas to the runway which could result in planes inadvertently entering the runway.

Additionally, the project removed excess pavement at Taxiway A5 to narrow the taxiway to a standard width and removed additional noncompliant pavement along the runway. A future Phase 2 project will remove noncompliant Taxiway A3 and construct a new compliant Taxiway A2.

On March 15, 2024, Granite Construction Company notified the City in writing that they consider the work complete, supported by the fact that all contract documents have been reviewed and the work has been inspected for compliance.

DISCUSSION/ANALYSIS:

Granite Construction Company has completed all work in compliance with approved Project Plans, Specifications, Special Provisions, and Contract Change Orders. City representatives have reviewed all contract documents and performed final inspections of the work and have determined that all work has been performed and completed in accordance with the contract documents, and as directed by the City. There are no liquidated damages to be assessed and there are no existing or potential contractor claims. Therefore, the project is deemed completed by staff and ready for council acceptance.

ENVIRONMENTAL STEWARDSHIP:

Construction waste was diverted from landfill for reuse or recycling where possible.

ALTERNATIVES:

There is no reasonable alternative to the recommended action, as the City has begun beneficial use of the completed facilities.

FISCAL IMPACT:

The total project budget including design, construction, construction management and oversight along with staff time for the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 was $889,280. Funding was provided from multiple sources including $732,838 of FAA Grant funding, $32,970 of Caltrans Grant funding, and $123,472 of Airport Funds.

The construction contract was awarded for $617,164, with a 10% construction contingency for a total authorized amount of $678,880. Construction was completed for $627,169 or $51,711 under budget. The cost increases beyond the original contract amount were primarily due to extra work due to unforeseen conditions encountered requiring replacement of a failing portion of storm drain.

The total project costs are estimated to be $833,465 including additional staff time to complete the project closeout. Staff anticipates approximately $55,814 in remaining Airport funds will be available to be re-allocated to support other Airport Capital Projects and operational needs.

6.B
Packet Pg. 21
ENVIRONMENTAL ANALYSIS:

The recommended action does not constitute a project under CEQA., pursuant to Section 15378(b)(5) of the California Environmental Quality Act (CEQA) Guidelines, approval of this Resolution is an administrative activity of the City that does not constitute a project under CEQA.

ATTACHMENT(S):

Resolution
Notice of Completion
Certificate of Completion

6.B
Packet Pg. 22

CITY OF HEALDSBURG
RESOLUTION NO. __-2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG ACCEPTING THE HEALDSBURG

MUNICIPAL AIRPORT TAXIWAY RECONFIGURATION
PROJECT PHASE 1 AS COMPLETE AND AUTHORIZING

STAFF TO FILE A NOTICE OF COMPLETION WITH THE

COUNTY RECORDER'S OFFICE
WHEREAS, on August 7, 2023, the Healdsburg City Council awarded a construction contract for the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 to Granite Construction Company; and
WHEREAS, the Healdsburg City Council at a regular meeting held May 20, 2024, received the report from the City Engineer that the Project has been satisfactorily completed in accordance with the contract documents and City Standards; and
WHEREAS, the work consisted of removing Taxiway A2 to eliminate a direct connection of apron and hangar areas to the runway which could result in planes inadvertently entering the runway; and
WHEREAS, additionally, the project removed excess pavement at Taxiway A5 to narrow the taxiway to a standard width and removed additional noncompliant pavement along the runway; and
WHEREAS, the City Engineer recommended that the City Council accept the Project as complete and take appropriate action to finalize the Project; and WHEREAS, pursuant to Section 15378(b)(5) of the California Environmental Quality Act (CEQA) Guidelines, approval of this Resolution is an administrative activity of the City that does not constitute a “project” under CEQA.; and
WHEREAS, after due consideration, the City Council accepts the recommendation of the City Engineer.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg hereby finds:

1. This action of accepting the Project as complete does not constitute a “project” under CEQA; and

2. Staff is authorized to file a Notice of Completion with the County Recorder's Office; and

3. Staff is authorized to take appropriate action to finalize the Project.

6.B.a
Packet Pg. 23
Attachment: Resolution (4446 : Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1) Resolution No.

PASSED, APPROVED AND ADOPTED, this 20th day May 2024, by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
__________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.B.a
Packet Pg. 24
Attachment: Resolution (4446 : Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1) Recording Requested by:

Healdsburg City Clerk
When Recorded Return to:

Healdsburg City Clerk
401 Grove Street
Healdsburg, CA. 95448

CITY OF HEALDSBURG

NOTICE OF COMPLETION
Project Title: Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1 City Project No. AP002
Site Address or
Location: Healdsburg Municipal Airport
Property Owner: City of Healdsburg
Address: 401 Grove Street, Healdsburg, CA 95448
Nature of Owner’s
Interest Public Facilities
NOTICE IS HEREBY GIVEN THAT I, Larry Zimmer, City Engineer of the City of Healdsburg, California, on April 22, 2024, did file with the City Clerk of the City of Healdsburg, my Certificate of Completion of the following described work the contract for doing, which was heretofore awarded Granite Construction Company on April 7, 2023, in accordance with the City Clerk and approved by the City Council of said City;
That said work and improvements were actually completed on March 15, 2024; That acceptance of the said work and improvements was ordered by City Council Resolution No. ___- 2024 on May 20, 2024.

That said work and improvements consisted of removing Taxiway A2 to eliminate a direct connection of apron and hangar areas to the runway. Removing excess pavement at Taxiway A5 to narrow the taxiway to a standard width and removal of additional noncompliant pavement along the runway.

I, Larry Zimmer, City Engineer, of the City of Healdsburg do hereby certify, under penalty of perjury, that the foregoing is true and correct.

DATED: ATTEST:
________________________________ ___________________________________ Larry Zimmer, City Engineer Raina Allan, City Clerk

6.B.b
Packet Pg. 25
Attachment: Notice of Completion (4446 : Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1)

6.B.c
Packet Pg. 26
Attachment: Certificate of Completion (4446 : Acceptance of the Healdsburg Municipal Airport Taxiway Reconfiguration Project Phase 1)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Authorize Collection of Voter Approved 2% TOT Increase Effective June 1, 2024 with Re-Authorization Provisions
PREPARED BY: Katie Edgar, Finance Director
STRATEGIC INITIATIVE(S):

Provide Effective Governance
RECOMMENDED ACTION(S):

Adopt a Resolution reauthorizing collection of a voter approved 2% increase to the City’s Transient Occupancy Tax effective June 1, 2024 with a requirement to review financial need every two years with reauthorization provisions.

COMMUNITY ENGAGEMENT/OUTREACH:

Not applicable.

BACKGROUND:

On December 19, 2005, the Council adopted a resolution authorizing the collection of the voter approved 2% increase to the City’s 10% TOT (Transient Occupancy Tax) effective June 1, 2006 with the requirement that the Council review the financial condition of the City’s General Fund every two years to determine whether the need to continue collecting the voter approved TOT increase still exists.

On April 21, 2008, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2008.

On July 19, 2010, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2010.

On May 21, 2012, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2012.

On May 5, 2014, the Council adopted a resolution reauthorizing the collection of the 2% increase

6.C
Packet Pg. 27
to the City’s 10% TOT effective June 1, 2014.

On May 16, 2016, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2016.

On May 21, 2018, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2018.

On May 18, 2020, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2020.

On May 16, 2022, the Council adopted a resolution reauthorizing the collection of the 2% increase to the City’s 10% TOT effective June 1, 2022.

DISCUSSION/ANALYSIS:

On Monday, May 13, 2024, the Council received a report showing the General Fund 2-year fund balance projection. Without the receipt of the TOT revenue, the unrestricted fund balance would not meet the required reserve set by Council. The General Fund would experience a severe financial hardship without the continuation of the 2% TOT into the future.

Staff recommends the reauthorization of the 2% TOT for the next two years based on the financial need to support public safety services.

ALTERNATIVES:

If this resolution is not approved, the projected June 30, 2026, General Fund, fund balance will decrease by $2,917,030 and the reductions in expenditures that will be necessary to make up the difference in revenue will impact the quality of the services provided by the City.

As proposed, the resolution requires staff to return to Council for reauthorization every two years. Council may desire to extend that time period to three or five years, or require an annual reauthorization.

ENVIRONMENTAL STEWARDSHIP:

Not applicable.

FISCAL IMPACT:

The proposed budgets for the next two fiscal years assume the approval of the 2% TOT. The General Fund TOT revenue projections for fiscal years 2024-25 and 2025-26 are estimated at $1,379,071 and $1,537,959 respectively.

ENVIRONMENTAL ANALYSIS:

Pursuant to Title 14, the California Code of Regulations, Section 15378(b)(5) of the California Environmental Quality Act (“CEQA”) guidelines, the proposed action is an administrative activity of the City that will not result in direct or indirect physical changes to the environment.

ATTACHMENT(S):

Resolution

6.C
Packet Pg. 28

CITY OF HEALDSBURG
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG REAUTHORIZING COLLECTION OF A VOTER
APPROVED 2% INCREASE IN THE CITY’S TRANSIENT

OCCUPANCY TAX WITH A FINANCIAL REVIEW CLAUSE OF

TWO YEARS AND REAUTHORIZATION PROVISIONS
WHEREAS, the voters of Healdsburg, on November 2, 2004 approved an increase of 2% to the City’s then 10% Transient Occupancy Tax (“TOT”) with the stipulation that the increase would not be initiated until the City Council made a determination, through the City's budget review process, that additional general fund revenues are needed to maintain city services, including police and fire protection services; and
WHEREAS, in 2016, with the passage of Measure S, the Healdsburg voters approved an increase of an additional 2% of TOT, bringing the total of TOT to 14%; and WHEREAS, the approval of Measure S did not affect the requirement that the City Council regularly re-authorize the 2% increase authorized by the voters in 2004; and WHEREAS, the City Council, after an in-depth review of the City’s General Fund, has determined that the additional 2% of TOT revenue is required to maintain current police and fire services; and
WHEREAS, the City Council, eager to ensure that the 2% increase in the TOT would only be in effect if necessary to support public safety services, determined that based on the financial condition of the General Fund, an assessment would be made every two years whether or not to continue imposing TOT at a rate of 14% rather than 12%; and WHEREAS, the City Council has determined that based on the financial condition of the General Fund it is necessary to continue imposing TOT at a rate of 14%.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg does hereby reauthorize the voter approved increase to the City’s Transient Occupancy Tax of 2% effective June 1, 2024 with a requirement that the Council review the financial condition of the City’s General Fund every two years to determine whether the need to continue collecting the voter approved TOT increase still exists.

PASSED, APPROVED AND ADOPTED, this 20th day of May 2024 by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
_______________________________ ___________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.C.a
Packet Pg. 29
Attachment: Resolution (4450 : Authorize Collection of Voter Approved 2% TOT)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Bid Award the Defensible Space Creation at Iverson-Gauntlett Mitigation Project
PREPARED BY: Patrick Fuss, Water/Wastewater Engineer
STRATEGIC INITIATIVE(S):

Pursue Initiatives that Promote Environmental Stewardship Maintain and Improve Infrastructure and Facilities
Maintain and Enhance Public Health and Safety
RECOMMENDED ACTION(S):

Adopt a Resolution conditionally awarding the Defensible Space Creation at Iverson-Gauntlett Mitigation Project to Tree Pro Tree Services, Inc. for an amount not to exceed $85,240 and authorize the City Manager to execute the contract and approve change orders up to $19,160.

COMMUNITY ENGAGEMENT/OUTREACH:

Staff posted notices regarding the project on two separate occasions on a publicly viewable bulletin board located outside the City’s Council chambers.

BACKGROUND:

The City of Healdsburg owns and operates a water utility that provides drinking water to the community to meet public health needs. The facilities for the water utility are distributed throughout the City with some located in the northeast portions of the City. These facilities are located within high fire threat areas as categorized by the City’s Wildland Urban Interface, California Public Utilities Commission’s High Fire Threat District Map, and CalFire’s Fire Hazard Severity Zones Map.

Over the past few years, the City has been threatened by multiple wildfires including the Tubbs Fire in 2017, the Kincaid Fire in 2019 (necessitating a Citywide evacuation), and the Walbridge Fire in 2020. The potential threat of wildfire to the City is very evident, and the City’s water facilities need to remain operational and undamaged to combat wildfire when it approaches.

DISCUSSION/ANALYSIS:

In 2020, Staff applied for a FEMA Hazard Mitigation Grant following the FEMA notice of

6.D
Packet Pg. 30
funding opportunity associated with California wildfires. The focus of the project, called the Defensible Space Creation at Iverson-Gauntlett Mitigation Project, for which the grant was sought is to create defensible space around the City’s water facilities in the high wildfire threat areas. These facilities include the Iverson Reservoir, the Gauntlett Reservoir, the power lines to the Gauntlett well field control building, the Gauntlett well field control building, the Gauntlett wells, the Sunset Reservoir, the Cadoul Reservoir, and the Revel booster pump station.

In the Defensible Space Creation at Iverson-Gauntlett Mitigation Project, a thirty-foot diameter buffer zone will be created, by removing dead trees and shrubs, removing invasive trees and other invasive plants, removing plants four inches in diameter and smaller to clear the undergrowth, and to remove limbs up to 10 feet above grade for trees greater than four inches in diameter. In doing so, ladder fuels will be removed and reduce the potential of ground-based fires traveling to the tree canopy where it spreads rapidly and is more difficult to combat. As a result of the work, an area of reduced vegetation will be created around the facilities providing firefighters a working area to slow and block wildfires from damaging City facilities.

In addition to the water facilities, 10 feet on each side of defensible space will be created along approximately 7,500 feet of unpaved road. The unpaved roads provide access to the Gauntlett control house and well field. The 900 feet of power lines that serve the Gauntlett well field will also have vegetation removed to 30 feet on each side of the power lines.

Staff estimated the Defensible Space Creation at Iverson-Gauntlett Mitigation Project would cost approximately $200,000 to implement. Staff submitted a competitive grant application to the FEMA Hazard Mitigation Grant Program on September 24, 2020. On August 15, 2023, the City was notified that it was awarded the grant which consists of 75 percent federal funding (up to $150,011 of the $200,000 project). The City will need to provide 25 percent of the project costs incurred to implement this project.

Staff prepared contract documents for bidding on the Defensible Space Creation at IversonGauntlett Mitigation Project. On March 18, 2024, the project was posted on the City’s website and on March 21, and 26, 2024, the project was advertised in the Press Democrat. On April 17, 2024, staff conducted a mandatory pre-bid meeting with prospective bidders.

On April 25, 2024, bids for implementing the project were opened. Five bids were received. All had attended the pre-bid meeting. The lowest bid was received from Tree Pro Tree Services, Inc. from Penryn, CA, in the amount of $85,240.00.

Staff have reviewed this bid and find it responsive to the project requirements. Staff recommends that City Council adopt a resolution awarding the work of this contract to Tree Pro Tree Services.

ENVIRONMENTAL STEWARDSHIP:

FEMA has conducted a National Environment Policy Act (NEPA) review the Defensible Space Cration Project. This review noted that the work had a potential to impact nesting birds in the work area. Staff will engage a certified biologist to conduct nesting bird surveys, identify mitigations if any active nests are found, monitor the nests as needed, and provide environmental

6.D
Packet Pg. 31
awareness training to the contractor’s crew.

Additionally, Staff will engage a forester to identify plants of special status within the work area.

If any are noted, the special status species will be flagged to not be disturbed by the work.

ALTERNATIVES:

The City Council may elect not to award the project to the lowest responsive bidder, Tree Pro Tree Services. If the Council make this election to not award, Staff will require direction from Council on how to proceed.

FISCAL IMPACT:

The costs anticipated for implementing the Defensible Space Creation at Iverson-Gauntlett Mitigation Project are summarized below.

Item
Contractor Bid Price $85,240
Bio. Monitor $14,591
Forester $4,900
Staff time (estimate) $23,000
Subtotal $127,731
Staff recommends a contract contingency of 15 percent to address unforeseen circumstances.

Contingency (15%) $12,786
Total with contingency $140,517
Federal Share (75%) $105,388, within the $150,011 allowed under the grant City Share (25%) $35,129
Staff believes that sufficient funds exist in the Water Operations Fund for the City share of this project. Additional appropriations are not requested at this time.

ENVIRONMENTAL ANALYSIS:

Pursuant to Title 14, the California Code of Regulations, Section 15302(c) of the California Environmental Quality Act (“CEQA”) guidelines, the action recommended is categorically exempt from CEQA review under the Class 1 exemption – maintenance of existing public facilities involving negligible or no expansion of capacity.

ATTACHMENT(S):

Resolution
Defensible Space Project Sites
H-burg Iverson Gauntlett Defesnible Space NOE

6.D
Packet Pg. 32

CITY OF HEALDSBURG
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG CONDITIONALLY AWARDING THE

DEFENSIBLE SPACE CREATION AT IVERSON-GAUNTLETT

MITIGATION PROJECT TO TREE PRO TREE SERVICES,
INC., FOR AN AMOUNT NOT TO EXCEED $85,240 AND

AUTHORIZE THE CITY MANAGER TO EXECUTE THE

CONTRACT AND APPROVE CHANGE ORDERS UP TO
$12,786
WHEREAS, the City of Healdsburg owns and operates a water utility to provide drinking water to the community to meet public health needs; and WHEREAS, portions of the water utility’s facilities are within high fire threat areas; and WHEREAS, the City has been threatened by wildfire over the past several years; and WHEREAS, the City applied for and was awarded a FEMA Hazard Mitigation Grant to implement the Defensible Space Creation at Iverson-Gauntlett Mitigation Project to mitigate risk of wildfire at the Iverson Reservoir, the Gauntlett Reservoir, the power lines to the Gauntlett well field control building, the Gauntlett well field control building, the Gauntlett wells, the Sunset Reservoir, the Cadoul Reservoir, and the Revel booster pump station; and WHEREAS, anticipated project cost of the Defensible Space Creation at Iverson-Gauntlett Mitigation Project was $200,000, 75 percent of which would be funded by the FEMA grant; and WHEREAS, plans and specifications for the Defensible Space Creation at IversonGauntlett Mitigation Project were prepared for bidding; and WHEREAS, Staff advertised the revised project in accordance with City purchasing policy on March 18, 2024; and
WHEREAS, the lowest responsive bid for the Defensible Space Creation at IversonGauntlett Mitigation Project was received from Tree Pro Tree Services, Inc., with a bid price of $85,240; and
WHEREAS, project costs including the bid amount, staff time, biological monitoring, and forester consulting total $127,731; and
WHEREAS, Staff recommends a contingency of 15 percent of the Tree Pro Tree Services, Inc contract costs or up to $12,786, to address unforeseen circumstances for a total project cost of $140,517; and
WHEREAS, the grant funded portion of the work will total $105,388, which is within the

6.D.a
Packet Pg. 33
Attachment: Resolution (4457 : 2024 Award Water Facilities Defensible Space Creation Project) Resolution No. -2024

$150,011 allowed under the grant; and
WHEREAS, the City’s portion of project costs totals $35,129; and WHEREAS, funds in the Water Operation Fund are sufficient to fund the City’s portion of the project costs; and
WHEREAS, Pursuant to Title 14, the California Code of Regulations, Section 15302(c) of the California Environmental Quality Act (“CEQA”) guidelines, the action recommended is categorically exempt from CEQA review under the Class 1 exemption – maintenance of existing public facilities involving negligible or no expansion of capacity.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg does hereby;

1. Find the work of the Defensible Space Creation at Iverson-Gauntlett Mitigation Project is categorically exempt from CEQA review under the Section 15302(c) Class 1 exemption for maintenance of existing public facilities involving negligible or no expansion of capacity.

2. Conditionally award implementation contract for the Defensible Space Creation at IversonGauntlett Mitigation Project to the apparent lowest responsive bidder Tree Pro Tree Services, Inc., for a not to exceed amount of $85,240.

3. Authorize the City Manager to execute the contract.

4. Authorize the City Manager to approve project change orders in execution of this work, up to a combined amount of $12,786.

PASSED, APPROVED, AND ADOPTED this 20th day of May 2024 by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
___________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.D.a
Packet Pg. 34
Attachment: Resolution (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 35
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 36
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 37
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 38
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 39
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

6.D.b
Packet Pg. 40
Attachment: Defensible Space Project Sites (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

Statutory Exemptions. State code number:

_______________________________________________
Print Form
Notice of Exemption Appendix E
To: Office of Planning and Research From: (Public Agency): ____________________________ P.O. Box 3044, Room 113 _______________________________________________ Sacramento, CA 95812-3044 County Clerk
(Address)
___________________________
___________________________
County of: __________________
Project Title: ____________________________________________________________________________ Project Applicant: ________________________________________________________________________ Project Location - Specific:

Project Location - City: ______________________ Project Location - County:

Description of Nature, Purpose and Beneficiaries of Project:
_____________________
Name of Public Agency Approving Project: _____________________________________________________ Name of Person or Agency Carrying Out Project: ________________________________________________ Exempt Status: (check one):

Ministerial (Sec. 21080(b)(1); 15268);
Declared Emergency (Sec. 21080(b)(3); 15269(a));
Emergency Project (Sec. 21080(b)(4); 15269(b)(c));
Reasons why project is exempt:

Lead Agency
Contact Person: ____________________________ Area Code/Telephone/Extension: _______________ If filed by applicant:

1. Attach certified document of exemption finding.

2. Has a Notice of Exemption been filed by the public agency approving the project? Yes No Signature: ____________________________ Date:

Signed by Lead Agency Signed by Applicant
Authority cited: Sections 21083 and 21110, Public Resources Code. Date Received for filing at OPR:

Reference: Sections 21108, 21152, and 21152.1, Public Resources Code. _______________
Categorical Exemption. State type and section number: ____________________________________ ______________________________________________
______________ Title: _______________________
Revised 2011

6.D.c
Packet Pg. 41
Attachment: H-burg Iverson Gauntlett Defesnible Space NOE (4457 : 2024 Award Water Facilities Defensible Space Creation Project)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: City Municipal Airport Contract Award for Aviation Fuel PREPARED BY: Tyler Kettmann, Central Services Manager
STRATEGIC INITIATIVE(S):

Quality of Life
Infrastructure & Facilities
Maintain and Improve Infrastructure and Facilities
RECOMMENDED ACTION(S):

Adopt a Resolution awarding a contract to EPIC Aviation, LLC, for the purchase and delivery of aviation fuel to the City Municipal Airport for a five-year contract term in an amount not to exceed $675,000, and authorizing the City Manager to execute the contract.

BACKGROUND:

The Healdsburg Municipal Airport (“Airport”) is classified by the Federal Aviation Administration as a regional general aviation airport with no commercial service. The City provides and manages fuel sales at the Airport. Healdsburg Aviation, the Fixed Base Operator currently provides other aeronautical services at the Airport, overall maintenance of the Airport and, aircraft maintenance. The Airport has operated as a proprietary exclusive AV gas fuel reseller under FAA regulations since 2002 and intends to continue providing fuel reseller services into the foreseeable future. The Airport maintains a 20,000 gallon fuel system that provides aviation fuel to the tenants, pilots and business owners of the Airport.

The expense to the City for fuel sales and deliveries to the Airport is offset by the revenue received. In fiscal year 2022-23 approximately 23,000 gallons of aviation fuel was sold at the airport. The revenue from fuel sales was $146,422 and expenses were $119,529 resulting in a net gain of $26,893. The additional revenue from the sale of the fuel is collected to support the ongoing maintenance, certification, and operating costs associated with the fuel system.

DISCUSSION/ANALYSIS:

A notice inviting bids was advertised in accordance with all applicable procedures and the City received four proposals. The proposals were evaluated by staff based on the criteria established in the Invitation for Bids.

6.E
Packet Pg. 42
The invitation for bid established that fuel is to be supplied from a nationally recognized brand.

Additionally, the Invitation for Bid required the bidders to provide their fixed freight per gallon and fixed markup per gallon. A summary of the bid results is provided below:

Bidder Fixed
Freight
($/gal)
Fixed Markup
($/gal)
Total
($/gal)
Fixed markup fees
per 40,000 gallons
Titan Aviation –
North Carolina
$0.0988 $0.0435 $0.1423 $5,692
Epic Fuels – Salem, OR $0.0747 $0.00 $0.0747 $2,988
Total costs to the City will include the current AV Gas cost per gallon (rack-price) at the closest primary fuel terminal, which is a variable cost. The Fixed markup fees will be added to the rack price to determine the City’s cost per gallon. (i.e. $4.2155 rack price + $0.0747 fixed markup fee = $4.2902 total cost per gallon to the City) It is Staff’s recommendation that the contract be awarded to EPIC Aviation, LLC, as the lowest, responsible, responsive bidder.

ALTERNATIVES:

The Council may choose to:
1) Reject all proposals and direct staff to request additional proposals for the fuel services; 2) Direct staff to award the contract to a different bidder than recommended by Staff; or 3) Council may also request staff to no longer supply fuel at the airport.

FISCAL IMPACT:

To date, expenditures are $120,951 and the net proceeds from the sale of aviation fuel for the year are approximately $11,006. The contract with EPIC Aviation LLC as proposed is for a total of five years. Staff is proposing a not-to-exceed amount, based on the expected total annual expenses, of $675,000 for the five-year agreement commencing on June 1st, 2024, and ending on June 1st, 2029. There are sufficient appropriations available in the Airport Operational Fund budget to support the proposed contract costs. The City’s costs for fuel purchase and delivery are fully offset by fuel sales revenue.

ENVIRONMENTAL ANALYSIS:

The purchase of fuel is not considered a ‘project’ as defined by the California Environmental Quality Act (“CEQA”) (CEQA Guidelines §15378). Consequently, no CEQA action is required.

ATTACHMENT(S):

Resolution

6.E
Packet Pg. 43

CITY OF HEALDSBURG
RESOLUTION NO. -2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG AWARDING A CONTRACT TO EPIC AVIATION LLC FOR

THE PURCHASE AND DELIVERY OF AVIATION FUEL TO THE

HEALDSBURG MUNICIPAL AIRPORT FOR AN AMOUNT NOT TO
EXCEED $675,000 OVER A FIVE-YEAR TERM AND AUTHORIZING THE

CITY MANAGER TO EXECUTE THE CONTRACT ON BEHALF OF THE
CITY
WHEREAS, the City owns and operates the Healdsburg Municipal Airport; and WHEREAS, the City provides and manages fuel sales at the Airport; and WHEREAS, the sale of fuel generates revenue and is a sustaining function of the Airport; and
WHEREAS, a notice inviting bids was advertised in accordance with all applicable procedures; and the City received two proposals; and
WHEREAS, it is Staff’s recommendation that the contract be awarded EPIC Aviation, LLC as the lowest, responsible, responsive bidder.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg hereby:

1. Conditionally awards a contract to EPIC Aviation, LLC, for the purchase and delivery of aviation fuel; and

2. Authorizes the City Manager to execute a contract with EPIC Aviation, LLC in an amount not to exceed $675,000 over the five-year contract term; and

3. Finds the contract for the purchase and delivery of aviation fuel is exempt from CEQA pursuant to Section 15378 of the California Code of Regulations, Title 14.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Healdsburg this 20th day of May 2024, by the following vote:

AYES: Councilmembers: ( )
NOES: Councilmembers: ( )
ABSENT: Councilmembers: ( )
ABSTAINING: Councilmembers: ( )
SO ORDERED: ATTEST:
____________________________ _________________________
David Hagele, Mayor Raina Allan, City Clerk

6.E.a
Packet Pg. 44
Attachment: Resolution (4462 : City Municipal Airport Contract Award for Aviation Fuel)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Biosolids Collaborative Memorandum of Agreement with the Town of Windsor
PREPARED BY: Patrick Fuss, Water/Wastewater Engineer
STRATEGIC INITIATIVE(S):

Pursue Initiatives that Promote Environmental Stewardship Maintain and Improve Infrastructure and Facilities
RECOMMENDED ACTION(S):

Adopt a Resolution authorizing the City Manager to sign a Memorandum of Agreement (MOA) for the Windsor Biosolids Collaborative.

COMMUNITY ENGAGEMENT/OUTREACH:

Not applicable
BACKGROUND:

The City of Healdsburg owns and operates a wastewater treatment plant, known as the Water Reclamation Facility (WRF). The WRF uses physical and biological processes to remove pollutants from the sewage generated by the City, creating treated wastewater compliant with regulations for discharge and reuse. The biological portion of the treatment process grows, as it consumes the pollutants in the wastewater, resulting in increases of biomass. Periodically, a portion of the biomass needs to be removed from the treatment process and disposed of. The removed portion of biomass is referred to as biosolids.

Prior to 2023, the City had been sending the biosolids to landfill for use as alternative daily cover. However, recently California Senate Bill (SB) 1383, in its goal of reducing greenhouse gas (GHG) emissions, required that communities such as Healdsburg stop sending the biosolids to landfills. The City complied and engaged contractors that would either convert the City’s biosolids to soil amendments or would apply the biosolids for subsequent land application.

Biosolids management is one of the largest operating costs of the City’s WRF as well as regional wastewater treatment plants throughout Sonoma County. Staff have been seeking approaches to address biosolids disposal cost-effectively while remaining compliant with the regulations.

6.F
Packet Pg. 45
DISCUSSION/ANALYSIS:

In April 2024, the Town of Windsor (Town) submitted a grant application to fund a regional biosolids management project. The biosolids management project will use a process called pyrolysis to convert biosolids to biochar, which is a useful soil amendment for agriculture. To make the project more competitive, the Town is planning the development of a regional facility and asking other municipalities with biosolids management operations to sign a letter of commitment. The City Council adopted a resolution on March 18, 2024, authorizing the City Manager to sign the letter of commitment, which accompanied the initial grant application.

Windsor is completing the grant application for submittal on July 1, 2024. As part of the final grant application, the Town has requested that agencies that signed letters of commitment for the regional biosolids management also sign a Memorandum of Agreement (MOA). The Windsor Biosolids Management Collaborative MOA will demonstrate to the funding agency that the regional approach proposed by Windsor has sufficient participation for the scope of project proposed.

The Windsor Biosolids Management Collaborative MOA identifies the Town as having the responsibility to complete the work of the project and take on the risk associated with the construction and operation of the pyrolysis facility. The MOA signatories are asked to provide greenhouse gas emission data and to participate in meetings of the Collaborative.

Staff believes that the risk exposure to the City of Healdsburg is low in signing the Windsor Biosolids Management Collaborative MOA and provides a more cost-effective approach to management the City’s biosolids. Staff is recommending that the City Council approve participation in the Windsor Biosolids Management Collaborative and direct the City Manager to sign the MOA.

ENVIRONMENTAL STEWARDSHIP:

The pyrolysis program will reduce GHG emissions associated with the City’s current trucking of biosolids to Merced County. Staff estimate that the City’s current trucking to Merced County produces roughly 55 metric tons of GHG each year. The product of the pyrolysis is biochar, which is a nutrient-rich soil amendment, benefiting local agricultural soils.

ALTERNATIVES:

The City Council may elect to not authorize the City Manager to sign the Windsor Biosolids Collaborative MOA. If the City Council makes this election, staff will continue with the current biosolids management approach and continue to seek a more cost-effective approach whenever possible.

FISCAL IMPACT:

Signing the Windsor Biosolids Collaborative MOA does not require a financial commitment from the City. The MOA does request GHG emissions data from the City, which the City already gathers. The MOA also requests a representative from the City to attend meetings of the Windsor Biosolids Collaborative. This type of activity is already part of the day-to-day activities in the operation of the Water Reclamation Facility.

6.F
Packet Pg. 46
ENVIRONMENTAL ANALYSIS:

Pursuant to Title 14, the California Code of Regulations, Section 15378(b)(5) of the California Environmental Quality Act (“CEQA”) guidelines, the proposed action of signing the Windsor Biosolids Management Collaborative MOA is an administrative activity of the City that will not result in direct or indirect physical changes to the environment; and therefore, is not a project for purposes of CEQA.

ATTACHMENT(S):

Resolution
EPAGrant Biosolids Facility Memorandum of Agreement

6.F
Packet Pg. 47

CITY OF HEALDSBURG
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG AUTHORIZING THE CITY MANAGER TO

SIGN A MEMORANDUM OF AGREEMENT FOR THE

WINDSOR BIOSOLIDS MANAGEMENT COLLABORATIVE
WHEREAS, the City of Healdsburg owns and operates the Water Reclamation Facility to treat wastewater generated by the City; and
WHEREAS, the Water Reclamation Facility generates approximately 104 wet tons of biosolids that must be disposed of in compliance with regulatory requirements; and WHEREAS, Staff have sought and continue to seek cost effective approaches to biosolids management; and
WHEREAS, Staff have met on numerous occasions with the Town of Windsor, City of Santa Rosa, City of Cloverdale, Sonoma Water, and others to discuss this regional issue; and WHEREAS, the Town of Windsor (Town) is developing a regional biosolids management program utilizing a process called pyrolysis; and
WHEREAS, the Town has engaged a design consultant and lobbied for grant money to design and construct a regional biosolids management facility on its property; and WHEREAS, the Town has identified a funding source through the EPA Climate Pollution Reduction Grants Program; and
WHEREAS, Staff, the Town, and other communities believe that a regional approach will help to make the Town’s grant application more competitive; and WHEREAS, the City signed a Letter of Commitment to support the grant application in March 2024; and
WHEREAS, the Town has asked agencies such as the City that signed the Letter of Commitment to further sign a Memorandum of Agreement (MOA) for participation in the Windsor Biosolids Collaborative; and
WHEREAS, the parties signing the MOA demonstrate the commitment of surrounding communities to the regional approach to biosolids management and confirming the scope of the project to be funded under the grant sought by Windsor; and WHEREAS, the City in signing the MOA is not committing funds to the Windsor Biosolids Management Project, but the City will provide data and participate in meetings of the Collaborative; and

6.F.a
Packet Pg. 48
Attachment: Resolution (4464 : Windsor Biosolids Collaborative MOA) Resolution No. -2024

WHEREAS, pursuant to California Environmental Quality Act and Title 14, the California Code of Regulations (“CEQA Guidelines”), signing the Windsor Biosolids Management Collaborative MOA is an administrative activity of the City that will not result in direct or indirect physical changes to the environment; and therefore, is not a project for purposes of CEQA.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg does hereby:

1. Find that signing the Windsor Biosolids Management Collaborative MOA is an administrative activity of the City that will not result in direct or indirect physical changes to the environment; and therefore, is not a project for purposes of CEQA.

2. Authorize the City Manager to sign the Windsor Biosolids Management Collaborative MOA on behalf of the City.

PASSED, APPROVED, AND ADOPTED this 20th day of May 2024 by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
___________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.F.a
Packet Pg. 49
Attachment: Resolution (4464 : Windsor Biosolids Collaborative MOA) 1 MEMORANDUM OF AGREEMENT

ESTABLISHING THE

TOWN OF WINDSOR BIOSOLIDS COLLABORATIVE
This Memorandum of Agreement (“MOA”) establishes the Windsor Biosolids Collaborative (“Collaborative”) for the purposes described herein. This MOA is made and entered into by and between the parties that are signatory to this MOA.

Recitals
WHEREAS, the Town of Windsor (“Windsor”) has applied to the Environmental Protection Agency's (“EPA”) Climate Pollution Reduction Grant Program (the “Grant”) for the Town of Windsor’s Biosolids Handling Facility Project (the “Project”); and WHEREAS the Town of Windsor will be accountable to EPA and accepts full responsibility for carrying out the full scope of work, for the proper fiscal management of the Grant and all regulatory and any liability of the Project, subject to the terms of the Grant and this MOA; and WHEREAS each of the parties to this MOA is a local government entity, special district or federally recognized Tribe functioning within Sonoma County (“County”); and WHEREAS, the parties desire to enter into this MOA to coordinate and support Windsor's Project with the purpose of enhancing the long-term climate resilience and adaptive capacity in the County, including the alignment of multiple communities across the County in a regionally collaborative approach to reducing greenhouse gas emissions by locally managing biosolids and promoting local access to and beneficial reuse of Class A EQ biosolids and Biochar; and; WHEREAS the parties wish to promote and disseminate information to the community on the climate resilience measures being taken in the County, including but not limited to biosolids management, wastewater treatment and recycling water; and WHEREAS the parties do not intend to create a separate public entity pursuant to Government Code § 6500 et seq. or to establish a sharing of powers agreement through this MOA and no provision of this MOA may be so construed; and
WHEREAS the parties hereto recognize the value of using common resources effectively; and
WHEREAS the parties hereto desire to be proactive on regulatory issues affecting the County that transcend the traditional jurisdictional boundaries of the parties; and WHEREAS the parties hereto desire to inform communities and the public in the County about the importance of a local biosolids handling facility; and WHEREAS the parties hereto wish to coordinate their consideration and review of local, state, and federal policies and programs related to the expansion of the existing biosolids handling facility that will be available throughout the County; and

6.F.b
Packet Pg. 50
Attachment: EPAGrant Biosolids Facility Memorandum of Agreement (4464 : Windsor Biosolids Collaborative MOA) 2 WHEREAS the parties hereto find that promoting a coordinated biosolids management approach in the County is in the public interest and for the common benefit of all within the County; and
WHEREAS Windsor is the applicant for the Climate Pollution Reduction Grant and will be solely responsible for managing and implementing the Grant, as well as the Project, including all phases of engineering, environmental compliance, construction, and monitoring, subject to the terms of the Grant and this MOA; and
WHEREAS, the other parties agree to attend Coordination Committee meetings, provide Greenhouse Gas Emissions data requested by Windsor (solely related to the Project), and to participate in the Regional Operations Study; and
WHEREAS the parties intend that participation in this MOA shall be entirely voluntary and that any party may elect to withdraw from the MOA at any time and for any reason.

NOW, THEREFORE, the parties hereto do hereby enter into this Memorandum of Agreement, as follows:

Memorandum of Agreement

1. Definitions. As used in this MOA, the following words and phrases shall have the meanings set forth below unless the context clearly indicates otherwise.

A. “MOA” shall mean this Memorandum of Agreement.

B. “Collaborative” shall mean the government entities, federally recognized Tribe and special district that are the parties to this MOA and otherwise referred to as the Windsor Biosolids Collaborative.

C. “Member Entity” or “Member Agencies” shall mean the local and/or regional public agencies, including Federally Recognized Indian Tribes, regulated under the Clean Water Act, 33 U.S.C. § 1251 et seq., Clean Water Act 33 U.S.C. § 518e et seq., the federal Safe Drinking Water Act, 42 U.S.C. § 300f et seq., and/or the state Safe Drinking Water Act, Health & Safety Code § 116275 et seq., that operate within or have jurisdiction over any area within the County, and that are signatories to this MOA. The Lytton Rancheria is only subject to federal law.

2. Purpose. This MOA is being entered into in order to establish the Windsor Biosolids Collaborative and carry out the goals and objectives stated herein related to local biosolids handling and greenhouse gas emission reductions. The mission, goals and objectives stated herein relate to the expansion of beneficial uses of biosolids in the County. While this MOA will coordinate the efforts of the Collaborative, there is no intent at this time to form an independent joint powers authority or agency or to establish a sharing of powers agreement pursuant to the requirements of Government Code § 6500 et seq. Neither this MOA nor any provision of this MOA may be construed as if the Member Entities intend to form a joint powers authority or agency or to enter a sharing of powers agreement pursuant to Government Code §6500 et seq. Rather, the Member Entities are entering this MOA in accordance with their respective police and other powers and the authority granted in Government Code §54981, which provides that the legislative body of any local agency

6.F.b
Packet Pg. 51
Attachment: EPAGrant Biosolids Facility Memorandum of Agreement (4464 : Windsor Biosolids Collaborative MOA) 3 may contract with any other local agency for the performance by the latter of municipal services or functions within the territory of the former.

3. Establishment of the Collaborative. There is hereby established the Windsor Biosolids Collaborative. The geographic boundaries of the Collaborative shall be the same as the combined boundaries of the Member Entities.

4. Effective Date. This MOA shall become effective, and the Collaborative shall be established when four (4) Member Entities have authorized its execution and when the fourth Member Entity has executed the agreement, notwithstanding additional entities’ execution thereafter.

5. Counterparts. This MOA may be executed in counterpart and each of these executed counterparts shall have the same force and effect as an original instrument and as if all of the parties to the aggregate counterparts had signed the same instrument.

6. Duties of Member Entities.

A. Town of Windsor.

Windsor is the applicant for the Grant and will be solely responsible for managing and implementing the Grant, as well as the Project, including all phases of engineering, environmental compliance, construction, and monitoring, subject to the terms of the Grant and this MOA. Additionally, Windsor shall attend Coordination Committee meetings.

B. Other Member Entities.

All Member Entities other than Windsor agree to:
(a) Attend coordination meetings with the other Member Agencies. (b) Provide Greenhouse Gas Emissions data requested by Windsor (solely related to the Project), which data provided may include, but not be limited to the following:
i. Electricity use and/or run times for onsite biosolids processing equipment
ii. Frequency, magnitude, and distance of off-site biosolids hauling iii. Frequency, magnitude, and distance of chemical deliveries iv. Solids content of biosolids taken offsite
v. Operational data if changes are made to biosolids handling processes. (c) Participate in the Regional Operations Study, which generally requires the Member Entities to respond to data requests and provide information regarding current and future biosolids handling practices in a timely manner, and provide input on operational considerations for a future local biosolids handling facility. (d) Cooperate in informing communities and the public in the County about the importance of a local biosolids handling facility; and
(e) Coordinate their consideration and review of local, state and federal policies and programs related to the establishment of a local biosolids handling facility that will be available to all Member Entities.

6.F.b
Packet Pg. 52
Attachment: EPAGrant Biosolids Facility Memorandum of Agreement (4464 : Windsor Biosolids Collaborative MOA) 4 (f) If any Member Entities are to be Grant subrecipients, to be fully accountable to Windsor for proper use of EPA funding and successful Grant implementation.

7. Termination of Membership.

Causes. A Member Entity's participation in this MOA shall terminate on the occurrence of any of the following:
(A) The voluntary resignation of a Member Entity upon written notice by an authorized representative of the Member Entity to the other Member Entities. (B) The occurrence of an event which renders a party no longer eligible for membership in this MOA as a Member Entity in accordance with the requirements of Section 1(d).

