Department of Public WorksPUBLIC HEARING TO APPROVE A SEWER USE FEE RATE STRUCTURE AND RATE ADJUSTMENTSCity Council Meeting May 6, 2024Item # 20 Department of Public WorksPresentation Overview •Background•Sewer Use Fee Revenues, Costs, and Fund Balance Clarifications•Proposed Capital Improvement Programs•Sewer Use Fee Rate Adjustment Scenarios •Smoothing Option•Staff Recommendation2 Department of Public WorksBackground•Rates last adjusted in 2007•Since then, rates have increased by CPI •Around FY 2023, Sewer Program costs started to exceed revenues•Sewer Facility Charge helped partially fund capital improvements•In June 2020, Council approved no increases to schedule of taxes, fees, charges and General Fee Schedule 3 Department of Public WorksSewer FeesSewer Use Fee Revenues, Costs, and Fund Balance Clarifications4 Department of Public WorksConsultant’s Estimate
5 Department of Public WorksConsultant’s Estimate•The consultant’s forecast was based on FY 2023 estimates as of April 2023.•The Total Revenues reflected the estimate at the time of how FY 2023 would finish, and the consultant forecasted FY 2024.•Total Expenses included the FY 2023 and 2024 Forecast for Operational plus CIP.6
Department of Public WorksOperating Budget Book
7 Department of Public WorksSewer Portion of Operations•Approximately 75% of operational costs are related to Sewer operations>$4,049,226•Operating Income from Sewer -$151,983•Revenue trending lower than budget8•Total expenses of $5,398,968 equal the operating budget rounded to $5.399M FY 2024BudgetBeginning Amount Available for Appropriations (176,833) RevenuesSewer Use Charge 4,201,179 Storm Drain Use Charge 3,417,994 Investment Earnings 268,453 Total Revenues 7,887,626 ExpensesPersonnel 2,077,514 Services and Supplies 2,685,561 Contributions To Other Funds 635,893 Other ExpensesTotal Expenses 5,398,968 Operating Income/(Loss) 2,488,658 Department of Public WorksStorm Drain Portion of Operations•Approximately 25% of operational costs are related to Storm Drain operations>$1,349,472•Operating Income from Storm Drain -$3,068,552•Revenue trending in line with budget9
Department of Public WorksCapital Forecast
•Contributions to Capital equals the amount appropriated in a fiscal year.•Reserve for Capital is the remaining balance of funded Capital carried forward into the next year.10 FY 2023 FY 2024Actual BudgetOperating Income/(Loss) 1,656,656 2,488,658 Ending Amount Available for Appropriations 3,505,795 2,311,825 Contributions to Capital Projects 3,800,000 1,400,000 Reserve for Capital Projects 6,673,070 8,903,335 Expended from Capital Projects (1,452,363) (14,774) Project Close Outs - Return Unspent Reserve (117,372) Net Income/(Loss) - Ending Amt less Contributions(176,833) 911,825 Department of Public WorksNet Income/(Loss) Forecast
•The fund may show a negative Net Income at year-end when the Operating Expenses plus the Capital Expenses in a fiscal year exceeds the Revenue for a given year.•A negative Net Income does not reflect an expenditure over budget.•Transfers between Operating and Capital are authorized by the City Council only.11
Department of Public WorksCIP – Approved
•This list is the approved and funded CIP Projects as of July 1, 2023. (Fiscal Year 2024)•Neither Sewer Use Fee funded project is fully funded through construction.12 Proj # ProjectSum of Total BudgetSum of Total TransfersSum of Amt Available to Transfer75087 Complete Street project - Union Street Cycle Track (phase I) 420,000.00 (81,166.00) 338,834.00 Storm Drain71909 Parking Lot Improvements City Facilities FY2019-2023 89,543.00 (74,769.00) 14,774.00 Storm Drain73932 Annual CW Resurfacing & ADA FY21 1,150,000.00 (1,078,819.00) 71,181.00 Storm Drain73933 Annual CW Resurfacing & ADA FY22 950,000.00 (8,126.00) 941,874.00 Storm Drain73937 Curb Ramp ADA Improvements FY2022 575,000.00 (375,000.00) 200,000.00 Storm Drain73938 Annual CW Resurfacing & ADA FY23 1,400,000.00 - 1,400,000.00 Storm Drain75052 Cordova Street Road Diet 1,200,000.00 (218,927.00) 981,073.00 Storm Drain75106 S Lake Pedestrian Access Improv Gol 160,000.00 (12,228.00) 147,772.00 Storm Drain76291 NPDES Arroyo Seco Bacteria Load Red 950,000.00 (383,634.00) 566,366.00 Storm Drain76292 NPDES Rio Hondo Bacteria Load Reduction - Concept Study 1,200,000.00 (553,531.00) 646,469.00 Storm Drain76913 Annual Storm Drain System Repair 2,826,293.00 (771,117.00) 2,055,176.00 Storm Drain76914 Storm Drain Master Plan 900,000.00 (728,863.00) 171,137.00 Storm Drain76917 Modernization of Busch Garden and Rosemont Sewer Pump Stations 2,900,000.00 (289,921.00) 2,610,079.00 Sewer76919 Civil Defense - Septic and Field Leaching System Upgrades - Design 200,000.00 (41,400.00) 158,600.00 Sewer10,303,335.00 Department of Public WorksSummary of Financials•In FY 2024, the budgeted surplus from Sewer Use Fees is only $151,983.