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Agenda Report
April 8,2024
TO: Honorable Mayor and City Council
FROM: Department of Public Works
SUBJECT: PUBLIC HEARING TO APPROVE RECOMMENDED SEWER USE FEE
RATE STRUCTURE AND RATE ADJUSTMENTS
RECOMMENDATION:
It is recommended that the City Council:
1. Find that the proposed action is not a project as defined in the California Environmental Quality Act (CEQA) Public Resources Code Section 21065, 21080(b)(8) and State CEQA Guidelines Sections 15378(a)and (b)(4), and that even if it were a project, the proposed sewer use fee increases are statutorily exempt pursuant to Section 15273 (Rates, Tolls, Fares, and Charges) understate CEQA Guidelines and as such, is not subject to environmental review;
2. Open a Public Hearing to receive public comment on the recommended adjustments to Sewer Use Fee rate structure and implement the Fiscal Year (FY) 2025 th rough FY 2029 rate adjustments effective July 1, 2024 or as soon as practicable thereafter;
3. Considerall protests against the proposed Sewer Use Fee rate increase in accordance with Proposition 218;
4. Following the close of the Public Hearing, approve the recommended Sewer Use Fee rate structure and rate adjustments; and
5. Direct the City Attorney to prepare an amendmentto the Sewer Use Charge Ordinance (Ordinance) implementing the changes to the Sewer Use Fee rate structure and rates described herein.
BACKGROUND:
On February 5, 2024, the City Council seta public hearing to be held April 8, 2024 to receive comments on the recommended Sewer Use Fee rate structure and rate adjustments and directed the Department of Public Works to mail the notice of the public hearing to customers and parcel owners. The proposed rates were previously presented to t
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MEETING OF_4/8/202^AGENDA ITEM NO. _ 15 __
Public Hearing to Approve Recommended Sewer Use Fee Rate April 8, 2024
the Municipal Services Committee (MSC)on January 23, 2024, who voted unanimously to forward this item to the City Council to set the public hearing date.
The City owns and operates a sewer wastewater collection system that serves approximately 140,000 residents and commercial users. The sewer system includes approximately 325 miles of sewer pipelines, three pump stations and approximately 7,430 manholes. The operations, ongoing maintenance, and needed capital improvements of the sewer collection system is funded by the City's Sewer Use Fee. This fee is paid by all users of the sewer system and is a part of customers' utility bills.
In March 2023, the Department of Public Works engaged the services of Raftelis Financial Consultants, Inc. (Raftelis)to conducts comprehensive cost-of-service rate study to evaluate and provide recommendations regarding the City's sewer use fee calculation methodology, rate amount, and develop a five-year financial plan.
The study highlighted several contributing factors as to why the sewer use fee rates need to be adjusted. These factors include: (1) the City has not raised the sewer use fee by more than the consumer price index since 2007 which has not kept pace with increased industry costs, (2) the current methodology used to calculate the sewer use fee is based on consumers' water use and generates insufficient revenue due to long-term drought conditions and customer water conservation efforts; and (3) the cost of maintaining the sewer collection system has increased significantly.
To fullyfund the sewer collection program, approximately $7.6 million is needed annually, and currently the City only collects $3.9 million on average each year. Revenue generation by the currentsewer use fee structure is insufficientto cover current an d future operating an d capital costs. To help balance the fund and maintain service levels over the last few years, needed capital improvements have been deferred and the Sewer Fund operating reserve balance has been depleted.
Sewer Use Fee Increase and New Methodology
The proposed new Sewer Use Fee rate calculation recommends a fixed charge plus a volumetric rate based on water con sumption for both residential and commercial customers. This option allows the City to recover fixed cost associated with operating the sewer collection system while still encouraging water conservation efforts. The proposed rate for single family residences is a fixed monthly rate of $6.16 plus a volumetric rate of $0.65/hundredcubicfeet(hcf) of water used. Single family residence water use is capped at 26 hcf per month which assumes th at water usage above 26 hcf is for irrigation, and therefore, does not go into the sewer collection system. The average single family residence monthly fee will go from $4.55 to $11.37 which is an increase of $6.82 monthly or 150%.
The commercial customers will have a fixed rate of $6.16 plus volumetric rate of $1.24/ hcf. The average commercial customer discharges more wastewater into the system, as such,thevolumetric rate reflects commercial customers' share of cost in proportion to flow.
Commercial customers' sewer use will be estimated by taking 90% of water use.