8. Liability
For the purposes of this MOA, the parties to this MOA shall each be solely responsible for their acts and omissions in fulfilling their duties specified in Section 6 of this MOA, and no party to this MOA shall have any responsibility for any acts or omissions of any other party to this MOA. In accordance with Section 2, this MOA does not form a joint powers authority or agency and is not a sharing of powers agreement pursuant to Government Code §6500 et seq. Accordingly, the provisions of Government Code §895.2 do not apply to this MOA, and the parties to this MOA are not jointly and severally liable for any liability arising from or related to this MOA, including, but not limited to, the parties’ acts and omissions in fulfilling their duties pursuant to this MOA. This MOA is not intended to alter and no provision of this MOA may be construed to alter the liability, immunities from liability and defenses against liability of any party to this MOA pursuant to applicable law.

6.F.b
Packet Pg. 53
Attachment: EPAGrant Biosolids Facility Memorandum of Agreement (4464 : Windsor Biosolids Collaborative MOA) 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as set forth below.

Town of Windsor/Windsor Water District Sonoma Water
By: By:

Print Name: Print Name:

Title: Title:

Date: Date:

City of Cloverdale City of Healdsburg
Print Name: Print Name:

Title: Title:

Date:

Date:

City of Santa Rosa
By:

Lytton Rancheria
By:

Print Name: Print Name:

Title:

Date:

Title:

Date:

City of Petaluma
By:

Print Name:

Title:

Date:

6.F.b
Packet Pg. 54
Attachment: EPAGrant Biosolids Facility Memorandum of Agreement (4464 : Windsor Biosolids Collaborative MOA)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Cal Fire Urban Forestry Grant Application
PREPARED BY: Andrew Sturmfels, Assistant City Manager
STRATEGIC INITIATIVE(S):

Pursue Initiatives that Promote Environmental Stewardship RECOMMENDED ACTION(S):

Adopt a Resolution authorizing the City's application to the Cal Fire Urban Forestry Grant for Urban Forest Management Activities.

COMMUNITY ENGAGEMENT/OUTREACH:

During 2023, the City conducted substantial community outreach as part of the development of the City’s Climate Mobilization Strategy. Since adoption of the strategy on October 16, 2023, City staff have engaged with multiple community members and groups on a variety of implementation strategies. City staff are currently working with Climate Action Healdsburg and Corazon Healdsburg on developing the scope of work for this grant request.

BACKGROUND:

On October 16, 2023, the City of Healdsburg adopted its first Climate Mobilization Strategy to guide City actions in reducing greenhouse gas emissions consistent with state and regional targets. As part of the full plan, the Council adopted an implementation plan that covers the period from adoption through the fiscal year ending June 30, 2026.

Within the implementation plan, Measure CS-1 focuses on “Increasing carbon sequestration by preserving existing mature tress and planting 500 new trees and high emissions reduction potential land cover types throughout the community by 2030.” As part of this measure, the following actions exist:

1. Develop a Street Tree Master Plan to include goals for promoting street tree health, enhancing resiliency, increasing the environmental benefits and co-benefits resulting from street trees and shading, community engagement around the urban forest. Include activity to promote street tree health and maintaining existing trees through partnerships with the community and local organizations, including organizations with connections to

6.G
Packet Pg. 55
vulnerable communities to assist in the implementation of the Street Tree Master Plan to ensure equity is prioritized as part of the plan.

2. Develop a new Tree Protection Ordinance to include protection for native and heritage trees. The ordinance should regulate the removal of not just heritage trees, but native trees that increase the City’s carbon stock and carbon sequestration.

3. Establish an adopt-a-tree or adopt-a-street program that enables individuals, businesses, and community organizations to plant and care for trees in selected communities.

Program should provide formalized information on appropriate trees eligible for planting in Healdsburg (i.e., native, drought tolerant, locations, fire resistant) and their maintenance. Leverage existing plant lists developed by nearby and partner organizations.

4. Prioritize low-income areas of the city with less existing tree canopy for tree plantings.

Increase shading in gathering spaces.

5. Explore urban and community forestry grant programs (e.g., CAL FIRE) and other sources of state, federal, and philanthropic funding to fund urban forestry programs. As part of this effort, establish a goal to apply for at least one grant every three years.

Action 5 listed above is intended to support funding for completing actions 1-4. The Cal-Fire Urban and Community Forestry Grants Program recently opened applications for the 2024-25 fiscal year. Applications are due May 30th by 5PM. As part of the application process, applicants are required to submit a Council Approved resolution provided by Cal-Fire to demonstrate a commitment to the grant’s goals.

DISCUSSION/ANALYSIS:

City staff have been working in collaboration with community members and community groups, including Climate Action Healdsburg and Corazon Healdsburg, to develop a grant application to support achieving the goals outlined in the CMS. The proposed grant application would request the following:

1. Funding to complete an Urban Forest Master Plan– The City would consult with an expert consultant to develop and complete the plan. This process would include extensive community engagement.

2. Funding to complete a City Tree Inventory– The City would hire an expert consultant to develop an updated GIS map of City trees, identify areas of opportunity, and provide data layers to the City for long-term management. Results of the analysis would be shared with the community as part of the Urban Forest Master Plan Development Process.

3. Update the City Tree Ordinance – City staff would lead the updating of the City’s tree ordinance in alignment with the CMS goals as part of the overall project work.

4. Adopt an updated Master Tree List – City staff would lead the updating of the City’s Master Tree List.

5. Provide funding to support planting 50 trees – Funds would be used to partner with a community group to plant trees in a low-income area impacted by lack of tree canopy.

Staff are requesting the City Council adopt the proposed resolution to support the grant application. The resolution is a standardized template provided by Cal-Fire and is required as part of the application process.

6.G
Packet Pg. 56
ENVIRONMENTAL STEWARDSHIP:

Applying for the Cal-Fire Urban and Community Forest Grant Program would support meeting the goals outlined in the City Climate Mobilization Strategy.

ALTERNATIVES:

Council could direct staff not to apply for the grant or recommend modifications to the proposed approach.

FISCAL IMPACT:

The grant request is for $350,000. City staff would provide matching resources in the form of staff time of approximately $50,000. If approved as submitted, no additional City funds would be required to complete the proposed scope of the grant work.

ENVIRONMENTAL ANALYSIS:

Pursuant to Title 14, the California Code of Regulations, Section 15378(b)(5) of the California Environmental Quality Act (“CEQA”) guidelines, the proposed action is an administrative activity of the City that will not result in direct or indirect physical changes to the environment.

ATTACHMENT(S):

Resolution

6.G
Packet Pg. 57

RESOLUTION
NOTE: DO NOT CHANGE THE FORMAT OR VERBIAGE IN THIS RESOLUTION FORMAT WITHOUT WRITTEN APPROVAL OF CAL FIRE STAFF.

Resolution No.: ______________________________
RESOLUTION OF THE______________________________________ OF ____________________________________ (Title of Governing Body) (City/County/District/nonprofit)

FOR FUNDING FROM THE URBAN AND COMMUNITY FORESTRY GRANT PROGRAM OF THE CALIFORNIA DEPARTMENT OF FORESTRY AND FIRE PROTECTION.

WHEREAS, the Governor of the State of California in cooperation with the State Legislature has appropriated General Funds for the state’s urban forestry programs; and
WHEREAS, the State Department of Forestry and Fire Protection has been delegated the responsibility for the administration of the program within the State, setting up necessary procedures governing application by local agencies and non-profit organizations under the program, and
WHEREAS, said procedures established by the Department of Forestry and Fire Protection require the applicant to certify by resolution the approval of application before submission of said application to the State; and WHEREAS, the applicant will enter an agreement with the State of California to carry out an urban forestry project; NOW, THEREFORE, BE IT RESOLVED that the _________________________:
(Title of Governing Body)

1. Approved the filing of an application for the Urban and Community Forestry grant program funds; and

2. Certifies that said applicant has or will have sufficient funds to operate and maintain the project; and,

3. Certifies that funds under the jurisdiction of ________________________are available to begin the project. (Title of Governing Body)

4. Certifies that said applicant will expend grant funds prior to March 30, 2026.

5. Appoints ______________, or a designee, as agent of the _______________________to conduct negotiations, (Position Title) (Title of Governing Body)
execute and submit all documents including, but not limited to applications, agreements, amendments, payment requests and so on, which may be necessary for the completion of the afore mentioned project.

Approved and adopted the __________day of _________, 20________.

I, the undersigned, hereby certify that the foregoing Resolution, number___________________, was duly adopted by the following roll call vote of the _____________________________________________________. (City Council/Board of Supervisor/Board of Directors)
Ayes: _______ Noes: _________ Absent: ________ ____________________________________(Clerk signature)

6.G.a
Packet Pg. 58
Attachment: Resolution (4465 : CalFire Urban Forestry Grant Application)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Annual Review of Good Faith Compliance with the Terms and Conditions of Development Agreements for the following Projects: 1. Mill District Project (Replay Healdsburg, LLC; Eden Mill District, LP) 2. North Village Project (CCS Healdsburg, LLC; Kendal at Sonoma, A Zen Inspired Community; BHDC North Village, LLC) 3. Saggio Hills Affordable Housing Project (Freebird Development Company, LLC) PREPARED BY: Linda Ruffing, Planning Consultant
STRATEGIC INITIATIVE(S):

Establish Proactive Policies/Programs to Continue to Promote Economic Diversity & Sustainable Growth
Pursue Initiatives that Promote Environmental Stewardship Expand Affordable Housing Opportunities
Maintain and Improve Infrastructure and Facilities
Provide Effective Governance
Maintain and Enhance Public Health and Safety
Provide Resident-Driven Community Services
RECOMMENDED ACTION(S):

Adopt a Resolution finding that Replay Healdsburg LLC, Eden Mill District LP, CCS Healdsburg LLC, Kendal at Sonoma, A Zen Inspired Community, BHDC North Village, LLC, and Freebird Development Company, LLC are in good faith compliance with the terms and conditions of their respective Development Agreements.

COMMUNITY ENGAGEMENT/OUTREACH:

The annual review of a development agreement ("DA") is an administrative action that is limited in scope to compliance with the terms of the DA pursuant to Government Code section 65865.1 and Healdsburg Municipal Code section 17.20.050.A. These provisions require that, once every 12 months during the term of a DA, the City Manager shall review the extent of each developer's good faith substantial compliance with the terms of its respective DA.

This report is brought forward to the City Council to provide transparency to the community

6.H
Packet Pg. 59
regarding the status of three development projects in Healdsburg that were subject to DAs in the past year: Mill District, North Village, and the Saggio Hills Affordable Housing project, and to evaluate the compliance of each project with its respective DA.

BACKGROUND:

It is noted that the DA for the Montage Healdsburg project (also known as the Saggio Hills project) expired in April 2023, thus that DA is no longer subject to the annual review requirement. Additionally, the City entered into a DA with Freebird Development Company, LLC for the Saggio Hills Affordable Housing Project in April 2023, and this is the first annual review for that DA.

1. Mill District Development Agreement. On April 1, 2019, the City entered into a DA ("Mill District DA") with Replay Healdsburg, LLC ("Replay") for the Mill District Project. The Mill District DA provides Replay with certain assurances that they may proceed with a development project that includes: a hotel containing approximately 53 guest rooms; up to 208 residential apartments and condominiums (including 40 rental units for occupancy by low-income and very low-income households, 30 multi-family residential units for occupancy by middle-income households, and not more than 138 condominium units to be sold as market rate housing); approximately 15,000 square feet of commercial space; and a variety of amenities including a privately owned and maintained park for public use and enjoyment, public plaza spaces; bicycle racks and shared vehicle charging stations. Replay is required to pay fees and costs associated with certain project improvements as identified in the Mill District DA. The term of the Mill District DA is for a period of 15 years unless extended or terminated by mutual agreement of the City and Replay. When Replay transferred title to Lot 7 (the affordable housing parcel) to Eden Mill District, LP, ("Eden") on April 21, 2021, certain rights and obligations of the Mill District DA were assigned to Eden.

2. North Village Development Agreement. On April 6, 2020, the City entered into a DA ("North Village DA") with Comstock for the North Village Project. The North Village DA provides Comstock with certain assurances that they may proceed with a development project that includes: a senior living community with 221 independent living units, a total of 54 assisted living and memory care beds, and ancillary facilities such as dining options and health/wellness/fitness facilities. Affordable units include 10 independent living units targeted to moderate-income households in the senior living community and 20 units targeted to workers and volunteers serving the senior living community who are in the very low-, low- and moderate-income ranges. The project also includes a 108-key hotel with a restaurant, rooftop bar, meeting spaces and a spa and fitness facility; 12,000 square feet of commercial retail space; 53 multi-family residential units targeted to a mix of very low-income, low-income and moderate-income households, and 27 units targeted to middle-income households. Comstock is required to pay fees and costs associated with certain project improvements as identified in the North Village DA. The term of the North Village DA is for a period of 10 years unless extended or terminated by mutual agreement of the City and Comstock. On August 20, 2020, Comstock entered into an Agreement with Kendal at Sonoma, A Zen Inspired Community ("Kendal") to assign certain rights and obligations of the North Village DA

6.H
Packet Pg. 60
to Kendal. On February 1, 2023, Comstock transferred a 3.01-acre portion of Parcel 4 to Burbank Housing Development Corporation ("Burbank") and entered into a partial Assignment and Assumption Agreement to assign certain rights and obligations of the North Village DA to Burbank.

3. Saggio Hills Affordable Housing Project Development Agreement. On May 17, 2023, the City entered into a DA ("Saggio Affordable Housing DA") with Freebird Development Company, LLC ("Freebird") for the Saggio Hills Affordable Housing project. The DA provides Freebird with certain assurances that they may proceed with a development project that includes: a total of 118 affordable housing units, a community building, open space and recreation facilities, and public and private improvements. As approved, the housing would consist of 42 apartments in four three-story walk-up buildings; 48 apartments in a three-story apartment building; 18 apartment or condominium units in two three-story buildings; and 10 two-story townhome units. The term of the Saggio Affordable Housing DA is for 10 years or upon completion of development of all phases of the project, whichever comes first, unless the Phase 1 improvements have not commenced within 5 years, in which case the DA will be deemed terminated.

DISCUSSION/ANALYSIS:

The City provided notice of this required annual review to each of the developers who is party to one of the three DAs. Each developer provided an update on the status of their project and good faith compliance with the DA, as summarized below.

MILL DISTRICT DA - Replay. The following information was submitted by Replay (Attachment 2), in accordance with Section 7.5 of the Mill District DA, to demonstrate compliance with the terms of the DA:

1. An accounting of the fees due and paid to City. Since March 2023, the total amount of fees paid to the City is $1,794,956.20, consisting of the following breakdown:
• City Staff and Contract Staff: $121,989.02
• City Legal: $1,775.00
• Permit & Application Fees: $45,332.97
• Landscape and Lighting District Assessments: $930.97
• Fire Truck Payment, two installments: $696,666.46
• Connectivity Funds, phase 1: $150,000
• Lot 7 Quimby Fees: $492,788.46
• Lot 4 City Staff and Contract Staff: $91,314.86
• Water Treatment fees for handling dewatering from Lot 4 construction:
$114,158.25
• Lot 1 Developer Deposit Account, initial deposit: $40,000 • Lot 6 Developer Deposit Account, initial deposit: $40,000

2. Any assignments or transfers of the Property.
• No assignments or transfers occurred during this reporting period.

6.H
Packet Pg. 61

3. All construction of public improvements under this Agreement. • Most of the public improvement construction is completed. Remaining work includes completion of the joint trench which is being sequenced with construction on Lot 4. The public improvements will be complete and conveyed to the city prior to completion of Lot 4.
• The affordable housing development on Lot 7 is complete and occupied, providing all the affordable housing requirements under the Development Agreement.
• Construction of the public park on Lot 5 is under way, with anticipated completion in June 2024
• Lot 4 construction is nearing completion, with expected final completion in summer 2024.

4. Description of any subsequent project approvals that have been applied for or approved.
• Lot 5 Park: The building permit for the park on Lot 5 was issued in January 2024 • Hotel on Lot 1: Planning Commission workshops for the Hotel on Lot 1 were held in January and February 2024, and the Major Design Review package was submitted on April 15, 2024.
• Retail & Residential Amenity on Lot 5 Parcel A: Planning Commission workshop in February 2024 and the Major Design Review package was submitted on April 15, 2024.

5. Description of any construction activity that has been commenced or completed during the applicable annual review period.
• Public Improvements – As indicated above, most of the construction is complete with remaining work being the joint trench.
• Construction of the public park on Lot 5 began in January 2024. • Construction of the Affordable Housing on Lot 7 was completed in July 2023.

6. Description of compliance with Section 5.1 through 5.4 of the Agreement.

Section 5.1: Affordable Housing Units
• See above.

Section 5.2: Middle Income Units
• Replay has not submitted major design review applications for any parcel that contains Middle Income Units
Section 5.3: Public Improvements
• See above.

Section 5.4: Additional Developer Contributions.
• Section 5.4(a) – This is no longer applicable.

6.H
Packet Pg. 62
• Section 5.4(b) – At the time of this letter, Replay has paid the first connectivity funds payment of $150,000 and will pay the second installment upon request from the city, consistent with a pending modification to the Development Agreement. • Section 5.4(c) – At the time of this letter, the third and final installment of the fire truck payments has been submitted to the city.
• Section 5.4(d) – The lighting and landscape district has been created and will be fully operational with completion of the public improvements.

7. Description of any enforced delay or permitted delay as provided for under Section

7.6 of the Agreement.
• There have been no enforced delays or permitted delays as provided for under section 7.6 of the Agreement.

MILL DISTRICT DA - Eden. The following information was submitted by Eden (Attachment 3) to demonstrate compliance with the terms of the Mill District DA in accordance with the Partial Assignment and Assumption of the Development Agreement and Estoppel Agreement.

1. An accounting of the fees due and paid to City.
• Not applicable

2. Any assignments or transfers of the Property.
• None.

3. All construction of public improvements under this Agreement. • Not applicable

4. Description of any subsequent project approvals that have been applied for or approved.
• Temporary Certificate of Occupancy was approved on May 24, 2003. Final Certificate of Occupancy was approved on October 20, 2023.

5. Description of any construction activity that has been commenced or completed during the applicable annual review period.
• Construction of The Randall (41 units of affordable housing on Lot 4 of the Mill District project) was completed on September 25, 2023.

6. Description of compliance with Section 5.1 through 5.4 of the Agreement re:

Additional Developer Contributions.
• Section 5.1(a):

Section 5.1(a)
Affordability
Requirement
Area Median Income Section 5.1(a) Unit
Count Requirement
The Randall Unit
Count

6.H
Packet Pg. 63
Very Low Income up to 50% 24 24*
Low Income 50-80% 16 16*
Middle Income 81-120% no more than one 1 manager's units *Some units may be restricted at deeper affordability levels by other regulatory agreements • Section 5.1(b):

Bedroom Size Section 5.1(b) Unit Count
Requirement
The Randall Unit Count
3 (20) 2 & 3 bedroom units total; no
fewer than (4) 3 bedroom units
11 2 11
1 n/a 19
Total 41 (including (1) 2 bedroom
manager's unit)
• Section 5.1(c): An Affordable Housing Agreement with the City was entered into by Replay Healdsburg, LLC for a term of 55 years effective December 31, 2020.

Replay Healdsburg, LLC subsequently assigned this agreement to Eden Mill District, L.P. through an Assignment and Assumption of Affordable Housing Regulatory Agreement and Declaration of Restriction Covenants and Estoppel Agreement effected April 21, 2021.
• Section 5.2 – 5.4: Not applicable per Section 3, Allocation of Rights and Obligations (a)(iii) of the Partial Assignment and Assumption of Development Agreement and Estoppel Agreement.

NORTH VILLAGE DA - Comstock. In accordance with Section 7.5 of the North Village DA, the following information was submitted by Comstock (Attachment 4) to demonstrate compliance with the terms of the DA.

1. An accounting of the fees due and paid to the City. Since February 11, 2023, the total amount of fees paid to the City is $1,205,758.65 consisting of the following breakdown:
• Permit Fees and Plan Check Fees: $441,419.30 - North Village Hotel Building Permit and Development Impact Fees; $222.48 - Foss Creek Pathway lighting permit
• Contract planner, City staff and City legal: $178,370.40 • Fire Substation Contribution Fee: $585,746.54

6.H
Packet Pg. 64

2. Assignments or transfers of the Property.
• None

3. All Construction of public improvements under this Agreement. • A Subdivision Improvement Agreement was issued on July 14, 2021. Major public improvements are under construction.
• All work under the Subdivision Improvement Agreement is substantially complete pending minor corrective action for Foss Creek Pathway surface cracking and installation of new Traffic Signal Pole to accommodate left turn lane for new Fire Substation.

4. Description of any subsequent project approvals that have been applied for or approved.
• Parcel 4 - Tentative Map, Design Review and CUP Amendments (pursued by Burbank) were approved by the Planning Commission on February 28, 2023. o Parcel 4 Tentative (Condo) Map was approved to allow the following ownerships:
▪ Residential condominium airspace and land use to Burbank. ▪ Retail spaces and underlying remainder parcel(s) to Comstock. • Owner has submitted applications for tentative map and major design review for Parcel 2 to develop 27 Category "C" townhomes with 2 car attached garages:
o Design Review was approved by Planning Commission on August 8, 2023. o Tentative map was approved by City Council on February 20, 2024.

5. Description of any construction activity that has been commenced or completed during the applicable annual review period.
• Vertical construction for the Enso Village Senior Living Community on Parcel 1 (Kendal) is complete and temporary Certificates of Occupancy have been issued. • Vertical construction of the hotel on Parcel 3 has commenced.

6. Amendments to Agreement.
• A request for 4th Amendment to the Development Agreement to address minor changes to affordability levels for workforce housing, was considered and approved by the City Council on May 1, 2023.

NORTH VILLAGE DA - Kendal. The following information was submitted by Kendal (Attachment 5) to demonstrate compliance with the terms of the North Village DA that were assigned to Kendal.

1. Section 4.2 re: Impact Fees. The Agreement and Assignment requires Kendal, as assignee of the Developer, to “pay all applicable impact fees imposed pursuant to the Mitigation Fee Act ... that are in force and effect on a City-wide basis... when such

6.H
Packet Pg. 65
Impact Fees are due in connection with the issuance of building permits or site improvement permits for components of the Project.”
• Kendal was billed and has paid impact fees in the amount of $4,379,384.20 pursuant to the City’s Invoice # INV-00015718, dated August 27, 2021. In addition, Kendal paid $1,198,890 in November 2023 as its contribution to the Fire Substation.

2. Section 5.4 re: Senior Living Community Affordable Housing. The Agreement and Assignment requires Kendal, as assignee of Developer, to construct 30 units of “Senior Living Community Affordable Housing... twenty [of which] shall be... Very Low Income... and ten [of which] shall be... Moderate Income.” In addition, Developer is required to enter into a Senior Living Community Affordable Housing Agreement with the City.
• Developer and City have entered into an “Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants,” dated June 3, 2020, and recorded as Sonoma County Document 2020049787, which by its terms is intended to serve as the Senior Living Community Affordable Housing Agreement required under the terms of the Development Agreement (the “Affordable Housing Agreement”).
• On April 4, 2022, the City Council approved a 1st Amendment to the North Village Development Agreement which amended the requirements of the Affordable Housing Agreement to increase the required number of Moderate Income units from 10 to 15, to require 5 Low Income units and to reduce the number of Very Low Income units from 20 to 10.
• Kendal has completed construction of its Senior Living Community facility including the 30 units of Senior Living Community Affordable Housing, and these units are now available for occupancy. Kendal has received entrance fee deposits from qualifying residents on 5 of the 15 Moderate Income units, and it has made arrangements for tenancy from qualifying residents on 4 of the Low Income Units and 5 of the Very Low Income units.

3. Section 5.5(d) re: Housing Guaranty and Satisfaction of Obligations. The Agreement and Assignment requires Kendal to identify and designate the Senior Living Community units before issuance of final certificates of occupancy for the Senior Living Community. • The units are identified as follows:
o Moderate Income Units (15): 469, 427, 426, 371, 369, 215, 352, 334, 327, 326, 323, 150, 134, 126, 104
o Low Income Units (5): 422, 418, 322, 318, 206
o Very Low Income Units (10): 468, 368, 227, 226, 218, 210, 127, 118, 110, 106

6.H
Packet Pg. 66

4. Section 5.8 re: PILOT Agreement. The Agreement and Assignment requires Kendal, as assignee of Developer, to enter into and record a Payment-in-lieu of Taxes (PILOT) Agreement within thirty (30) days of issuance of the first building permit for the Senior Living Community facility.
• Kendal and the City have entered into an Agreement for Payment In Lieu of Taxes, dated June 19, 2021, and recorded as Sonoma County Document 2021077992.

NORTH VILLAGE DA - Burbank. The following information was submitted by Burbank (Attachment 6) to demonstrate compliance with the terms of the North Village DA that were assigned to Burbank.
• The construction documents have been submitted for third round review; issuance of permits is pending from City staff.
• The Affordable Housing Regulatory Agreement has been recorded. • The Condo Map has been recorded.
• The General Contractor has been selected for the project and is prepared to begin construction upon issuance of City permits.
• A reconciliation of the fees due and paid to the City identifies a total of $98,230,00 of fees paid in the reporting period, primarily for building permit plan check and planning services.

SAGGIO AFFORDABLE HOUSING DA - Freebird. The following information was submitted by Kendal (Attachment 7) to demonstrate compliance with the terms of the Saggio Affordable Housing DA.

1. Specify whether Impact fees, Processing fees, Connection fees and/or other fees due and payable have been paid during this annual review period. • Since execution of the Development Agreement, Developer has paid a $25,000 deposit as required by the Development and Disposition Agreement and a $10,000 deposit as required by the Electric Cost Recovery Agreement.

2. Describe whether other applicable Development Agreement obligations were completed during this annual review period and, if so, specifically identify such obligations.
• Since execution of the Development Agreement, Developer has completed 100% Design Development documents and pursued gap funding for the Phase 1 Project including: 1) an application to the State under the 2023 Multifamily Finance Super Notice of Funding Availability (project was not awarded); 2) an application to the Sonoma County Community Development Commission under the 2024-2025 Notice of Funding Availability (project has been recommended for an award); and 3) an application to the State under the 2024 Affordable Housing and Sustainable Communities Program (application was submitted on 3/19/24). Developer will continue to pursue all gap funding opportunities.

6.H
Packet Pg. 67

3. Specify whether Developer has assigned the Development Agreement, in whole or in part, or otherwise conveyed the Property or any portion thereof during this annual review period.
• The Developer has not assigned the Development Agreement, in whole or in part.

The Developer has executed a Partial Assignment and Assumption of Disposition and Development Agreement (“Partial Assignment”) with Saggio Hills Lot 14, L.P. with respect to the Phase 1 Project. Saggio Hills Lot 14, L.P. is the tax credit partnership that has been established for Phase 1. The Partial Assignment was required in connection with the Developer’s application to the State’s Affordable Housing and Sustainable Communities Program.

REQUIRED FINDING. As required by Government Code section 65865.1 and Healdsburg Municipal Code section 17.20.050.A, the purpose of the annual review of the development agreements is for the City to determine whether each developer has, in good faith, substantially complied with the terms of the applicable development agreement.

Based on the approvals and project-related activities noted in this report, staff recommends that the City Council make a finding of substantial compliance for each DA for this reporting period by adopting the attached resolution (Attachment 1).

ENVIRONMENTAL STEWARDSHIP:

While the annual review process is administrative and has no environmental effects, each developer is bound by and required to perform all mitigation measures for or relating to their project as contained in and required by the environmental documentation and mitigation monitoring and reporting programs for each project.

ALTERNATIVES:

If the City Manager is not satisfied that a developer is performing in accordance with its respective DA and/or the City Council determines that there are significant questions as to whether a developer has complied with the terms and conditions of its agreement, each DA includes provisions for notification and procedures to cure non-compliance, including but not limited to, termination of the DA in accordance with California Government Code section 65856.1 and the Healdsburg Municipal Code.

FISCAL IMPACT:

There are no fiscal impacts related to the proposed action.

ENVIRONMENTAL ANALYSIS:

This annual review of the City's three DAs is an informational report and is not a project that is subject to environmental review because the annual review report could not possibly impact the environment (California Environmental Quality Act, CEQA Guidelines section 15061).

Therefore, in accordance with the general rule of the California Environmental Quality Act (CEQA), no further environmental review of the annual review report is required.

6.H
Packet Pg. 68
ATTACHMENT(S):

ATT 1 Resolution
ATT 2 Replay 2024 DA Annual Review Response
ATT 3 Eden 2024 DA Annual Review Response
ATT 4 Comstock 2024 DA Annual Review Response
ATT 5 Kendal 2024 DA Annual Review Response
ATT 6 Burbank 2024 DA Annual Review Response
ATT 7 Freebird 2024 DA Annual Review Response

6.H
Packet Pg. 69

CITY OF HEALDSBURG
RESOLUTION NO. -2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

HEALDSBURG FINDING THAT REPLAY HEALDSBURG LLC

AND EDEN MILL DISTRICT LP ARE IN GOOD FAITH

COMPLIANCE WITH THE TERMS AND CONDITIONS OF

THE DEVELOPMENT AGREEMENT FOR THE MILL
DISTRICT PROJECT; AND CCS HEALDSBURG LLC,

KENDAL AT SONOMA, A ZEN INSPIRED COMMUNITY,

AND BHDC NORTH VILLAGE LLC ARE IN GOOD FAITH

COMPLIANCE WITH THE TERMS AND CONDITIONS OF

THE DEVELOPMENT AGREEMENT FOR THE NORTH
VILLAGE PROJECT; AND FREEBIRD DEVELOPMENT

COMPANY LLC IS IN GOOD FAITH COMPLIANCE WITH

THE TERMS AND CONDITIONS OF THE DEVELOPMENT

AGREEMENT FOR THE SAGGIO HILLS AFFORDABLE

HOUSING PROJECT
WHEREAS, on April 1, 2019, the City of Healdsburg (“City”) entered into a Development Agreement (“Mill District DA”) with Replay Healdsburg LLC (“Replay”) as the owner and developer to allow the development of certain real property consisting of 9.59 acres located in the City of Healdsburg, Sonoma County, and more particularly described in the Mill District DA; and WHEREAS, as used herein, the term Mill District DA includes that certain First Administrative Agreement Amendment To Development Agreement And First Administrative Project Amendment dated March 31, 2020, that certain Second Administrative Agreement Amendment To Development Agreement dated December 30, 2020, and that certain Third Amendment Project Amendment To Development Agreement dated April 14, 2022; and WHEREAS, the term of the Mill District DA is for a period of fifteen (15) years commencing on May 1, 2019; and
WHEREAS, on April 21, 2021, pursuant to a Partial Assignment And Assumption Of Development Agreement, Replay assigned a portion of its interests under the Mill District DA to Eden Mill District LP (“Eden”); and
WHEREAS, as used herein, Replay and Eden shall be referred to as the “Developer” under the terms of the Mill District DA; and
WHEREAS, on April 6, 2020, the City of Healdsburg (“City”) entered into a Development Agreement (“North Village DA”) with CCS Healdsburg LLC (“Comstock”) as the owner and developer to allow the development of certain real property consisting of 32 acres located in the City of Healdsburg, Sonoma County, and more particularly described in the North Village DA; and

6.H.a
Packet Pg. 70
Attachment: ATT 1 Resolution (4471 : Annual Review of Development Agreements) Resolution No. – 2024

WHEREAS, as used herein, the term North Village DA includes that certain First Amendment To Development Agreement dated June 21, 2022, that certain Second Amendment To Development Agreement dated May 18, 2022, that certain Third (Administrative Agreement) Amendment To Development Agreement dated December 22, 2022, and that certain Fourth Amendment to Development Agreement dated June 1, 2023; and WHEREAS, the term of the North Village DA is for a period of ten (10) years commencing on May 6, 2020; and
WHEREAS, on March 17, 2021, pursuant to a Partial Assignment of Rights And Assumption Of Obligations Under Development Agreement, Comstock assigned a portion of its interests under the North Village DA to Kendal at Sonoma, A Zen Inspired Community (“Kendal”); and
WHEREAS, on December 21, 2022, pursuant to a Partial Assignment of Rights And Assumption Of Obligations Under Development Agreement, Comstock assigned a portion of its interests under the North Village DA to BHDC North Village LLC (“Burbank”); and WHEREAS, as used herein, Comstock, Kendal and Burbank shall be referred to as the “Developer” under the terms of the North Village DA; and WHEREAS, on May 17, 2023, the City of Healdsburg (“City”) entered into a Development Agreement (“Saggio Affordable Housing DA”) with Freebird Development Company LLC (“Freebird”), and by virtue of the Disposition and Development Agreement by and between City and Freebird entered into on April 21, 2023, Freebird has a legal and equitable interest in the development of certain real property owned by City which consists of 12.46 acres located in the City of Healdsburg, Sonoma County, and more particularly described in the Saggio Affordable Housing DA; and
WHEREAS, the term of the Saggio Hills Affordable Housing DA is for a period of ten (10) years commencing on May 17, 2023, or upon completion of development of all phases of the project, whichever comes first, unless the Phase 1 improvements have not commenced within five (5) years, in which case the DA will be deemed terminated; and WHEREAS, as used herein, Freebird shall be referred to as the “Developer” under the terms of the Saggio Affordable Housing DA; and
WHEREAS, Healdsburg Municipal Code section 17.20.050.A and Government Code §65865.1 require the City to review the extent of good faith substantial compliance by each Developer with the terms and conditions each respective Development Agreement, once every 12 months during the term of the Development Agreement; and

6.H.a
Packet Pg. 71
Attachment: ATT 1 Resolution (4471 : Annual Review of Development Agreements) Resolution No. – 2024

WHEREAS, the City initiated its annual review of the Mill District DA, North Village DA and Saggio Affordable Housing DA by giving each Developer timely and proper notice of the City's initiation of the review; and
WHEREAS, each Developer has submitted a letter to the City providing information required for the annual review; and
WHEREAS, the City Manager has reviewed each Developer's submission and determined that each Developer has complied in good faith with the terms of its respective Development Agreement; and
WHEREAS, there remains adequate time for each Developer to perform its obligations under the terms of its respective Development Agreement; and WHEREAS, at its regular meeting of May 20, 2024, the City Council provided an opportunity for each Developer and members of the public to be heard regarding the Mill District DA, North Village DA and Saggio Affordable Housing DA, and considered the facts as described in the staff report that support the finding of compliance made by the City Manager.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg hereby:

1. Affirms the City Manager's finding that Replay Healdsburg, LLC and Eden Mill District LP are in good faith substantial compliance with the terms and conditions of the Development Agreement between the City of Healdsburg, Replay Healdsburg, LLC and Eden Mill District LP for the Mill District project.

2. Affirms the City Manager's finding that CCS Healdsburg, LLC, Kendal at Sonoma, A Zen Inspired Community, and BHDC North Village, LLC, are in good faith substantial compliance with the terms and conditions of the Development Agreement between the City of Healdsburg, CCS Healdsburg, LLC, Kendal at Sonoma, a Zen Inspired Community, and BHDC North Village, LLC, for the North Village project.

3. Affirms the City Manager's finding that Freebird Development Company, LLC is in good faith substantial compliance with the terms and conditions of the Development Agreement between the City of Healdsburg and Freebird Development Company, LLC for the Saggio Hills Affordable Housing project.

4. Finds that this review satisfies the annual review of the above-referenced development agreements as required by Healdsburg Municipal Code section 17.20.050.A and Government Code section 65865.1.

6.H.a
Packet Pg. 72
Attachment: ATT 1 Resolution (4471 : Annual Review of Development Agreements) Resolution No. – 2024

PASSED, APPROVED AND ADOPTED by the City Council of the City of Healdsburg, this 20th day of May 2024, by the following vote:

AYES: Councilmembers: ( )
NOES: Councilmembers: ( )
ABSENT: Councilmembers: ( )
ABSTAINING: Councilmembers: ( )
SO ORDERED: ATTEST:
__________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk

6.H.a
Packet Pg. 73
Attachment: ATT 1 Resolution (4471 : Annual Review of Development Agreements) 105B Plaza Street, Healdsburg CA 95448
707.314.0087
milldistricthealdsburg.com
[email protected]
April 23, 2024
Scott Duiven
Community Development Director
City of Healdsburg
401 Grove Street, Healdsburg CA 95448
RE: Annual Review of the Mill District Development Agreement Dear Director Duiven,
Section 7.5 of the Development Agreement between the City of Healdsburg and Replay Healdsburg, LLC (“Agreement”) stipulates the requirement of an annual review of the Agreement. The following information below pertains to the reporting year between March 12, 2023 and March 11, 2024. The following information is required to be reported:

1. An accounting of the fees due and paid to City
• Since March 2023, the total amount of fees paid to the City is $1,794,956.20, consisting of the following breakdown:
o City Staff and Contract Staff $121,989.02
o City Legal $1,775.00
o Permit & Application Fees $45,332.97
o Landscape and Lighting District Assessments $930.97
o Two installments of Fire Truck Payment totalling $696,666.67 o Phase 1 Connectivity Funds $150,000.00
o Lot 7 Quimby Fees $492,788.46
o Lot 4 City Staff and Contract Staff $91,314.86
o Water Treatment fees for handling of dewatering water from Lot 4 Construction $114,158.25
o Lot 1 Developer Deposit Account Deposit: $40,000 but have not received a reconciliation for this account to indicate uses of funds o Lot 6 Developer Deposit Account Deposit: $40,000 but have not received a reconciliation for this account to indicate uses of funds • The total amount due to the city is $367,229.90 for electrical system deposit account replenishment.

2. Any assignments or transfers of the Property
• No assignments or transfers of property occurred during this reporting period.

3. All construction of public improvements under this Agreement • Most of the public improvement construction is completed. Remaining work includes completion of the joint trench which is being sequenced with construction on Lot 4. The

6.H.b
Packet Pg. 74
Attachment: ATT 2 Replay 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) 105B Plaza Street, Healdsburg CA 95448
707.314.0087
milldistricthealdsburg.com
[email protected]
public improvements will be complete and conveyed to the city prior to completion of Lot 4.
• The affordable housing development on Lot 7 is complete and occupied, providing all of the affordable housing requirements under the Development Agreement. • Construction of the public park on Lot 5 is under way, with anticipated completion in June 2024
• Lot 4 construction is nearing completion, with expected final completion in summer 2024.

4. Description of any subsequent project approvals that have been applied for or approved • Lot 5 Park: The building permit for the park on Lot 5 was issued in January 2024 • Hotel on Lot 1: Planning Commission workshops for the Hotel on Lot 1 were held in January and February 2024, and the Major Design Review package was submitted on 4/15/24.
• Retail & Residential Amenity on Lot 5 Parcel A: Planning Commission workshop in February and the Major Design Review package was submitted on 4/15/24.

5. Description of any construction activity that has been commenced or completed during the applicable annual review period
• Public Improvements – As indicated above, most of the construction is complete with remaining work being the joint trench.
• Construction of the public park on Lot 5 began in January 2024. • Construction of the Affordable Housing on Lot 7 was completed in July 2023.

6. Description of compliance with Section 5.1 through 5.4 of the Agreement Section 5.1: Affordable Housing Units
• See above.

Section 5.2: Middle Income Units
• Replay has not submitted major design review applications for any parcel that contains Middle Income Units
Section 5.3: Public Improvements
• See above.

Section 5.4: Additional Developer Contributions
• Section 5.4(a) – This is no longer applicable.

6.H.b
Packet Pg. 75
Attachment: ATT 2 Replay 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) 105B Plaza Street, Healdsburg CA 95448
707.314.0087
milldistricthealdsburg.com
[email protected]
• Section 5.4(b) – At the time of this letter, Replay has paid the first connectivity funds payment of $150,000 and will pay the second installment upon request from the city, consistent with a pending modification to the Development Agreement. • Section 5.4(c) – At the time of this letter, the third and final installment of the fire truck payments has been submitted to the city.
• Section 5.4(d) – The lighting and landscape district has been created and will be fully operational with completion of the public improvements.

7. Description of any enforced delay or permitted delay as provided for under Section 7.6 of the Agreement
• There have not been any enforced delays or permitted delays as provided for under section

7.6 of the Agreement.

Sincerely,
Mike McCone,
Vice President of Development
Replay Destinations
CC: Jeff Kay, City Manager
Linda Ruffing, North Coast Community Planning
Paul Woodward, Replay Destinations
Dave Despres, Replay Destinations
Harrison Smith, Replay Destinations

6.H.b
Packet Pg. 76
Attachment: ATT 2 Replay 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.c
Packet Pg. 77
Attachment: ATT 3 Eden 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.c
Packet Pg. 78
Attachment: ATT 3 Eden 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.c
Packet Pg. 79
Attachment: ATT 3 Eden 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.c
Packet Pg. 80
Attachment: ATT 3 Eden 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) CCS Healdsburg, LLC
3760 Kilroy Way, Ste 130
Long Beach, CA 90806
310.546-5781
[email protected]
[Website]
April 3, 2024
Scott Duiven
Community Development Director
City of Healdsburg
401 Grove Street
Healdsburg, CA 95448-4723
Dear Mr. Duiven,
RE: Annual Review of North Village Development Agreement Section 7.5 of the Development Agreement between the City of Healdsburg and CCS Healdsburg, LLC (“Agreement”) stipulates the requirement of an annual review of the Agreement. The following information below pertains to the reporting year between February 11, 2023 and February10, 2024.

The following information is required to be reported:

1. An accounting of the fees due and paid to the City
Since February 11, 2023, the total amount of fees paid to the City is $1,205,758.65 consisting of the following breakdown:
• Permit Fees and Plan Check Fees: $441,419.30 - North Village Hotel Building Permit and Development Impact Fees; $222.48 - Foss Creek Pathway lighting permit • Contract Planner, staff and City Legal: $178,370.40
• Fire Substation Contribution Fee: $585,746.54

2. Assignments or transfers of the Property
• None
NORTH

VILLAGE

6.H.d
Packet Pg. 81
Attachment: ATT 4 Comstock 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

3. All Construction of public improvements under this Agreement • A Subdivision Improvement Agreement was issued on July 14th, 2021. Major public improvements are under construction.
• All work under the Subdivision Improvement Agreement is substantially complete pending minor corrective action for Foss Creek Pathway surface cracking and installation of new Traffic Signal Pole to accommodate left turn lane for new Fire Substation.

4. Description of any subsequent project approvals that have been applied for or approved • Parcel 4 – Tentative (Condo) Map, Design Review and CUP Amendments (pursued by Burbank Housing) were approved by the Planning Commission on February 28, 2023. o Parcel 4 – Tentative (Condo) Map was approved to allow the following ownerships:
§ Residential condominium airspace and land use to Burbank Housing § Retail spaces and underlying remainder parcel(s) to CCS Healdsburg, LLC. • Owner has submitted applications for tentative map and major design review for Parcel 2 to develop 27 Category “C” townhomes with 2 car attached garages. o Design Review was approved by Planning Commission on August 8, 2023. o Tentative Map is scheduled for review by City Council on February 20, 2024

5. Description of any construction activity that has been commenced or completed during the applicable annual review period
• Vertical construction for Parcel 1 Kendal at Sonoma is complete and Certificates of Occupancy were issued.
• Vertical construction of the hotel on Parcel 3 has commenced.

6. Amendments to Agreement
• A request for Amendment #4 to the MCUP and DA to address minor changes to affordability levels for workforce housing, was considered and approved by City Council on May 1, 2023.

Respectfully Submitted,
Debra Geiler
VP Forward Planning and Entitlements
Cc: Jeff Kay, City Manager
Linda Ruffing, Planning Consultant
Robert Miller, Lubin Olson & Niewiadomski LLP

6.H.d
Packet Pg. 82
Attachment: ATT 4 Comstock 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.e
Packet Pg. 83
Attachment: ATT 5 Kendal 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.e
Packet Pg. 84
Attachment: ATT 5 Kendal 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

6.H.e
Packet Pg. 85
Attachment: ATT 5 Kendal 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) April 11, 2024
Mr. Scott Duiven
Community Development Director
City of Healdsburg
401 Grove Street
Healdsburg, CA 95448
RE: Annual Review - North Village Development Agreement Dear Mr. Duiven,
We are in receipt of your letter dated March 18, 2024 requesting a written update regarding the status of BHDC’s affordable mixed use housing project on Parcel 4 at North Village, as required by the Development Agreement between the City of Healdsburg and CCS Healdsburg, LLC. The following summarizes the current status of the project:
• The construction documents have been submitted for third round review; issuance of permits is pending from City staff.
• The Affordable Housing Regulatory Agreement has been recorded. • The Condo Map has been recorded.
• The General Contractor has been selected for the project and is prepared to begin construction upon issuance of City permits.
• A reconciliation of the fees due and paid to the City is attached.

Should you have any questions pertaining to the above, please do not hesitate to contact me.

Sincerely,
Larry Florin
Chief Executive Officer
cc: Ms. Linda Ruffing

6.H.f
Packet Pg. 86
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) 4/5/2024 4:10:21 PM Page 1 of 3
Project Activity Report
City of Healdsburg, CA By Project Number
Report Dates: - 03/31/2024
D0331 North Village-Burbank-AH Developer Deposit Cost Recovery Agreement Active Project Number Project Name Group Type Status
Revenues
Account Key Account Name Category Total Activity
D0331DEP Deposit PAR - Project Activity Report - DD -104,600.00 GL Account Number GL Account Name Post Date Description Vendor Name Item Number Activity 101-1000-24064-D0331 North Village-Burbank-AH 07/01/2023 Developer Deposit -Transfer Balances to New GL & PL … -9,450.00 101-1000-24064-D0331 North Village-Burbank-AH 10/24/2023 Burbank Housing Dev Corp- North Village -AH Develope… -63,750.00 101-1000-24064-D0331 North Village-Burbank-AH 11/30/2023 Burbank Housing Dev Corp - North Village - AH Develo… -31,400.00 FY 2023-2024 Total: -104,600.00
Total Revenues: -104,600.00
Expenses
Account Key Account Name Category Total Activity
D0331EXP Expenses PAR - Project Activity Report - DD 98,230.00 GL Account Number GL Account Name Post Date Description Vendor Name Item Number Activity 101-1000-24064-D0331 North Village-Burbank-AH 08/28/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23042576 20,359.42 101-1000-24064-D0331 North Village-Burbank-AH 08/28/2023 To Record 10% of Vendor Contract - Bureau Veritas 8/… 2,035.94 101-1000-24064-D0331 North Village-Burbank-AH 08/29/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23042648 16,650.86 101-1000-24064-D0331 North Village-Burbank-AH 08/29/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23042649 23,592.09 101-1000-24064-D0331 North Village-Burbank-AH 08/29/2023 To Record 10% of Vendor Contract - Bureau Veritas 8/… 1,665.09 101-1000-24064-D0331 North Village-Burbank-AH 08/29/2023 To Record 10% of Vendor Contract - Bureau Veritas 8/… 2,359.21 101-1000-24064-D0331 North Village-Burbank-AH 09/07/2023 Planning Services - North Village/Burbank (D0331) LINDA RUFFING 2023-08 Burbank (No… 1,250.00 101-1000-24064-D0331 North Village-Burbank-AH 09/07/2023 To Record 10% of Vendor Contract - Ruffing August 20… 125.00 101-1000-24064-D0331 North Village-Burbank-AH 09/21/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23044220 10,147.63 101-1000-24064-D0331 North Village-Burbank-AH 09/21/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23044221 7,000.00 101-1000-24064-D0331 North Village-Burbank-AH 09/21/2023 Record 10% of vendor contract - Bureau Veritas 700.00 101-1000-24064-D0331 North Village-Burbank-AH 09/21/2023 Record 10% of vendor contract - Bureau Veritas 1,014.76 101-1000-24064-D0331 North Village-Burbank-AH 09/25/2023 North Village Lot 4 Plan REview & Inspection BUREAU VERITAS NORTH AMERI… RI 23044882 7,000.00 101-1000-24064-D0331 North Village-Burbank-AH 09/25/2023 Record 10% of Vendor contract - North Village 700.00 101-1000-24064-D0331 North Village-Burbank-AH 11/04/2023 10% vendor contract - Ruffing October 2023 40.00 101-1000-24064-D0331 North Village-Burbank-AH 11/04/2023 Planning Services - North Village/Burbank (D0331) LINDA RUFFING 2023-10 Burbank (No… 400.00 101-1000-24064-D0331 North Village-Burbank-AH 12/04/2023 Planning Services - North Village/Burbank (D0331) LINDA RUFFING 2023-11 Burbank (No… 1,250.00 101-1000-24064-D0331 North Village-Burbank-AH 12/04/2023 Ruffing - November 2023 125.00 101-1000-24064-D0331 North Village-Burbank-AH 02/01/2024 Planning Services - North Village/Burbank (D0331) LINDA RUFFING 2024-01 Burbank (No… 1,050.00 101-1000-24064-D0331 North Village-Burbank-AH 02/01/2024 To record 10% of vendor contracts - North Village Burb… 105.00 101-1000-24064-D0331 North Village-Burbank-AH 03/01/2024 Planning Services - North Village/Burbank (D0331) LINDA RUFFING 2024-02 Burbank (No… 600.00

6.H.f
Packet Pg. 87
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development Project Activity Report Report Dates: - 03/31/2024
4/5/2024 4:10:21 PM Page 2 of 3
GL Account Number GL Account Name Post Date Description Vendor Name Item Number Activity 101-1000-24064-D0331 North Village-Burbank-AH 03/01/2024 To record 10% of vendor contracts - Ruffing 3/1/24 60.00 FY 2023-2024 Total: 98,230.00
Total Expenses: 98,230.00
D0331 Total: -6,370.00

6.H.f
Packet Pg. 88
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development Project Activity Report Report Dates: - 03/31/2024
4/5/2024 4:10:21 PM Page 3 of 3
Summary
Project Number Project Name
Project Summary
Total Revenue Total Expense
Revenue Over/
(Under) Expenses
D0331 North Village-Burbank-AH 104,600.00 98,230.00 6,370.00 Project Totals: 104,600.00 98,230.00 6,370.00
Group Summary
Group Total Revenue Total Expense
Revenue Over/
(Under) Expenses
Developer Deposit 104,600.00 98,230.00 6,370.00
Group Totals: 104,600.00 98,230.00 6,370.00
Type Summary
Type Total Revenue Total Expense
Revenue Over/
(Under) Expenses
Cost Recovery Agreement 104,600.00 98,230.00 6,370.00
Type Totals: 104,600.00 98,230.00 6,370.00

6.H.f
Packet Pg. 89
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development 4/11/2024 4:32:00 PM Page 1 of 2
Project Activity Report
City of Healdsburg, CA By Project Number
Report Dates: - 04/11/2024
ER010 North Village, Parcel 4 CIP Project Electric Reimbursable CIP Active Project Number Project Name Group Type Status
Revenues
Account Key Account Name Category Total Activity
ER010DEVELOPER Developer Funding N/A - N/A -10,000.00
GL Account Number GL Account Name Post Date Description Vendor Name Item Number Activity 542-1000-37701-00000 Other Revenues 11/08/2023 Burbank Housing Dev Corp- Electric Cost Recovery Agr… -10,000.00 FY23-24 Total: -10,000.00
Total Revenues: -10,000.00
Expenses
Account Key Account Name Category Total Activity
ER010WAGES Wages N/A - N/A 2,009.99
GL Account Number GL Account Name Post Date Description Vendor Name Item Number Activity 542-7501-45000-ER010 Capital Projects- North Village… 02/29/2024 February CIP - Long 6.5 hrs 580.66 542-7501-45000-ER010 Capital Projects- North Village… 03/31/2024 March CIP - Long 16 hrs 1,429.33 FY23-24 Total: 2,009.99
Total Expenses: 2,009.99
ER010 Total: -7,990.01

6.H.f
Packet Pg. 90
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development Project Activity Report Report Dates: - 04/11/2024
4/11/2024 4:32:00 PM Page 2 of 2
Summary
Project Number Project Name
Project Summary
Total Revenue Total Expense
Revenue Over/
(Under) Expenses
ER010 North Village, Parcel 4 10,000.00 2,009.99 7,990.01 Project Totals: 10,000.00 2,009.99 7,990.01
Group Summary
Group Total Revenue Total Expense
Revenue Over/
(Under) Expenses
CIP Project 10,000.00 2,009.99 7,990.01
Group Totals: 10,000.00 2,009.99 7,990.01
Type Summary
Type Total Revenue Total Expense
Revenue Over/
(Under) Expenses
Electric Reimbursable CIP 10,000.00 2,009.99 7,990.01
Type Totals: 10,000.00 2,009.99 7,990.01

6.H.f
Packet Pg. 91
Attachment: ATT 6 Burbank 2024 DA Annual Review Response (4471 : Annual Review of Development

ANNUAL REVIEW FORM
This Annual Review Evaluation Form is submitted to the City of Healdsburg (“City”) by Freebird Development Company, LLC, a California limited liability company (“Developer”), pursuant to the requirements of California Government Code section 65865.1 regarding Developer’s good faith substantial compliance with its obligations under the Development Agreement between the City and Developer having an Effective Date of May 17, 2023 (“Development Agreement”). All terms not otherwise defined herein shall have the meanings assigned to them in the Development Agreement:

Annual Review Period: 5/17/23 to 5/17/24
Specify whether Impact fees, Processing fees, Connection fees and/or other fees due and payable have been paid during this annual review period. Since execution of the Development Agreement, Developer has paid a $25,000 deposit as required by the Development and Disposition Agreement and a $10,000 deposit as required by the Electric Cost Recovery Agreement.

Describe whether other applicable Development Agreement obligations were completed during this annual review period and, if so, specifically identify such obligations. Since execution of the Development Agreement, Developer has completed 100% Design Development documents and pursued gap funding for the Phase 1 Project including: 1) an application to the State under the 2023 Multifamily Finance Super Notice of Funding Availability (project was not awarded); 2) an application to the Sonoma County Community Development Commission under the 2024-2025 Notice of Funding Availability (project has been recommended for an award); and 3) an application to the State under the 2024 Affordable Housing and Sustainable Communities Program (application was submitted on 3/19/24). Developer will continue to pursue all gap funding opportunities.

Specify whether Developer has assigned the Development Agreement, in whole or in part, or otherwise conveyed the Property or any portion thereof during this annual review period. The Developer has not assigned the Development Agreement, in whole or in part. The Developer has executed a Partial Assignment and Assumption of Disposition and Development Agreement (“Partial Assignment”) with Saggio Hills Lot 14, L.P. with respect to the Phase 1 Project.

Saggio Hills Lot 14, L.P. is the tax credit partnership that has been established for Phase 1. The Partial Assignment was required in connection with the Developer’s application to the State’s Affordable Housing and Sustainable Communities Program.

The undersigned representative confirms that Developer is:
__X__ In good faith substantial compliance with its obligations under the Development Agreement for this annual review period.
_____ Not in good faith substantial compliance with its obligations under the Development Agreement for this annual review period, in response to which Developer is taking the actions set forth in the attachment hereto.

6.H.g
Packet Pg. 92
Attachment: ATT 7 Freebird 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements) IN WITNESS WHEREOF, Developer has executed this Annual Review Form as of this ____ day of ______________, 20__.

DEVELOPER:

FREEBIRD DEVELOPMENT COMPANY,
LLC, a California limited liability company
By:

Name:

Its:
22nd
March 24
Robin Zimbler
Manager

6.H.g
Packet Pg. 93
Attachment: ATT 7 Freebird 2024 DA Annual Review Response (4471 : Annual Review of Development Agreements)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Second Reading of an Ordinance establishing Water and Wastewater Rates for Fiscal Years 2024-25, 2025-26 and 2026-27
PREPARED BY: Terry Crowley, Utilities Director
STRATEGIC INITIATIVE(S):

Maintain and Improve Infrastructure and Facilities
Maintain and Enhance Public Health and Safety
RECOMMENDED ACTION(S):

Pass an Ordinance of the City Council of the City of Healdsburg adopting water and wastewater rates for fiscal years 2024-25, 2025-26, and 2026-27.

COMMUNITY ENGAGEMENT/OUTREACH:

In October of 2023 the City Council approved a professional services agreement to update water and wastewater rates due to revenues falling well below the forecasted amounts. In February of 2024 staff and the City’s consultant presented the City Council with preliminary financial forecasts and potential rate increases. On March 18th an additional meeting provided further information requested by the City Council and another opportunity for public feedback. Upon the conclusion of the March agenda item, the City Council directed staff to begin the Proposition 218 balloting process to adjust rates. Notices were mailed to all property owners and water and wastewater customers, in both Spanish and English, on or before March 22, 2024. On May 6, 2025 the City Council held a public hearing during a regularly scheduled meeting as required by Proposition 218 and recorded 187 protest votes; less than a majority.

BACKGROUND:

In June of 2022 the City Council approved a series of new water and wastewater rates. These rates were intended to cover operating costs and fund necessary capital improvement projects.

However, ongoing conservation stemming from the recent drought resulted in reduced sales and revenues necessary to operate both the Water and Wastewater departments. Although conservation is desirable, the variance between projected and actual usage created a financial imbalance for the funds. Over the last two fiscal years, staff have proposed, and the City Council has adopted several budget reductions to both the Water and Wastewater fund in an effort to reduce costs and support fiscal responsibility, including freezing staff positions, reductions in

6.I
Packet Pg. 94
operational expenses, and deferral of capital projects. Despite these changes, both funds remain structurally imbalanced, threatening the City’s ability to provide critical water and sewer services to City residences. To correct this, staff recommended, and the City Council approved a professional service agreement with Raftelis Financial Consultants, Inc. (Raftelis) to review and update the financial outlook for the water and wastewater departments along with proposed rate corrections.

On February 5, 2024, and March 18, 2024, City staff and Raftelis presented an updated financial outlook, a revised capital improvement plan, and proposed rate structures to recover the costs necessary to provide water and wastewater services. As part of this process, staff further scrutinized operational budgets for savings and carefully prioritized outstanding capital projects.

The findings indicated that rate increases for both water and wastewater services are necessary to not only cover basic operating costs and bond covenants but to also fund new regulatory obligations and the replacement of aging infrastructure.

The new proposed rates included updated monthly fixed fees for all customers, three tiers for residential customers, and the establishment of various per unit fees for each customer class. The new rate structures are intended to fund basic operations, meet bond covenant requirements, fund critical capital improvement projects, and support funding to lessen the City’s reliance on the Russian River.

DISCUSSION/ANALYSIS:

The table below shows the forecasted revenue requirement, expenses by category and the overall proposed rate increases. These expenditures include operational costs, sufficient revenue to meet bond covenants, capital improvements, and funding for improved water supply security.

Water fund forecasted revenue, expenditures, and overall rate increases.

Effective Date FY 2024-25 FY 2025-26 FY 2026-27
Operating & Maintenance $5,247,953 $5,506,084 $5,774,793 Debt Service $779,894 $784,515 $632,022
Capital Improvements $1,404,571 $1,458,834 $4,097,434
Total Costs $7,432,418 $7,749,433 $10,504,249
Revenue Adjustment 21.0% 20.0% 13.0%
Wastewater fund forecasted revenue, expenditures, and overall rate increases.

Effective Date FY 2024-25 FY 2025-26 FY 2026-27
Operating & Maintenance $6,719,022 $7,045,209 $7,381,809 Debt Service $1,794,750 $1,791,250 $1,795,750
Capital Improvements $1,160,094 $2,333,129 $3,391,373
Total Costs $9,673,867 $11,169,588 $12,568,931
Revenue Adjustment 18.0% 18.0% 15.0%
Proposed Rates
Included in the proposed rates are structural changes for both water and wastewater. As proposed, residential monthly fixed fees for water customers will be set by the metered

6.I
Packet Pg. 95
connection size rather than the number of dwellings per meter. Additionally, per unit water charges will be based upon customer class (residential, commercial, industrial, landscape) and residential customers will include three increasing tiers. For wastewater, monthly fixed fees will remove the combined charge for single-family dwellings (SFD) with accessory dwelling units (ADU) and treat SFD with ADU as multi-family residential (MFR). The tables below, which are also included in the executive summary, show the proposed monthly and per-unit rates for water and wastewater services over the next three fiscal years.

Proposed Three-Year Water Rate Schedule (Executive Summary Table 1-3) Description Current FY 2025 FY 2026 FY 2027
Residential Fixed Monthly Service Charge
Single Family $28.61 By Meter
Size
By Meter
Size
By Meter
Size
Single Family + ADU (per DU) $21.84 By Meter
Size
By Meter
Size
By Meter
Size
Multi-Family (Per DU) $17.01 By Meter
Size
By Meter
Size
By Meter
Size
Fixed Monthly Service Charges
Up to 1” $45.26 $41.34 $49.61 $56.06
1 ½” $45.26 $77.94 $93.53 $105.69
2” $86.90 $121.86 $146.24 $165.26
3” $136.86 $238.98 $286.78 $324.07
4” $253.46 $370.75 $444.90 $502.74
6” $419.91 $736.76 $884.12 $999.06
Residential (Single Family & Multi-Family)
Tier 1 (0-5 HCF) $6.48 $6.48 $7.78 $8.80
Tier 2 (6-10 HCF) $6.48 $8.41 $10.10 $11.42
Tier 3 >10 HCF $6.48 $10.80 $12.96 $14.65
Non-Residential Classes
Commercial $6.48 $7.61 $9.14 $10.33
Industrial $6.48 $9.49 $11.39 $12.88
Landscape $6.48 $11.06 $13.28 $15.01
Riverview HOA1$1.59 $1.93 $2.32 $2.63
1 Rate applicable to Riverview HOA under the terms of the 1997 order of condemnation

6.I
Packet Pg. 96
Proposed Three-Year Wastewater Rate Schedule (Executive Summary Table 1-5) Description Current FY 2025 FY 2026 FY 2027
Residential Service Charges ($/Month/Dwelling Unit)
Single Family Residential (SFR) $46.67 $51.33 $60.57 $69.66 SFR + ADU $31.95 N/A N/A N/A
Multi-Family Residential (MFR) $37.80 $36.94 $43.60 $50.14 Flat Rate (Sewer Only SFR) $104.01 $106.21 $125.34 $144.15 Non-Residential Service Charges
($/Month/Meter)
5/8” $75.75 $83.88 $98.99 $113.84
1” $75.75 $83.88 $98.99 $113.84
1 ½” $148.49 $243.37 $287.18 $330.26
2” $235.77 $396.68 $468.09 $538.31
3” $439.44 $1,279.52 $1,509.84 $1,736.32
4” $730.39 $1,405.05 $1,657.97 $1,906.67
6” $1,966.94 $1,405.05 $1,657.97 $1,906.67
Wastewater Usage Charges ($/HCF)
Residential (SFR/MFR) $11.47 $14.71 $17.37 $19.98
Non-Residential
Low Strength $10.31 $11.43 $13.49 $15.52
Medium Strength $15.09 $15.21 $17.95 $20.65
High Strength $22.08 $21.08 $24.88 $28.62
Funded and Deferred Capital Improvement Projects
Due to aging underground infrastructure and new regulatory requirements staff is recommending, and the proposed rates include funding for critical capital improvement and replacement projects. Major funded projects include improved filtration of the City’s drinking water to eliminate cryptosporidium (a parasite found in surface waters) and to improve the City’s water supply security by increasing our ability to pump water from Dry Creek and Lake Sonoma.

Several capital replacement projects totaling roughly $27.5 million were deferred. The table below summarizes both the major funded projects and the major deferred projects.

Included In Proposed Rates ($13.9 million) Deferred Projects ($27.5 million) Dry Creek Cryptosporidium Filtration – Water Fitch Well Field Cryptosporidium Filtration – Water
Dry Creek Pumping & Clear Well
Improvements – Water
Dry Creek Well Capacity Improvements –
Water
Gauntlett Reservoir Liner Replacement –
Water
Gauntlett WTP Membrane Replacements –
Water
Healdsburg Ave Utility Replacement - Water
& Wastewater
Gauntlett Reservoir Membrane Replacements –
Water
Brown Street Sewer & Water Replacement – Fitch Treatment Modernization – Water

6.I
Packet Pg. 97
Water & Wastewater
University Street Sewer & Water Rpl. – Water
& Wastewater
PFAS removal – Water (TBD by 2024/25 test
results)
Orchard Lift Station Rehabilitation –
Wastewater
Gauntlett and Fitch Pipeline Rehab – Water
Healdsburg Ave Sewer Replacement -
Wastewater
McDonough Watermain Replacement – Water
& Wastewater
Water Reclamation Facility Membrane
Replacement – Wastewater
Heron Lift Station Relocation – Wastewater
Magnolia Lift Station Rehabilitation –
Wastewater
Hendricks Lift Station Conversion –
Wastewater
Inflow & Infiltration Repairs – Wastewater
Residential Bill Impacts
The forecasted costs and increases shown are necessary to provide reliable water and wastewater services. While the overall rate increases are shown in the tables further above, impacts on individual users and differing classes of customers can vary. Included within the executive summary and in the charts below are rate impacts to typical water and wastewater customers. For the average water and wastewater users (5HCF of water and 4HCF of wastewater) the combined rate increase is roughly $30 per month.

Monthly Water Bill Impacts for typical Single-Family residential usage (FY 2024-25)

6.I
Packet Pg. 98
Monthly Wastewater Bill Impacts for typical Single-Family usage (FY 2024-25) Unique to Healdsburg is the ownership of a publicly owned electric utility. Over the years the City’s electric utility has provided better reliability at a lower cost than available outside City limits. Currently the City’s electric rates are roughly half those of PG&E resulting in citywide savings of over $19 million annually. While rate increases in water and wastewater are an unwelcome necessity, energy cost savings for Healdsburg’s residential and commercial customers outweigh the proposed increases. For example, the typical residential home using 300 kilowatt-hours per month will save roughly $75 a month, creating an overall utility bill (water, sewer, and electric) that’s lower than other surrounding cities.

Final Cost of Service and Rate Design Study
During the May 6, 2024 public hearing, staff heard comments from one resident regarding concerns of errors within the Cost of Service and Rate Design Study (Study). Staff and Raftelis closely reviewed those concerns and provided corrections to the final Study. The errors consisted of typographical or text errors that did not impact the published rates, rate structures, or forecasted revenues. Corrections included the following:
- Corrections to units shown in Figure 11, this chart is millions of gallons not acre-feet. - Corrections to table 4-3 correcting the current number of metered water connections. - Corrections to the meter ratio text (section 4.5.1), 50 gpm is the correct divisor. - Identified small rounding errors within the estimated bill impacts presented in the Prop 218 notice. Rounding resulted in combined bill impact error of 9-cents in 2025 and 18-cents in 2026.

Rate Implementation
During the City Council’s regularly schedule May 6, 2024 meeting, a public hearing was held and receive public input on the recommended water and wastewater rate increases. Upon

6.I
Packet Pg. 99
conclusion of the public hearing the City recorded 187 protest votes, less than a majority allowing the Council to approve of the proposed rate increases. After further deliberations, the City Council approved the proposed rate increases and the ordinance is on the agenda for May 20, 2024 for final adoption.

ENVIRONMENTAL STEWARDSHIP:

Continued adequate funding for both the water and wastewater departments allows these activities to work within existing and future environmental regulations. The proper treatment of drinking water along with the proper collection and treatment of the City’s wastewater helps ensure the responsible use of natural water resources and that the City’s waste will not pollute the local creeks and rivers.

ALTERNATIVES:

As an alternative the City Council could choose not to pass the ordinance and provide further direction to staff. Due to existing structural deficits and needed funding for capital improvements staff does not recommend this option.

FISCAL IMPACT:

Due to lower-than-expected customer usage, both the Water and Wastewater departments are experiencing budget shortfalls that are not sustainable. Staff and the City Council have eliminated many capital improvement projects and lowered necessary operating costs where possible to continue operations under the current rate structure. However, the prepared financial outlook identifies that revenue adjustments are needed to correct budget shortfalls, meet bond covenants, meet reserve policies, and fund necessary capital improvement projects. The proposed rates will correct the structural deficit and place the City on a path to fund critical capital improvement projects.

ENVIRONMENTAL ANALYSIS:

A utility rate is not subject to the provisions of the California Environmental Quality Act (CEQA) because a rate study and/or increase is not a project as defined in CEQA Guidelines section 15378, since it will not have a direct or reasonably foreseeable indirect impact on the environment.

ATTACHMENT(S):

Ordinance
Healdsburg Rate Study Report

6.I
Packet Pg. 100
4888-6324-5708 v1

CITY OF HEALDSBURG
ORDINANCE NO.

AN UNCODIFIED ORDINANCE OF THE CITY COUNCIL OF

THE CITY OF HEALDSBURG ADOPTING WATER AND
WASTEWATER RATES FOR FISCAL YEARS 2024-25, 2025-
26, AND 2026-27
WHEREAS, Healdsburg Municipal Code Section 13.20.180 and 13.20.130 authorize the City Council to set and impose rates, by resolution, for water and wastewater services rendered by the City of Healdsburg (“City”); and
WHEREAS, the City Council may adopt any fee or charge by ordinance if it is permitted to adopt the fee or charge by resolution; and
WHEREAS, the water and wastewater services rates currently applied to City customers were last updated by Resolution No. 96-2022 adopted by City Council on June 21, 2022; and WHEREAS, the City hired Raftelis, Inc (“Raftelis”) to review the City’s water and wastewater rates to determine whether they adequately recover ongoing costs to provide these services and support needed capital improvements; and
WHEREAS, Raftelis submitted a Water and Wastewater Cost of Service and Rate Design, dated March 22, 2024 (“Rate Study”), which recommends revised water and wastewater rate schedules for Fiscal Years 2024-25, 2025-26, and 2026-27. The Rate Study is attached hereto as Exhibit A and hereby incorporated by reference; and
WHEREAS, the City Council finds and determines that, based on the entire record before the City Council, including but not limited to the Rate Study and the Staff Report and attachments thereto:
(1) Revenues derived from the proposed rates will not exceed the costs required to provide water and wastewater service, respectively.
(2) Revenues derived from the proposed water and wastewater rates will not be used for any purpose other than that for which they were imposed. (3) The amount of the rates imposed upon any parcel or person as an incident of property ownership will not exceed the proportionate cost of the service attributable to the parcel. (4) The rates are imposed for a service or services that are actually used by, or immediately available to, the owner of the property in question.
(5) The rates are not being imposed for, nor will they contribute to, general government services; and

6.I.a
Packet Pg. 101 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

WHEREAS, pursuant to the provisions of Article XIII D, Section 6, of the California Constitution (“Proposition 218”), prior to extending, imposing or increasing water and wastewater rates, property owners shall be provided at least 45 days’ notice of a public hearing to consider such modifications to water and wastewater rates together with an explanation of:
(1) the amount of the proposed rates, (2) the basis on which the rates are calculated, (3) the reason for the rate modifications, and (4) the date, time and place of a public hearing to consider the rate modifications, together with an explanation of the rights of property owners to submit written protests to the proposed rate modifications. The proposed rate modifications may not be imposed if, prior to the close of the public hearing, written protests are submitted by a majority of the parcels subject to the modified rates (“majority protest”); and WHEREAS, notice of the public hearing to consider proposed adjustments to the water and wastewater rates was mailed to property owners of record and customers of record in accordance with Proposition 218; and
WHEREAS, on May 6, 2024, the City Council conducted a public hearing, considered testimony, and at the conclusion of the hearing determined that a majority protest did not exist; and
WHEREAS, the Rate Study recommends transitioning the existing capital reserve policy to a rate stabilization policy, eliminating the earmarking of reserves for specific capital purposes, and instead utilizing the capital reserve to complete preemptive capital replacement and fund maintenance costs in a manner that stabilizes rates; and WHEREAS, the mailed notice of public hearing included a statement that there is a 120- day statute of limitations for challenging the water and wastewater rates should the proposed water or wastewater rates be adopted; and
WHEREAS, the water and wastewater rates are “exempt charges,” within the meaning of Section 1 of Article XIII C of the California Constitution and the proposed Taxpayer Protection and Government Accountability Act (Initiative No. 21-0042) because they are charges that are imposed in accordance with and subject to Article XIII D of the California Constitution; and

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF HEALDSBURG DOES ORDAIN AS FOLLOWS:

Section 1. The above recitals are true and correct, and incorporated herein by reference and each is relied upon independently by the City Council for its adoption of the Ordinance.

Section 2. The City Council finds that the adoption of this Ordinance is not considered a project under Public Resources Code Section 21065 and California Environmental Quality Act (“CEQA”) Guidelines Section 15378 because the Ordinance does not have the potential for

6.I.a
Packet Pg. 102 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, as the Ordinance creates government funding mechanisms which do not involve any commitment to any specific project. The Ordinance is also exempt from CEQA as there is no possibility for causing a significant effect on the environment, per CEQA Guideline Section 15061(b)(3). No specific water or wastewater projects are associated with this Ordinance. The Ordinance is policy-oriented and would create a funding mechanism for the development of future water or wastewater facilities. When and if specific water or wastewater projects are developed and proposed for implementation, the environmental impacts of such facilities would be evaluated in accordance with CEQA and City practice.

Section 3. The procedures followed and the water and wastewater rates referenced herein are in compliance with the California Constitution Article XIII D and Government Code section 53755.

Section 4. The City Council adopts the water and wastewater rate schedules in Exhibit B attached hereto and incorporated herein by this reference. These rates shall supersede previously adopted water and wastewater rates, with the exception of previously adopted Water Shortage Rate Surcharges.

Section 5. The City Council approves and adopts the Rate Study attached hereto as Exhibit A, which sets forth the basis for the water and wastewater rates.

Section 6. The water and wastewater rates, set forth in Exhibit B, may be amended from time to time by ordinance or resolution of the City Council.

Section 7. The City Council approves and adopts a reserve target for both the Water and Wastewater enterprises at the amount of revenue needed to sustain a 90-day operating reserve plus an additional one-million dollars, for each enterprise, to be used as a rate stabilization reserve.

Section 8. If any provision, section, paragraph, sentence or word of this Ordinance, or the application thereof to any person or circumstance, is rendered or declared invalid by any court of competent jurisdiction, the remaining provisions, sections, paragraphs, sentences or words of this Ordinance, and their application to other persons or circumstances, shall not be affected thereby and shall remain in full force and effect and, to that end, the provisions of this Ordinance are severable.

Section 9. This Ordinance shall become effective thirty days after the date of its adoption.

Section 10. The City Clerk is directed to cause this Ordinance to be published in the manner required by law.

6.I.a
Packet Pg. 103 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

INTRODUCED by the City Council of the City of the Healdsburg on the 6th day of May, 2024, and PASSED and APPROVED at a regular meeting of the City Council on the 20 day of May 2024, by the following vote:

AYES: Councilmembers: ( )
NOES: Councilmembers: ( )
ABSENT: Councilmembers: ( )
ABSTAINING: Councilmembers: ( )
SO ORDERED: ATTEST:
____________________________________ ____________________________________ David Hagele, Mayor Raina Allan, City Clerk
Dated: ______________________________

6.I.a
Packet Pg. 104 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

EXHIBIT B – WATER AND WASTEWATER USAGE FEES ORDINANCE
WATER RATES:

A. For the purposes of this imposition of the water rate schedule for Fiscal Years (FY) 2024- 2025, 2025-2026, and 2026-2027, the term:
1) “City Customer” shall mean any person, corporation, or other entity that receives City water services, regardless of whether City water services are provided to property within the City, or property outside the boundaries of the City. 2) “Single Family Residential” (SFR) means a single dwelling per parcel with sleeping and cooking facilities and intended for domestic use and in which the occupants live as a single housekeeping unit that is not part of a Multiple Dwelling. 3) “Multi-Family Residential” (MFR) means two or more residential dwelling units per parcel with sleeping and cooking facilities and intended for domestic use. 4) “Commercial” water service means any water service to a non-residential building or purpose, other than irrigation, with annual usage characteristics consistent with typical commercial use within the City of Healdsburg.
5) “Industrial” water service means any water service to a non-residential building or purpose, other than irrigation, that is classified as an irrigation use within the City’s billing system. Industrial customers generally have high annual peaking factors and significant average monthly water usage.
6) “Irrigation” water service means any dedicated water service that provides potable water solely for irrigation purposes, where none of the water consumed returns to the City’s sewer system.

B. Monthly Service Charges and Per Unit water rates are set as follows.

6.I.a
Packet Pg. 105 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

Fixed Monthly Service Charges July 1, 2024 July 1, 2025 July 1, 2026 Up to 1-inch $41.34 $49.61 $56.06
1 ½-inch $77.94 $93.53 $105.69
2-inch $121.86 $146.24 $165.26
3-inch $238.98 $286.78 $324.07
4-inch $370.75 $444.90 $502.74
6-inch $736.76 $884.12 $999.06
Residential Usage Charge $/HCF
(SFR & MFR)
July 1, 2024 July 1, 2025 July 1, 2026
Tier-1 (0 to 5 HCF) $6.48 $7.78 $8.80
Tier-2 (over 5 up to 10 HCF) $8.41 $10.10 $11.42
Tier-3 (usage over 10 HCF) $10.80 $12.96 $14.65
Non-Residential Usage Charge by Classes
($/HCF)
July 1, 2024 July 1, 2025 July 1, 2026
Commercial $7.61 $9.14 $10.33
Industrial $9.49 $11.39 $12.88
Landscape $11.06 $13.28 $15.01
Riverview HOA $1.93 $2.32 $2.63
1) All volumetric rates are shown in terms of dollars per hundred cubic feet ($/HCF). 2) Tier-1 residential usage is up to the first 5 hundred cubic feet (HCF) of water per monthly billing period.
3) Tier-2 residential usage encompasses usage greater than 5 and up to and including 10 HCF per monthly billing period.
4) Tier-3 residential usage comprises all units of water usage exceeding 10 HCF per monthly billing period.
5) Tier usage allocations will be assigned based on the number of residential dwelling units served per metered water service connection. For example, a single water meter serving 4 dwelling units will be allocated four times the Tier-1 usage, then four times the Tier-2 usage, with all usage exceeding the Tier-1 and Tier-2 allocations billed at the Tier-3 rate. 6) The volumetric use charge applicable to Riverview HOA’s irrigation services is per terms of the 1997 order of condemnation.
7) At the conclusion of each calendar year, the City will re-evaluate usage patterns for nonresidential customers and re-assign annually, as necessary, customer classifications between commercial and industrial water services. The City’s Finance Director may adjust customer classifications to maintain accuracy in customer class assignments. The Finance Director’s determination in response to a reclassification request is final.

6.I.a
Packet Pg. 106 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

WASTEWATER RATES:

A. For the purposes of this imposition of the wastewater rate schedule for Fiscal Years (FY) 2024-2025, 2025-2026, and 2026-2027, the term:
1) “City Customer” shall mean any person, corporation, or other entity that receives City wastewater services, regardless of whether City wastewater services are provided to property within the City, or property outside the boundaries of the City. 2) “Single Family Residential” means a single dwelling per parcel with sleeping and cooking facilities and intended for domestic use and in which the occupants live as a single housekeeping unit that is not part of a Multiple Dwelling. 3) “Multi-Family Residential” means two or more residential dwelling units per parcel with sleeping and cooking facilities and intended for domestic use. 4) “Average Winter Consumption” (AWC) or “Residential Seasonal Sewer Average” (SSA) is the 3-month average of residential metered water usage during the January, February, March, and April billing periods, with the highest of the four-month usage being omitted. This average will be calculated in May of each year and establish the yearlong wastewater usage for residential services.

B. Monthly Service Charges and per hundred cubic feet (HCF) of usage are set as follows.

Fixed Monthly Service Charges July 1, 2024 July 1, 2025 July 1, 2026 Single Family Residential (SFR) $51.33 $60.57 $69.66
Multi-Family Residential (MFR) $36.94 $43.60 $50.14
Flat Rate (sewer only SFR) $110.18 $130.02 $149.53
Non-Residential Service Charge
($/Month/Service)
July 1, 2024 July 1, 2025 July 1, 2026
Up to 1-inch $83.88 $98.99 $113.84
1½-inch $243.37 $287.18 $330.26
2-inch $396.68 $468.09 $538.31
3-inch $1,279.52 $1,509.84 $1,736.32
4-inch $1,405.05 $1,657.97 $1,906.67
6-inch $1,405.05 $1,657.97 $1,906.67
Wastewater Use Charges $/HCF July 1, 2024 July 1, 2025 July 1, 2026 Residential Usage Charge (SFR & MFR) $14.71 $17.37 $19.98 Non-Residential $/HCF
Low Strength $11.43 $13.49 $15.52
Medium Strength $15.21 $17.95 $20.65
High Strength $21.08 $24.88 $28.62

6.I.a
Packet Pg. 107 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

1) All volumetric rates are shown in terms of dollars per hundred cubic feet ($/HCF). 2) All residential use charges are based upon their average winter consumption as calculated each May.
3) All non-residential use charges, where there is no dedicated wastewater flow meter, are based upon billed unit of water within the same monthly billing period. 4) Residential Flat Rate fees apply, per dwelling unit, to dwellings connected to the City’s sewer system without a City metered water service.
5) Non-Residential customers taking City wastewater services but not metered City water service will be assigned monthly fixed charges and usage fees based upon similar businesses.

C. Classification of Low, Medium, and High Strength Non-Residential Customers is per the table below.

Use Type Low Medium High
Auto repair / Service X
Bakery (production) X
Bar / Tavern / Cocktail Lounge (with prepackaged foods and snacks only)
X
Bar / Tavern / Cocktail Lounge (with food preparation or commercial kitchen)
X
Barber / Beauty salon X
Brewery, Distillery, and Beverage Production X
Coffee Shop (with prepackaged foods and snacks only) X
Cannabis Retail Dispensary (no production or processing) X Cannabis and CBD Processing X
Car wash X
Ceramics manufacturing X
Church / Lodge (no food preparation or commercial kitchen) X Church / Lodge (with food preparation or commercial kitchen) X Commercial kitchen (Including schools, catering, grange, meeting hall)
X
Community facility (without food preparation or commercial kitchen)
X
Community facility (with food preparation or commercial kitchen) X Creamery (production) X
Daycare Facility X
Food Manufacturing X
Gas station (no food preparation, snack bar, or commercial kitchen)
X
Gas station (with food preparation/snack bar) X

6.I.a
Packet Pg. 108 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Ordinance No.

Gas Station (with commercial kitchen or restaurant) X
Grocery (without food preparation or commercial kitchen) X Grocery (with food preparation or commercial kitchen) X Health club / Spa (no food preparation or commercial kitchen) X Health club / Spa (with food preparation/snack bar) X
Hospital / Residential care facility (no food preparation or commercial kitchen)
X
Hospital / Residential care facility (with food preparation or commercial kitchen)
X
Hotel / Motel (with food preparation, commercial kitchen, or restaurant)
X
Hotel / Motel / Residential visitor lodging (no restaurant or commercial kitchen)
X
Ice cream / Frozen yogurt X
Laundromat / Dry cleaners X
Medical / Dental office X
Mortuary X
Movie theater (without food preparation or commercial kitchen) X Movie theater (with food preparation or commercial kitchen) X Office X
Park X
Print Shop X
Restaurant/Café X
Retail X
School (no commercial kitchen) X
School (with food preparation or commercial kitchen) X
Warehouse (dry storage) X
Wine tasting (with prepackaged foods and snacks only) X Wine tasting (with food preparation or commercial kitchen) X Winery (production) X
1) For business with wastewater discharges that do not fit within the generalized categories above, have significant pre-treatment of wastewater, or have routine and validated measurements of total suspended solids (TSS) and biochemical oxygen demand (BOD) the City Engineer will assign a wastewater strength classification with the issuance of an industrial discharge permit.