Public Hearing to Approve Recommended Sewer Use Fee Rate April 8, 2024
The table below shows the proposed monthly rates for the next five years:
SS<9K~vfYEZOtS FYE2026 FYE 2027 FYE 2028 FYE2I
|Single Family
[Residence Rate
IFixed n/a
|Volumetric($/hcf) $0.35
ICommercial Rate
Fixed n/a
|Volu metric ($/hcf) $0.67
$6.16
$0.65
$6.16
$1.24
$7.15
$0.75
$7.15
$1.44
$7.44
$0.78
$7.44
$1.50
$7.73
$0.82
$7.73
$1.56
$8.04
$0.85
$8.04
$1.62
hcf = hundred cubic feet
The following table shows the impact to the average single-family residents' and commercial customers' monthly utility bill.
Cvrrent FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
[Average Single Family
iResidence Bill $4.55 $11.37 $13.19 $13.71 $14.26 $14.83 [Average Commercial Bill $35.51 $65.40 $75.86 $78.90 $82.05 $85.34 Proposition 218 Compliance
In accordance with Proposition 218, notices were mailed on Febmary 21, 2024 to all property owners/customers of record of the public hearing for the recommended adjustments to the Sewer Use Fee rate structure and rate adjustments. The notice included information such as the date and time of the public hearing as well as the following link for more information: www.cityofpasadena.net/public-works. A copy of the public hearing notice is included in AttachmentA.
The City shall considerall protests and will count one written protest per parcel, filed by an owner or ten ant of the parcel, in calculating a majority protest. If the City receives written protests from a majority of property owners or ratepayers, the City Council may not implement the Sewer Use Fee rate adjustments. There are a total of 29,197 sewer parcels in the City, which means at least 14,599 protests would need to be received in order to constitute as a majority protest.
Implementation Timeline
The table below outlines the approximate timeline and implementation schedule for the proposed rate actions.
DateAction Item
April 8, 2024Sewer Rate Public Hearing and City Council Vote on Proposed Rate
April 29, 2024First Reading of the Updated Sewer Use Charge Ordinance
Public Hearing to Approve Recommended Sewer Use Fee Rate April 8, 2024
May 6,2024Second Reading of the Updated Sewer Use Charge Ordinance
July 1, 2024, or as soon as
practicable thereafter
Effective Date of New Sewer Use Fee Rates
Customer Outreach and Education
In addition to the notice of public hearing that was mailed to all sewer use customers, Public Works provided various outreach options to provide information and education to the community about the recommended Sewer Use Fee rate adjustments. The public hearing notice was translated to Spanish and Mandarin and posted on the Public Works website and shared on the City's social media channels, such as Facebook and Twitter.
Public Works staff also hosted two in-person public meetings on March 19th at Robinson Park Recreation Center and on March 20th at Victory Park Recreation Center, provided information in the City Manager's Newsletter, provided information with the district liaisons, and issued a press release on March 6th.
COUNCU-POLICY CONSIDERATION:
The recommendation is consistent with the City Council's goals to maintain fiscal responsibility an d stability; an d improve, maintain, and enhance public facilities and infrastructure.
ENVIRONMENTAL ANALYSIS:
The implementation of a sewer use fee increase is an administrative action that would not cause either a direct physical change in the environ mentor a reason ably foreseeable indirect physical change in the environment. Therefore, the proposed action is not a "project" subjectto CEQA, as defined in Section 21065 of CEQA and Sections 15378(a) and (b)(4) of the CEQA Guidelines. Since the action is not a project subject to CEQA, no environmental document is required.
Furthermore, the recommended sewer use fee increases are determined to be statutorily exempt from CEQA under Public Resources Code Section 21080(b)(4) and Section 15273 (Rates, Tolls, Fares, and Charges) of the State CEQA Guidelines. Under Section 15273, CEQAdoes not apply to the establishment, modification, structuring, restructuring, or approval rates, tolls, fares, or other charges by public agencies which the public agency finds are for the purpose of:
1. Meeting operating expenses, including employee wage rates and fringe benefits,
2. Purchasing or leasing supplies, equipment, or materials,
3. Meeting financial reserve needs and requirements,
4. Obtaining funds for capital projects, necessary to maintain service within existing services areas, or
5. Obtaining funds necessary to maintain such intra-agency transfers are authorized by city charter.
The rate increase falls within these parameters and therefore is exempt from CEQA.
Public Hearing to Approve Recommended Sewer Use Fee Rate April 8, 2024
FISCAL IMPACT:
To fully fund the sewer collection program, approximately $7.6 million is needed annually for operating and capital cost. Currently, the city collects $3.9 million on average each year. The recommended Sewer Use Fee increase, if approved, will become effective on July 1,2024,and is expected to generate an additional $4.2 million in revenue needed to address the cost of service in FY 2025 and to start to build the reserves.
Respectfully submitted,
^
TOMY OLMOS, P.E.
Director of Public Works
Prepared by:
Kris Markarian, P.E.
Deputy Director of Public Works/City Engineer
Approved by:
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MIGUEL-MARQUEZ
City Manager
Attach mentA- Public Hearing Notice