6.I.a
Packet Pg. 109 Attachment: Ordinance (4480 : 2nd Reading of Water Wastewater Rates) Water and Wastewater Cost of Service
and Rate Design Study
City of
Healdsburg
Study Report // March 22, 2024
Corrected May 14, 2024

6.I.b
Packet Pg. 110 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2024 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY March 22, 2024
Mr. Terry Crowley
Public Works Director
City of Healdsburg
401 Grove Street
Healdsburg, CA 95448
Subject: Water and Wastewater Rate Study
Dear Mr. Crowley,
Raftelis is pleased to provide this Water and Wastewater Rate Study to the City of Healdsburg. The overall purpose of the study was to develop three years of proposed rates for the City’s Water and Wastewater Enterprises for implementation in Fiscal Year (FY) 2024-25 through FY 2026-27. The proposed utility rates were developed following industry standard rate methodologies and in conjunction with the City’s legal counsel to ensure that rates are fair, cost-justified, and aligned with the requirements of California’s Proposition 218.

The primary objectives of the study were to:
» Develop a long-range financial plan for both the City’s Water and Wastewater Enterprises to ensure financial sufficiency in recovering operating costs, funding long-term capital needs, and maintaining prudent reserves. » Conduct water and wastewater cost of service analyses to ensure a nexus between proposed rates and the cost to provide services to customers.
» Evaluate rate alternatives and proposed rate structure modifications to better align with community values and the City’s policy objectives
» Develop three years of water and wastewater rates in alignment with Proposition 218 requirements. » Document the details of the study within a Rate Study report, to support the City’s administrative record This Report outlines the study background, results, and recommendations related to the development of utility financial plans, cost of service analyses, and proposed rates. It has been a pleasure working with you and we thank you and other City staff for the support provided to Raftelis during this study.

Sincerely,
Kevin Kostiuk
Senior Manager

6.I.b
Packet Pg. 111 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) Table of Contents

1. EXECUTIVE SUMMARY................................................................................................................... 1

1.1. Study Overview ................................................................................................................................. 1

1.2. Rate Study Process ........................................................................................................................... 1

1.3. Proposed Water Financial Plan ......................................................................................................... 2

1.4. Proposed Water Rates ...................................................................................................................... 7

1.5. Water Bill Impacts ............................................................................................................................ 10

1.6. Proposed Wastewater Financial Plan ............................................................................................. 10

1.7. Proposed Wastewater Rates ........................................................................................................... 15

1.8. Wastewater Bill Impacts .................................................................................................................. 17

2. INTRODUCTION ............................................................................................................................. 18

2.1. Agency Overview ............................................................................................................................. 18

2.2. Study Overview ............................................................................................................................... 18

3. LEGAL REQUIREMENTS AND RATE SETTING METHODOLOGY ............................................ 20

3.1. Legal Requirements ........................................................................................................................ 20

3.2. Rate-Setting Methodology ............................................................................................................... 20

4. WATER RATE STUDY ................................................................................................................... 22

4.1. Key Inputs and Assumptions ........................................................................................................... 22

4.1.1. Current Water Rates ........................................................................................................................ 22

4.1.2. Water Enterprise Financial Assumptions ........................................................................................ 23

4.1.3. Projected Water Service Connections ............................................................................................ 24

4.1.4. Projected Water Sales ..................................................................................................................... 25

4.2. Water Financial Plan ....................................................................................................................... 25

4.2.1. Water Enterprise Revenue under Current Rates ............................................................................ 25

4.2.2. Water Enterprise Operations & Maintenance Expenses ................................................................ 26

4.2.3. Water Enterprise Debt ..................................................................................................................... 27

4.2.4. Water Enterprise Capital Improvement Program ............................................................................ 27

4.2.5. Water Enterprise Financial Policies ................................................................................................ 29

4.2.6. Status Quo Water Financial Plan .................................................................................................... 31

4.2.7. Proposed Water Financial Plan ....................................................................................................... 32

4.3. Proposed Water Rate Structure Modifications ................................................................................ 38

4.4. Water Cost of Service Analysis ....................................................................................................... 39

4.4.1. Methodology .................................................................................................................................... 39

4.4.2. Water Rate Revenue Requirement ................................................................................................. 40

4.4.3. Water System Peaking Factors ....................................................................................................... 41

6.I.b
Packet Pg. 112 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2024 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY

4.4.4. Functionalization and Allocation of Expenses ................................................................................. 42

4.4.5. Water Enterprise O&M Expense Allocation .................................................................................... 44

4.4.6. Water Enterprise Capital Allocation ................................................................................................ 45

4.4.7. Peaking Units of Service ................................................................................................................. 47

4.4.8. Development of unit costs ............................................................................................................... 49

4.4.9. Water Cost Allocation to Customer Classes ................................................................................... 50

4.5. Proposed Water Rates .................................................................................................................... 51

4.5.1. Water Service Charges (Test Year FY 2024-25) ............................................................................ 51

4.5.2. Water Volume Rates (Test Year) .................................................................................................... 52

5. WASTEWATER RATE STUDY ...................................................................................................... 56

5.1. Key Inputs and Assumptions ........................................................................................................... 56

5.1.1. Current Wastewater Rates .............................................................................................................. 57

5.1.2. Wastewater Enterprise Financial Assumptions ............................................................................... 57

5.1.3. Projected Wastewater Billing Units of Service ................................................................................ 58

5.2. Wastewater Financial Plan .............................................................................................................. 59

5.2.1. Wastewater Enterprise Revenue under Current Rates .................................................................. 59

5.2.2. Wastewater Enterprise Operations & Maintenance Expenses ....................................................... 60

5.2.3. Wastewater Enterprise Debt ........................................................................................................... 61

5.2.4. Wastewater Enterprise Capital Improvement Plan ......................................................................... 61

5.2.5. Wastewater Enterprise Financial Policies ....................................................................................... 63

5.2.6. Status Quo Wastewater Financial Plan ........................................................................................... 64

5.2.7. Proposed Wastewater Financial Plan ............................................................................................. 66

5.3. Wastewater Cost-of-Service Analysis ............................................................................................. 71

5.3.1. Methodology .................................................................................................................................... 71

5.3.2. Wastewater Rate Revenue Requirement ........................................................................................ 72

5.3.3. Functionalization and Allocation of Expenses ................................................................................. 73

5.3.4. Wastewater Enterprise O&M Expense Allocation ........................................................................... 74

5.3.5. Wastewater Enterprise Capital Allocation ....................................................................................... 75

5.3.6. ALLOCation of revenue requirement to cost components .............................................................. 76

5.3.7. Plant Mass Balance Analysis .......................................................................................................... 77

5.3.8. Wastewater Unit Costs .................................................................................................................... 78

5.3.9. Wastewater Cost Allocation to Customer Classes .......................................................................... 79

5.4. Proposed Wastewater Rates ........................................................................................................... 80

5.4.1. Proposed Wastewater Rates (Test Year) ....................................................................................... 80

6. CUSTOMER BILL IMPACTS .......................................................................................................... 83

6.1. Combined Water & Wastewater Monthly Bill Impacts, SFR ........................................................... 83

6.I.b
Packet Pg. 113 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) List of Tables
Table 1-1: Proposed Water Revenue Adjustments ...................................................................................................... 2 Table 1-2: Current and Proposed Water Use Rate Structures ..................................................................................... 8 Table 1-3: Proposed Three-Year Water Rates Schedule ............................................................................................. 9 Table 1-4: Proposed Wastewater Revenue Adjustments ........................................................................................... 11 Table 1-5: Proposed Three-Year Wastewater Rate Schedule ................................................................................... 16 Table 4-1: Current Water Rates Schedule .................................................................................................................. 23 Table 4-2: Water Enterprise Inflationary Assumptions ............................................................................................... 24 Table 4-3: Current Metered Water Connections ......................................................................................................... 24 Table 4-4: Projected Water Demand .......................................................................................................................... 25 Table 4-5: Projected Revenue from Existing Rates .................................................................................................... 25 Table 4-6: Other Water Enterprise Revenues ............................................................................................................ 26 Table 4-7: Summary of Projected Water Enterprise Revenues (Current Rates) ........................................................ 26 Table 4-8: Projected Water Enterprise O&M Expenses ............................................................................................. 27 Table 4-9: Water Enterprise Debt Service .................................................................................................................. 27 Table 4-10: Water Enterprise Five-Year Capital Improvement Plan .......................................................................... 28 Table 4-11: Water Enterprise Capital Improvement Plan, by Funding Source ........................................................... 29 Table 4-12: Water Enterprise Financial Policies ......................................................................................................... 30 Table 4-13: Projected Water Enterprise Reserve Targets .......................................................................................... 30 Table 4-14: Water Enterprise Cash Flow – Status Quo Financial Plan ...................................................................... 31 Table 4-15: Water Enterprise Pro Forma - Status Quo Financial Plan....................................................................... 32 Table 4-16: Proposed Water Enterprise Revenue Adjustments ................................................................................. 33 Table 4-17: Water Enterprise Cash Flow – Proposed Financial Plan ........................................................................ 33 Table 4-18: Water Enterprise Pro Forma - Proposed Financial Plan ......................................................................... 34 Table 4-19: Proposed Water Rate Structure Changes ............................................................................................... 39 Table 4-20: Projected Water Use by Class and Tier – Test Year ............................................................................... 39 Table 4-21: Water Enterprise Rate Revenue Requirement (Test Year) ..................................................................... 41 Table 4-22: Water System Peaking Factors and Allocations ..................................................................................... 42 Table 4-23: Allocation of Functional Categories to Water Cost Causation Components ........................................... 43 Table 4-24: Water Enterprise O&M Expenses by Functional Category ..................................................................... 44 Table 4-25: Allocation of Water Enterprise O&M Expenses to Cost Causation Components ................................... 44 Table 4-26: Summary of Water Enterprise Capital Assets by Functional Category ................................................... 45 Table 4-27: Allocation of Functionalized Water Capital Assets to Cost Causation Components ............................... 45 Table 4-28: Peaking Units of Service by Customer Class .......................................................................................... 47 Table 4-29: Fireflow Analysis ...................................................................................................................................... 48 Table 4-30: Allocation of Peaking Units to Fire Protection ......................................................................................... 48 Table 4-31: Summary of Total Customer Demand Peaking Units .............................................................................. 48 Table 4-32: Allocation of Revenue Requirement to Cost Components ...................................................................... 49 Table 4-33: Derivation of Cost-of-Service Unit Rates ................................................................................................. 49 Table 4-34: Recovery of Cost Causation Components by Charge Type ................................................................... 50 Table 4-35: Cost to Serve by Water Customer Class ................................................................................................. 50 Table 4-36: Equivalent Water Meters (Test Year) ...................................................................................................... 51 Table 4-37: Water Service Charge Calculation (Test Year) ....................................................................................... 52 Table 4-38: Water Service Charges Calculation (Test Year) ..................................................................................... 52 Table 4-39: Calculation of Supply Rates by Customer Class and Tier....................................................................... 52 Table 4-40: Calculation of Base Delivery Rate ........................................................................................................... 53 Table 4-41: Calculation of Peaking Unit Rates ........................................................................................................... 53 Table 4-42: Calculation of Conservation Unit Rates ................................................................................................... 54 Table 4-43: Water Use Rates Calculation (Test Year) ............................................................................................... 54

6.I.b
Packet Pg. 114 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2024 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY Table 4-44: Proposed Three-Year Water Rates Schedule ......................................................................................... 55 Table 5-1: Current Wastewater Rates Schedule ........................................................................................................ 57 Table 5-2: Wastewater Enterprise Inflationary Assumptions ...................................................................................... 58 Table 5-3: Current Wastewater Enterprise Connections ............................................................................................ 58 Table 5-4: Estimated Non-Residential Wastewater Flows (hcf), Existing Rate Structure .......................................... 59 Table 5-5: Projected Rate Revenues with Current Wastewater Rates ...................................................................... 59 Table 5-6: Other Wastewater Enterprise Revenues ................................................................................................... 60 Table 5-7: Projected Wastewater Enterprise Revenues Under Current Rates .......................................................... 60 Table 5-8: Projected Wastewater Enterprise O&M Expenses .................................................................................... 60 Table 5-9: Wastewater Enterprise Debt Service......................................................................................................... 61 Table 5-10: Wastewater Enterprise Capital Improvement Plan .................................................................................. 62 Table 5-11: Wastewater Enterprise Capital Improvement Plan, by Funding Source ................................................. 63 Table 5-12: Wastewater Enterprise Financial Policies ............................................................................................... 64 Table 5-13: Projected Wastewater Enterprise Reserve Targets ................................................................................ 64 Table 5-14: Wastewater Cash Flow – Status Quo Financial Plan .............................................................................. 65 Table 5-15: Wastewater Enterprise Pro Forma – Status Quo Financial Plan ............................................................ 66 Table 5-16: Proposed Wastewater Enterprise Revenue Adjustments ....................................................................... 66 Table 5-17: Wastewater Cash Flow – Proposed Financial Plan ................................................................................ 67 Table 5-18: Wastewater Enterprise Pro Forma – Proposed Financial Plan ............................................................... 68 Table 5-19: Wastewater Rate Revenue Requirement (Test Year) ............................................................................. 72 Table 5-20: Allocation of Functional Categories to Wastewater Cost Causation Components ................................. 74 Table 5-21: Wastewater Enterprise O&M Expenses – Allocation to Cost Causation Components ........................... 74 Table 5-22: Wastewater Enterprise Capital Assets by Functional Category .............................................................. 75 Table 5-23: Functionalized Wastewater Capital Assets Allocation to Cost Causation Components ......................... 75 Table 5-24: Allocation of Test Year Revenue Requirement to Cost Causation Components .................................... 76 Table 5-25: Mass Balance Analysis ............................................................................................................................ 77 Table 5-26: Wastewater Unit Costs Calculation (Test Year) ...................................................................................... 78 Table 5-27: Wastewater Cost Allocation to Customer Classes (Test Year) ............................................................... 79 Table 5-28: Proposed Wastewater Rate Calculation (Test Year) ............................................................................... 81 Table 5-29: Proposed Three-Year Wastewater Rates Schedule ............................................................................... 82 Table 6-1: FY 2023-24 Single Family Residential Bill Impacts (7 HCF water, 4 HCF AWC) ..................................... 83

6.I.b
Packet Pg. 115 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) List of Figures
Figure 1-1: Water Enterprise Capital Improvement Plan .............................................................................................. 4 Figure 1-2: Water Enterprise Financial Plan - Proposed vs. Status Quo ..................................................................... 5 Figure 1-3: Water Enterprise Projected Ending Cash Balances ................................................................................... 6 Figure 1-4: Water Enterprise Projected Debt Coverage ............................................................................................... 7 Figure 1-5: Single Family Residential Monthly Water Bill Impacts (FY 2024-25) ....................................................... 10 Figure 1-6: Wastewater Enterprise Capital Improvement Plan .................................................................................. 12 Figure 1-7: Wastewater Enterprise Financial Plan - Proposed vs. Status Quo .......................................................... 13 Figure 1-8: Wastewater Enterprise Projected Ending Cash Balances ....................................................................... 14 Figure 1-9: Wastewater Enterprise Projected Debt Coverage ................................................................................... 15 Figure 1-10: Single Family Residential Monthly Wastewater Bill Impacts (FY 2024-25) ........................................... 17 Figure 11: Historical Annual Water Usage (Acre Feet) .............................................................................................. 19 Figure 4-1: Water Enterprise Capital Improvement Plan ............................................................................................ 29 Figure 4-2: Proposed Water Financial Plan – Projected Debt Coverage ................................................................... 35 Figure 4-3: Proposed Water Financial Plan – Projected Ending Cash Balances ....................................................... 36 Figure 4-4: Proposed vs. Status Quo Water Financial Plan ....................................................................................... 37 Figure 5-1: Wastewater Enterprise Capital Improvement Plan .................................................................................. 63 Figure 5-2: Proposed Wastewater Financial Plan – Projected Debt Coverage .......................................................... 69 Figure 5-3: Proposed Wastewater Financial Plan – Projected Ending Cash Balances ............................................. 70 Figure 5-4: Proposed vs. Status Quo Wastewater Enterprise Financial Plan ............................................................ 71

6.I.b
Packet Pg. 116 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2024 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY List of Abbreviations
AF: Acre-feet
AFY: Acre-feet per year
AWWA: American Water Works Association
BOD: Biological Oxygen Demand
CIP: Capital Improvement Plan
City: City of Healdsburg
COS: Cost of Service
CPI: Consumer Price Index
CY: Calendar Yar
FY: Fiscal year
GPCD: Gallons per capita per day
GPM: Gallons per minute
HCF: One hundred cubic feet
K: Thousand
Lbs: Pounds
M: Million
Manual M1: American Water Works Association’s Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices - M1 Seventh Edition
Max Day: Maximum day water demand
Max Hour: Maximum hour water demand
MG: Million gallons
Mg/L: Milligrams per Liter
MGD: Million gallons per day
NPDES Permit: National Pollutant Discharge Elimination System Permit O&M: Operations and maintenance
PPM: Parts per million
R&R: Repair and replacement
RCLD: Replacement cost less depreciation
SS: Suspended Solids
Study Period: the rate-setting period of this study which extends through fiscal year 2027-28 WEF: Water Environment Federation
WWTP: Wastewater treatment plant

6.I.b
Packet Pg. 117 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) This page intentionally left blank to facilitate two-sided printing.

6.I.b
Packet Pg. 118 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates)

6.I.b
Packet Pg. 119 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 1

1.Executive Summary

1.1.Study Overview
Public water and wastewater utilities in California typically perform a Cost-of-Service analysis every three to five years to ensure that customers are appropriately charged for service commensurate with the cost to provide service.

The City of Healdsburg last conducted a water and wastewater cost of service study in 2022, which established proposed rates over a five-year period. However, the study did not anticipate recent historic inflation and the significant and sustained water conservation seen through the end of 2022 and into 2023. The City of Healdsburg (City) engaged Raftelis to conduct a water and wastewater cost of service study to develop a long-range financial plan and establish a proposed three-year schedule of water and wastewater rates through FY 2026-27. Note that proposed rates cannot be implemented until formally adopted by City Council after a public hearing, and absent a majority protest by parcels served by the City. Proposition 218 requires that the City customers mail a public hearing notice detailing proposed rate changes no fewer than 45 days before the public hearing.

The major objectives of this study are to:
» Develop a long-range financial plan for both the City’s Water and Wastewater Enterprises to ensure financial sufficiency in recovering operating costs, funding long-term capital needs, and maintaining prudent reserves. » Conduct water and wastewater cost of service analyses to ensure a nexus between proposed rates and the cost to provide services to customers.
» Evaluate rate alternatives and proposed rate structure modifications to better align with community values and the City’s policy objectives
» Develop three years of water and wastewater rates in alignment with Proposition 218 requirements. » Document the details of the study within a Rate Study report, to support the City’s administrative record

1.2.Rate Study Process
This study was conducted using industry-standard principles outlined by the American Water Works Association’s (AWWA) Manual M1 and the Water Environment Federation’s (WEF) Financing and Charges for Wastewater Systems. The overall process outlined below applies to the development of both water and wastewater rates.

1. Financial Plan: Develop cash flow projections for the Water and Wastewater Enterprise to determine the amount of revenue required from water and wastewater rates.

2. Cost of Service Analysis: Allocate costs to system components and then to various customer classes based on the costs incurred and user characteristics of each.

3. Rate Design: Develop rates that generate sufficient revenues based on the results of the financial plan and cost of service analyses and that communicate the policy preferences of the agency, maintaining that rates are cost-justified.

4. Administrative Record Preparation: Develop an administrative record (Study report) to document the results of the rate study.

5. Rate Adoption: Proposed rates may be adopted by City Council only after holding a public hearing in accordance with the procedural requirements of Proposition 218.

6.I.b
Packet Pg. 120 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2 CITY OF HEALDSBURG

1.3.Proposed Water Financial Plan
Raftelis conducted a status quo cash flow analysis to evaluate whether existing water rates adequately fund the Water Enterprise’s various expenses over a long-range planning period. Annual projections of revenues, O&M costs, debt service payments, and capital expenditures through FY 2032-33 were developed with City staff. Raftelis projects that with no rate increases over the five-year study period, the Water Enterprise’s reserves will quickly turn negative and fail to meet minimum debt coverage requirements in all years. This analysis demonstrates a clear need for revenue adjustments (i.e. gross water rate revenue increases relative to existing rate revenues). Raftelis worked with City staff to develop the following proposed revenue adjustments over the five-year study period, with proposed rates for adoption for the first three years only (see Table 1-1).

The proposed rates are predicated on a shift in current adopted reserve policy outlined in the 2022 rate study.

Failure to adopt the recommended changes may result in higher projected rates to adhere to the existing minimum coverage requirement. Raftelis recommends transitioning from a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes and instead utilizing them to complete preemptive capital replacement and fund maintenance costs in a manner that stabilizes rates support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. As a result, the proposed financial plan fully funds the operating reserve, but it does not fully fund the rate stabilization reserve. When the City undertakes the next rate study, it is recommended that the City consider fully funding the rate stabilization reserve in the financial plan.

Table 1-1: Proposed Water Revenue Adjustments

PROPOSED INCREASE FUTURE INCREASES
Fiscal Year FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Effective Date July 1, 2024 July 1, 2025 July 1, 2026 July 1, 2027 July 1, 2028 Revenue Adjustment 21.0% 20.0% 13.0% 12.0% 12.0%
Key factors influencing the need for proposed revenue adjustments include:
» Cost inflation: Operating costs continue to increase year over year due to general inflationary pressures with higher increases projected for power, labor, and water supply. » Reduction in baseline water demand: Following two multi-year droughts and associated mandatory conservation and messaging, the City has continued to experience lower overall water consumption relative to historical demands. While conservation is necessary in ensuring reliable long-term water supplies, utility costs must be recovered and reduced water demands generally mean increased rate pressure.
» Planned capital expenditures: Adjusted for inflation, the Water Enterprise has over $28 M in planned CIP in the next five years. Many projects in the long-term capital plan have been deferred in prior studies due to financial constraints. Continued deferral will challenge overall system reliability and cause larger future rate increases. The City’s utilities have a combined 120 miles of utility pipeline, and a third of those pipes are over 50 years old, resulting in an average of two water service repairs per week. Rate revenues need to be sufficient to execute these projects with cash, future external borrowing (debt proceeds), or a combination of the two. Additionally, the City is facing increasing regulatory mandates to improve water filtration. These mandates include filtering for cryptosporidium and the potential treatment of Per- and Polyfluorinated Substances (PFAS) which requires additional CIP investment. » Cash reserves: Utilities must have sufficient cash on hand to provide for working capital (paying routine expenses), to mitigate fluctuations in costs, and to mitigate risk, whether from seasonality of revenues and

6.I.b
Packet Pg. 121 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 3 expenses or the risk that comes with providing services that rely on extensive and specialized infrastructure. Recent inflationary pressure coupled with declines in water sales revenues has resulted in a drawdown of operating reserves. Revenue adjustments will help to ensure that the Water Enterprise can maintain minimum operating reserve policy targets to provide sufficient cash flow and mitigate system risk.
» Debt Coverage: The Water Enterprise fund has debt service coverage requirements as a condition of past external borrowing. Proposed rates ensure the Water Enterprise can achieve coverage on existing debt and have sufficient capacity to qualify for future credit extensions.

In this Study, wastewater rates are proposed for adoption for the first three fiscal years (FY25-FY27) only.

However, Raftelis developed a long-range financial plan to project revenues and expenses over a 10-year period (current fiscal year through FY 2033). For planning purposes and to provide full transparency on the trajectory of future revenue increases, the following figures present 10 years of projections. In addition to the three years of proposed changes and two years of potential future changes (five years total) shown in Table 1-4, an additional four years of future projected increases for wastewater are required to fully recover projected operating and capital costs, maintain debt service coverage above minimum, and maintain operating cash reserves above minimum levels during the 10 year financial planning period. Specifically, these outer year future increases are 5% in FY 2030 and 3.5% in FY 2031-2033. These projections will be revisited as part of future rate studies and are subject to change based on new information, changes in revenues and expenses, City policies, and regulatory requirements.

However, if the predicted future rate increases are not adopted and timely implemented, then cash flows will likely be less than currently depicted.

6.I.b
Packet Pg. 122 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 4 CITY OF HEALDSBURG
Figure 1-1 shows the proposed CIP financing plan over the long-range planning period. The City intends to fund future CIP costs through a combination of cash and future debt proceeds. Future debt proceeds are for planning purposes only and would only be required if the City is required to expend funds on a series of projects related to PFAS.

Figure 1-1: Water Enterprise Capital Improvement Plan

6.I.b
Packet Pg. 123 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 5 Figure 1-2 shows the proposed versus status quo Water Enterprise operating financial plan. Revenues under the proposed financial plan and status quo financial plan are represented by the black and blue lines, respectively.

Revenue requirements including O&M expenses, debt service, and cash reserve funding (including for CIP) are represented by the various stacked bars. Revenue adjustments (i.e., gross rate revenue increases) are required to generate additional revenue to fully recover O&M expenses, CIP expenditures, debt service payments, and reserve funding over the study period.

Figure 1-2: Water Enterprise Financial Plan - Proposed vs. Status Quo

6.I.b
Packet Pg. 124 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 6 CITY OF HEALDSBURG
Figure 1-3 shows the Water Enterprise’s projected fiscal year-end cash balance under the proposed financial plan.

The light blue bars indicate the ending balance on June 30 of each year. The minimum operating reserve target is represented by the orange line. The minimum operating reserve is 90 days of operating expenses (including O&M and debt service). The proposed revenue increases shown in Table 1-1 will allow the City to increase operating reserve funding beginning in FY 2024-25, such that the City’s operating reserve funding will meet its minimum reserve requirement throughout the long-range planning period.

Figure 1-3: Water Enterprise Projected Ending Cash Balances

6.I.b
Packet Pg. 125 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 7 Figure 1-4 shows projected debt coverage (blue line) relative to the debt coverage minimum requirement (gray line) over the planning period. Debt coverage will increase significantly with the proposed revenue increases shown in Table 1-1. The proposed rate increases will allow the City to meet its minimum debt coverage requirement throughout the study period while planning to borrow for future projects. Failure to meet minimum debt service coverage minimums could result in a downgrade of credit rating, higher costs of future borrowing, or even denial of credit.

Figure 1-4: Water Enterprise Projected Debt Coverage

1.4.Proposed Water Rates
The City of Healdsburg’s existing water rate structure consists of fixed Water Service Charges (based on meter size or dwelling units) and variable Water Volume Rates (per hundred cubic feet [HCF] of water delivered). Raftelis worked closely with City staff and the City’s legal counsel to evaluate potential changes to the existing water rate structure. The following changes are proposed:
» Water Use Rates
o Residential Tiered Water Rates: The Study recommends that the City introduce a three-tiered rate structure for Residential water customers including Single-Family Residential (SFR) and Multi-Family Residential (MFR). MFR customers will receive tier allotments for each dwelling unit served. Tier 1 is defined as the first 5 units of water (HCF) per monthly billing period, reflecting average winter usage (January -March) for a SFR customer rounded up to the nearest whole number. Tier 2 encompasses usage greater than 5 and up to and including 10 HCF,

6.I.b
Packet Pg. 126 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 8 CITY OF HEALDSBURG
representing summer peak (75th percentile in the July – September periods) demands of SFR customers rounded up to the nearest whole number. Tier 3 comprises of all units of water usage exceeding 10 HCF. Residential users are a homogenous customer class with similar indoor needs for health and sanitation, similar outdoor irrigation needs, and similar seasonality in these demand patterns. It is therefore appropriate to tier this class of customers. The proposed monthly allotments for residential customers are shown below in Table 1-2 and reflect actual demand patterns of City water users. Note that non-residential customers will maintain a uniform rate structure.
o All Other Classes: The Study recommends that all other customer classes maintain a uniform rate structure, however, going forward each class will have a distinct uniform rate based on their specific demand characteristics. The new rates by customer class include those customers designated as Commercial, Industrial, and Landscape Irrigation. Non-residential classes have highly varying demand patterns within each class based on the type of business, seasonality, and/or transient effects. Peaking costs, also referred to as extra capacity costs, are costs associated with higher demand patterns. These costs are allocated to each customer class based on their specific class demand patterns and calculating peaking. For this reason, uniform rates are proposed for each of the non-residential classes.
» Monthly Service Charges: The Study recommends harmonizing the fixed service charges across user classes. This change will align Residential customers with a metered connection of a specific size with Non-Residential customers with the same size meter. The proposed structure relies on meter size alone to distinguish the “class” of customer. This change acknowledges that meter capacity, not customer classification, reflects the best estimate of the costs imposed by a user on the water system that are recovered through fixed charges.

Table 1-2: Current and Proposed Water Use Rate Structures Description Current Structure Proposed Structure
Residential (SFR/MFR)
Tier 1 Uniform Water Use Rate
(All Classes)
0-5 HCF
Tier 2 Uniform Water Use Rate
(All Classes)
6-10 HCF
Tier 3 Uniform Water Use Rate
(All Classes)
>10 HCF
Non-Residential Classes
Commercial Uniform Water Use Rate
(All Classes)
Uniform Water Use Rate,
by Class
Industrial Uniform Water Use Rate
(All Classes)
Uniform Water Use Rate,
by Class
Landscape Irrigation Uniform Water Use Rate
(All Classes)
Uniform Water Use Rate,
by Class

6.I.b
Packet Pg. 127 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 9 Table 1-3 the shows the three years of proposed Water Service Charges and Water Volume Rates (through FY 2026-27). All charges and tier allotments are shown in monthly terms and all rates are rounded up to the nearest penny. All volumetric rates are shown in terms of dollars per hundred cubic feet ($/HCF). All rates are assumed to be implemented at the beginning of each fiscal year and in effect on or after July 1.

Table 1-3: Proposed Three-Year Water Rates Schedule
Description Current FY 2025 FY 2026 FY 2027
Residential Fixed Monthly Service Charge
Single Family $28.61 By Meter Size By Meter Size By Meter Size Single Family + ADU (per DU) $21.84 By Meter Size By Meter Size By Meter Size Multi-Family (Per DU) $17.01 By Meter Size By Meter Size By Meter Size Fixed Monthly Service Charges
Up to 1" $45.26 $41.34 $49.61 $56.06
1 1/2" $86.90 $77.94 $93.53 $105.69
2" $136.86 $121.86 $146.24 $165.26
3" $253.46 $238.98 $286.78 $324.07
4" $419.91 $370.75 $444.90 $502.74
6" $1,127.75 $736.76 $884.12 $999.06
Residential (Single Family & Multi-Family)
Tier 1 (0-5 HCF) $6.48 $6.48 $7.78 $8.80
Tier 2 (6-10 HCF) $6.48 $8.41 $10.10 $11.42
Tier 3 >10 HCF $6.48 $10.80 $12.96 $14.65
Non-Residential Classes
Commercial $6.48 $7.61 $9.14 $10.33
Industrial $6.48 $9.49 $11.39 $12.88
Landscape $6.48 $11.06 $13.28 $15.01
Riverview HOA1 $1.59 $1.93 $2.32 $2.63
1 Only the volumetric rate is applicable to Riverview HOA under the terms of the 1997 order of condemnation. HOA Riverview pays a fixed monthly service charge by meter size that increases based schedule.

6.I.b
Packet Pg. 128 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 10 CITY OF HEALDSBURG

1.5. Water Bill Impacts
Figure 1-5 shows sample monthly water bills for single family residential customers at varying levels of water use under both current and proposed FY 2024-25 rates. Note that actual bill impacts will vary based on individual water use; however, the values shown below are based on low, high, and typical volumes for single family residential customers in the City of Healdsburg.

Figure 1-5: Single Family Residential Monthly Water Bill Impacts (FY 2024-25)

1.6.Proposed Wastewater Financial Plan
Raftelis conducted a status quo cash flow analysis to evaluate whether existing wastewater rates adequately fund the Wastewater Enterprise’s various expenses over the long-range planning period. Annual projections of revenues, O&M expenses, debt service payments, and capital expenditures through FY 2032-33 were developed with City staff. Raftelis projects that with no rate increases the Wastewater Enterprise’s reserves will quickly become negative and fail to meet minimum debt coverage. This demonstrates a clear need for revenue adjustments (i.e. gross wastewater rate revenue increases relative to existing rate revenues). Raftelis worked with City staff to develop the following proposed revenue adjustments over the five-year study period, with proposed rates for adoption for the first three years only (see Table 1-4).

The proposed rates are predicated on a shift in current adopted reserve policy outlined in the 2022 rate study.

Failure to adopt the recommended changes may result in higher projected rates to adhere to the existing minimum coverage requirement. Raftelis recommends transitioning from a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes and instead utilizing them to complete preemptive capital replacement and fund maintenance costs in a manner that stabilizes rates support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. As a result, the proposed financial plan fully funds the operating reserve, but it does not fully

6.I.b
Packet Pg. 129 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 11 fund the rate stabilization reserve. When the City undertakes the next rate study, it is recommended that the City consider fully funding the rate stabilization reserve in the financial plan.

Table 1-4: Proposed Wastewater Revenue Adjustments

PROPOSED INCREASES FUTURE INCREASES
Fiscal Year FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Effective Date July 1, 2024 July 1, 2025 July 1, 2026 July 1, 2027 July 1, 2028 Revenue Adjustment 18.0% 18.0% 15.0% 9.0% 5.0%
Key factors influencing the need for proposed Wastewater Enterprise revenue adjustments include:
» Cost inflation: Operating costs continue to increase year over year due to general inflationary pressures with higher increases projected for power, labor, chemicals, and treatment costs among others. » Planned capital expenditures: Adjusted for inflation, the Wastewater Enterprise has over $15 M in CIP in the next five years. As with the Water Enterprise, many projects in the long-term capital plan have been deferred in prior studies due to financial constraints. Continued deferral will challenge overall system reliability and cause larger future rate increases. The City’s utilities have a combined 120 miles of utility pipeline, and a third of those pipes are over 50 years old. Rate revenues need to be sufficient to execute these projects and . for planning purposes, all Wastewater Enterprise projects in this study are assumed to be cash funded.
» Cash reserves: Utilities must have sufficient cash on hand to provide for working capital (paying routine expenses), to mitigate fluctuations in costs, and to mitigate risk whether from seasonality of revenues and expenses or the risk that comes with providing services that rely on extensive and specialized infrastructure. Recent inflationary pressure on both operating and capital costs has resulted in a drawdown of operating reserves. Revenue adjustments will help to ensure that the Wastewater Enterprise can maintain minimum operating reserve policy targets to provide sufficient cash flow and mitigate system risk.
» Debt Coverage: The utility has debt obligations which require a minimum coverage policy. With the added revenues from proposed rate increases, the Enterprise will have sufficient funds to meet debt coverage requirements.

In this Study, wastewater rates are proposed for adoption for the first three fiscal years (FY25-FY27) only.

However, Raftelis developed a long-range financial plan to project revenues and expenses over a 10-year period (current fiscal year through FY 2033). For planning purposes and to provide full transparency on the trajectory of future revenue increases, the following figures present 10 years of projections. In addition to the three years of proposed changes and two years of future changes (five years total) shown in Table 1-4, an additional four years of future projected increases for wastewater are required to fully recover projected operating and capital costs, maintain debt service coverage above minimum, and maintain cash reserves above minimum levels during the 10 year financial planning period. Specifically, these outer year future increases are 5% in FY 2030 and 3.5% in FY 2031-2033. These projections will be revisited as part of future rate studies and are subject to change based on new information, changes in revenues and expenses, City policies, and regulatory requirements. However, if the predicted future rate increases are not adopted and timely implemented, then cash flows will likely be less than currently depicted.

6.I.b
Packet Pg. 130 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 12 CITY OF HEALDSBURG
Figure 1-6 shows the proposed CIP financing plan over the study period. Primary wastewater CIP projects include lift station replacements and relocations as well as extensive sewer line replacement. The City plans to finance its wastewater CIP projects through cash.

Figure 1-6: Wastewater Enterprise Capital Improvement Plan

6.I.b
Packet Pg. 131 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 13 Figure 1-7 shows the proposed versus status quo Wastewater Enterprise operating financial plan. Revenues under the proposed financial plan and status quo financial plan are represented by the black and blue lines, respectively.

Revenue adjustments (i.e., gross rate revenue increases) are required to generate additional revenue to fully recover O&M expenses, CIP project costs, debt service payments, and reserve funding over the long-term planning period.

Figure 1-7: Wastewater Enterprise Financial Plan - Proposed vs. Status Quo

6.I.b
Packet Pg. 132 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 14 CITY OF HEALDSBURG
Figure 1-8 shows the Wastewater Enterprise’s projected fiscal year-end cash balance under the proposed financial plan. The light blue bars indicate the ending balance on June 30 of each year. The minimum operating reserve target is represented by the orange line. The minimum operating reserve is 90 days of operating expenses (including O&M and debt service). The proposed wastewater revenue increases shown in Table 1-4 will allow the City to increase operating reserve funding beginning in FY 2024-25, such that the City’s operating reserve funding will meet its minimum reserve requirement throughout the long-range planning period.

Figure 1-8: Wastewater Enterprise Projected Ending Cash Balances

6.I.b
Packet Pg. 133 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 15 Figure 1-9 shows projected debt coverage (blue line) relative to the debt coverage requirement (gray line) over the study period. The wastewater utility is projected to meet debt coverage requirements and does not intend to issue debt throughout the long-range planning period.

Figure 1-9: Wastewater Enterprise Projected Debt Coverage

1.7.Proposed Wastewater Rates
The City of Healdsburg’s current fixed wastewater rate structure consists of Fixed Service Charges per dwelling unit for residential customers, and charges by meter size for non-residential customers. All customers are also charged a per unit (HCF) charge based on estimated wastewater flows and the strength of the flows. Residential customers’ variable charge units are based on their average winter consumption (AWC) whereas Non-Residential customers are charged per billed unit of water.

Proposed rate structure modifications include:
» Retire the SFR + ADU Fixed Charge: any SFR customer with two or more dwelling units per parcel will be treated as a MFR customer and subject to the multifamily charge. » Non-Residential Meter-Based Fixed Charges: This study maintains the existing non-residential fixed charge structure by meter size, however, the ratios between the meter sizes are proposed to use calculated flow ratios rather than hydraulic capacity ratios. Raftelis used City of Healdsburg sewer user billing data to

6.I.b
Packet Pg. 134 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 16 CITY OF HEALDSBURG
calculate average flow per billing period at each meter size. This approach is more representative of wastewater generation by meter size versus ratios which reflect potential water demand by meter size.

Proposed wastewater rates reflect the revenue adjustments in Table 1-4, the updated wastewater cost of service analysis, and rate modifications discussed immediately above.

Table 1-5 shows proposed wastewater rates through FY 2026-27. All Fixed Charges shown are monthly and all volumetric rates are shown in terms of dollars per hundred cubic feet ($/HCF). All rates are rounded up to the nearest penny. All rates are assumed to be implemented at the beginning of each fiscal year on July 1.

Table 1-5: Proposed Three-Year Wastewater Rate Schedule Description Current FY 2025 FY 2026 FY 2027
Residential Service Charges ($/Month/Dwelling Unit)
Single Family Residential (SFR) $46.67 $51.33 $60.57 $69.66 SFR + ADU $31.95 N/A N/A N/A
Multi-Family Residential (MFR) $37.80 $36.94 $43.60 $50.14 Flat Rate (Sewer Only SFR) $104.01 $110.18 $130.02 $149.53 Non Residential Service Charges ($/Month/Meter)
Up to 1" $75.75 $83.88 $98.99 $113.84
1 1/2" $148.49 $243.37 $287.18 $330.26
2" $235.77 $396.68 $468.09 $538.31
3" $439.44 $1,279.52 $1,509.84 $1,736.32
4" $730.39 $1,405.05 $1,657.97 $1,906.67
6" $1,966.94 $1,405.05 $1,657.97 $1,906.67
Wastewater Usage Charges ($/HCF)
Residential (SFR/MFR) $11.47 $14.71 $17.37 $19.98
Non Residential
Low Strength $10.31 $11.43 $13.49 $15.52
Medium Strength $15.09 $15.21 $17.95 $20.65
High Strength $22.08 $21.08 $24.88 $28.62

6.I.b
Packet Pg. 135 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 17

1.8. Wastewater Bill Impacts
Figure 1-10 shows sample monthly wastewater bills for SFR customers at varying levels of AWC under both current rates and proposed FY 2024-25 rates. The average AWC for a residence in Healdsburg is approximately 4 HCF per month.

Figure 1-10: Single Family Residential Monthly Wastewater Bill Impacts (FY 2024-25)

6.I.b
Packet Pg. 136 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 18 CITY OF HEALDSBURG

2.Introduction

2.1.Agency Overview
The City of Healdsburg (City), situated 70 miles north of San Francisco on Highway 101 within Sonoma County, boasts a population of around 11,183 residents. The city lies at the meeting point of three valleys: Russian River, Dry Creek, and Alexander Valleys. The City provides water and wastewater services to the City’s residents and businesses, providing services to around 4,700 accounts. The City’s drinking-water is sourced from three well fields: tow located along the Russian River and one located on Dry Creek. The potable water distribution system comprises three pressure zones supplied by six storage reservoirs. Meanwhile, the wastewater collection system consists of an underground network of pipelines that gather and transport raw wastewater from individual user connections to the city's tertiary-level treatment plant, known as the City of Healdsburg's Wastewater Treatment, Reclamation, and Disposal Facility (WWTF). At this facility, all wastewater is treated to meet Title 22 recycled water standards before being discharged into a former gravel extraction pit, Basalt Point, where it percolates into the underlying groundwater basin, ultimately connecting to the Russian River.

2.2. Study Overview
Public water and wastewater utilities in California typically perform a Cost-of-Service analysis every three to five years to ensure that customers are appropriately charged for service commensurate with the cost to provide service.

The City of Healdsburg last conducted a water and wastewater cost of service study in 2022, which established proposed rates over a five-year period. However, the study did not anticipate recent historic inflation and the significant and sustained water conservation seen through the end of 2022 and into 2023. The City of Healdsburg (City) engaged Raftelis to conduct a water and wastewater cost of service study to develop a long-range financial plan and establish a proposed three-year schedule of water and wastewater rates through FY 2026-27. Note that proposed rates cannot be implemented until formally adopted by City Council after a public hearing, and absent a majority protest by parcels served by the City. Proposition 218 requires that the City mail a public hearing notice detailing proposed rate changes no fewer than 45 days before the public hearing.

Study Objectives
The major objectives of this study are to:
» Develop a long-range financial plan for both the City’s Water and Wastewater Enterprises to ensure financial sufficiency in recovering operating costs, funding long-term capital needs, and maintaining prudent reserves.
» Conduct water and wastewater cost of service analyses to ensure a nexus between proposed rates and the cost to provide services to customers.
» Evaluate rate alternatives and proposed rate structure modifications to better align with community values and the City’s policy objectives
» Develop three years of water and wastewater rates in alignment with Proposition 218 requirements. » Document the details of the study within a Rate Study report, to support the City’s administrative record

6.I.b
Packet Pg. 137 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 19 Key Changes Since Prior Rate Study
Reduction in baseline water demand: One significant development affecting water demand is the enduring drought conditions in California, which have led to permanent reductions in baseline water consumption across the state. Specifically, the City has experienced a notable decrease of approximately 20% from historical average usage levels. Furthermore, since the last rate study, there has been a consistent decline in both per capita and per connection demands compared to historical baselines. As depicted in Figure 11, the annual water demand for the City exceeded 600 million gallons per year from 2017 to 2020 and has not rebounded over the past three years.

Figure 11: Historical Annual Water Usage (Million Gallons) Cost inflation: The City’s water and wastewater operations are impacted by increasing costs and shocks in system inputs like chemicals and labor. Operating costs continue to increase year over year due to general inflationary pressures with higher increases projected for power, labor, and water supply. Overall, utility operating costs far outpace general inflation rates.
» Capital Expenditures: Many projects in the long-term Capital Improvement Program (CIP) previously included in the prior rate studies were deferred due to financial constraints.. Additionally, the City is facing increasing regulatory mandates to improve water filtration. These mandates include filtering for cryptosporidium and the potential treatment of Per- and Polyfluorinated Substances (PFAS) which requires additional CIP investment. Total CIP deferred projects total roughly $8.1 million excluding the possible cost of PFAS treatment.

6.I.b
Packet Pg. 138 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 20 CITY OF HEALDSBURG

3.Legal Requirements and
Rate Setting Methodology

3.1.Legal Requirements
California Constitution - Article XIII D, Section 6 (Proposition 218) Proposition 218, reflected in the California Constitution as Article XIII D, was enacted in 1996 to ensure that rates and fees are reasonable and proportional to the cost of providing service. The principal requirements, as they relate to public water and wastewater service are as follows:

1. A property-related charge (which include water or wastewater rates) imposed by a public agency on a parcel shall not exceed the costs required to provide the property-related service.

2. Revenues derived by the charge shall not be used for any purpose other than that for which the charge was imposed.

3. The amount of the charge imposed upon any parcel shall not exceed the proportional cost of service attributable to the parcel.

4. No charge may be imposed for a service unless that service is actually used or immediately available to the owner of the property.

5. No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.

As stated in the American Water Works Association’s (AWWA) Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices - M1 Seventh Edition (Manual M1), “water rates and charges should be recovered from classes of customers in proportion to the cost of serving those customers.” Raftelis follows industry standard rate setting methodologies set forth by the AWWA’s Manual M1 to ensure the water cost of service analysis presented in this study meets Proposition 218 requirements and establishes rates that do not exceed the proportionate cost of providing water services on a parcel basis. The methodology in the Manual M1 is a nationally recognized industry ratemaking standard which courts have recognized as consistent with Proposition 218. Similarly, the wastewater cost of service presented in this study was conducted in accordance with principles established by the Water Environment Federation (WEF) and described in Financing and Charges for Wastewater Systems.

3.2.Rate-Setting Methodology
This study was conducted using industry-standard principles outlined by the AWWA’s Manual M1 and WEF’s Financing and Charges for Wastewater Systems. The process and approach Raftelis utilized in the study to determine rates is informed by the City’s policy objectives, the current system of rates, and the legal requirements in California (namely, Proposition 218). The resulting financial plans, cost of service analyses, and rate design process follows five key steps, outlined below, to determine proposed rates that fulfill the City’s objectives, meet industry standards, and align with state law. The overall process outlined below applies to the Cost-of-Service analyses for both water and wastewater.

1. Financial Plan: The first study step is to develop a multi-year financial plan that projects the Water and Wastewater Enterprises’ revenues, expenses, capital project financing, annual debt service, and reserve

6.I.b
Packet Pg. 139 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 21 funding. The financial plan is used to determine revenue adjustments needed to recover adequate revenues to fully recover system costs.

2. Revenue Requirement Determination: After completing the financial plan, the rate-making process begins with the determination of the revenue requirement for the test year, also known as the Cost-of Service year.

The test year for this study is FY 2022-23. The revenue requirement should sufficiently fund the Water and Wastewater Enterprises’ operating costs, annual debt service (including coverage requirements), capital expenditures, and reserve funding needs.

3. Cost-of-Service Analysis: The annual cost of providing water or wastewater service (i.e. the revenue requirement) is then distributed to customer classes commensurate with their use of and burden on the system. A Cost-of-Service analysis involves the following steps:
» Functionalize costs – the different components of the revenue requirement are categorized into functions such as supply, transmission, storage, customer service, etc. (for water) and collection, treatment, customer, etc. (for wastewater)
» Allocate to cost causation components – the functionalized costs are then allocated to cost causation components such as supply, base delivery, peaking, etc. (for water) and flow, strength, etc. (for wastewater)
» Develop unit costs – unit costs for each cost causation component are determined using units of service
» Distribute cost components – the cost components are allocated to each customer class or tier using the unit costs in proportion to their demand and burden on the system.

A water cost of service analysis considers both the average water demand and peak demand. Peaking, or extra-capacity, costs are incurred during periods of peak consumption, most often coinciding with summer water use. There are additional capacity-related costs associated with designing, constructing, operating, maintaining, and replacing facilities to meet peak demand. Patterns of use impose additional costs on a water utility and are used to determine the cost burden on peaking-related facilities. Similarly, a wastewater cost of service analysis considers the amount of wastewater treatment plant influent contributed by each customer class to account for customer differences in the quantity and strength of wastewater discharges.

4. Rate Design: After allocating the revenue requirement to each customer class, the rate design and calculation process can begin. Rates do more than simply recover costs; within the legal framework and industry standards, properly designed rates should also support and optimize the City’s policy objectives.

5. Administrative Record Preparation and Rate Adoption: The final step in a rate study is to develop the administrative record in conjunction with the rate adoption process. This report serves as the administrative record for this study. The administrative record documents the study results and presents the methodologies, rationale, justifications, and calculations used to determine the proposed rates. A thorough and methodological administrative record serves two important functions: maintaining defensibility in a stringent legal environment and communicating the rationale for revenue adjustments and proposed rates to customers and key stakeholders.

6.I.b
Packet Pg. 140 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 22 CITY OF HEALDSBURG

4.Water Rate Study

4.1.Key Inputs and Assumptions
Raftelis developed a water rate model to project financial calculations over the next ten fiscal years with projections shown in this report through the five-year rate-setting period of FY 2028-29 (i.e. the “study period”). While the study period consists of five years, the City is only considering three years of proposed rates for adoption at this time. The City’s fiscal year spans from July 1 through June 30. Projections in future years were generally made based on actual data for FY 2021-22 or FY 2022-23, or the adopted budget for FY 2023-24 using key assumptions outlined below. Assumptions were discussed with, and reviewed by, City of Healdsburg Public Works and Finance staff to ensure that the City water system’s unique characteristics are accurately accounted for. Note that most table values shown throughout this report are rounded to the last digit shown and may therefore not sum precisely to the totals shown.

The proposed rates are predicated on a shift in current adopted reserve policy outlined in the 2022 rate study.

Failure to adopt the recommended changes may result in higher projected rates to adhere to the existing minimum coverage requirement. Raftelis recommends transitioning from a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes and instead utilizing them to complete preemptive capital replacement and fund maintenance costs in a manner that stabilizes rates support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. As a result, the proposed financial plan fully funds the operating reserve, but it does not fully fund the rate stabilization reserve. When the City undertakes the next rate study, it is recommended that the City consider fully funding the rate stabilization reserve in the financial plan.

4.1.1.CURRENT WATER RATES
Table 4-1 shows the rates currently in effect from July 1, 2023, which were developed during the prior rate study in 2022. Customers are currently billed monthly for two primary charges: 1) Water Service Charges and 2) Water Volume Rates per hundred cubic feet (HCF)2 of water delivered. The Water Service Charge is a fixed monthly charge that varies based on meter size for non-residential customers, and per dwelling unit (DU) for residential customers. All customer classes are subject to a uniform Water Volume Rate. 2 One HCF equals approximately 748 gallons.

6.I.b
Packet Pg. 141 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 23 Table 4-1: Current Water Rates Schedule
Description FY 2024
Residential Fixed Monthly Service Charge
Single Family $28.61
Single Family + ADU (per DU) $21.84
Multi-Family (Per DU) $17.01
Fixed Monthly Service Charges
Up to 1" $45.26
1 1/2" $86.90
2" $136.86
3" $253.46.
4" $419.91
6" $1,127.75
8" $1,502.45
Residential (Single Family & Multi-Family)
Tier 1 (0-5 HCF) $6.48
Tier 2 (6-10 HCF) $6.48
Tier 3 >10 HCF $6.48
Non-Residential Classes
Commercial $6.48
Industrial $6.48
Landscape $6.48
Riverview HOA1 $1.59

4.1.2.WATER ENTERPRISE FINANCIAL ASSUMPTIONS
Inflationary assumptions shown in Table 4-2 are used to escalate projected operations and maintenance (O&M) expenses beyond FY 2023-24. For O&M expenses, the general inflation rate is consistent with long-term changes in the Consumer Price Index (CPI). Specifically, increases in salaries and cost-of-living adjustments (COLA) match the annual percentage changes in wages and salaries reported by the CPI. At the direction of city staff, adjustments for salary/employee benefits and electricity costs have been made. Electricity cost adjustments directly reflect the estimated rate increases provided by the city's electric suppliers. Utility costs have been updated to mirror the changes in fuel and utilities prices from October 2022 to October 2023, as indicated by the CPI. Capital expenses have been adjusted based on the three-year average from the Engineering News-Record (ENR).

6.I.b
Packet Pg. 142 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 24 CITY OF HEALDSBURG
Table 4-2: Water Enterprise Inflationary Assumptions
Inflationary Categories FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Expenses
General Cost Inflation 3.7% 3.7% 3.7% 3.7% 3.7%
Salary / COLA 4.5% 4.5% 4.5% 4.5% 4.5%
Salary / Employee Benefits 7.0% 7.0% 7.0% 7.0% 7.0%
Utilities 5.2% 5.2% 5.2% 5.2% 5.2%
Capital 5.9% 5.9% 5.9% 5.9% 3.5%
Electricity 14.0% 8.0% 7.0% 5.0% 5.0%

4.1.3.PROJECTED WATER SERVICE CONNECTIONS
City staff provided Raftelis with the number of water meters by size for FY 2022-23. The City anticipates negligible growth for the foreseeable future, as the service area is mostly built-out and will not see significant increases in the number of meters for future years. As such, Raftelis used the current actual meter counts – shown below in Table 4-3 for all future years in the study.

Table 4-3: Current Metered Water Connections
Description
Current
Metered
Connections
Meter Sizes – Non Residential
1" 4,460
1 1/2" 132
2" 157
3" 26
4" 21
6" 0
8" 0
Total 4,796
Residential Monthly Meter Charge ADU’s
Single Family 3,856
Single Family + ADU (per DU) 490
Multi-Family (per DU) 1,094
Total 5,440
[1] Riverview HOA, Fitch Mtn. CSA, and reclaimed metered water are excluded from the cost of service because these rates are set by contract.

The rate revenues associated with these customers are used to offset the revenue requirement.

6.I.b
Packet Pg. 143 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 25

4.1.4.PROJECTED WATER SALES
City staff provided Raftelis with total annual water use data by customer class for FY 2022-23. The City does not expect an increase in water use, and with the trend of conservation in the prior years it was decided to keep water use constant over the study period. Total water use is shown in hundred cubic feet (hcf), which is the billing unit.

Excluded from water usage shown below is reclaimed water, water sold to the Fitch Mountain Service Area, and Riverview HOA irrigation water. This excluded usage is provided under contract and not subject to the proposed rates within this study.

Table 4-4: Projected Water Demand Description Actual
FY 2023
Single Family 297,304
Multifamily 44,590
Commercial 122,377
Industrial 13,035
Landscape 42,040
Total 519,346

4.2.Water Financial Plan
Section 4.2 details the development of a proposed Water Enterprise financial plan for City of Healdsburg over the study period. The following subsections include estimates and projections of annual revenues, O&M expenses, debt service payments, capital expenditures, and reserve funding through FY 2028-29. The overall purpose of the financial plan is to determine annual water rate revenues required to achieve sufficient cash flow, execute the capital program, maintain adequate reserves, and meet debt coverage requirements.

4.2.1.WATER ENTERPRISE REVENUE UNDER CURRENT RATES
The Water Enterprise’s revenue sources consist of water rates, miscellaneous fees, interest earnings on cash reserves, and other non-rate revenues. The rate revenue projections shown in this section assume that current water rates are effective throughout the study period, and therefore represent estimated revenues in the absence of any water rate increases. This status quo scenario provides a baseline from which Raftelis evaluates the need for revenue adjustments (i.e. gross rate revenue increases).

Projected Water Rate Revenues
Raftelis projected annual water rate revenues from Water Service Charges and Water Volume Rates over the study period based on current FY 2023-24 water rates. Per City direction, Raftelis projected rate revenues for future years using no account growth and constant water demand (as described above in Table 1-3 and Table 4-4). The resulting projected revenues under existing rates are shown below in Table 4-5.

Table 4-5: Projected Revenue from Existing Rates
Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Water Rate Revenues
Fixed $2,299,153 $2,299,153 $2,299,153 $2,299,153 $2,299,153 $2,299,153 Variable $3,365,362 $3,365,362 $3,365,362 $3,365,362 $3,365,362 $3,365,362 Total $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515

6.I.b
Packet Pg. 144 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 26 CITY OF HEALDSBURG
Other Water Enterprise Revenues
Table 4-6 shows all other Water Enterprise revenues. All FY 2021-22 to FY 2023-24 other revenues are based on the City’s actual and budgeted revenues and those are kept constant throughout the forecasted study period with the exception of non-recurring transfer in FY 2023-24. Interest revenue is estimated in the financial plan model beginning in FY 2024-25 based on projected fund balances and the assumed interest rate.

Table 4-6: Other Water Enterprise Revenues
Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Water - Other Revenues
Interest Income $30,797 $26,967 $39,121 $36,903 $34,081 $34,921 Other Revenues $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Transfers In $422,161 $0 $0 $0 $0 $0
Total $462,958 $36,967 $49,121 $46,903 $44,081 $44,921
Summary of Projected Water Enterprise Revenues
Table 4-7 shows a summary of all projected Water Enterprise revenues under current rates over the study period.

This includes all projected revenues shown in Table 4-5 and Table 4-6. This revenue summary represents expected revenues in the absence of any rate increase over the study period.

Table 4-7: Summary of Projected Water Enterprise Revenues (Current Rates) Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Water Revenues
Water Sales Revenue $3,365,362 $3,365,362 $3,365,362 $3,365,362 $3,365,362 $3,365,362 Fixed Charge Revenue $2,299,153 $2,299,153 $2,299,153 $2,299,153 $2,299,153 $2,299,153 Interest Income $30,797 $26,967 $39,121 $36,903 $34,081 $34,921 Riverview HOA and Reclaimed
Revenue $142,781 $172,765 $207,318 $234,270 $262,382 $293,868 Other Revenue $432,161 $10,000 $10,000 $10,000 $10,000 $10,000 Total $6,270,254 $5,874,247 $5,920,954 $5,945,687 $5,970,978 $6,003,304

4.2.2.WATER ENTERPRISE OPERATIONS & MAINTENANCE EXPENSES Table 4-8 shows a summary of all Water Enterprise O&M expenses over the study period. Raftelis worked closely with City staff to determine reasonable inflationary assumptions that were then used to project O&M expenses through FY 2028-29. O&M expenses are projected to increase by approximately 5 percent per year on average over the study period – excluding the change from FY2023-24 to FY 2024-25 which is due to onetime expenses being removed. All O&M expense projections were provided by City in current dollars and adjusted by Raftelis for estimated future inflation.

6.I.b
Packet Pg. 145 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 27 Table 4-8: Projected Water Enterprise O&M Expenses
O&M Expenses Budgeted
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Supply $760,318 $794,533 $830,287 $867,649 $906,694 $947,495 Reservoir $319,038 $341,371 $365,266 $390,835 $418,194 $447,467 Treatment $276,396 $288,196 $300,538 $313,449 $326,959 $341,098 Storage $239,936 $248,862 $258,119 $267,721 $277,681 $288,010 Distribution $130,253 $135,098 $140,124 $145,337 $150,743 $156,351 Fire $1,028,402 $1,077,081 $1,128,119 $1,181,633 $1,237,748 $1,296,593 Meters $453,957 $485,734 $519,735 $556,117 $595,045 $636,698 Customer $35,725 $37,291 $38,927 $40,634 $42,417 $44,279 Conservation $384,583 $398,971 $413,901 $429,392 $445,466 $462,145 General $1,668,899 $1,440,816 $1,511,069 $1,582,026 $1,736,804 $1,810,877 Total O&M Expenses $5,297,507 $5,247,953 $5,506,084 $5,774,793 $6,137,750 $6,431,013

4.2.3.WATER ENTERPRISE DEBT
Table 4-9 shows the Water Enterprise’s projected debt service obligations over the study period. Existing debt service consists of the City’s 2005 and 2014 debt service. Proposed Water Enterprise debt service associated with future capital project costs are also shown beginning in FY 2029. Note that proposed debt service terms (inflation, loan duration, issuance cost) represent preliminary projections based on the best information available at the time of this study.

Table 4-9: Water Enterprise Debt Service
Debt Service FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Existing Debt Service
Series 2005 D CSCDA
Revenue Bond $206,850 $204,475 $206,725 $208,475 $200,294 $202,200 Series 2014 Water
Refunding Bond $739,539 $575,420 $577,790 $423,547 $317,097 $315,411 Subtotal $946,389 $779,894 $784,515 $632,022 $517,391 $517,611 Proposed Debt Service
2027 Proposed Bonds $0 $0 $0 $0 $0 $758,333
Subtotal $0 $0 $0 $0 $0 $758,333
Total $946,389 $779,894 $784,515 $632,022 $517,391 $1,275,944

4.2.4.WATER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM
Table 4-10 shows the City’s planned capital improvement program (CIP) for the Water Enterprise, amounting to approximately $28.2M over the five-year study period. No estimates were provided for FY 2023-24. The values shown are based on the most recently prepared multi-year CIP. To reduce immediate financial needs and financial impacts the CIP defers several infrastructure replacement projects for portions of the utility pipeline beyond their useful life. The plan further prioritizes the infrastructure rehabilitation and water treatment at the Dry Creek well

6.I.b
Packet Pg. 146 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 28 CITY OF HEALDSBURG
field while deferring the water treatment of the Fitch well field. The City will discontinue use of the Fitch well field in FY 25-26 and will retain sufficient water supply to serve the Utility from the other remaining well fields. The deferral of these projects will not impact the immediate service provided by the Utility. Significant CIP expenditures are anticipated to continue over the next ten years, highlighting the need to maintain adequate reserves for future cash funded, and debt funded, CIP. Capacity-related project costs are not included in the CIP and revenue associated with capital recover fees are excluded from the revenue requirement.

Table 4-10: Water Enterprise Five-Year Capital Improvement Plan Project Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Cryptosporidium treatment At Fitch WTP $0 $0 $0 $0 $1,223,732 $0 Dry Creek WTP Upgrades - Cryptosporidium $0 $896,737 $0 $0 $0 $0 Dry Creek WTP Upgrades - Pumping and Clear well Improvements $0 $0 $0 $1,477,457 $0 $0 Dry Creek Wells Capacity Improvements $0 $0 $0 $0 $0 $1,456,416 Gauntlett WTP Membranes Replacement $0 $0 $0 $301,662 $319,376 $330,555 ASR Wells $0 $0 $0 $0 $0 $0
Fitch Treatment Building Modernization $0 $0 $0 $0 $0 $631,981 PFAS - Gauntlett $0 $0 $0 $0 $247,510 $4,057,160
PFAS - Fitch $0 $0 $0 $0 $262,587 $4,304,231
PFAS - Dry creek $0 $0 $0 $0 $255,049 $4,179,395
Dry Creek Chlorinator $0 $0 $0 $118,671 $0 $0
Fitch Chlorinator $0 $102,696 $0 $0 $0 $0
Gauntlett Reservoir Liner Replacement $0 $0 $0 $658,625 $0 $0 Passalacqua Pumps Rehab $0 $0 $0 $0 $0 $0
G2 Well Flow Meter $0 $0 $0 $100,871 $0 $0
PRV - North street $0 $0 $0 $0 $16,333 $0
PRV Villa Chanticleer $0 $0 $0 $0 $0 $16,905
PRV Latimer $0 $0 $0 $0 $0 $16,905
PRV Grant Street $0 $0 $0 $0 $0 $0
PRV Larkspur $0 $0 $0 $0 $0 $0
PRV Hidden Acres $0 $0 $0 $0 $16,333 $0
WTP Compressor #1 Replacement $0 $0 $0 $26,820 $0 $0
Water Treatment plant SCADA Computer $0 $7,411 $0 $0 $0 $0 Reconstruct Corp Yard Lift Station $0 $0 $0 $60,399 $0 $0 Gauntlett Well Field Pipeline Rehab/Replacement $0 $0 $0 $0 $273,895 $642,384 Fitch Well Field Pipeline Rehab/Replacement $0 $0 $0 $0 $591,763 $0 McDonough Water Transmission Main Replacement $0 $0 $0 $0 $182,052 $2,063,690 Brown Street Sewer & Water Replacement $0 $0 $1,330,576 $0 $0 $0 Reed Court & Bianca Lane Sewer & Water Replacement $0 $0 $0 $0 $0 $146,552 University Street Sewer & Water Replacement $0 $0 $128,258 $1,352,929 $0 $0 Healdsburg Ave Utility Replacement $0 $397,727 $0 $0 $0 $0 University Street Sewer and Water Replacement (North Street to Mason St) $0 $0 $0 $0 $0 $0 Johnson Street Sewer and Water $0 $0 $0 $0 $0 $0
Ongoing R&R $0 $0 $0 $0 $0 $0
Total CIP $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $17,846,173

6.I.b
Packet Pg. 147 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 29 Table 4-11 shows the funding plan for Water Enterprise CIP projects over the study period. As shown below, the City plans to fund its CIP projects through a combination of debt and cash-funding over the study period. Figure 4-1 shows a summary of total Water Enterprise CIP expenditures by funding source through FY 2028-29.

Table 4-11: Water Enterprise Capital Improvement Plan, by Funding Source Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Capital Improvement Plan
Rate Funded (PAYGO) $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $4,846,173 Debt Funded $0 $0 $0 $0 $0 $13,000,000
Total $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $17,846,173 Figure 4-1: Water Enterprise Capital Improvement Plan

4.2.5.WATER ENTERPRISE FINANCIAL POLICIES
Required Debt Coverage
The Water Enterprise is required to meet debt service coverage requirements on its outstanding water revenue bonds. Failure to meet debt service coverage results in a technical default, which without foreseeable remedial action such as implementing rate increases, could result in a downgrade of credit rating, higher costs in future debt issuance, or even denial of credit. The required debt coverage ratio is 1.20, meaning that the Water Enterprise’s net operating revenues (i.e. total revenues less operating expenses) must amount to at least 1.20 times the amount of annual debt service.

6.I.b
Packet Pg. 148 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 30 CITY OF HEALDSBURG
Reserve Targets
Adequate cash reserves are required to meet operating, capital, and debt service requirements. The current operating reserve target is equal to 25% percent of annual O&M expenses. Raftelis recommends the City shift the reserve policy outlined in the previous study of establishing a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes, and instead utilizing them to support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. Furthermore, when the City undertakes the next rate studies and adopts the next rate plan, it’s recommended that the City consider funding an additional one-million-dollar rate stabilization reserve, which can be used to address major equipment failures and natural disasters. The change will mitigate otherwise higher rate increases over the study period.

Table 4-12 summarizes the Water Enterprise’s key financial policies relevant to this rate study. Table 4-13 shows projected operating and capital reserve targets over the study period based on the policies outlined above.

Table 4-12: Water Enterprise Financial Policies
Financial Policy Target/Requirement
Debt Coverage
Target Debt Coverage Ratio 1.20
Reserve Targets
Operating Reserve Target 25% of annual O&M expenses
Rate Stabilization Target $1,000,000
Total Reserve Target 25% of annual O&M expenses + $1 million Table 4-13: Projected Water Enterprise Reserve Targets
Reserve Target FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Operating Reserve $1,324,377 $1,311,988 $1,376,521 $1,443,698 $1,534,437 $1,607,753 Rate Stabilization $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 Total Reserve Target $2,324,377 $2,311,988 $2,376,521 $2,443,698 $2,534,437 $2,607,753

6.I.b
Packet Pg. 149 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 31

4.2.6.STATUS QUO WATER FINANCIAL PLAN
To evaluate the need for revenue adjustments (i.e. increases to gross rate revenues), Raftelis first developed a status quo financial plan. The status quo financial plan assumes that current rates remain unchanged over the study period. Table 4-14 combines projected water rate revenues (from Table 4-5), O&M expenses (from Table 4-8), and debt service (from Table 4-9) to generate operating cash flow projections under the status quo. In the absence of any revenue adjustments, the Water Enterprise will fail to generate sufficient revenue to recover O&M expenses and debt service, and net cash generation becomes increasingly negative in subsequent years.

Table 4-14: Water Enterprise Cash Flow – Status Quo Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Water Rate Revenue under Current Rates
2 Water Rates Subject to
Revenue Adjustments $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 3 Non-Rate Revenues3$605,739 $209,732 $256,440 $281,173 $306,463 $338,789 4 Total Revenues $6,270,254 $5,874,247 $5,920,954 $5,945,687 $5,970,978 $6,003,304 5 6 O&M Expenses $5,297,507 $5,247,953 $5,506,084 $5,774,793 $6,137,750 $6,431,013 7 Debt Service $946,389 $779,894 $784,515 $632,022 $517,391 $1,275,944 8 Rate-Funded CIP $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $4,846,173 9 Total Expenses $6,243,896 $7,432,418 $7,749,433 $10,504,249 $10,043,771 $12,553,130 24 25 Net Cash Flow4$26,358 ($1,558,171) ($1,828,479) ($4,558,561) ($4,072,793) ($6,549,826) 3 Includes miscellaneous revenues and interest income. Note that grant and loan revenue and the capital projects associated with them are excluded in this cashflow on both the revenue and expense side of the calculation. 4 Equal to [Line 18 – Line 23].

6.I.b
Packet Pg. 150 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 32 CITY OF HEALDSBURG
Table 4-15 shows projected reserve balances and debt coverage under the status quo financial plan for the entire Water Enterprise. Sources of funds include both rate revenues and non-rate revenues, but do not include revenues from projected rate increases. Use of funds include O&M expenses (from Table 4-8), debt service (from Table 4-9), and CIP expenditures (from Table 4-11). The FY 2023-24 beginning balance reflects actual Water Enterprise reserve balances as of July 1, 2023. All ending balance and debt coverage figures are projected values. Target reserve balances shown are from Table 4-13.

Under the status-quo financial plan, reserves are projected to fall below target by the end of FY 2024-25. Debt coverage is projected to fall well below the required ratio in all years following FY 2024-25. The status quo financial plan is insufficient to meet the Water Enterprise’s financial needs over the study period. This demonstrates a clear need for revenue adjustments over the study period to increase rate revenues and ensure financial sustainability.

Table 4-15: Water Enterprise Pro Forma - Status Quo Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Projected Beginning
Balance $2,055,607 $2,081,965 $523,793 ($1,304,685) ($5,863,246) ($9,936,039) 2 3 Source of Funds
4 Status Quo Rate Revenues $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 5 Other Revenues $605,739 $209,732 $256,440 $281,173 $306,463 $338,789 9 Total Source of Funds $6,270,254 $5,874,247 $5,920,954 $5,945,687 $5,970,978 $6,003,304 10 11 Use of Funds
12 O&M Expenses $5,297,507 $5,247,953 $5,506,084 $5,774,793 $6,137,750 $6,431,013 13 Debt Service $946,389 $779,894 $784,515 $632,022 $517,391 $1,275,944 14 Rate-Funded CIP $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $4,846,173 15 Total Use of Funds $6,243,896 $7,432,418 $7,749,433 $10,504,249 $10,043,771 $12,553,130 16 17 Net Cashflow $26,358 ($1,558,171) ($1,828,479) ($4,558,561) ($4,072,793) ($6,549,826) 18 19 Projected Ending Balance5$2,081,965 $523,793 ($1,304,685) ($5,863,246) ($9,936,039) (16,485,866) 20 Operating Reserve Target $1,324,377 $1,311,988 $1,376,521 $1,443,698 $1,534,437 $1,607,753 21 22 Debt Coverage
23 Projected Debt Coverage6 1.03 0.80 0.53 0.27 (0.32) (0.34) 24 Required Debt Coverage 1.20 1.20 1.20 1.20 1.20 1.20

4.2.7.PROPOSED WATER FINANCIAL PLAN
The Water Enterprise must increase its revenues from water rates over the study period to adequately fund its operating and capital expenditures, meet required debt coverage, and maintain sufficient reserve funding. Raftelis worked closely with City staff to identify financial plan options for the City Council’s consideration. The selected option of proposed annual revenue adjustments are shown in Table 4-16. Revenue adjustments represent annual percent increases in total rate revenue relative to rate revenue generated by the prior year’s water rates. The proposed first-rate increase implementation date is July 1, 2024.
5 Equal to [Line 1 + Line 17]
6 Equal to [(Line 9 – Line 12) ÷ Line 13]

6.I.b
Packet Pg. 151 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 33 Table 4-16: Proposed Water Enterprise Revenue Adjustments

PROPOSED INCREASE FUTURE INCREASES
Fiscal Year FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Effective Date July 1, 2024 July 1, 2025 July 1, 2026 July 1, 2027 July 1, 2028 Revenue Adjustment 21.0% 20.0% 13.0% 12.0% 12.0%
Table 4-17 combines projected rate and miscellaneous revenues (from Table 4-7), O&M expenses (from Table 4-8), and debt service (from Table 4-9) to generate operating cash flow projections under the proposed financial plan. By implementing the proposed revenue adjustments, we project that Water Enterprise will maintain sufficient operating cash flow through the end of the study period.

Table 4-17: Water Enterprise Cash Flow – Proposed Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Water Rate Revenue under Current Rates
2 Water Rates Subject to
Revenue Adjustments $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 $5,664,515 3 Non-Rate Revenues7$605,739 $209,732 $256,440 $281,173 $306,463 $338,789 4 Revenue Adjustments
5 Fiscal Year
6 FY 2025 21.00% $1,189,548 $1,189,548 $1,189,548 $1,189,548 $1,189,548 7 FY 2026 20.00% $1,370,813 $1,370,813 $1,370,813 $1,370,813 8 FY 2027 13.00% $1,069,234 $1,069,234 $1,069,234
9 FY 2028 12.00% $1,115,293 $1,115,293
10 FY 2029 12.00% $1,249,128
11 Total Adjustments $0 $1,189,548 $2,560,361 $3,629,595 $4,744,888 $5,994,016 12 13 Total Revenues $6,270,254 $7,063,795 $8,481,315 $9,575,282 $10,715,866 $11,997,320 14 15 O&M Expenses $5,297,507 $5,247,953 $5,506,084 $5,774,793 $6,137,750 $6,431,013 16 Debt Service $946,389 $779,894 $784,515 $632,022 $517,391 $1,275,944 17 Rate-Funded CIP $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $4,846,173 18 Total Expenses $6,243,896 $7,432,418 $7,749,433 $10,504,249 $10,043,771 $12,553,130 19 20 Net Cash Flow8$26,358 ($368,623) $731,882 ($928,967) $672,095 ($555,811) Table 4-18 shows projected reserve balances and debt coverage under the proposed financial plan for the entire Water Enterprise. Sources of funds include status quo revenues (from Table 4-7), revenue adjustments (from Table 4-17), and miscellaneous revenues. Use of funds include O&M expenses (from Table 4-8), debt service (from Table 4-9), and rate-funded CIP expenditures (from Table 4-11). The 2024 beginning balances reflects actual Water Enterprise reserve balances as of July 1, 2023. All ending balance and debt coverage figures are projected values.

Target reserve balances shown are from Table 4-13. Under the proposed financial plan, reserve balances and debt coverage are projected to achieve target policies over the rate-setting period. 7 Includes miscellaneous revenues, interest income, and loan/grant revenues. 8 Equal to [Line 13 – Line 18].

6.I.b
Packet Pg. 152 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 34 CITY OF HEALDSBURG
Table 4-18: Water Enterprise Pro Forma - Proposed Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Beginning Balance $2,055,607 $2,081,965 $1,713,342 $2,445,224 $1,516,257 $2,188,352 2 3 Source of Funds
4 Rate Revenues (including
adjustments) $5,664,515 $6,854,063 $8,224,875 $9,294,109 $10,409,402 $11,658,531 5 Other Revenues $605,739 $209,732 $256,440 $281,173 $306,463 $338,789 9 Total Source of Funds $6,270,254 $7,063,795 $8,481,315 $9,575,282 $10,715,866 $11,997,320 10 11 Use of Funds
12 O&M Expenses $5,297,507 $5,247,953 $5,506,084 $5,774,793 $6,137,750 $6,431,013 13 Debt Service $946,389 $779,894 $784,515 $632,022 $517,391 $1,275,944 14 Capital Improvement Plan
Expenditures $0 $1,404,571 $1,458,834 $4,097,434 $3,388,631 $4,846,173 15 Total Use of Funds $6,243,896 $7,432,418 $7,749,433 $10,504,249 $10,043,771 $12,553,130 16 17 Ending Balance9
$2,081,965 $1,713,342 $2,445,224 $1,516,257 $2,188,352 $1,632,541 18 Operating Reserve Target $1,324,377 $1,311,988 $1,376,521 $1,443,698 $1,534,437 $1,607,753 19 20
21 Debt Coverage
22 Projected Debt Coverage10 1.03 2.33 3.79 6.01 8.85 4.36 23 Required Debt Coverage 1.20 1.20 1.20 1.20 1.20 1.20 Figure 4-2 shows projected debt coverage (blue line) relative to the debt coverage requirement (grey line) all years after the initial rate-setting year (FY 2024-25). The City will begin meeting its debt coverage requirement of 1.20 in FY 2025 and remain above the minimum coverage requirement for the remainder of the study period. 9 Equal to [Line 1 + Line 9 – Line 15].
10 Equal to [(Line 9 – Line 12) / Line 13].

6.I.b
Packet Pg. 153 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 35 Figure 4-2: Proposed Water Financial Plan – Projected Debt Coverage

6.I.b
Packet Pg. 154 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 36 CITY OF HEALDSBURG
Figure 4-3 shows the Water Enterprise’s projected ending balances under the proposed financial plan. The light blue bars indicate the ending balance. The minimum reserve targets (based on the policies described above in Table 4-12) are shown by the orange line The Water Enterprise is projected to meet cash reserves over the study period and any additional reserves are used to offset capital expenses in the future years. The Water Enterprise’s reserves are projected to achieve the minimum goal target amount with the proposed and planned rate increases.

Figure 4-3: Proposed Water Financial Plan – Projected Ending Cash Balances

6.I.b
Packet Pg. 155 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 37 Figure 4-4 shows the proposed versus status quo operating financial plan. Revenues under the status quo and proposed financial plans are represented by the blue and blacklines, respectively. Revenue requirements including O&M expenses, debt service, and reserve funding are represented by the various stacked bars. Revenue adjustments are required to generate sufficient revenue to recover O&M expenses and debt service payments over the study period.

Figure 4-4: Proposed vs. Status Quo Water Financial Plan

6.I.b
Packet Pg. 156 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 38 CITY OF HEALDSBURG

4.3.Proposed Water Rate Structure Modifications
Raftelis worked closely with City staff to evaluate potential changes to the existing water rate structure. All proposed water rates presented in subsequent sections incorporate the following recommended revisions to the existing water rate structure.
o Residential Tiered Water Rates: The Study recommends that the City introduce a three-tiered rate structure for Residential water customers including Single-Family Residential (SFR) and Multi-Family Residential (MFR). MFR customers will receive tier allotments for each dwelling unit served. Tier 1 is defined as the first 5 units of water (HCF) per monthly billing period, reflecting average winter usage (January -March) for SFR customer rounded up to the nearest whole number. Tier 2 encompasses usage greater than 5 units and up to and including 10 HCF, representing summer peak (75th percentile in the July – September periods) demands of SFR customers rounded up to the nearest whole number. Tier 3 comprises all units of water usage exceeding 10 HCF. Residential users are a homogenous customer class with similar indoor needs for health and sanitation, similar outdoor irrigation needs, and similar seasonality in these demand patterns. It is therefore appropriate to tier this class of customers. The proposed monthly allotments for residential customers are shown below in Table 1-2 and reflect actual demand patterns of City water users. Note that non-residential customers will maintain a uniform rate structure.
o All Other Classes: The Study recommends that all other customer classes maintain a uniform rate structure, however, going forward each class will have a distinct uniform rate based on their specific demand characteristics. The new rates by customer class include those customers designated as Commercial, Industrial, and Landscape Irrigation. Non-residential classes have highly varying demand patterns within each class based on the type of business, seasonality, and/or transient effects. Peaking costs, also referred to as extra capacity costs, are costs associated with higher demand patterns. These costs are allocated to each customer class based on their specific class demand patterns and calculating peaking. For this reason, uniform rates are proposed for each of the non-residential classes.
» Monthly Service Charges: The Study recommends harmonizing the fixed service charges across user classes. This change will align Residential customers with a metered connection of a specific size with Non-Residential customers with the same size meter. The proposed structure relies on meter size alone to distinguish the “class” of customer. This change acknowledges that meter capacity, not customer classification, reflects the best estimate of the costs imposed by a user on the water system that are recovered through fixed charges.

6.I.b
Packet Pg. 157 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 39 Table 4-19: Proposed Water Rate Structure Changes
Description Current Structure Proposed Structure
Residential (SFR/MFR)
Tier 1 Uniform Water Use
Rate (All Classes)
0-5 HCF
Tier 2 Uniform Water Use
Rate (All Classes)
6-10 HCF
Tier 3 Uniform Water Use
Rate (All Classes)
>10 HCF
Non-Residential Classes
Commercial Uniform Water Use
Rate (All Classes)
Uniform Water Use
Rate, by Class
Industrial Uniform Water Use
Rate (All Classes)
Uniform Water Use
Rate, by Class
Landscape Irrigation Uniform Water Use
Rate (All Classes)
Uniform Water Use
Rate, by Class
Table 4-20 shows estimated water use by tier under the proposed two-tier rate structure. All projections are based on detailed account-level analysis of FY 2022-23 actual water use. Raftelis projects that approximately 64% of all residential water use will fall within Tier 1 under the proposed three-tier residential rate structure.

Table 4-20: Projected Water Use by Class and Tier – Test Year Description
Projected
FY 2024-25
Water Use
(hcf)
Residential
Tier 1 217,661
Tier 2 62,452
Tier 3 61,781
Subtotal 341,894
Commercial 122,377
Industrial 13,035
Landscape 42,040
Total 519,346

4.4.Water Cost of Service Analysis
This section details the Cost-of-Service (COS) analysis performed for the Water Enterprise. The COS analysis allocates the overall rate revenue requirement to customer classes based on their proportion of use of and burden on the water system. This provides the basis for the development of proposed water rates through FY 2028-29.

4.4.1.METHODOLOGY
The first step in a COS analysis is to determine the revenue required from water rates. The total revenue requirement results from the financial plan in Section 4.2. The framework and methodology utilized to develop the COS analysis

6.I.b
Packet Pg. 158 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 40 CITY OF HEALDSBURG
and to apportion the revenue requirement to each customer class and tier is informed by the processes outlined in the AWWA’s Manual M1.

COS analyses are tailored to meet the specific needs of each water system. However, there are four distinct steps in every COS analysis to recover costs from customers in an accurate, equitable, and defensible manner:

1. Cost functionalization: O&M expenses and capital assets are categorized by their function in the system.

Sample functions may include water supply, treatment, distribution, transmission, customer service, etc.

2. Cost causation component allocation: Functionalized costs are then allocated to cost causation components based on their burden on the system. The cost causation components include water supply, base delivery, extra-capacity, meters, and customer, among others. The revenue requirement is allocated accordingly to the cost causation components and results in the total share of the revenue requirement attributable to each cost component.

3. Unit cost development: The revenue requirement for each cost causation component is divided by the appropriate units of service to determine the unit cost of each.

4. Revenue requirement distribution: The unit cost is utilized to distribute the revenue requirement for each cost causation component to customer classes based on each customer class’s individual service units.

This method of functionalizing costs is consistent with the AWWA’s Manual M1 and is widely used in the water industry to perform COS analyses.

4.4.2.WATER RATE REVENUE REQUIREMENT
Table 4-21 shows the rate revenue requirement for FY 2024-25 (referred to throughout as the “test year”). The revenue requirement is divided into operating and capital categories (Columns C and D), which are later allocated based on either O&M expenses or capital assets. The revenue requirements (Lines 2-8) are equal to FY 2024-25 operating expenses, rate-funded CIP, and debt service costs. The revenue offsets (Lines 11-16) include miscellaneous rate revenue not subject to revenue adjustments, grants, and income from loans. These revenues are applied as offsets to the final rate revenue requirement. The reserve transfer adjustment (Line 19) is equal to FY 2024-25 negative net operating cash flow and represents the additional rate revenue required to offset reserve spending in the test year. All values are from the proposed financial plan operating cash flow (Table 4-17). Note that, because there is no adjustment in the test year (FY 2024-25), there is also no adjustment for a mid-year increase. Rate adjustments will instead begin after the test year, in FY 2024-25. The final rate revenue requirement (Line 24) is calculated as follows:

Total revenue required from rates (Line 24) = Revenue requirements (Line 8) - Revenue offsets (Line 16) - Adjustments (Line 21)

6.I.b
Packet Pg. 159 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 41 Table 4-21: Water Enterprise Rate Revenue Requirement (Test Year) [A] [B] [C] [D] [F]
Line Description
Operating
Revenue
Requirement
Capital
Revenue
Requirement
Total
1 Revenue Requirements
2 O&M Expenses $5,247,953 $0 $5,247,953
6 Debt Service $0 $779,894 $779,894
7 Capital Expenditures - PAYGO $0 $1,404,571 $1,404,571 8 Total Revenue Requirements $5,247,953 $2,184,465 $7,432,418 9 10 Less Revenue Offsets
11 Miscellaneous Revenues -$182,765 $0 -$182,765
12 Interest Income – General -$26,967 $0 -$26,967
13 Total Revenue Offsets -$209,732 $0 -$209,732
14 15 Less Adjustments -$368,623 $0 -$368,623
16 Adjustment for Cash Balance $0 $0 $0
17 Adjustment for Mid-Year Increase
18 Total Adjustments -$368,623 $0 -$368,623
19 20 Total Revenue Requirement Without Offsets $5,247,953 $2,184,465 $7,432,418 21 Total Revenue Requirement $4,669,598 $2,184,465 $6,854,063

4.4.3.WATER SYSTEM PEAKING FACTORS
A significant portion of the costs of the water system are based on the peaking characteristics of the different customer classes. A water system is designed to meet different requirements, including average water demands, extracapacity/peak demands, and fire flow requirements. Peaking costs are divided into maximum day (Max Day) and maximum hour (Max Hour) demand. The Max Day demand is the maximum amount of water used in a single day over a full year. The Max Hour demand is the maximum use in an hour on the Max Day. For example, storage and treatment components of the water system are designed to handle Max Day requirements while the distribution system is designed for Max Hour demands.

Table 4-22 shows system-wide peaking factors for the City’s water system, which are used to derive the cost component allocation bases for Base Delivery, Max Day, and Max Hour costs. Base Delivery use is considered average daily demand over one year, which has been normalized to a factor of 1.00 (Column C, Line 1). The Max Day peaking factor (Column C, Line 2) indicates that the Max Day demand is 1.90 times greater than the average daily demand. Similarly, the Max Hour peaking factor (Column C, Line 3) shows that the Max Hour demand is

3.20 times greater than average demand. The allocation bases (Columns D-F) are calculated using the equations outlined below. Columns are represented in these equations as letters, and lines are represented as numbers. For example, Column D, Line 2 is shown as D2.

The Max Day allocations are calculated as follows:
» Base Delivery: C1 / C2 x 100% = D2
» Max Day: (C2 - C1) / C2 x 100% = E2

6.I.b
Packet Pg. 160 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 42 CITY OF HEALDSBURG
The Max Hour allocations are calculated as follows:
» Base Delivery: C1 / C3 x 100% = D3
» Max Day: (C2 - C1) / C3 x 100% = E3
» Max Hour: (C3 - C2) / C3 x 100% = F3
Table 4-22: Water System Peaking Factors and Allocations [A] [B] [C] [D] [E] [F] [G]
Line Description Factor11 Base Max Day Max Hour Total
1 Base 1.00 100% 0% 0% 100%
2 Max Day 1.90 53% 47% 0% 100%
3 Max Hour 3.20 31% 28% 41% 100%
4 Average Max Day/Max Hour 42% 38% 20% 100%

4.4.4.FUNCTIONALIZATION AND ALLOCATION OF EXPENSES
After determining the revenue requirement and systemwide peaking allocation basis, the next step of the water COS analysis is to allocate O&M expenses and capital assets to the following functional categories:
» Water Supply: costs associated with the utilities supply of water » Treatment: costs associated with treating water to drinking water standards » Storage: costs related to water storage tanks and reservoirs » Distribution: costs related to delivering water to customers through pipelines from storage facilities to the metered connection
» Fire Protection: costs attributable to fireflow sizing for fire protection » Meters: costs of meter maintenance, servicing, and repair » Customer: costs of meter reading, billing, and other customer service functions » Conservation: costs associated with water conservation, outreach, and efficiency programs » General: operating costs not directly attributable to the above functions are allocated based on the overall cost functionalization
The functionalization of costs allows for the allocation of costs to cost causation components. Some cost causation components correspond directly to a functional category listed above. The cost causation components include:
» Water Supply: directly associated with the Water Supply functional category » Base Delivery: costs associated with providing water under average water demand conditions » Peaking (Max Day and Max Hour): extra-capacity costs associated with providing water during peak demand conditions
» Fire Protection: costs associated with providing fire flow capacity for fire protection » Meters: directly associated with the Meters functional category » Customer: directly associated with the Customer functional category » Conservation: directly associated with the Conservation functional category » General: directly associated with the General/Admin functional category » Revenue Offsets: miscellaneous revenues applied as offsets to the rate revenue requirement 11 Max Day and Max Hour assumptions were developed from the City’s most recent master plan, which was completed in 2016 and summarized peak data from 2010 to 2014. 5-year average peaks were used for this study.

6.I.b
Packet Pg. 161 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 43 Table 4-23 shows the basis for allocating each functional category to the various cost causation components. This provides the basis for allocating O&M and capital expenses in the following subsections. Most functional categories are allocated entirely to the corresponding cost causation component. The allocation basis for functional categories not allocated entirely to a single cost causation component is as follows:
» Functional categories allocated based on Max Day demand: Storage, treatment, and transmission infrastructure is designed to accommodate maximum day water demand. Therefore, all Storage, Treatment, Storage/Treatment, and Transmission costs are allocated to the Base Delivery and Max Day cost causation components based on the Max Day allocation from Table 4-22. » Functional categories allocated based on Max Hour demand: Distribution infrastructure is designed to accommodate maximum hour water demand, therefore all Distribution costs are allocated to the Base Delivery, Max Day, and Max Hour cost causation components based on the Max Hour allocation from Table 4-22.

Table 4-23: Allocation of Functional Categories to Water Cost Causation Components [A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K]
Line Functional
Category Base Max Day
Max
Hour Supply Conservation Meters Customer General Total
1 Water Supply 0% 0% 0% 100% 0% 0% 0% 0% 100%
2 Treatment 53% 47% 0% 0% 0% 0% 0% 0% 100%
3 Storage 53% 47% 0% 0% 0% 0% 0% 0% 100%
4 Distribution 31% 28% 41% 0% 0% 0% 0% 0% 100%
5 Fire12 42% 38% 20% 0% 0% 0% 0% 0% 100%
6 Meters 0% 0% 0% 0% 0% 100% 0% 0% 100%
7 Customer 0% 0% 0% 0% 0% 0% 100% 0% 100%
8 Conservation 0% 0% 0% 0% 100% 0% 0% 0% 100%
9 General 0% 0% 0% 0% 0% 0% 0% 100% 100%
12 Fire expenses are reallocated from max day and max hour to meter for public fire protection based on system capacity required for fire vs customer demand.

6.I.b
Packet Pg. 162 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 44 CITY OF HEALDSBURG

4.4.5.WATER ENTERPRISE O&M EXPENSE ALLOCATION
The next step of the COS analysis is to develop an allocation basis for the operating revenue requirement based on the functionalization of the Water Enterprise’s O&M expenses. Raftelis worked with City staff to assign O&M expenses, by line item, to the most closely associated functional category. Table 4-24 shows a summary of FY 2024- 25 O&M expenses by functional category. This intermediate step is necessary to allocate total O&M expenses to individual cost causation components.

Table 4-24: Water Enterprise O&M Expenses by Functional Category [A] [B] [C] [D]
Line Functional Category FY 2024-25
O&M Expenses Percent of Total
1 Water Supply $436,652 8.3%
2 Treatment $2,142,743 40.8%
3 Storage $108,073 2.1%
4 Distribution $1,398,346 26.6%
5 Meters $345,839 6.6%
6 Customer $286,181 5.5%
7 Conservation $31,116 0.6%
8 General $499,003 9.5%
9 Total O&M Expenses $5,247,953 100%
Table 4-25 shows the allocation of FY 2024-25 O&M expenses by functional category to each cost causation component. The percentage allocation of each functional category (Columns C-J) to the various cost causation components were determined in Table 4-23. Total O&M expenses associated with each functional category (Column K) were determined in Table 4-24. The total dollar amount allocated to each cost causation component (Line 9) is determined by multiplying the total expense associated with each functional category by the corresponding percentage allocation and summing across all functional categories.

Table 4-25: Allocation of Water Enterprise O&M Expenses to Cost Causation Components [A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K]
Line Functional
Category Base Max
Day
Max
Hour Supply Conservation Meters Customer General Total
O&M
1 Water
Supply $0 $0 $0 $436,652 $0 $0 $0 $0 $436,652
2 Treatment $1,127,759 $1,014,983 $0 $0 $0 $0 $0 $0 $2,142,743 3 Storage $56,881 $51,192 $0 $0 $0 $0 $0 $0 $108,073
4 Distribution $436,983 $393,285 $568,078 $0 $0 $0 $0 $0 $1,398,346 5 Meters $0 $0 $0 $0 $0 $345,839 $0 $0 $345,839
6 Customer $0 $0 $0 $0 $0 $0 $286,181 $0 $286,181
7 Conservation $0 $0 $0 $0 $31,116 $0 $0 $0 $31,116
8 General $0 $0 $0 $0 $0 $0 $0 $499,003 $499,003
9 Total O&M $1,621,623 $1,459,461 $568,078 $436,652 $31,116 $345,839 $286,181 $499,003 $5,247,953 10 11 O&M
Allocation 30.9% 27.8% 10.8% 8.3% 0.6% 6.6% 5.5% 9.5% 100%

6.I.b
Packet Pg. 163 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 45

4.4.6.WATER ENTERPRISE CAPITAL ALLOCATION
Capital assets are utilized in COS analyses to allocate the capital revenue requirement to the various cost causation components. The distribution of short-term CIP project costs can be heavily weighted to specific cost causation components based on the type of projects. Use of short-term plans to allocate capital costs may cause rates to fluctuate and result in customer confusion. The overall water asset base, however, is considerably stable in the long-term, and therefore is more representative of long-term capital investment in the City’s water system. Thus, functionalized capital assets are used to allocate capital costs.

City staff provided Raftelis with a detailed capitalized asset database that included the original cost of each individual asset. Raftelis calculated the replacement cost less depreciation (RCLD) of each asset based on net book value using the Engineering News-Record’s 20-City Average Cost Construction Index (CCI) to account for capital cost inflation. As part of the capital asset analysis and with assistance from City staff, Raftelis assigned each individual asset to a functional category. Total water asset value (RCLD) by functional category is shown in Table 4-26. Percentages are rounded to the nearest one-tenth of one percent.

Table 4-26: Summary of Water Enterprise Capital Assets by Functional Category [A] [B] [C] [D]
Line Functional Category Asset Value
(RCLD) Percent of Total
1 Water Supply $0 0%
2 Treatment $6,600,000 31%
3 Storage $900,000 4%
4 Distribution $9,535,414 44%
5 Fire $4,407,417 21%
6 Meters $11,648 0%
7 Customer $0 0%
8 Conservation $0 0%
9 General $0 0%
10 Customer $0 0%
11 Total Asset Value (RCLD) $21,454,479 100%
Table 4-27 shows the allocation of capital assets by functional category to each cost causation component. The percentage allocation of each functional category (Columns C-J) to the various cost causation components was determined in Table 4-23. Total asset value associated with each functional category (Column K) was determined in Table 4-26. The total dollar amount allocated to each cost causation component (Line 10) is determined by multiplying the total asset value associated with each functional category by the corresponding percentage allocation and summing across all functional categories. This is consistent with the methodology used to determine the allocation of O&M expenses to cost causation components in Table 4-25 (described in detail in Section 4.4.5). The initial capital allocation percentages (Line 12) represent the proportion of total capital assets allocated to each cost causation component (Line 10). The total capital revenue requirement (Column K, Line 14) equals the capital revenue requirement from Table 4-21, Column D, Line 21.

Table 4-27: Allocation of Functionalized Water Capital Assets to Cost Causation Components [A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K]
Line Functional
Category Base Max
Day
Max
Hour Supply Conservation Meters Customer General Asset
Value

6.I.b
Packet Pg. 164 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 46 CITY OF HEALDSBURG
(RCLD)
1 Supply $0 $0 $0 $0 $0 $0 $0 $0 $0
2 Treatment $3,473,684 $3,126,316 $0 $0 $0 $0 $0 $0 $6,600,000 3 Storage $473,684 $426,316 $0 $0 $0 $0 $0 $0 $900,000
4 Distribution $2,979,817 $2,681,835 $3,873,762 $0 $0 $0 $0 $0 $9,535,414 5 Fire $1,848,505 $1,663,655 $895,257 $0 $0 $0 $0 $0 $4,407,417 6 Meters $0 $0 $0 $0 $0 $11,648 $0 $0 $11,648
7 Customer $0 $0 $0 $0 $0 $0 $0 $0 $0
8 Conservation $0 $0 $0 $0 $0 $0 $0 $0 $0
9 General $0 $0 $0 $0 $0 $0 $0 $0 $0
10 Total Assets $8,775,691 $7,898,122 $4,769,019 $0 $0 $11,648 $0 $0 $21,454,479 11 12 Capital
Allocation 40.9% 36.8% 22.2% 0.0% 0.0% 0.1% 0.0% 0.0% 100.0% 13 14
Capital
Revenue
Requirement $893,529 $804,176 $485,575 $0 $0 $1,186 $0 $0 $2,184,465

6.I.b
Packet Pg. 165 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 47

4.4.7.PEAKING UNITS OF SERVICE
Peaking units of service are developed to calculate unit peaking costs (Max Day and Max Hour) for each customer class and tier and provide a basis to reallocate the extra-capacity costs of Fire Protection in subsequent steps of the COS analysis. Fire protection, like hydrants, contribute to system capacity-related costs (i.e. peaking costs), and therefore are reallocated a portion of Max Day and Max Hour costs.

Table 4-28 shows the calculation of peaking units of service for non-fire related water service. These calculations attribute peaking costs to specific customer classes based on actual water use patterns. Raftelis estimates Max Day (Column E) and Max Hour (Column H) factors based on actual FY 2022-23 water use and system-wide peaking factors (from Table 4-22). The Max Day factor is derived using the max month factor calculated from the customer billing data. Utilizing the actual water use data, organized by billing period, and accounting for use by class and tier, Raftelis derives a ratio of maximum period to average period. This ratio becomes the proxy for the max day factor.

The Max Hour factor is the max day ratio multiplied proportionally by the ratio of system max hour to max day.

Projected FY 2022-23 water use in Column C (from Table 4-4) is divided by 365 days to determine average daily water use (Column D). Average daily use in Column D is then multiplied by the Max Day factor (Column E) to determine Max Day demand (Column F). Max Day requirements (Column G) are determined by subtracting average daily water use (Column D) from Max Day demand (Column F). Max Hour requirements (Column J) are similarly calculated. Max Hour demand (Column I) equals average daily water use (Column D) multiplied by the Max Hour factor (Column H). Max Hour requirements (Column J) equal Max Hour demand (Column I) less Max Day demand (Column F).

Table 4-28: Peaking Units of Service by Customer Class
[A] [B] [C] [D] [E] [F] [G] [H] [I] [J]
Line Customer
Class
Annual
Water
Use
(hcf)
Average
Daily
Water
Use (hcf)
Max
Day
Factor
Max Day
Demand
(hcf/day)
Max Day
Requirements
(hcf/day)
Max
Hour
Factor
Max
Hour
Demand
(hcf/day)
Max
Hour
Requirements
(hcf/day)
1 Residential
2 Tier 1 217,661 596 1.12 669 72 1.89 1,126 457
3 Tier 2 62,452 171 1.53 261 90 2.57 440 179
3 Tier 3 61,781 169 1.97 333 164 3.31 561 228
4 Subtotal 341,894 937 1.35 1,263 326 2.27 2,127 864
5 6 Non-Residential
7 Commercial 122,377 335 1.35 452 117 2.27 761 309
8 Industrial 13,035 36 1.74 62 27 2.94 105 43
9 Landscape 42,040 115 2.08 239 124 3.50 403 164
10 Total 519,346 1,423 2,016 593 3,396 1,380
Table 4-29 shows the methodology13 used to calculate peaking units of service associated with fire protection based on a hypothetical fire duration and flow rate in gallons per minute (gpm):

Max Day Requirements (HCF/day) = Duration of Fire (hrs) × Water Use Rate (gpm) × 60 mins/hr ÷ 748.05 gallons/HCF Max Hour Requirements (HCF/day) = [Water Use Rate (gpm) × 60 mins/hr × 24 hrs/day ÷ 748.05 gallons/HCF] – Max Day Requirements (HCF/day)
13 Per the AWWA Manual M1.

6.I.b
Packet Pg. 166 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 48 CITY OF HEALDSBURG
Table 4-29: Fireflow Analysis
[A] [B] [C]
Line Description Value
1 Duration of Fire (Hours) 2.0
2 Water Use Rate (gallons per minute) 1,500
3 Max Day Requirements (HCF/Day) 241
4 Max Hour Requirements (HCF/Day) 2,647
Table 4-30 shows the distribution of Fire Protection Max Day and Max Hour requirements (from Table 4-29) to customer Max Day and Max Hour requirements (Table 4-28) to determine the proportion of system capacity reserved for fire protection.

Table 4-30: Allocation of Peaking Units to Fire Protection [A] [B] [C] [D]
Line Description Max Day Max Hour
1 Fire Protection Capacity Requirements 241 2,647
2 Customer Demand Capacity Requirements 593 1,380
4 Total Capacity Requirements 834 4,027
5 6 Proportion of System Capacity
Fire Protection Capacity 28.9% 65.7%
Customer Demand Capacity 71.1% 34.3%
6 Total 100.0% 100.0%
Peaking units of service (from Table 4-28 and Table 4-30) are summarized below in Table 4-31. The percentage of Max Day and Max Hour Requirements attributed to each customer class is shown in Columns D and F respectively.

Table 4-31: Summary of Total Customer Demand Peaking Units [A] [B] [C] [D] [E] [F]
Line Customer Class
Max Day
Requirements
(HCF/Day)
% of Max Day
Requirements
Max Hour
Requirements
(HCF/Day)
% of Max Hour
Requirements
1 SFR
2 Tier 1 72 9% 457 11%
3 Tier 2 90 11% 179 4%
4 Tier 3 164 20% 228 6%
5 Subtotal 326 39% 864 21%
6 7 Non-Residential
8 Commercial 117 14% 309 8%
9 Industrial 27 3% 43 1%
10 Landscape 124 15% 164 4%
11 Fire Capacity 241 29% 2,647 66%
12 Total 593 100% 1,380 100%

6.I.b
Packet Pg. 167 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 49

4.4.8. DEVELOPMENT OF UNIT COSTS
The next step in the COS is to allocate total revenue requirement costs to cost components using the allocation methods developed above in Table 4-23,
Table 4-25, and Table 4-27. These costs include FY 2024-25 operating expenses, capital expenditures, and revenue offsets (including miscellaneous revenues, and loan/grant revenues for FY 2024-25). The total revenue requirement (including operating expenses, capital expenses, and revenue offset) is distributed to cost causation components based on the allocation percentages described above.

Table 4-32: Allocation of Revenue Requirement to Cost Components [A] [B] [C] [D]
Line Description Test Year Revenue
Requirement Allocation Basis
1 Operating Expenses $4,669,598 O&M (see
Table 4-25)
2 Capital Expenses $2,184,465 Capital allocation (see Table 4-27) 3 Total Revenue Requirement $6,854,063
he allocations above provide the basis for the adjusted COS shown below in line 1 of the table. These costs are then divided by relevant units of service (total water use, max day/hour use, equivalent meters, or annualized bills) to produce the unit cost shown below in line 6. In the next section, these unit costs are applied to customer classes based on each classes’ respective units of service.

Table 4-33: Derivation of Cost-of-Service Unit Rates
[A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L]
Lin
e
Descriptio
n
Base Max
Day
Max
Hour Supply Conservation Meters Customer
Fire General Total
1 Total
Adjusted
COS
$2,498,279 $959,798 $217,831 $415,443 $29,605 $2,460,826 $272,280 $014 $015 $6,854,063 2 3 Units of
Service 519,346 593 1,380 519,346 519,346 67,234 57,552 0 57,552 4 Units hcf hcf hcf/day hcf/day hcf equivale
nt meters
annuali
zed bills
Fire
Capacity
annualiz
ed bills
5 6 Unit Cost $4.81 $1,617.6
4 $157.91 $0.80 $0.06 $36.60 $4.73 $0.00 $0.00
7 Units $/hcf $/hcf $/hcf/d
ay
$/hcf/d
ay
$/private
fire lines
$/equiva
lent
meters
$/annu
alized
bills
$
hcf/day
$/annual
ized bills
14 Public fire costs are reallocated to the meter component and recovered from the meter service charges, by meter size. 15 Per industry standard, general costs are reallocated proportionally to the other cost components.

6.I.b
Packet Pg. 168 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 50 CITY OF HEALDSBURG

4.4.9.WATER COST ALLOCATION TO CUSTOMER CLASSES
The final cost of service allocation determines how much revenue must be recovered from the City’s water rates and charges. Each cost causation component is recovered by either a fixed charge (in monthly terms) or volumetric rate (per hcf). Table 4-34 details which cost components are recovered by which type of rate.

Table 4-34: Recovery of Cost Causation Components by Charge Type [A] [B] [C]
Line Cost Causation
Component Associated Charge
1 Water Supply Volumetric Rates
2 Base Delivery Volumetric Rates
3 Max Day Fixed & Volumetric Rates
4 Max Hour Fixed & Volumetric Rates
5 Fire Fixed Charges
6 Meter Fixed Charges
7 Customer Fixed Charges
8 Conservation Volumetric Charges
9 General Reallocated Pro Rata
Table 4-35 shows the projected COS values by customer class and tier. These values are developed by taking the units of service for each customer class (equivalent meters, customer bills, annual average demand, and max day/max hour demands by customer class) and multiplying by the unit rates derived in Table 4-33. These provide the basis for the total cost-to-serve each class, which are then used to develop fixed and variable rates for each customer class/tier in later sections. Note that the total cost to serve in Line 10, Column M is equal to the total revenue requirement derived for FY 2023-24 in Table 4-21.

Table 4-35: Cost to Serve by Water Customer Class
[A] [B] [C] [D] [E] [F] [G] [I] [J] [M]
Lin
e
Description Base Max Day Max
Hour Supply Conservation Meters Customer
Total
1 SFR $1,934,648 $234,129 $2,168,777
2 Tier 1 $1,047,044 $116,820 $72,230 $174,115 $12,407 $1,422,617 3 Tier 2 $300,421 $146,022 $28,239 $49,958 $3,560 $528,199 4 Tier 3 $297,193 $264,828 $35,975 $49,421 $3,522 $650,939 5 Subtotal $1,644,658 $527,671 $136,444 $273,493 $19,489 $1,934,648 $234,129 $4,770,532 6 7 Commercial $588,686 $188,528 $48,815 $97,894 $6,976 $373,244 $28,216 $1,332,359 8 Industrial $62,704 $43,012 $6,731 $10,427 $743 $40,847 $2,157 $166,621 9 Landscape $202,231 $200,588 $25,841 $33,629 $2,396 $112,087 $7,778 $584,550 10 Total $2,498,279 $959,798 $217,831 $415,443 $29,605 $2,460,826 $272,28 0 $6,854,06
3 6.I.b
Packet Pg. 169 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 51

4.5.Proposed Water Rates
Section 4.5 shows detailed calculations of proposed water rates through FY 2028-29. All proposed rates are first calculated directly from the results of the COS analysis (in Section 4.4) for FY 2024-25 (i.e. the “test year”). All FY 2024-25 “COS” rates and charges shown represent intermediate, revenue neutral results of the rate design process.

FY 2022-24 “COS” rates and charges must be calculated to provide a basis for proposed rates for FY 2024-25 through FY 2028-29 which rely on the results of the financial plan.

4.5.1.WATER SERVICE CHARGES (TEST YEAR FY 2024-25)
Table 4-36 shows the calculation of equivalent meters, which is necessary to differentiate Water Service Charges by meter size. Meter capacity ratios (Column D) are first calculated by dividing meter capacity (Column C) by 50 gallons per minute (gpm). Meter capacity ratios (Column D) are then multiplied by the number of water meters at each meter size in Column E to determine equivalent meters (Column F). Equivalent meters in this study are based on AWWA-rated hydraulic capacities16 and are calculated to represent the potential demand on the water system relative to a base meter size.

Table 4-36: Equivalent Water Meters (Test Year)
[A] [B] [C] [D] [E] [F]
Line Meter Size Meter Capacity
(gpm)
Meter Capacity
Ratio
Number of
Meters
Number of
Equivalent Meters
1 3/4-inch water meter 30 1.00 0 0
2 1-inch water meter 50 1.00 4,460 4,460
3 1.5-inch water meter 100 2.00 132 264
4 2-inch water meter 160 3.20 157 502
5 3-inch water meter 320 6.40 26 166
6 4-inch water meter 500 10.00 21 210
7 6-inch water meter 1000 20.00 0 0
9 Total 4,796 5,603
Water Service Charges are designed to recover costs associated with the Customer and Meters cost causation components. Table 4-37 shows the calculation of unit charges for the Customer and Meters cost causation components by dividing the total revenue requirement associated with each cost causation component (from Table 4-32) by the number of billing units.

Customer unit charges are calculated per customer bill. Meter unit charges are calculated per equivalent meter.

Equivalent meters are used to allocate meter-related costs appropriately and equitably. Larger meters impose larger demand, are more expensive to install, maintain, and replace than smaller meters, and have greater capacity potential within the water system. The resulting unit costs are shown below. 16 From the AWWA’s Manual of Water Supply Practices M22: Sizing Water Service Lines and Meters (Third Edition).

6.I.b
Packet Pg. 170 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 52 CITY OF HEALDSBURG
Table 4-37: Water Service Charge Calculation (Test Year) Description Customer Meters
COS Allocation $272,280 $2,460,826
Billing Units 57,552 Bills 67,234 Annual Equivalent
Meters
Unit Charge (per Month) $4.73 per Bill $36.60 per Equivalent Meter Table 4-38 shows the detailed calculation of monthly Water Service Charges for the test year based on Customer and Meters unit charges. Customer costs do not vary by meter size. Therefore, the Customer unit rate is applied uniformly to all Water Service Charges (Column F). Because Meters costs vary by meter size based on hydraulic capacity, AWWA capacity ratios in Column C (from Table 4-36) are used to differentiate Meters unit charges by meter size.

The Meters charges (Column D) are calculated by multiplying the Meters unit charge (from Table 4-37) by the AWWA capacity ratio (Column C). COS monthly Water Service Charges (Column G) equal the sum of Columns D-F, and are compared to current FY 2022-23 charges in Columns I and J.

Table 4-38: Water Service Charges Calculation (Test Year) [A] [B] [C] [D] [F] [G] [H] [I] [J]
Line Meter
Size
Meter
Capacity
Ratio
Meter Customer
COS
Monthly
Charge
Current
Monthly
Charge
Difference
($) Difference (%)
1 3/4" 1.00 $36.60 $4.73 $41.34 $45.26 -$3.92 -9%
2 1" 1.00 $36.60 $4.73 $41.34 $45.26 -$3.92 -9%
3 1 1/2" 2.00 $73.20 $4.73 $77.94 $86.90 -$8.96 -10%
4 2" 3.20 $117.12 $4.73 $121.86 $136.86 -$15.00 -11%
5 3" 6.40 $234.25 $4.73 $238.98 $253.46 -$14.48 -6%
6 4" 10.00 $366.01 $4.73 $370.75 $419.91 -$49.16 -12%
7 6" 20.00 $732.02 $4.73 $736.76 $1,127.75 -$390.99 -35%

4.5.2.WATER VOLUME RATES (TEST YEAR)
Water Volume Rates are designed to recover the portion of the rate revenue requirement allocated to the following cost causation components: Water Supply, Base Delivery, Peaking (Max Day and Max Hour), and Conservation.

Supply rates are applied uniformly to all customer classes as the rates cover the cost of water supply. This rate is calculated by taking the total adjusted COS value for Base (shown in Table 4-33 above) and dividing by the total number of billing units (in hcf).

Table 4-39: Calculation of Supply Rates by Customer Class and Tier Description Base
Delivery
COS Allocation $415,443
Billing Units (HCF) 519,346
Unit Rate ($ / HCF) $0.80

6.I.b
Packet Pg. 171 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 53 Base Delivery Unit Rate
Base Delivery unit rates are applied uniformly to all customer classes and tiers as these are costs incurred to provide water service during average daily demand conditions. This rate is calculated by taking the total adjusted COS value for Base (shown in Table 4-33 above) and dividing by the total number of billing units (in hcf). Table 4-40 shows the calculation of Base Delivery unit rates.

Table 4-40: Calculation of Base Delivery Rate
Description Base Delivery
COS Allocation $2,498,279
Billing Units (HCF) 519,346
Unit Rate ($ / HCF) $4.81
Peaking Unit Rate
Peaking unit rates vary by customer class and tier based on peak water use characteristics. The allocation of these costs is based on the COS allocation of Max Day and Max Hour factors by customer class and tier, developed earlier in Table 4-35. The individual class/tier peaking rates are developed by taking the total allocation for Max Day and Max Hour by customer class and tier (Column C) and dividing by the total water use in each tier/class (Column B). Table 4-41 shows this calculation and the resulting rates (Column D).

Table 4-41: Calculation of Peaking Unit Rates
[A] [B] [C] [D]
Description Water Use
(hcf)
Capacity
Costs (Max
Day + Max
Hour)
Unit Rate ($/hcf)
SFR
Tier 1 217,661 $189,051 $0.87
Tier 2 62,452 $174,261 $2.79
Tier 3 61,781 $300,803 $4.87
Commercial 122,377 $237,344 $1.94
Industrial 13,035 $49,743 $3.82
Landscape 42,040 $226,429 $5.39
Total 519,346 $1,177,630
Conservation Unit Rate
Conservation costs are the costs associated with customer outreach, messaging, and direct conservation programs The total COS costs for conservation, by customer class (from Table 4-35) is divided by the total demands for each tier to determine a per HCF rate. Conservation costs are first allocated to both rate classes and then differentiated by residential tier. Because conservation efforts are aimed at curtailing high volume water use, the costs of SFR conservation are allocated entirely to Tier 3. Non-Residential’s share of conservation is recovered uniformly over

6.I.b
Packet Pg. 172 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 54 CITY OF HEALDSBURG
every unit of water since this class has a uniform rate structure; the conservation calculation is simply the total cost divided by the total water use for that class. Table 4-42 shows the calculation of conservation rates.

Table 4-42: Calculation of Conservation Unit Rates
Description
Water
Demand
(hcf)
Conservation
Costs Unit Rate ($/hcf)
SFR
Tier 1 217,661 $0 $0.00
Tier 2 62,452 $0 $0.00
Tier 3 61,781 $19,489 $0.32
Non-Residential
Commercial 122,377 $6,976 $0.06
Industrial 13,035 $743 $0.06
Landscape 42,040 $2,396 $0.06
Total 519,346 $29,605
Water Volume Rate Calculation (Test Year)
Table 4-43 shows the calculation of Water Volume Rates for the test year. The final rate is summing the individual class/tier rates for each component developed above (water supply, base, peaking, and conservation). No revenue adjustments are incorporated into the COS rates shown, which are designed to collect the same amount of revenue as current water rates. The relevant tables for the calculation of each component are shown below:
» Water Supply Unit Rates (from Table 4-39)
» Base Delivery Unit Rates (from Table 4-40)
» Peaking Unit Rates (from Table 4-41)
» Conservation Unit Rates (from Table 4-42)
Table 4-43: Water Use Rates Calculation (Test Year)
[A
] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K]
Li
ne
Customer
Class
By
Class/
Tier
(HCF)
Water
Suppl
y Unit
Rate
Base
Cost
Unit
Rate
Peaki
ng
Unit
Rate
Conser
vation
Unit
Rate
Proposed
COS
Rate
($/hcf)
Current
Rate
($/hcf)
Differenc
e ($)
Differenc
e (%)
1 SFR
2 Tier 1 217,661 $0.80 $4.81 $0.87 $0.00 $6.48 $6.48 $0.00 0.0% 3 Tier 2 62,452 $0.80 $4.81 $2.79 $0.00 $8.41 $6.48 $1.93 29.8% 4 Tier 3 61,781 $0.80 $4.81 $4.87 $0.32 $10.80 $6.48 $4.32 66.7% 5 6 Commercia
l 122,377 $0.80 $4.81 $1.94 $0.06 $7.61 $6.48 $1.13 17.4% 7 Industrial 13,035 $0.80 $4.81 $3.82 $0.06 $9.49 $6.48 $3.01 46.5% 8 Landscape 42,040 $0.80 $4.81 $5.39 $0.06 $11.06 $6.48 $4.58 70.7%

6.I.b
Packet Pg. 173 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 55 Proposed Five-Year Rates Schedule
Table 4-44 shows the proposed three-year schedule of water rates for implementation July1, 2024 through July 2026. July 2024 rates are calculated by taking the final proposed rate in Table 4-43 and multiplying by the proposed revenue adjustment shown in Table 4-16. The rates for the remaining years of the study are calculated by multiplying each year’s rate by the proposed adjustment shown for that year in Table 4-16.

Table 4-44: Proposed Three-Year Water Rates Schedule
Description Current FY 2025 FY 2026 FY 2027
Residential Fixed Monthly Service Charge
Single Family $28.61 By Meter Size By Meter Size By Meter Size Single Family + ADU (per DU) $21.84 By Meter Size By Meter Size By Meter Size Multi-Family (Per DU) $17.01 By Meter Size By Meter Size By Meter Size Fixed Monthly Service Charges
Up to 1" $45.26 $41.34 $49.61 $56.06
1 1/2" $86.90 $77.94 $93.53 $105.69
2" $136.86 $121.86 $146.24 $165.26
3" $253.46 $238.98 $286.78 $324.07
4" $419.91 $370.75 $444.90 $502.74
6" $1,127.75 $736.76 $884.12 $999.06
Residential (Single Family & Multi-Family)
Tier 1 (0-5 HCF) $6.48 $6.48 $7.78 $8.80
Tier 2 (6-10 HCF) $6.48 $8.41 $10.10 $11.42
Tier 3 >10 HCF $6.48 $10.80 $12.96 $14.65
Non-Residential Classes
Commercial $6.48 $7.61 $9.14 $10.33
Industrial $6.48 $9.49 $11.39 $12.88
Landscape $6.48 $11.06 $13.28 $15.01
Riverview HOA17 $1.59 $1.93 $2.32 $2.63
17 Only the volumetric rate applicable to Riverview HOA under the terms of the 1997 order of condemnation. HOA Riverview pays a fixed monthly service charge by meter size that increases based schedule.

6.I.b
Packet Pg. 174 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 56 CITY OF HEALDSBURG

5.Wastewater Rate Study

5.1.Key Inputs and Assumptions
Raftelis developed a wastewater rate model to project financial calculations over the next ten fiscal years with projections shown in this report through the five-year rate-setting period of FY 2028-29 (i.e. the “study period”).

While the study period consists of five years, the proposed rates for adoption are for only the first three years only.

The City’s fiscal year spans from July 1 through June 30. Projections in future years were informed by actual data for FY 2021-22 or FY 2022-23, or the adopted budget for FY 2023-24 using key assumptions outlined below.

Assumptions were discussed with, and reviewed by, City of Healdsburg Public Works and Finance staff to ensure that the City wastewater system’s unique characteristics are accurately accounted for. Note that most table values shown throughout this report are rounded to the last digit shown and may therefore not sum precisely to the totals shown.

The proposed rates are predicated on a shift in current adopted reserve policy outlined in the 2022 rate study.

Failure to adopt the recommended changes may result in higher projected rates to adhere to the existing minimum coverage requirement. Raftelis recommends transitioning from a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes and instead utilizing them to complete preemptive capital replacement and fund maintenance costs in a manner that stabilizes rates support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. As a result, the proposed financial plan fully funds the operating reserve, but it does not fully fund the rate stabilization reserve. When the City undertakes the next rate study, it is recommended that the City consider fully funding the rate stabilization reserve in the financial plan.

6.I.b
Packet Pg. 175 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 57

5.1.1.CURRENT WASTEWATER RATES
Table 5-1 shows the wastewater rates currently in effect in FY 2023-24, which were developed during the prior rate study in 2022. Rates and charges vary by customer class. Residential customers are subject to a monthly Fixed Charge per dwelling unit and a variable flow charge per Average Winter Consumption (AWC) over January to April, with highest month usage being omitted; non-residential customers are subject to a fixed charge by meter size and a variable Flow Charge based on actual water use and strength category for each billing period. All current charges are shown on a monthly basis.

Table 5-1: Current Wastewater Rates Schedule
Description FY 2024
Residential Service Charges
($/Month/Dwelling Unit)
Single Family Residential (SFR) $46.67
SFR + ADU $31.95
Multi-Family Residential (MFR) $37.80
Flat Rate (Sewer Only SFR) $104.01
Non Residential Service Charges
($/Month/Meter)
5/8" $75.75
1" $75.75
1 1/2" $148.49
2" $235.77
3" $439.44
4" $730.39
6" $1,966.94
Wastewater Usage Charges ($/HCF)
Residential (SFR/MFR) $11.47
Non Residential
Low Strength $10.31
Medium Strength $15.09
High Strength $22.08

5.1.2.WASTEWATER ENTERPRISE FINANCIAL ASSUMPTIONS
Inflationary assumptions shown in Table 5-2 are used to escalate projected non-rate revenues and operations and maintenance (O&M) expenses beyond FY 2023-24. For O&M expenses, the general inflation rate is consistent with long-term changes in the Consumer Price Index (CPI). Specifically, increases in salaries and cost-of-living adjustments (COLA) match the annual percentage changes in wages and salaries reported by the CPI. At the direction of city staff, adjustments for salary/employee benefits and electricity costs have been made. Electricity cost adjustments directly reflect the estimated rate increases provided by the city's electric suppliers. Utility costs have been updated to mirror the changes in fuel and utilities prices from October 2022 to October 2023, as indicated by the CPI. Capital expenses have been adjusted based on the three-year average from the Engineering News-Record (ENR). All inflationary assumptions are consistent with inflationary assumptions used in the water rate study.

6.I.b
Packet Pg. 176 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 58 CITY OF HEALDSBURG
Table 5-2: Wastewater Enterprise Inflationary Assumptions Inflationary Categories FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Expenses
General Cost Inflation 3.7% 3.7% 3.7% 3.7% 3.7%
Salary / COLA 4.5% 4.5% 4.5% 4.5% 4.5%
Salary / Employee Benefits 7% 7% 7% 7% 7%
Utilities 5.2% 5.2% 5.2% 5.2% 5.2%
Capital 5.9% 5.9% 5.9% 5.9% 5.9%
Electricity 14.0% 8.0% 7.0% 5.0% 5.0%

5.1.3.PROJECTED WASTEWATER BILLING UNITS OF SERVICE
City staff provided Raftelis with wastewater billing data to gather customer counts and usage per class and meter size. Similar to the water utility, the City's wastewater utility isn't expecting an increase in accounts. This, coupled with a strong emphasis on water conservation, resulted in overall usage and revenues remaining stable. Therefore, for the study period, Raftelis didn't project any growth in accounts but relied on current estimates of actual meter counts for all future years.

Table 5-3 displays the current values for wastewater meters. To ensure conservative rate revenue projections and align with water demand projections, no additional demand factor was applied to billed wastewater flows. All billing units provided below are based on the current wastewater rate structure.

Table 5-3: Current Wastewater Enterprise Connections
Description Current Number
of Meters
Residential (Dwelling Units)
Single Family Residential (SFR) 3,774
SFR + ADU 316
Multi-Family Residential (MFR) 811
Subtotal - Residential 4,901
Non-Residential Accounts
Low Strength 369
Medium Strength 97
High Strength 75
Subtotal – Non-Residential 541
Total Dwelling Units & Accounts 5,442
Table 5-4 shows the projected wastewater flows for the City’s customers over the study period. Note that, because the City assumed constant water demand, all flows remain constant throughout the study period. As such, only FY 2022-23 actual flows are shown and are the estimate for future years`; all other years in the study (through FY 2032-33) are equivalent to those shown in Table 5-4 below. All flows are shown in hundred cubic feet (hcf).

6.I.b
Packet Pg. 177 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 59 Table 5-4: Estimated Non-Residential Wastewater Flows (hcf), Existing Rate Structure Description Projected
FY 2025
Residential
Single Family Residential (SFR) 156,948
SFR + ADU 9,256
Multi-Family Residential (MFR) 25,760
Subtotal – Residential 191,964
Non-Residential
Low Strength 68,244
Medium Strength 27,349
High Strength 39,944
Subtotal – Non-Residential 135,537
Total Flows 327,501

5.2.Wastewater Financial Plan
Section 5.2 details the development of a proposed Wastewater Enterprise financial plan over the study period. The following subsections include estimates and projections of annual revenues, O&M expenses, debt service payments, capital expenditures, and reserve funding through FY 2028-29. The overall purpose of the financial plan is to determine annual wastewater rate revenues required to achieve sufficient cash flow, maintain adequate reserves, and meet debt coverage requirements.

5.2.1.WASTEWATER ENTERPRISE REVENUE UNDER CURRENT RATES The Wastewater Enterprise’s revenue sources consist of wastewater rates, interest earnings on cash reserves, and other non-rate revenues. The rate revenue projections shown in this section assume that current FY 2023-24 wastewater rates are effective throughout the study period, and therefore represent estimated revenues in the absence of any wastewater rate increases. This status quo scenario provides a baseline from which Raftelis evaluated the need for revenue adjustments (i.e. gross rate revenue increases).

Table 5-5: Projected Rate Revenues with Current Wastewater Rates Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Wastewater Rate Revenues
Variable $4,200,083 $4,200,083 $4,200,083 $4,200,083 $4,200,083 $4,200,083 Fixed $3,436,715 $3,436,715 $3,436,715 $3,436,715 $3,436,715 $3,436,715 Total $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 Other Wastewater Enterprise Revenues
Table 5-6 shows all other Wastewater Enterprise revenues. All FY 2023-24 other revenues are based on the City’s FY 2023-24 adopted budget which includes non-recurring transfers and a one-time adjustment to account for available capital funding. Projected future miscellaneous revenues represent scheduled loan repayments.. Interest revenue is estimated in the financial plan model beginning in FY 2024-25 based on projected fund balances and the assumed interest rate.

6.I.b
Packet Pg. 178 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 60 CITY OF HEALDSBURG
Table 5-6: Other Wastewater Enterprise Revenues
Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Wastewater - Other Revenues
Miscellaneous Revenues $1,070,403 $123,313 $123,313 $123,313 $123,313 $123,313 Interest Income $37,810 $40,159 $44,829 $39,427 $38,969 $39,409 Total $1,108,213 $163,472 $168,142 $162,740 $162,282 $162,722 Summary of Projected Wastewater Enterprise Revenues
Table 5-7 shows a summary of all projected Wastewater Enterprise revenues under current rates over the study period. This includes all projected revenues shown in Table 5-5 and Table 5-6. This revenue summary represents expected revenues in the absence of any rate increase over the study period.

Table 5-7: Projected Wastewater Enterprise Revenues Under Current Rates Description Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Wastewater Revenues
Variable Revenues $4,200,083 $4,200,083 $4,200,083 $4,200,083 $4,200,083 $4,200,083 Fixed Revenues $3,436,715 $3,436,715 $3,436,715 $3,436,715 $3,436,715 $3,436,715 Miscellaneous Revenues $1,070,403 $123,313 $123,313 $123,313 $123,313 $123,313 Interest Income $37,810 $40,159 $44,829 $39,427 $38,969 $39,409 Total $8,745,011 $7,800,270 $7,804,940 $7,799,538 $7,799,080 $7,799,520

5.2.2.WASTEWATER ENTERPRISE OPERATIONS & MAINTENANCE EXPENSES Table 5-8 shows a summary of all Wastewater Enterprise O&M expenses over the study period. O&M expenditures include the cost of operating and maintaining wastewater collection, treatment, and disposal facilities.

O&M expenses also include the costs of providing technical services such as laboratory services and other administrative costs of the wastewater system. These costs are a normal obligation of the system and are met from operating revenues as they are incurred. The projection indicates that operation and maintenance (O&M) expenses will rise by an average of 5% each year throughout the study period. However, there is an exception between 2024 and 2025, when costs are expected to decrease. This decrease is attributed to several one-time expenses, including legal services, and equipment repairs that were funded by non-recurring transfers in the 2024 budget but will not continue into subsequent years. The City provided Raftelis with projected actuals for FY 2022-23 and budgeted values for FY 2023-24. Raftelis then used the inflation factors shown above in Table 5-2 to escalate O&M costs in the out years.

Table 5-8: Projected Wastewater Enterprise O&M Expenses O&M Expenses Projected
FY 2024
Projected
FY 2025
Projected
FY 2026
Projected
FY 2027
Projected
FY 2028
Projected
FY 2029
Collection $2,187,114 $2,310,089 $2,415,419 $2,524,975 $2,637,152 $2,761,448 Treatment $3,550,677 $3,407,584 $3,582,147 $3,760,612 $3,935,847 $4,119,726 Customer $215,468 $225,246 $235,497 $246,245 $257,516 $269,337 General $812,296 $776,103 $812,145 $849,976 $889,691 $931,390 Total O&M Expenses $6,765,555 $6,719,022 $7,045,209 $7,381,809 $7,720,206 $8,081,902

6.I.b
Packet Pg. 179 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 61

5.2.3.WASTEWATER ENTERPRISE DEBT
Table 5-9 shows the Wastewater Enterprise’s projected debt service obligations over the study period. Existing debt service consists of the City’s Series 2015 In July 2015, the City issued the 2015 Wastewater Revenue Refunding Bonds, which defeased the remaining Sewer Bonds of the 2005 CSDA Bonds of $2,440,000. The 2005 CSDA Sewer Bonds are considered to be defeased and the liability has been removed from long-term debt. The wastewater utility received a $425,000 loan from the general fund to be paid back over the next 4 years which is considered O&M in the budget. The City does not plan to issue new debt for its wastewater enterprise during the study period.

Table 5-9: Wastewater Enterprise Debt Service
Debt Service FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Existing Debt Service
Series 2015 Revenue
Refunding Bond $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 Subtotal $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 Proposed Debt Service
New Debt $0 $0 $0 $0 $0 $0
Subtotal $0 $0 $0 $0 $0 $0
Total $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416

5.2.4.WASTEWATER ENTERPRISE CAPITAL IMPROVEMENT PLAN
Table 5-10 shows the City’s capital improvement plan (CIP) for the Wastewater Enterprise over the study period.

The values shown are based on the most recently prepared multi-year CIP. . To reduce immediate financial needs and financial impacts the CIP defers several infrastructure replacement projects for portions of the utility pipeline beyond their useful life and several rehabilitation projects for aging lift stations. The deferral of these projects will not impact the immediate service provided by the Utility, but it will continue to challenge overall system reliability in the long-term. Significant CIP expenditures are anticipated to continue over the next ten years, with approximately $3.7M in capital spending per year for the duration of the ten-year planning period. This highlights the need to maintain adequate reserves to fund substantial CIP projects beyond FY 2028-29. Capacity-related project costs are not included in the CIP and revenue associated with capital recover fees are excluded from the revenue requirement.

6.I.b
Packet Pg. 180 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 62 CITY OF HEALDSBURG
Table 5-10: Wastewater Enterprise Capital Improvement Plan Project Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Orchard Lift Station Rehabilitation $0 $0 $277,981 $0 $0 $0 Heron Lift Station Relocation $0 $0 $0 $0 $1,706,188 $0 Magnolia LS Structure Rehabilitation $0 $0 $216,332 $0 $0 $0 Hendricks Lift Station / Westside Road Gravity Sewer $0 $0 $0 $0 $0 $1,557,636 Spare centrifuge rotating assembly $0 $0 $183,826 $0 $0 $0 Pond 1 Liner Repairs $0 $80,463 $0 $0 $0 $0
Membrane Feed Pumps $0 $0 $95,276 $0 $0 $123,706
Storm Drain Pumps $0 $0 $0 $0 $75,384 $0
Plant Drain Pumps $0 $0 $0 $0 $77,897 $0
WRF membrane replacement $0 $281,620 $0 $0 $0 $0
Reconstruct Corp Yard Lift Station $0 $0 $0 $0 $63,946 $0 WRF Fence / Trees $0 $0 $0 $0 $97,999 $0
WRF Compressors $0 $29,644 $32,506 $0 $0 $0
A-Basin Diffusers Replacement $0 $0 $68,374 $0 $0 $0
Air actuators for Filtration gallery 10-inch valves $0 $0 $0 $0 $0 $17,292 Air actuators for Filtration gallery 14-inch valves $0 $0 $0 $0 $0 $21,283 Mixers $0 $0 $0 $0 $0 $0
Magnolia Pump Station Pump 1 Replacement $0 $0 $0 $0 $131,922 $0 Wastewater and Programming Computer $0 $7,411 $0 $0 $0 $0 Boeger Pump Rehab $0 $0 $0 $0 $18,846 $19,953
UV Wiper hydraulic Hoses $0 $0 $0 $31,391 $0 $0
Inflow and Infiltration Investigation $0 $0 $0 $0 $332,945 $0 Drainage Improvements at Industrial Group Building $0 $0 $0 $0 $37,692 $0 McDonough Water Transmission Main Replacement $0 $0 $0 $0 $45,513 $527,747 Brown Street Sewer & Water Replacement $0 $0 $1,330,576 $0 $0 $0 Reed Court & Bianca Lane Sewer & Water Replacement $0 $0 $0 $0 $0 $107,079 University Street Sewer & Water Replacement $0 $0 $128,258 $1,352,929 $0 $0 Healdsburg Ave Sewer Replacement $0 $0 $0 $2,007,053 $0 $0 Healdsburg Ave Utility Replacement $0 $760,956 $0 $0 $0 $0 Ongoing R&R $0 $0 $0 $0 $0 $1,995,264
Inflow and Infiltration Repairs $0 $0 $0 $0 $1,256,398 $0 Total CIP $0 $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960

6.I.b
Packet Pg. 181 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 63 Table 5-11 shows the assumed funding sources for Wastewater Enterprise CIP projects over the five-year study period. The City plans to fund its capital expenditures through rates (e.g., PAYGO). The rate study does not project the need for additional debt issuances for the study period; as such, the capital funding plan for the Wastewater Enterprise assumes cash-funding for the duration of the study period. Figure 5-11 shows a summary of total Wastewater Enterprise CIP expenditures by funding source through FY 2032-33.

Table 5-11: Wastewater Enterprise Capital Improvement Plan, by Funding Source Description FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Rate Funded $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 Bond Funded $0 $0 $0 $0 $0
Grant Funded $0 $0 $0 $0 $0
Total $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 Figure 5-1: Wastewater Enterprise Capital Improvement Plan

5.2.5.WASTEWATER ENTERPRISE FINANCIAL POLICIES
Required Debt Coverage
The Wastewater Enterprise is required to meet debt service coverage requirements on its outstanding wastewater revenue bonds. Failure to meet debt service coverage results in a technical default, which, without foreseeable remedial action such as implementing rate increases, could result in a downgrade of credit rating, higher costs in future debt issuance or even denial of credit. This is consistent with the requirements for the City’s Water

6.I.b
Packet Pg. 182 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 64 CITY OF HEALDSBURG
Enterprise. The required debt coverage ratio is 1.20, meaning that the Wastewater Enterprise’s net operating revenues (i.e. total revenues less operating expenses) must amount to at least 1.20 times the amount of annual debt service.

Reserve Targets
Adequate cash reserves are required to meet operating, capital, and debt service requirements. The current operating reserve target is equal to 25% percent of annual O&M expenses. Raftelis recommends the City shift the reserve policy outlined in the previous study of establishing a capital reserve policy to a rate stabilization policy to streamline the approach, eliminating the earmarking of reserves for specific capital purposes, and instead utilizing them to support rates. As part of this transition, the City would allocate a portion of the reserve to offset increases over the next three fiscal years. Furthermore, when the City undertakes the next rate studies and adopts the next rate plan, it’s recommended that the City consider funding an additional one-million-dollar rate stabilization reserve, which can be used to address major equipment failures and natural disasters. The change will mitigate otherwise higher rate increases over the study period.

Table 5-12: Wastewater Enterprise Financial Policies
Financial Policy Target/Requirement
Debt Coverage
Target Debt Coverage Ratio 1.20
Reserve Targets
Operating Reserve Target 25% of annual O&M expenses
Rate Stabilization Target $1 Million
Total Reserve Target 25% of annual O&M expenses + $1 million Table 5-13: Projected Wastewater Enterprise Reserve Targets Reserve Target FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Operating Reserve $1,691,389 $1,679,756 $1,761,302 $1,845,452 $1,930,051 $2,020,475 Rate Stabilization
Reserve $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Total Reserve
Target $2,691,389 $2,679,756 $2,761,302 $2,845,452 $2,930,051 $3,020,475

5.2.6.STATUS QUO WASTEWATER FINANCIAL PLAN
To evaluate the need for revenue adjustments (i.e. increases to gross rate revenues), Raftelis first developed a status quo financial plan. The status quo financial plan assumes that current FY 2023-24 rates remain unchanged over the study period. Table 5-14 combines projected revenues (from Table 5-7), O&M expenses (from Table 5-8), and debt service (from Table 5-9) to generate operating cash flow projections under the status quo. In the absence of any revenue adjustments, the Wastewater Operating Fund will fail to generate sufficient revenue to recover O&M expenses and debt service over the study period.

6.I.b
Packet Pg. 183 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 65 Table 5-14: Wastewater Cash Flow – Status Quo Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Wastewater Rate Revenue under Current Rates
2 Wastewater Rates
Subject to Revenue
Adjustments
$7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 3 Non-Rate revenues 18 $1,108,213 $163,472 $168,142 $162,740 $162,282 $162,722 4 Total Revenues $8,745,011 $7,800,270 $7,804,940 $7,799,538 $7,799,080 $7,799,520 5 6 O&M Expenses $6,765,555 $6,719,022 $7,045,209 $7,381,809 $7,720,206 $8,081,902 7 Debt Service $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 8 Rate-Funded CIP $0 $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 9 Total Expenses $8,556,905 $9,673,867 $11,169,588 $12,568,931 $13,359,860 $14,245,277 10 11 Net Cash Flow19 $188,105 ($1,873,597) ($3,364,648) ($4,769,394) ($5,560,780) ($6,445,757 )
Table 5-15 shows projected reserve balances and debt coverage under the status quo financial plan for the entire Wastewater Enterprise. Sources of funds include both rate and non-rate revenues but exclude revenues from rate increases. Use of funds include O&M expenses (from Table 5-8), debt service (from Table 5-9), and CIP expenditures (from Table 5-11). The FY 2023-24 beginning balance reflects actual Wastewater Enterprise reserve balances as of July 1, 2023. All ending balance and debt coverage figures are projected values. Target reserve balances shown are from Table 5-13.
18 Includes miscellaneous revenues and interest income. 19 Equal to [Line 4 – Line 9].

6.I.b
Packet Pg. 184 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 66 CITY OF HEALDSBURG
Table 5-15: Wastewater Enterprise Pro Forma – Status Quo Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Projected Beginning
Balance $2,758,739 $2,946,844 $1,073,248 ($2,291,400) ($7,060,794) ($12,621,574) 2 3 Source of Funds
4 Status Quo Rate Revenues $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 5 Other Revenues $1,108,213 $163,472 $168,142 $162,740 $162,282 $162,722 9 Total Source of Funds $8,745,011 $7,800,270 $7,804,940 $7,799,538 $7,799,080 $7,799,520 10 11 Use of Funds
12 O&M Expenses $6,765,555 $6,719,022 $7,045,209 $7,381,809 $7,720,206 $8,081,902 13 Debt Service $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 14 Rate-Funded CIP $0 $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 15 Total Use of Funds $8,556,905 $9,673,867 $11,169,588 $12,568,931 $13,359,860 $14,245,277 16 17 Net Cashflow $188,105 ($1,873,597) ($3,364,648) ($4,769,394) ($5,560,780) ($6,445,757) 18 19 Projected Ending
Balance20 $2,946,844 $1,073,248 ($2,291,400) ($7,060,794) ($12,621,574) ($19,067,331) 20 Operating Reserve Target $2,691,388 $2,679,755 $2,761,302 $2,845,452 $2,930,051 $3,020,475 22 23 Debt Coverage
24 Projected Debt Coverage21

1.11 0.60

0.42 0.23

0.04 (0.16)
25 Required Debt Coverage 1.20 1.20 1.20 1.20 1.20 1.20

5.2.7.PROPOSED WASTEWATER FINANCIAL PLAN
Wastewater Enterprise must increase its revenues from wastewater rates over the study period to adequately fund its operating and capital expenditures, meet required debt coverage, and maintain sufficient reserve funding. Raftelis worked closely with City staff to identify financial plan options for the Board’s consideration. The selected option of proposed annual revenue adjustments is shown in Table 5-16. Revenue adjustments represent annual percentage increases in total rate revenue relative to rate revenue generated by the prior year’s wastewater rates.

Table 5-16: Proposed Wastewater Enterprise Revenue Adjustments Proposed Future Increases
Fiscal Year FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Effective Date July 1, 2024 July 1, 2025 July 1, 2026 July 1, 2027 July 1, 2028 Revenue Adjustment 18.0% 18.0% 15.0% 9.0% 5.0%
Table 5-17 combines projected wastewater rate and non-rate revenues (from Table 5-7), O&M expenses (from Table 5-8), and debt service (from Table 5-9) to generate operating cash flow projections under the proposed financial plan. By implementing the proposed revenue adjustments, we project that the Wastewater Operating Fund will maintain sufficient operating cash flow through the end of the study period. 20 Equal to [Line 1 + Line 17]
21 Equal to [(Line 9 – Line 12) ÷ Line 13]

6.I.b
Packet Pg. 185 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 67 Table 5-17: Wastewater Cash Flow – Proposed Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Wastewater Rate Revenue under Current Rates
2 Wastewater Rates
Subject to Revenue
Adjustments
$7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 $7,636,798 3 Non-Rate Revenues22 $1,108,213 $163,472 $168,142 $162,740 $162,282 $162,722 4 Revenue Adjustments
5 Fiscal
Year
Rev.

Adj.
6 FY 2025 18.00% $1,374,624 $1,374,624 $1,374,624 $1,374,624 $1,374,624 7 FY 2026 18.00% $1,622,056 $1,622,056 $1,622,056 $1,622,056 8 FY 2027 15.00% $1,595,022 $1,595,022 $1,595,022
9 FY 2028 9.00% $1,100,565 $1,100,565
10 FY 2029 5.00% $666,453
11 Total Adjustments $0 $1,374,624 $2,996,679 $4,591,701 $5,692,266 $6,358,719 12 13 Total Revenues $8,745,011 $9,174,893 $10,801,620 $12,391,239 $13,491,346 $14,158,239 14 15 O&M Expenses $6,765,555 $6,719,022 $7,045,209 $7,381,809 $7,720,206 $8,081,902 16 Debt Service $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 17 Rate-Funded CIP $0 $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 18 Total Expenses $8,556,905 $9,673,867 $11,169,588 $12,568,931 $13,359,860 $14,245,277 19 20 Net Operating Cash
Flow23 $188,105 ($498,973) ($367,968) ($177,693) $131,486 ($87,038) Table 5-18 shows projected reserve balances and debt coverage under the proposed financial plan for the entire Wastewater Enterprise. Sources of funds include revenues (from Table 5-7), revenue adjustments (from Table 5-17), use of funds include O&M expenses (from Table 5-8), debt service (from Table 5-9), and CIP expenditures (from Table 5-11). The FY 2023-24 beginning balance reflects actual Wastewater Enterprise reserve balances as July 1, 2023. All ending balance and debt coverage figures are projected values. Target reserve balances shown are from Table 5-13. Under the proposed financial plan, reserve balances and debt coverage are projected to achieve target policies in all years of the rate-setting period. 22 Includes miscellaneous revenues, interest income, and loan/grant revenues. 23 Equal to [Line 13 – Line 18].

6.I.b
Packet Pg. 186 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 68 CITY OF HEALDSBURG
Table 5-18: Wastewater Enterprise Pro Forma – Proposed Financial Plan Line Description FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 1 Beginning Balance $2,758,739 $2,946,844 $2,447,871 $2,079,903 $1,902,210 $2,033,696 2 3 Source of Funds
4 Rate Revenues (including
adjustments) $7,636,798 $9,011,421 $10,633,477 $12,228,499 $13,329,064 $13,995,517 5 Other Revenues $1,108,213 $163,472 $168,142 $162,740 $162,282 $162,722 9 Total Source of Funds $8,745,011 $9,174,893 $10,801,620 $12,391,239 $13,491,346 $14,158,239 10 11 Use of Funds
12 O&M Expenses $6,765,555 $6,719,022 $7,045,209 $7,381,809 $7,720,206 $8,081,902 13 Debt Service $1,791,350 $1,794,750 $1,791,250 $1,795,750 $1,794,925 $1,793,416 14 Capital Improvement Plan
Expenditures $0 $1,160,094 $2,333,129 $3,391,373 $3,844,730 $4,369,960 15 Total Use of Funds $8,556,905 $9,673,867 $11,169,588 $12,568,931 $13,359,860 $14,245,277 16 17 Ending Balance24 $2,946,844 $2,447,871 $2,079,903 $1,902,210 $2,033,696 $1,946,658 18 Operating Reserve Target $2,691,388 $2,679,755 $2,761,302 $2,845,452 $2,930,051 $3,020,475 19 20 Debt Coverage
23 Projected Debt Coverage25

1.11 1.37

2.10 2.79

3.22 3.39
24 Required Debt Coverage 1.20 1.20 1.20 1.20 1.20 1.20 24 Equal to [Line 1 + Line 9 – Line 15].
25 Equal to [(Line 9 – Line 12) / Line 13].

6.I.b
Packet Pg. 187 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 69 Figure 5-2 shows projected debt coverage (blue line) relative to the debt coverage requirement (gray line) over the study period. As shown below, debt coverage remains far above the requirement throughout the study period due to the minimal amount of existing debt and absence of future debt issuances for this study.

Figure 5-2: Proposed Wastewater Financial Plan – Projected Debt Coverage Figure 5-3 shows the Wastewater Enterprise’s projected ending balance under the proposed financial plan. The light blue bars indicate the ending balance. Minimum targets (based on the policies described in Table 5-12) are shown by the orange line and red line.

6.I.b
Packet Pg. 188 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 70 CITY OF HEALDSBURG
Figure 5-3: Proposed Wastewater Financial Plan – Projected Ending Cash Balances Figure 5-4 shows the proposed versus status quo operating financial plan. Revenues under the status quo and proposed financial plans are represented by the blue and black lines, respectively. Revenue requirements including O&M expenses, debt service, and reserve funding for CIP/other purposes are represented by the various stacked bars. Revenue adjustments are required to generate sufficient revenue to recover O&M expenses and debt service payments over the study period.

6.I.b
Packet Pg. 189 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 71 Figure 5-4: Proposed vs. Status Quo Wastewater Enterprise Financial Plan

5.3.Wastewater Cost-of-Service Analysis
Section 5.3 details the Cost-of-Service (COS) analysis performed for the Wastewater Enterprise for FY 2024-25. The COS analysis allocates the overall rate revenue requirement to customer classes based on their proportion of use of and burden on the wastewater system. This provides the basis for the development of proposed wastewater rates through FY 2028-29.

5.3.1.METHODOLOGY
The first step in a COS analysis is to determine the revenue required from wastewater rates. The total revenue requirement results from the wastewater financial plan in Section 5.2. The methodology to develop the COS analysis and to apportion the revenue requirement to user classes is informed by the WEF’s Manual of Practice (MOP) No. 27 Financing and Charges for Wastewater Systems. COS analyses are tailored to meet the specific needs of each wastewater system. However, there are distinct steps in every COS analysis to recover costs from customers in an accurate, equitable, and defensible manner:

1. Cost Functionalization: O&M expenses and capital assets are categorized by their function in the wastewater system. Sample functions may include collection, treatment, and customer service, among others.

2. Cost Causation Component Allocation: Functionalized costs are then allocated to cost causation components based on their burden on the wastewater system. The cost causation components include flow, biological oxygen demand (BOD), and suspended solids (SS), among other specific cost components. The

6.I.b
Packet Pg. 190 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 72 CITY OF HEALDSBURG
revenue requirement is allocated accordingly to the cost causation components and results in the total share of the revenue requirement attributable to each cost component.

3. Mass Balance Analysis: The flow and strength (BOD and SS) of wastewater treatment plant (WWTP) influent is attributed to each customer class based on water use data and estimated wastewater generation and strength assumptions that vary by user classification. However, due to the unique characteristics of pipelines and treatment facilities, this analysis may not always yield precise service units by class but can confirm the total volume of treated wastewater. In this study, Raftelis relied on industry standard strength and average plant strength data.

4. Revenue Requirement Distribution: The unit cost is utilized to distribute the revenue requirement for each cost causation component unit cost to customer classes based on each customer class’s individual burden on the wastewater system.

5.3.2.WASTEWATER RATE REVENUE REQUIREMENT
Table 5-19 shows the calculation of the wastewater rate revenue requirement for FY 2024-25 (also referred to as the test year). The revenue requirement is split into operating and capital categories (Columns C-D), which are later allocated based on O&M expenses and capital assets. The revenue requirements (Lines 2-4) include FY 2024-25 O&M expenses, debt service, and capital projects. The revenue offsets (Lines 8-10) include all non-rate revenues.

These revenues are applied as offsets to the final rate revenue requirement. The adjustment for cash balance (Line 14) is equal to FY 2024-25 negative net operating cash flow under the proposed financial plan, and accounts for the drawdown of operating reserves in FY 2024-25. All values are from the proposed wastewater financial plan operating cash flow (Table 5-17). The final rate revenue requirement (Line 19) is calculated as follows:

Total revenue required from rates (Line 19) = Revenue requirements (Line 5) - Revenue offsets (Line 11) - Adjustments (Line 16) Table 5-19: Wastewater Rate Revenue Requirement (Test Year) [A] [B] [C] [D] [E]
Line Description
Operating
Revenue
Requirement
Capital
Revenue
Requirement
Total
1 Revenue Requirements
2 O&M Expenses $6,719,022 $6,719,022
3 Debt Service $1,794,750 $1,794,750
4 Capital Expenditures – PAYGO $1,160,094 $1,160,094
5 Total Revenue Requirements $6,719,022 $2,954,844 $9,673,867 6 7 Less: Revenue Offsets
8 Miscellaneous Revenues $123,313 $123,313
9 Interest Income $40,159 $40,159
10 Total Revenue Offsets $163,472 $0 $163,472
11 12 Less: Adjustments
13 Adjustment for Cash Balance $498,973 $498,973
14 Adjustment for Mid-Year Increase $0 $0
15 Total Adjustments $0 $498,973 $498,973
16 17 Total Revenue Requirement w/o Offsets $6,719,022 $2,455,871 $9,174,893 18 Total - Revenue Requirement $6,555,550 $2,455,871 $9,011,421

6.I.b
Packet Pg. 191 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 73

5.3.3.FUNCTIONALIZATION AND ALLOCATION OF EXPENSES
After determining the revenue requirement, the next step of the wastewater COS analysis is to allocate O&M expenses and capital assets to the following functional categories:
» Collection: costs associated with the collection and transport of wastewater discharges from customers to the wastewater treatment plant
» Treatment: costs associated with the treatment and disposal of wastewater from customers » Customer: costs of billing, revenue collections, and other customer services functions » General: costs for general administration and operational expenses or any other costs that do not clearly relate to another functional category (i.e. indirect costs) The functionalization of costs allows for the allocation of costs to cost causation components. Some cost causation components correspond directly to a functional category listed above. The cost causation components include:
» Flow: costs associated with the volume of wastewater generated, collected, and treated » BOD/SS: costs associated with the strength of wastewater treated and disposed of in terms of the following parameters: suspended solids (SS) and biochemical oxygen demand (BOD) » Customer: costs of billing, revenue collections, and other customer services functions » General: costs for general administration and operational expenses or any other costs that do not clearly relate to another functional category (i.e. indirect costs)

6.I.b
Packet Pg. 192 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 74 CITY OF HEALDSBURG

5.3.4.WASTEWATER ENTERPRISE O&M EXPENSE ALLOCATION
Table 5-20 shows the basis for allocating each functional category to the various cost causation components. This provides the basis for allocating O&M and capital expenses in the following subsections.

The collection costs are directly assigned to the flow category. General costs are initially allocated to a general category, which is later redistributed based on overall allocations. Treatment costs are allocated in three ways: 52% to flow, 31% to biological oxygen demand, and 17% to suspended solids. This allocation reflects the treatment plant reclaimed system for flow and the pounds of effluent treated.

Table 5-20: Allocation of Functional Categories to Wastewater Cost Causation Components [A] [B] [C] [D] [E] [F] [G] [H]
Line Functional
Category Flow
Biological
Oxygen
Demand
Suspended
Solids General Billing Total
1 Collection 100% 0% 0% 0% 0% 100%
2 Treatment 52% 31% 17% 0% 0% 100%
3 Customer 0% 0% 0% 0% 100% 100%
4 General 0% 0% 0% 100% 0% 100%
The next step of the COS analysis is to develop an allocation basis for the operating revenue requirement based on the functionalization of the Wastewater Enterprise’s O&M expenses. Table 5-21 shows the allocation of FY 2024- 25 O&M expenses by functional category to each cost causation component. The percentage allocation of each functional category (Columns C-H) to the various cost causation components was determined in Table 5-20. The total dollar amount allocated to each cost causation component (Line 5) is determined by multiplying the total expense associated with each functional category by the corresponding percentage allocation and summing across all functional categories.

Table 5-21: Wastewater Enterprise O&M Expenses – Allocation to Cost Causation Components [A] [B] [C] [D] [E] [F] [G] [H]
Line Functional
Category Flow BOD SS General Billing FY 2024-25 O&M
1 Collection $2,310,089 $0 $0 $0 $0 $2,310,089
2 Treatment $1,771,944 $1,056,351 $579,289 $0 $0 $3,407,584 3 Customer $0 $0 $0 $0 $225,246 $225,246
4 General $0 $0 $0 $776,103 $0 $776,103
5 Total O&M $4,082,033 $1,056,351 $579,289 $776,103 $225,246 $6,719,022 6 7 O&M Allocation 60% 16% 9% 12% 3% 100%

6.I.b
Packet Pg. 193 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 75

5.3.5.WASTEWATER ENTERPRISE CAPITAL ALLOCATION
Capital assets are utilized in COS analyses to allocate the capital revenue requirement to the various cost causation components. The distribution of short-term CIP project costs can be heavily weighted to specific cost causation components based on the type of projects. Use of short-term plans to allocate capital costs may cause rates to fluctuate and result in customer confusion. The overall wastewater asset base, however, is considerably stable in the long-term, and therefore is more representative of long-term capital investment in the City’s wastewater system.

Thus, functionalized capital assets are used to allocate capital costs.

City staff provided Raftelis with a detailed asset listing that included the original cost of each individual wastewater asset. Raftelis calculated the replacement cost less depreciation (RCLD) of each asset based on net book value using the Engineering News-Record’s 20-City Average Cost Construction Index (CCI) to account for capital cost inflation. RCLD is the most common valuation method for deriving functional values for a utility system as it is the best point in time estimate of a system for a cost of service analysis. As infrastructure is reinvested in over time, the asset base will change, with changes accounted for in subsequent cost of service analyses. As part of the capital asset analysis, Raftelis assigned each individual asset to a functional category with the assistance of City staff. Total wastewater asset value (RCLD) by functional category is shown in Table 5-22. Percentages are rounded to the nearest one-tenth of one percent.

Table 5-22: Wastewater Enterprise Capital Assets by Functional Category [A] [B] [C] [D]
Line Functional Category Asset Value
(RCLD) Percent of Total
1 Collection $9,664,590 22.2%
2 Lift Stations $270,000 0.6%
3 Treatment $32,200,000 73.9%
4 Customer $0 0.0%
5 General $1,434,416 3.3%
6 Total Asset Value (RCLD) $43,569,006 100.0%
Table 5-23 shows the allocation of capital assets by functional category to each cost causation component. The percentage allocation of each functional category (Columns C-H) to the various cost causation components was determined in Table 5-20. Total capital assets associated with each functional category (Column I) were determined in Table 5-22. The total dollar amount allocated to each cost causation component (Line 6) is determined by multiplying the total asset value associated with each functional category by the corresponding percentage allocation and summing across all functional categories. This is consistent with the methodology used to determine the allocation of O&M expenses to cost causation components in Table 5-21. The initial capital line allocation percentages (line 8) represent the proportion of total capital assets allocated to each cost causation component (line 6). The total capital revenue requirement (Column I, line 11) equals the capital revenue requirement from Table 5-19 (Column D, line 18).

Table 5-23: Functionalized Wastewater Capital Assets Allocation to Cost Causation Components [A] [B] [C] [D] [E] [G] [H] [I]

6.I.b
Packet Pg. 194 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 76 CITY OF HEALDSBURG
Line Functional Category Flow
Biological
Oxygen
Demand
Suspended
Solids General Billing Asset Value (RCLD)
1 Collection $9,664,590 $0 $0 $0 $0 $9,664,590
2 Lift Stations $270,000 $0 $0 $0 $0 $270,000
3 Treatment $16,744,000 $9,982,000 $5,474,000 $0 $0 $32,200,000 4 Customer $0 $0 $0 $0 $0 $0
5 General $0 $0 $0 $1,434,416 $0 $1,434,416
6 Total Assets $26,678,590 $9,982,000 $5,474,000 $1,434,416 $0 $43,569,006 7 Total Assets – General
Reallocated $27,586,827 $10,321,824 $5,660,355 $0 $0 $43,569,006 8 Capital Allocation before
General Reallocation 61.23% 22.91% 12.56% 3.29% 0.00% 100% 9 Final Capital Allocation 63.32% 23.69% 12.99% 0.00% 0.00% 100% 10 11 Capital Revenue
Requirement $1,554,997 $581,814 $319,059 $0 $0 $2,455,871

5.3.6.ALLOCATION OF REVENUE REQUIREMENT TO COST COMPONENTS Utilizing the cost allocations developed above in Table 5-20, Table 5-21, and Table 5-23, we can now allocate the operating, capital, and revenue offset portions of the revenue requirement to the various cost components. As with Water Enterprise COS, we allocate the revenue offset (non-rate revenues) according to the capital allocation for interest income; and the operating allocation for miscellaneous revenues.

The resulting distributions of costs are listed below in Table 5-24. Note that the total revenue requirement in Line 4, Column G, is equal to the total revenue requirement developed in Table 5-19.

Table 5-24: Allocation of Test Year Revenue Requirement to Cost Causation Components [A] [B] [C] [D] [E] [F] [H] [G]
Line Description Flow BOD SS Customer Bills FY 2024-25 Rev. Req. 1 Operating
Expenses $4,504,989 $1,162,870 $637,703 $0 $249,988 $6,555,550 2 Capital
Expenses $1,554,997 $581,814 $319,059 $0 $0 $2,455,871
3 Total $6,059,986 $1,744,684 $956,762 $0 $249,988 $9,011,421

6.I.b
Packet Pg. 195 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 77

5.3.7.PLANT MASS BALANCE ANALYSIS
The next step of the wastewater COS analysis is to attribute flow and strength loadings entering the City’s wastewater treatment plant to various user classifications. This is necessary to allocate the Flow, Biological Oxygen Demand, and Suspended Solids cost causation components to each customer class for recovery by the proposed wastewater rates.

Table 5-25 shows Raftelis’ mass balance analysis of the City’s wastewater treatment plant based on plant influent data for FY 2021-22. The result is attribution of flow and strength loadings to each customer class. Key inputs and assumptions include:
» Estimated total FY 2022-23 wastewater flows entering the wastewater treatment plant » Estimated strength concentration for BOD and SS based on previous wastewater rate analyses, SWRCB guidelines, and adjustments to better match actual treatment plant flows and loadings. » FY 2022-23 water use associated with non-residential wastewater customers (from City billing data) » Estimated return-to-sewer factors for non-residential classes based on an analysis of monthly metered water use.
» Residential class wastewater generation is aligned with average plant influent strength.

Table 5-25: Mass Balance Analysis
[B] [C] [D] [E] [F] [G] [H]
Description Flow
(HCF)
BOD
(mg/L)
SS
(mg/L)
Flow
(MG)26 BOD (lbs)27 SS (lbs)
Total Plant
Influent 535,925 508 299 401 1,699,409 1,000,485
Net influent 353,711 608 399 265 1,585,656 886,732
Non-Residential Influent
Low 61,420 240 200 46 92,017 76,681
Medium 24,614 500 400 18 76,825 61,640
High 35,950 1,000 600 27 224,413 134,648
Total NonResidential
Influent
121,984
1,740 1,200 91
393,255 272,789
Net Residential
Flow 231,727 508 299 173 734,911 432,556
SFR 156,948 508 299 142 600,857 353,654
MFR 35,016 508 299 32 134,055 78,902
26 Conversion factor: one (1) hundred cubic feet = 0.000748 million gallons. 27 Conversion factor: one (1) milligram per liter = 8.35 pounds per million gallons.

6.I.b
Packet Pg. 196 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 78 CITY OF HEALDSBURG

5.3.8.WASTEWATER UNIT COSTS
The next step of the wastewater COS analysis is to develop unit costs for each cost causation component. This is necessary to allocate the revenue requirement to each customer class in subsequent steps of the COS analysis.

Table 5-26 shows the calculation of unit costs (Line 6). This is developed by taking the total COS allocation for each cost component (Line 1) and dividing by the corresponding total units of service for flow, BOD, SS, customer, and bills shown in Line 3. The resulting unit rates may then be applied to customer classes based on the number of units in each respective class. Flow is recovered across all units of wastewater. BOD and SS unit rates are derived by dividing across the total estimated BOD and SS in pounds per year. Customer costs are divided by the total number of equivalent meters, and billing cost are divided by the number of bills Table 5-26: Wastewater Unit Costs Calculation (Test Year) [A] [B] [C] [D] [E] [F] [H] [G]
Line Description Flow BOD SS Customer Bills
Test Year
Revenue
Requirement
1 Total COS $6,059,986 $1,744,684 $956,762 $0 $249,988 $9,011,421 2 3 Total Units
of Service 313,948 1,128,166 705,345 5,775 53,712
4 Units hcf/yr lb/yr lb/yr equivalent
meters
annualized
bills
5 6 Unit Cost $19.30 $1.55 $1.36 $0.00 $4.65
7 Units hcf lb lb per bill Per bill

6.I.b
Packet Pg. 197 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 79

5.3.9.WASTEWATER COST ALLOCATION TO CUSTOMER CLASSES
Table 5-27 shows the allocation of the rate revenue requirement, by cost causation component, to each customer class based on the unit rates developed above in Table 5-26. The units of service shown for each customer class for the Flow, Biological Oxygen Demand, and Suspended Solids (Columns C-E) were previously determined as part of the mass balance analysis (see Table 5-25). The unit rate for each of these components is multiplied by the corresponding number of flow/BOD/SS units determined in Table 5-25 for each class to calculate the total cost for that component, by customer class. The number of equivalent meters per class is multiplied by the unit rate for each Customer to determine the total cost component. Similarly, the total number of bills (e.g., number of accounts multiplied by the number of bills per year) for each class is multiplied by the unit rate for Billing to determine the total cost component for Billing, for each class. This allows for the development of customer-specific COS allocations, as shown below in Table 5-27. Note again that the total amount of revenue to be recovered (the last line of Column H) is the same as the total revenue requirement originally developed in Table 5-19.

Table 5-27: Wastewater Cost Allocation to Customer Classes (Test Year) [A] [B] [C] [D] [E] [F] [G] [H]
Line Customer Class Flow BOD SS Customer Billing Total
1 Residential $3,705,388 $1,136,524 $586,739 $0 $219,773 $5,648,424 2 Single Family $3,029,491 $929,212 $479,712 $0 $210,781 $4,649,196 3 Multifamily
Residential $675,897 $207,312 $107,027 $0 $8,992 $999,228 5 6 Non-Residential $2,354,598 $608,160 $370,023 $0 $30,215 $3,362,997 7 Low Strength $1,185,561 $142,303 $104,014 $0 $20,609 $1,452,486 8 Medium Strength $475,112 $118,808 $83,367 $0 $5,418 $682,704 9 High Strength $693,925 $347,050 $182,642 $0 $4,189 $1,227,806 10 Total $6,059,986 $1,744,684 $956,762 $0 $249,988 $9,011,421

6.I.b
Packet Pg. 198 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 80 CITY OF HEALDSBURG

5.4.Proposed Wastewater Rates
Section 5.4 shows detailed calculations of proposed wastewater rates through FY 2026-27. The City of Healdsburg’s current fixed wastewater rate structure consists of Fixed Service Charges per dwelling unit for residential customers, and charges by meter size for non-residential customers. All customers are also charged a per unit (HCF) charge based on estimated wastewater flows and the strength of the flows. Residential customers’ variable charge units are based on their average winter consumption (AWC) whereas Non-Residential customers are charged per billed unit of water.

Proposed rate structure modifications include:
» Retire the SFR + ADU Fixed Charge: any SFR customer with two or more dwelling units per parcel will be treated as a MFR customer and subject to the multifamily charge. » Non-Residential Meter-Based Fixed Charges: This study maintains the existing non-residential fixed charge structure by meter size, however, the ratios between the meter sizes are proposed to use calculated flow ratios rather than hydraulic capacity ratios. Raftelis used City of Healdsburg sewer user billing data to calculate average flow per billing period at each meter size. This approach is more representative of wastewater generation by meter size versus ratios which reflect potential water demand by meter size.

Proposed wastewater rates reflect the revenue adjustments and the updated wastewater cost of service analysis, and rate modifications. All Fixed Charges shown are monthly and all volumetric rates are shown in terms of dollars per hundred cubic feet ($/HCF). All rates are rounded up to the nearest penny. All rates are assumed to be implemented at the beginning of each fiscal year on July 1.

5.4.1.PROPOSED WASTEWATER RATES (TEST YEAR)
Table 5-28 shows the calculation of COS wastewater rates for the test year. The revenue requirement associated with each charge Column C was determined from customer class cost allocations in Table 5-27.

The Cost-of-Service analysis identifies the total amount to be recovered from each customer class. The city enlisted Raftelis to evaluate the existing rate structures and propose any modifications that better align with the City's policy objectives. Currently, the city's rate structure recovers 45% of wastewater costs from fixed service charges, with the remaining 55% recovered from volumetric charges based on water use and wastewater generation. This cost recovery share is to ensure an adequate amount of revenue comes from fixed sources to guard against revenue insufficiency. The proposed cost of service analysis maintains this 45/55 split of fixed and variable rate revenue while better harmonizing the degree of fixed revenue between Residential and Non-Residential users.

Currently, the City's Wastewater Enterprise recovers 54% of Residential costs from fixed dwelling unit charges and 29% of Non-Residential costs from fixed meter-based charges. In order to promote fairness in cost recovery across classes while maintaining revenue stability, the proposed rate structures recover the following share of each class's cost of service:
» 50% of Residential costs are recovered through fixed, dwelling unit-based charges. The remaining 50% of the costs to serve Residential users are recovered from the wastewater flow rate, based on each connection's average winter consumption (AWC).
» 39% of Non-Residential costs are recovered through fixed, meter-based charges. The remaining 61% of the costs to serve Non-Residential users are recovered from the wastewater flow rates, based on actual metered water use, and the relative strength (i.e., Low, Medium, or High) of the wastewater generated. NonResidential users pay different wastewater usage rates based on the strength of the wastewater generated.

Given the variability in water use among non-residential users and declining water demands, increasing

6.I.b
Packet Pg. 199 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 81 fixed revenue recovery promotes revenue stability while moving towards the same share of fixed/variable cost recovery as Residential users.

These varying rates reasonably recover costs from customers in a manner consistent with how costs are incurred by the wastewater system in collecting, treating, and disposing of wastewater. Overall, the City will maintain the same level of fixed cost recovery which, in conjunction with proposed rate revenue increases, will provide the city with adequate revenues to fully recover projected operational and capital expenditures.

Table 5-28: Proposed Wastewater Rate Calculation (Test Year) [A] [B] [C] [D] [E] [F] [G] [H] [I] [J]
Line Description
Fixed
COS
Costs28
Variable
COS
Costs29
DU/
Acct30
Units
(HCF)
Adjusted
Fixed
COS
Costs
Adjusted
Variable
COS
Costs
Fixed
Charg
e
Volume
Charge
(per hcf)
1 Residential
2 Single
Family $210,781 $4,438,415 3,774 156,948 $2,324,598 $2,324,598 $51.33 $14.71 3 Multifamily $8,992 $990,236 1,227 35,016 $499,614 $499,614 $36.94 $14.71 5 6 Non-Residential
7 Low $20,609 $1,431,877 369 68,244 $672,667 $779,819
Per
Meter
Size
$11.43
8 Medium $5,418 $677,286 97 27,349 $266,729 $415,975
Per
Meter
Size
$15.21
9 High $4,189 $1,223,617 75 39,944 $385,848 $841,958
Per
Meter
Size $21.08
Table 5-29 shows the proposed three-year schedule of wastewater rates for implementation July 2024 through July 2026. All proposed rates in subsequent years are then increased by the proposed revenue adjustments from Table 5-16. All proposed rates are rounded up to the nearest whole cent. 28 Includes customer component costs only.
29 Includes all other cost components (flow, BOD, SS, and Recycled – Treatment). 30 Dwelling Units (DU) applies to residential and Account apply to non-residential

6.I.b
Packet Pg. 200 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 82 CITY OF HEALDSBURG
Table 5-29: Proposed Three-Year Wastewater Rates Schedule Description Current FY 2025 FY 2026 FY 2027
Residential Service Charges ($/Month/Dwelling Unit)
Single Family Residential (SFR) $46.67 $51.33 $60.57 $69.66 SFR + ADU $31.95 N/A N/A N/A
Multi-Family Residential (MFR) $37.80 $36.94 $43.60 $50.14 Flat Rate (Sewer Only SFR) $104.01 $110.18 $130.02 $149.53 Non Residential Service Charges ($/Month/Meter)
Up to 1" $75.75 $83.88 $98.99 $113.84
1 1/2" $148.49 $243.37 $287.18 $330.26
2" $235.77 $396.68 $468.09 $538.31
3" $439.44 $1,279.52 $1,509.84 $1,736.32
4" $730.39 $1,405.05 $1,657.97 $1,906.67
6" $1,966.94 $1,405.05 $1,657.97 $1,906.67
Wastewater Usage Charges ($/HCF)
Residential (SFR/MFR) $11.47 $14.71 $17.37 $19.98
Non Residential
Low Strength $10.31 $11.43 $13.49 $15.52
Medium Strength $15.09 $15.21 $17.95 $20.65
High Strength $22.08 $21.08 $24.88 $28.62

6.I.b
Packet Pg. 201 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates) 2023 WATER AND WASTEWATER COST OF SERVICE AND RATE DESIGN STUDY 83

6.Customer Bill Impacts

6.1. Combined Water & Wastewater Monthly Bill Impacts,
SFR
Table 6-1 shows the combined monthly bill impacts for a Single Family Residential customer using 7 hcf of water and an Average Winter Consumption of 4 hcf under current versus proposed rates. This usage level was determined using actual billing data for single family residential customers in FY 2022-23. This impact includes the changes proposed for both water and wastewater, so the total dollar difference is the entire change for a customer receiving both water and wastewater service from the City.

Table 6-1: FY 2023-24 Single Family Residential Bill Impacts (7 HCF water, 4 HCF AWC) Customer Class Proposed
July 2024 Bill Current Bill Difference ($)
Difference
(%)
Single Family Residential $200.73 $166.52 $34.21 21%

6.I.b
Packet Pg. 202 Attachment: Healdsburg Rate Study Report (4480 : 2nd Reading of Water Wastewater Rates)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Fiscal Year 2023-24 Third Quarter Budget Review as of March 31, 2024 PREPARED BY: Katie Edgar, Finance Director
STRATEGIC INITIATIVE(S):

Provide Effective Governance
RECOMMENDED ACTION(S):

1. Receive a presentation on the FY 2023-24 City financials through March 31, 2024; and

2. Adopt a Resolution approving a budget amendment for the FY 2023-24.

COMMUNITY ENGAGEMENT/OUTREACH:

Not Applicable.

BACKGROUND:

On June 6th, 2022, the City Council adopted the biennial budget covering the two-year period ending June 30, 2024. On February 5, 2024, the Council approved the audited financial statements for the 2022-2023 fiscal year. On February 20th, 2024, City staff provided the Council with an update on the mid-year financial results for the 2023-24 fiscal year. The purpose of this report is to provide an update on the City’s financial results through the third quarter of the fiscal year, ending March 31, 2024.

DISCUSSION/ANALYSIS:

The scope of this report is limited to the General Fund, Community Services Fund, Measure T Fund, Water Fund, Wastewater Fund, and Electric Fund.

General Fund Revenue and Expenses:

Mid-year General Fund revenues equaled $12,354,273 or 67% of the adopted budget of $18,571,187. The following notable sources of revenue were received through the third quarter of the year:

Property Tax: The City received $2,001,226 in property tax revenue through March, 65% of the amended fiscal year budget of $3,057,400. The April disbursement was not included

8.A
Packet Pg. 203
in this report; however, revenues appear to continue trending in alignment with the amended budget.

Transfer Tax: The City received $102,297 in transfer tax revenue through March, 44% of the total fiscal year budget of $235,000. The total number of property transfers continues to be lower than in previous years and the current year-end estimates reflect this revenue ending about $100,000 under the adopted budget. However, there are a few large developments that are nearing completion and staff anticipate those property sales have the potential to produce transfer tax before June 30th.

Vehicle License Fees: The City received $1,012,569 in Vehicle license fees from the State through the third quarter. This includes the first of two equal disbursements as well as an excess disbursement from a true up of the prior year allocation. Revenues are expected to exceed the budget by approximately $14,000 by year end.

Sales Tax: The City received $3,688,422 in sales tax revenue through February, 63% of the total fiscal year budget. The March disbursement will be distributed in late May and is expected to be slightly lower than the revised budget.

Business License Taxes: The City received $212,079 in revenue to a total budget of $200,000. Annual business license renewals were completed in the new online system beginning last June with the renewal period extended to September to facilitate the transition to the new system. The renewal period will open again this June resulting in some additional revenue received in the current fiscal year.

Franchise Fees: The City received $611,201 in franchise fees through the third quarter, 77% of the revised total budget of $789,088. The third quarter revenues do not include the third quarter disbursement from Comcast but are trending in line to exceed the adopted budget.

Transient Occupancy Tax (TOT): The City received $929,308 in total TOT revenue through March, 66% of the revised total budget of $1,400,652. TOT through the third quarter has continued to lag compared to historical seasonal averages and is estimated to end the year below the revised budget.
½ Cent Sales Tax PSAF – The City received $144,158 in Public Safety Augmentation Fund revenue from the County, 75% of the total fiscal year budget.

Development Fees: The City received $1,534,475 in development-related activity fees, accounting for 105% of the total budget. Building Permit revenues continue to far exceed expectations and staff anticipate additional pending permits to be paid in June before the fees increase in the new year.

Charges for Services: The City received $616,816 in charges for miscellaneous discretionary services through March, 77% of the total $803,131 revised budget.

Intergovernmental Revenues: The City received $319,685 in state and federal grant revenues, 63% of the adopted budget of $504,586. The Fire Department continues to implement wildfire mitigation funded by the State Coastal Conservancy Grants, however, reimbursements for expenses in the first half of the year have not been received yet.

Third quarter expenses for the General Fund are summarized in the following table:

Expense By Department Activity Through
March 31, 2024 Total Budget % Expended
City Council $ 167,345 $ 151,121 111%

8.A
Packet Pg. 204
Legal Services $ 449,801 $ 367,500 122%
City Manager's Office $ 1,620,204 $ 2,334,546 69%
Finance $ 1,781,997 $ 2,452,918 73%
Planning $ 1,550,623 $ 2,211,118 70%
Police $ 5,962,150 $ 8,053,543 74%
Fire $ 3,644,814 $ 4,838,661 75%
Public Works $ - $ 34,565 0%
Non-Departmental $ (1,599,873) $ 17,553 -9114%
TOTAL $ 13,577,061 $ 20,461,526 66%
*Non-departmental expenses include scheduled transfers between the General Fund and other funds.

The aggregate total of expenditures through December is skewed due to the Non-Departmental activity, but when adjusted, expenditures are at about 74% of the adopted budget. The activity through March in the Non-Departmental category represents the proportion of General Fund City costs allocated to other funds in accordance with the cost allocation plan netted against any transfers out. Most of the transfers are associated with the ARPA funds of which most have been encumbered and will be transferred as the expenses are incurred. Legal services expenses have exceeded the adopted budget driven in part by an increase in Public Record Act requests. On the other end of the spectrum, the newly added Public Works department in the General Fund has not incurred any expenses through March as the Capital Project Manager position remains vacant.

Year End Projections:

City Departments have submitted year end estimates to the finance department in conjunction with the budget development process. Finance staff have reviewed both revenue projections and year-end estimates for each department. Below is a chart that summarizes current year end projections by department.

Expense By Department Total Budget Estimate To
Close Variance
City Council $ 151,121 $ 210,111 $ 58,990
Legal Services $ 367,500 $ 582,806 $ 215,306
City Manager's Office $ 2,334,546 $ 2,261,686 $ (72,860) Finance $ 2,452,918 $ 2,342,011 $ (110,907)
Planning $ 2,211,118 $ 2,114,927 $ (96,191)
Police $ 8,053,543 $ 7,936,577 $ (116,966)
Fire $ 4,838,661 $ 4,877,269 $ 38,609
Public Works $ 34,565 $ - $ (34,565)
Non-Departmental $ 17,553 $ (22,447) $ (40,000)
TOTAL $ 20,461,526 $ 20,302,940 $ (158,586)
Surplus Policy:

The chart below compiles the Revenue and Expenditure projections for Fiscal Year 2023-24. The

8.A
Packet Pg. 205
surplus policy identifies a surplus as any unallocated fund balance exceeding $250,000. The surplus policy promotes long-term strategic thinking by allocating one-time revenues towards one-time expenses to maintain a structurally balanced budget. The estimates to close indicate the General Fund will have a surplus of $241,019 at the end of the current fiscal year. However, staff are not proposing to allocate the surplus towards additional one-time expenditures.

Staff presented the Council with a proposed budget for FY 24-25 and FY 25-26 on May 13th, 2024. The budget proposed for FY 24-25 reflected a 4% year-over-year increase in operating expenditures associated with inflationary impacts on operational costs rather than additional ongoing initiatives. The proposed revenue budget for FY 24-25 remains largely flat due to economic conditions negatively affecting Sales Tax and Transient Occupancy Tax which make up 39% of General Fund revenue. As a result, while still structurally balanced, the proposed budget depends on the current year surplus to maintain the required 30% operating reserve.

FY 23-24 FY 23-24
Adopted Estimate
Budget To Close
Beginning Fund Balance $ 12,257,096 $ 12,257,096
Revenue 18,571,189 18,616,270
Expenditure 17,962,674 17,804,088
One-Time Expenditure 2,498,852 2,498,852
Estimated Ending Fund Balance $ 10,366,760 $ 10,570,427 Change in Ending Fund Balance $ (1,890,337) $ (1,686,670) Components of Fund Balance
Reserve Policy (30%) $ 5,388,802 $ 5,341,226
Pension Stabilization 4,707,557 4,738,181
Unallocated Fund Balance $ 270,401 $ 491,019
% of annual expenditures 31.5% 32.8%
General Fund - Fund Balance
Community Services Fund Revenue and Expenses:

Community Services Revenue through December totaled $5,362,958, 66% of the total revised budget of $8,095,803. Revenue performance is largely being driven by $4,646,540 in TOT revenue through March, representing 66% of the adopted budget for the fiscal year. Due to seasonality in the hospitality industry the City typically receives about 71% of its total TOT revenue through the third quarter. TOT revenues continue to trend lower than seasonal averages and the estimates to close reflect revenues about 3% lower than the revised budget. All other program revenue for Community Services totaled $716,418, representing 66% of the adopted budget.

Third Quarter expenses by program are as follows:

8.A
Packet Pg. 206
Expense By Program Activity Through
March 31, 2024 Total Budget % Expended
General Administration $ 2,941,776 $ 3,983,065 74%
Recreation Programs $ 302,643 $ 342,850 88%
ASES After School Program $ 219,465 $ 323,250 68%
Community Center $ 156,722 $ 251,500 62%
Senior Services $ 210,209 $ 294,230 71%
Parks and Trails $ 419,026 $ 813,778 51%
Open Space $ 22,174 $ 55,962 40%
School Facility Maintenance $ 40,789 $ 50,025 82%
Swim Center $ 87,128 $ 122,500 71%
Arts and Culture $ 1,722 $ 50,000 3%
Contracted Facility Operations $ 51,488 $ 109,625 47%
Special Events $ 166,342 $ 197,000 84%
Non-Departmental $ 497,925 $ 2,068,158 24%
TOTAL $ 5,117,408 $ 8,661,943 59%
Community Services Fund expenses totaled $5,117,408 through the third quarter, representing 59% of the total fiscal year budget. A large driver of the expense budget this year is the NonDepartmental category transfers that are supporting the Foley Community Pavilion project that is under construction. When adjusted for operating expenses only, total expenses through December are 70% of the adopted budget.

The chart below depicts the estimates to close and the projected fund balance. Due to the reduced revenue projections and operational cost overruns, staff propose foregoing the completion of the Skate Park Deck Replacement and Villa Chanticleer Gate Replacement identified in the deferred maintenance plan. The estimates to close below represent the $120,000 allocated to these deferred maintenance projects being reallocated to cover operational costs.

8.A
Packet Pg. 207
FY 23-24 FY 23-24
Adopted Estimate
Budget To Close
Beginning Fund Balance $ 3,056,154 $ 3,056,154
Revenue 8,095,803 7,986,805
Expenditure - Operations 6,789,072 6,835,509
Expenditure - Capital 1,872,871 1,769,387
Estimated Ending Fund Balance $ 2,490,014 $ 2,438,064
Change in Ending Fund Balance $ (566,140) $ (618,090)
Components of Fund Balance
Reserve Policy (30%) $ 2,036,722 $ 2,050,653
Pension Stabilization 439,884 448,777
Unallocated Fund Balance $ 13,408 $ (61,366)
% of annual expenditures 30.2% 29.1%
Community Services Fund Balance
Measure T Fund Revenue and Expenses:

Measure T revenue through February totaled $1,838,825 65% of the adopted budget of $2,839,022. The March disbursement of Measure T revenue is anticipated in late May. Revenues to date are trending in line with the current budget and staff will continue to monitor revenues through year end. Measure T expenses through the third quarter of the year totaled $1,228,324, 19% of the $6,481,378 adopted budget. 65% of the expense budget for the current fiscal year is allocated as matching funding for Capital Projects that are funded primarily by grants and development, with $2.9 million allocated to the Fire Substation and approximately $400k each supporting the design of Healdsburg Ave Complete Streets and the Grove Street Neighborhood Implementation Plan. As matching funding, the timing of expenses are commonly incurred as a small proportion of the total or after all other funding is expended. Many of the projects are progressing and expenses not incurred by year end are anticipated to be re-budgeted in the next fiscal year.

Water Fund Revenue and Expenses:

Total revenue for the Water Fund was $4,846,989, 76% of the total $6,368,892 budget for the year. The revenues through March are trending in alignment with the Adopted Budget that was revised down at the third quarter review of Fiscal Year 2022-2023. At the May 6th Council meeting a Public Hearing was held for the proposed adoption of Water Rates for the next three fiscal years and the second reading of the ordinance is scheduled for the May 20th Council meeting. If adopted the rates will go into effect on July water usage and be reflected on the August utility bills. Expenses at the close of the third quarter totaled $4,475,462, 72% of the total $6,243,897 budget.

8.A
Packet Pg. 208
The Municipal Recycled Water Pipeline Project WA004 is currently fully funded by a State Department of Water Resources Grant. However, it has come to staff’s attention that some of the consultant costs incurred were ineligible for reimbursement under the grant. All ineligible costs have been identified and the City is no longer incurring additional ineligible costs. Staff are proposing to increase the project budget and appropriate a transfer from the Water Operating Fund to the Water Capital Fund to cover these costs. The chart below reflects the Adopted Budget, the Amended Budget reflecting the proposed amendment, and the Estimates to Close in the Water Fund. Staff are watching year-end actuals closely as estimates to close were prepared by department heads in conjunction with the budget process back in March and may not reflect recent operational developments.

FY 23-24 FY 23-24 FY 23-24
Adopted Amended Estimate
Budget Budget To Close
Beginning Working Capital $ 2,520,356 $ 2,520,356 $ 2,520,356 Revenue 6,368,892 6,406,787 5,947,719
Expenditure - Operations 5,821,736 5,783,841 5,644,467
Expenditure - Capital 422,161 460,056 37,895
Estimated Ending Working Capital $ 2,645,351 $ 2,683,246 $ 2,785,713 Change in Working Capital $ 124,995 $ 162,890 $ 265,357 Components of Fund Balance
Reserve Policy (25%) $ 1,455,434 $ 1,445,960 $ 1,411,117 Pension 512,424 512,424 524,125
Remaining Working Capital 677,493 724,862 850,472
Total $ 2,645,351 $ 2,683,246 $ 2,785,713
Water Fund Balance
Wastewater Fund Revenue and Expenses:

Total revenue for the Wastewater Fund was $5,780,912 through March, 72% of the $8,018,499 budget. Revenues are trending relatively in alignment with the adjusted budget but are similarly below the rate study expectations resulting in the planned use of reserve funds to support operations. Expenses through the third quarter totaled $6,483,633, 76% of the total $8,556,905 budget, however, operational expenses are projected to end the year under budget. The chart below reflects the current budget and the estimated year-end revenue and expenses in the Wastewater Fund. Year-end actuals are being monitored and may come in higher than projected as estimates to close were prepared by department heads in conjunction with the budget process back in March.

8.A
Packet Pg. 209
FY 23-24 FY 23-24
Adopted Estimate
Budget To Close
Beginning Working Capital $ 2,625,843 $ 2,625,843
Revenue 8,443,499 8,305,184
Expenditure - Operations 8,329,815 8,078,717
Expenditure - Capital 227,090 115,000
Estimated Ending Working Capital $ 2,512,437 $ 2,737,310 Change in Working Capital $ (113,406) $ 111,467
Components of Fund Balance
Reserve Policy (25%) $ 2,082,454 $ 2,019,679
Pension Stabilization 617,104 631,195
Remaining Working Capital (187,121) 86,436
Total $ 2,512,437 $ 2,737,310
Wastewater Fund Balance
Electric Fund Revenue and Expenses:

Total revenues through the third quarter for the Electric Fund are $10,899,538 77% of the total revised budget of $14,226,890. Revenues are projected to end the year in alignment with the revised budget reflecting the utility rates implemented in November. Expenses totaled $11,080,978, 69% of the total $16,082,706. With the wet weather conditions boosting production of hydroelectric power, power procurement costs are now trending lower than the amended budget. Staff will continue to monitor these expenses through the end of the year but estimates to close prepared in March reflect operational savings. The chart below reflects the effects of staffs estimated year end revenue and expenses on the Electric fund balance.

8.A
Packet Pg. 210
FY 23-24 FY 23-24
Adopted Estimate
Budget To Close
Beginning Working Capital $ 14,427,540 $ 14,427,540
Revenue 14,226,890 14,192,842
Expenditure - Operations 15,563,728 14,863,389
Expenditure - Capital 470,000 323,817
Estimated Ending Working Capital $ 12,620,702 $ 13,433,176 Change in Working Capital $ (1,806,838) $ (994,364)
Components of Fund Balance
Reserve Policy (50%) $ 7,781,864 $ 7,431,695
Reserve Policy ($4 Million Capital) $ 4,000,000 $ 4,000,000 Pension Stabilization $ 881,332 $ 901,457
Remaining Working Capital $ (42,494) $ 1,100,025
Total $ 12,620,702 $ 13,433,176
Electric Fund Balance
ENVIRONMENTAL STEWARDSHIP:

Not applicable.

ALTERNATIVES:

City Council could choose not to approve the proposed budget amendments. If this action is taken staff requests additional direction.

FISCAL IMPACT:

Revenue and Expenditure adjustments are proposed for several funds. The Electric Capital Fund includes offsetting revenue and expense increases for various Capital Projects that are funded entirely by developers through Electric Cost Recovery Agreements. Staff are proposing several amendments to transfer the Electric Cap and Trade revenues that are currently commingled with the Electric Public Benefit revenues into a separate fund that was previously created to ease financial reporting and compliance requirements. Staff are proposing to increase the Municipal Recycled Water Pipeline Project WA004 budget and appropriate a transfer from the Water Operating Fund to the Water Capital Fund resulting in a Water Fund Balance reduction of $37,895. The final amendment proposed tonight is an offsetting revenue and expenditure increase in the Building Maintenance Fund to appropriate increased costs associated with a rebate for the EV Charging Stations being installed at the Corporation Yard.

8.A
Packet Pg. 211
ENVIRONMENTAL ANALYSIS:

Receiving a fiscal update from City staff is an administrative activity, which is not considered a 'project' as defined by the California Environmental Quality Act (“CEQA”) (CEQA Guidelines§15378). Consequently, no CEQA action is required.

ATTACHMENT(S):

Resolution
Exhibit A Budget Amendments
Attachment A - General Fund Revenue and Expenses
Attachment B - Community Services Fund Revenue and Expenses

8.A
Packet Pg. 212

CITY OF HEALDSBURG
RESOLUTION NO. ___-2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HEALDSBURG AMENDING THE FISCAL YEAR 2023-24
BUDGET
WHEREAS, on June 6, 2022, the City Council adopted the 2022-24 biennial budget; and WHEREAS, developers have updated or entered new Electric Cost Recovery Agreements to pay directly for Electric Capital Projects that are specific for their developments; and WHEREAS, the Electric Cap and Trade revenues are currently comingled with the Electric Public Benefit revenues; and
WHEREAS, separating these revenues into two different funds will increase efficiencies due to the different restrictions and reporting requirements; and WHEREAS, the Municipal Recycled Water Pipeline Project WA004 incurred expenses that were ineligible for reimbursement from the State Grant that require funding; and WHEREAS, the Building Maintenace Fund is installing EV Charging Stations at the Corporation Yard and received a rebate to offset additional project cost; and WHEREAS, the Community Services Fund needs to reallocate funding from the Skate Park Deck Replacement and Villa Chanticleer Gate Replacement deferred maintenance projects to prevent operational expenses exceeding budget appropriations.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Healdsburg does hereby approve amending the fiscal year 2023-24 budget as depicted on the attached Exhibit A.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Healdsburg this 20th day of May 2024 by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ABSTAINING: Councilmembers:

SO ORDERED: ATTEST:
_________________________________ ___________________________________ David Hagele, Mayor Raina Allan, City Clerk

8.A.a
Packet Pg. 213 Attachment: Resolution (4293 : FY 23-24 Q3 Financial Update) Resolution No.

Exhibit A
Account Number Increase Amount Decrease Amount Description 542-7501-45000-ER007 $ 30,000 Increase Project Budget - ER007 - 3 Healdsburg Avenue Apartments 542-7501-45000-ER008 $ 14,000 Increase Project Budget - ER008 - Williams-Selyem Winery 1460 Grove Street 542-7501-45000-ER009 $ 53,003 Increase Project Budget - ER009 - Montage Events Building 542-7501-45000-ER010 $ 10,000 Increase Project Budget - ER010 - North Village Affordable Housing 542-7501-45000-ER002 $ 7,700 Increase Project Budget - ER002 - Passalacqua & Parkland Farms Inf 542-1000-37701-00000 $ 114,703 Increase Other Revenues to Reflect Developer Contributions Account Number Increase Amount Decrease Amount Description 547-1000-39001-00000 $ 2,982,370 Increase Transfer In to Move Accumulated Cap & Trade Revenues to New Fund 547-7501-43205-00000 $ 19,816 Increase Contracted Services Budget in New Cap & Trade Fund 547-7501-43209-00000 $ 217 Increase Meeting, Travel, and Training Budget in New Cap & Trade Fund 547-7501-49801-00000 $ 73,084 Increase Conservation & Energy Rebates Budget in New Cap & Trade Fund 547-7576-43211-00000 $ 1,300 Increase Printing Budget in New Cap & Trade Fund 547-7576-49807-00000 $ 136,119 Increase Green House Gas Reduction Measures Budget in New Cap & Trade Fund 547-7501-41101-00000 $ 29,518 Increase Wages for Staff Time Supporting Cap & Trade Fund 546-7501-41200-00000 $ 16,747 Increase Benefits for Staff Time Supporting Cap & Trade Fund Account Number Increase Amount Decrease Amount Description 546-8080-42301-00000 $ 2,982,370 Increase Transfer Out to Move Accumulated Cap & Trade Revenues to New Fund 546-7501-41101-00000 $ 29,518 Reduce Wages for Staff Time Supporting Cap & Trade Fund 546-7501-41200-00000 $ 16,747 Reduce Benefits for Staff Time Supporting Cap & Trade Fund Account Number Increase Amount Decrease Amount Description 520-8080-42301-00000 $ 37,895 Increase Transfers Out from Water Fund to Water Capital Fund for Project WA004 Account Number Increase Amount Decrease Amount Description 522-1000-39001-00000 $ 37,895 Increase Transfers In from Water Fund to Water Capital Fund for Project WA004 522-6367-45000-WA004 $ 37,895 Increase Budget for Municpal Recycled Water Pipeline Project WA004 Account Number Increase Amount Decrease Amount Description 604-8082-43225-00000 $ 40,000 Increase Expense Budget for Corp Yard EV Charging Stations 604-1000-37701-00000 $ 40,000 Increase Revenue Budget for Cap & Trade Rebate for Charging Stations

WATER OPERATING FUND

WATER CAPITAL FUND
FY 23-24 BUDGET AMENDMENTS

ELECTRIC CAPITAL FUND

ELECTRIC PUBLIC BENEFIT FUND

ELECTRIC CAP & TRADE FUND

BUILDING MAINTENANCE FUND

8.A.b
Packet Pg. 214 Attachment: Exhibit A Budget Amendments (4293 : FY 23-24 Q3 Financial Update) Attachment A: General Fund Revenue and Expenses
As of March 31, 2024
Revenue Activity Through
March 31, 2024 Total Budget Amount Remaining % Received Property Tax $ 2,001,226 $ 3,057,400 $ 1,056,174 65%
Property Transfer Tax $ 102,297 $ 235,000 $ 132,703 44% Vehicle License Fee Swap $ 1,012,569 $ 1,997,206 $ 984,637 51% Sales Tax $ 3,688,422 $ 5,809,658 $ 2,121,236 63%
Business License Tax $ 212,079 $ 200,000 $ (12,079) 106% Franchise Fees $ 611,201 $ 789,088 $ 177,887 77%
TOT $ 929,308 $ 1,400,652 $ 471,344 66%
Sales Tax - PSAF $ 144,158 $ 192,781 $ 48,623 75%
Development Fees and Permits $ 1,534,475 $ 1,463,569 $ (70,906) 105% Intergovernmental Revenue $ 319,685 $ 504,586 $ 184,901 63% Charges for Services $ 616,816 $ 803,131 $ 186,315 77%
Unrestricted Interest $ 138,332 $ 248,461 $ 110,129 56% Restricted Interest $ 84,093 $ 71,474 $ (12,619) 118%
Rent Received $ 63,028 $ 61,934 $ (1,094) 102%
Misc Fees and Charges $ 349,071 $ 340,992 $ (8,079) 102% Fines and Collections $ 29,373 $ 60,000 $ 30,627 49%
Transfers In $ 518,140 $ 1,335,257 $ 817,118 39%
TOTAL $ 12,354,273 $ 18,571,189 $ 6,216,917 67%
Expense By Department Activity Through
March 31, 2024 Total Budget Amount Remaining % Expended City Council $ 167,345 $ 151,121 $ (16,224) 111%
Legal Services $ 449,801 $ 367,500 $ (82,301) 122%
City Manager's Office $ 1,620,204 $ 2,334,546 $ 714,342 69% Finance $ 1,781,997 $ 2,452,918 $ 670,921 73%
Planning $ 1,550,623 $ 2,211,118 $ 660,496 70%
Police $ 5,962,150 $ 8,053,543 $ 2,091,393 74%
Fire $ 3,644,814 $ 4,838,661 $ 1,193,847 75%
Public Works $ - $ 34,565 $ 34,565 0%
Non Departmental $ (1,599,873) $ 17,553 $ 1,617,426 -9114% TOTAL $ 13,577,061 $ 20,461,526 $ 6,884,465 66%
Summary Activity Through
March 31, 2024 Total Budget Amount Remaining
Revised
Budget
Total Revenue $ 12,354,273 $ 18,571,189 $ 6,216,917 $ 18,571,189 Total Expenses $ 13,577,061 $ 20,461,526 $ 6,884,465 $ 20,302,940 Difference $ (1,222,788) $ (1,890,337) $ (667,548) $ (1,731,751)

8.A.c
Packet Pg. 215 Attachment: Attachment A - General Fund Revenue and Expenses (4293 : FY 23-24 Q3 Financial Update) Attachment B: Community Services Fund Revenue and Expenses As of March 31, 2024
Revenue Activity Through
March 31, 2024 Total Budget Amount Remaining % Received Transient Occupancy Tax $ 4,646,540 $ 7,003,262 $ 2,356,722 66% Other Revenue $ 25,051 $ - $ - N/A
St Grants $ 97,533 $ 210,000 $ 112,467 46%
Fees & Charges $ 14,316 $ 7,200 $ (7,116) 199%
Admission and Passes $ 15,848 $ 31,000 $ 15,152 51%
Program Revenue $ 134,798 $ 255,000 $ 120,202 53%
Contracted Program Revenue $ 68,985 $ 107,500 $ 38,515 64% Special Events $ 66,355 $ 59,000 $ (7,355) 112%
Event Permits $ 16,206 $ 20,000 $ 3,794 81%
Advertising $ 495 $ 500 $ 5 99%
Program Sponsorships $ 38,100 $ 90,000 $ 51,900 42%
Reimbursement for Services $ 36,364 $ 43,000 $ 6,636 85% Facility Rental $ 18,790 $ 48,675 $ 29,885 39%
Facility Long term Lease $ 21,400 $ 32,450 $ 11,050 66% Interest Income $ 151,908 $ 183,716 $ 31,808 83%
Contributions & Donations $ 10,270 $ 4,500 $ (5,770) 228% TOTAL $ 5,362,958 $ 8,095,803 $ 2,732,845 66%
Expense By Program Activity Through
March 31, 2024 Total Budget Amount Remaining % Expended General Administration $ 2,941,776 $ 3,983,065 $ 1,041,289 74% Recreation Programs $ 302,643 $ 342,850 $ 40,207 88%
ASES After School Program $ 219,465 $ 323,250 $ 103,785 68% Community Center $ 156,722 $ 251,500 $ 94,778 62%
Senior Services $ 210,209 $ 294,230 $ 84,021 71%
Parks and Trails $ 419,026 $ 813,778 $ 394,752 51%
Open Space $ 22,174 $ 55,962 $ 33,788 40%
School Facility Maintenance $ 40,789 $ 50,025 $ 9,236 82% Swim Center $ 87,128 $ 122,500 $ 35,372 71%
Arts and Culture $ 1,722 $ 50,000 $ 48,278 3%
Contracted Facility Operations $ 51,488 $ 109,625 $ 58,137 47% Special Events $ 166,342 $ 197,000 $ 30,658 84%
Non Departmental $ 497,925 $ 2,068,158 $ 1,570,233 24%
TOTAL $ 5,117,408 $ 8,661,943 $ 3,544,535 59%
Summary Activity Through
March 31, 2024 Total Budget Amount Remaining
Total Revenue $ 5,362,958 $ 8,095,803 $ 2,732,845
Total Expenses $ 5,117,408 $ 8,661,943 $ 3,544,535
Difference $ 245,550 $ (566,140) $ (811,690)

8.A.d
Packet Pg. 216 Attachment: Attachment B - Community Services Fund Revenue and Expenses (4293 : FY 23-24 Q3 Financial Update)

CITY OF HEALDSBURG

CITY COUNCIL AGENDA STAFF REPORT
MEETING DATE: May 20, 2024
SUBJECT: Discussion and Direction Regarding Use of 217 Healdsburg Ave (former Chamber of Commerce Building)
PREPARED BY: Tyler Kettmann, Central Services Manager
STRATEGIC INITIATIVE(S):

Maintain and Improve Infrastructure and Facilities
Provide Effective Governance
RECOMMENDED ACTION(S):

Receive a presentation and provide direction to staff on proposed use of 217 Healdsburg Avenue.

COMMUNITY ENGAGEMENT/OUTREACH:

Staff is requesting feedback and direction on issuing a publicly available request for proposals to support future activation of the property. Staff have received interest from both non-profit organizations and for-profit businesses in leasing the property at 217 Healdsburg Avenue.

BACKGROUND:

The City of Healdsburg is the owner of certain real property located at 217 Healdsburg Avenue, Healdsburg, CA 95448, more commonly known as the Chamber of Commerce Building (the “Property”).

The Property has a long and rich history of serving Healdsburg’s economic development interests. In November 1935, the Healdsburg Chamber of Commerce presented a proposal before the City Council to erect a new building to house the Chamber. The building was to be constructed on a lot owned by the City. Plans called for a 2-story reinforced concrete structure, containing a public lobby and office, private office and women’s restroom downstairs with a committee room and men’s restroom upstairs. In 1936, this Mediterranean-style civic building, financed by the Works Progress Administration (WPA) and local boosters, was completed at 217 West Street (now “Healdsburg Avenue”). The building was officially occupied in February 1938 and served as a Chamber of Commerce Office and Visitor Center Space until December 31, 2023.

The most recent lease with the Healdsburg Chamber of Commerce was executed in 1989, for $1

9.A
Packet Pg. 217
per year. The site has served as both the Chamber Office and Visitors Center. After H2 Hotel opened in 2018, the Chamber moved its offices to their current location in the back of H2 Hotel, and the City and Chamber agreed to use the Property as the location of the Visitors Center. The lease term expired in December 2019 and the Chamber operated on a month-to-month lease with the City. On June 12, 2023, the Chamber notified the City that it was ceasing Visitor Center Operations on December 31, 2023.

The Chamber has since vacated the property. As part of the closure of the physical space, Chamber staff have provided messaging to the community and indicated they have a strategy in place to modernize visitor services to ensure visitors to our community have access to information to help them best enjoy their stay and experience all that is great about Healdsburg.

The Chamber continues to provide visitor support services to guests on a walk-in basis at their office. The City and Chamber have also entered into a Right of Entry agreement to allow access to their current offices located in the back of H2 hotel, adjacent to the Property, as depicted and described in the attached agreement, included with this report. More recently, the Chamber has shown renewed interest in the Property, due to H2 hotel having future planned uses for the Chamber Office space currently under lease. Chamber staff have indicated a desire to re-claim the Property in 2026-2027.

DISCUSSION/ANALYSIS:

The Property is within the Downtown Commercial Zone. Approved uses are listed in the table attached. Any proposed land use changes require Planning Commission and City Council approval. The interior of the building is currently set up to function as an office space. Any remodeling of the interior or exterior requiring a building permit would obligate significant ADA improvements to the facility. ADA improvement requirements when a building is altered are focused on the accessible path of travel to the primary function areas of a building, such as the lobby of a bank or the dining room in a restaurant. Any bathrooms, telephones and drinking fountains must also be made accessible. Bathroom accessibility improvements may pose the greatest cost and challenge to any proposed renovation to the space, though other path of travel costs should be expected.

Staff have identified the following goals and objectives for future use of the Property:
• The Property is of historical significance to Healdsburg and there is strong interest in preserving and honoring the history and architecture of the space; • The Property should be activated to support a vibrant downtown; • The Property, and any potential proposed tenant within, should be viable and sustainable; and
• The Property should provide some community benefit, either in the form of public services, economic development purposes, or revenue to support City operations. • Staff is seeking no more than a five (5)-year initial lease term (maximum).

9.A
Packet Pg. 218
Staff intend to find a productive use for the Property that meets its full potential to provide the generation of lease revenue, economic development, and/or community resources for the City of Healdsburg and its residents. To that end, Staff intend to solicit proposals from both non-profit organizations and for-profit businesses. Based on the criteria set forth in the proposed solicitation, Staff will identify the top-ranked proposals from each group (non-profit and forprofit) and present those recommendations to City Council for consideration at a later date.

Proposals will be ranked based on the following criteria:
• Cover Letter - Reflects project understanding and summarizes critical issues, challenges, milestone tasks, and appropriate resourcing.
• Proposed Use – Quality of proposed use and business plan; and demonstrated ability to successfully achieve the City’s goals and objectives for the Property • Community Benefits – Proposer adequately describes any community benefits provided by the proposed use.
• Project Schedule - adequacy and reasonableness of schedule and deadlines. • Statement of Qualifications - description of the Proposer qualifications is provided. • Proposed Lease Terms – Rental Fee, Tenant Improvement Investments, and Lease term length.
• Financial Strength - Adequate equity capital available to ensure the project is fully funded.
• References.

Staff are requesting feedback from Council on this item prior to proceeding with the proposed competitive solicitation process. Feedback on the following items will assist in providing direction to staff:
• Does Council approve of the existing approach of the solicitation as proposed? o Specifically, does Council want to target the proposed solicitation to a specific use group (public serving vs. private)?
• Is there a specific Lease Term length that Council would like to see for the resulting agreement from this proposed solicitation?
• Is there any evaluation criteria that Staff have not identified that Council would like Staff to focus on?
• Is there any other specific feedback?
Upon receiving feedback from Council on this item, staff will return with a future agenda item at the completion of the proposed solicitation with a summary of ranked results for Council consideration for award.

ENVIRONMENTAL STEWARDSHIP:

Not applicable.

ALTERNATIVES:

The purpose of this presentation is to seek feedback from Council on the proposed RFP process.

Staff intend to bring back a resolution for consideration at a future meeting at the completion of the proposed competitive solicitation process. As an alternative, Council could reject the

9.A
Packet Pg. 219
proposed RFP, and provide further direction to staff.

FISCAL IMPACT:

There is no immediate fiscal impact related to the proposed action, as the rent collected from the Chamber of Commerce was negligible. However, should Council direct a commercial business as a future tenant, rent would be collected. Revenues from any collected rent would be placed into the General Fund and are subject to appropriation via the bi-annual budget process. Staff will return with results from any competitive solicitation, and Council would ultimately approve any lease agreement prior to execution.

ENVIRONMENTAL ANALYSIS:

Pursuant to California Environmental Quality Act (“CEQA”) and Title 14, the California Code of Regulations Section 15378(b)(2), the recommended action is administrative in nature and does not qualify as a “Project” under CEQA. Therefore, no further CEQA or environmental review is required.

ATTACHMENT(S):

Permitted and Conditionally Permitted Uses for Downtown Commercial 217 Healdsburg Avenue - Historic Resource Inventory
Access Agreement_Right of Entry 217 Healdsburg Ave

9.A
Packet Pg. 220

20.08.145 Permitted and conditionally permitted uses: PR, CD, and CS Districts The following permitted and conditionally permitted uses may be allowed in the PR, CD and CS Districts.

Chapter 20.28 HMC, Article V, describes the procedures for obtaining a conditional use permit.

Table 10 Permitted and conditionally permitted uses: PR, CD and CS Districts
Permitted (P) and Conditionally Permitted
(C) Uses

PR CD CS
Specific Use
Regulations
Residential Uses
Accessory dwelling unit
P P P
HMC

20.20.010
Day care, general -- C C
Day care, limited -- P P
Homeless shelters -- -- P
Multifamily dwellings located on the same site
as a commercial use – above ground floor
C P P
Multifamily dwellings located on the same site
as a commercial use – any floor
-- P P
Residential care, general -- C C
Residential care, limited -- P P
Single-room occupancy dwellings located on
the same site as a commercial use – above
ground floor
C P P
Single-room occupancy dwellings located on
the same site as a commercial use – any floor
-- P P
Supportive housing P P P
Transitional housing P P P
Vacation rental -- C --
Retail Trade and Services
Ambulance service -- -- P
Antique car display and sales -- C P
Antique sales – above ground floor P P C
The Healdsburg Municipal Code is current through Ordinance 1236, passed January 16, 2024.

Healdsburg Municipal Code 20.08.145 Permitted and conditionally permitted uses: PR, CD, and CS Districts