>Revenue is trending lower than estimate.>Future revenue forecast without a fee increase is too optimistic.•Only two of the active CIP Projects that are approved and funded are funded with Sewer Use Fees.•The Sewer and Storm Drain Fund in the published Budget and Financial Reports look positive due to Storm Drain Use Fees, not Sewer Use Fees.•Must generate sufficient revenue to cover costs.13 Department of Public WorksSewer Collection SystemPROPOSED CAPITAL IMPROVEMENT PROGRAMS14 Department of Public WorksAnnual CIP Program
15 Proposed Capital Improvement Programs (CIP)OPTIMUMACCEPTABLEKEY SCOPE OF WORK30 years40 yearsReline 325 miles of Sewer main pipes(80% over 80 years old)60% of MH in 30 years25% of MH in 40 yearsRehabilitate manhole (MH) structures (7,430 systemwide)5-year cycle7-year cycleTelevise & inspect system; flow monitor & heavy clean-out where needed-50% of OptimumDig-up & repair sewer pipes (unable to reline)10-year cycles10-year cyclesPump station upgrades$5.15M$3.5MEST. TOTAL ANNUAL PROGRAM COST Department of Public WorksRate ScenariosSEWER USE FEE ADJUSTMENT SCENARIOS16 Department of Public Works
City of PasadenaSewer Rate Study Continuation of the Public HearingMay 6, 2024City of PasadenaSewer Rate Study Continuation of the Public HearingMay 6, 2024 Sewer Rate Study
Department of Public WorksRate Model Updates
18 • Revised model assumes that FY 2025 starts with a zero-reserve balance as opposed to a negative balance• Assumed capital is $3.5Mper year before inflation Department of Public WorksReserve Targets
19 Dolllars$Typical Reserve TargetsDollars $Modeled Reserve Targets$1.1M25% of O&M$0.5M10% of OperationsOperating Reserve$4.6M1 Year of Average CIP$2.3M50% of Average CIPCapital Reserve*$5.7M$2.8MTotal*Capital reserve accounts for inflation Department of Public WorksScenario 1: Operations Only
20 Department of Public WorksScenario 1: Operations OnlyOperations Only (No CIP, No Reserve) –Not Recommended•Unable to complete two deferred CIP projects>Sewer pump stations rehabilitation and Civil Defense septic upgrades•Unable to reline sewer pipes & extend life of over 80-year-old pipes•No funding for emergency repairs•Risk sewer back-ups & overflows due to lack of CIP>Contamination of stormwater channels/creeks>Claims due to sewer back-up into homes/facilities>Fines by Regional Water Quality Control Board •Unable to sustain the integrity of the sewer system21 Department of Public WorksScenario 2: Operations + $3.5M CIP + No Reserve 22 Department of Public WorksScenario 2: Operations + $3.5M CIP + No ReserveOperations + $3.5M CIP + No Reserve –Not Recommended•Funds “Acceptable” level of CIP to extend life of sewer system•Funds two deferred CIP projects•No funding for emergency repairs>Defer implementation of CIP projects to pay for emergency work•Minimizes risk for sewer back-ups and overflows23
Department of Public WorksScenario 3 Revised Proposed Rate: Operations + $3.5M CIP + Reserve Starting at $0 in FY 2025 24 Department of Public WorksScenario 3 Revised Proposed Rate: Operations + $3.5M CIP + Reserve Starting at $0 in FY 2025Operations + $3.5M CIP +Reserve Starting at $0 in FY 2025 –Recommended•Funds “Acceptable” level of CIP to extend life of sewer system•Funds two deferred CIP projects•Reserve fund available for emergency repairs•Minimizes risk for sewer back-ups and overflows25
Department of Public WorksScenario 4: Operations + $5.15M CIP + Reserve Starting at $0 in FY 2025 26 Department of Public WorksScenario 4: Operations + $5.15M CIP + Reserve Starting at $0 in FY 2025Operations + $5.15M CIP + Reserve Starting at $0 in FY 2025 –Not Recommended•Funds “Optimum” level of CIP to extend life of sewer system •Funds two deferred CIP projects•Reserve fund available for emergency repairs•Minimizes risk for sewer back-ups and overflows27
Department of Public WorksRate ScenarioSEWER USE FEE ADJUSTMENT “SMOOTHING OPTION”28 Department of Public Works“Smoothing Option”: Operations + Reduced FY 2025 & FY 2026 CIP + Reserve 29 Department of Public Works“Smoothing Option”: Operations + Reduced FY 2025 & FY 2026 CIP + Reserve Operations + Reduced FY2025 ($1.33M)& FY 2026 ($2.5M) CIP + Reserve•Allows construction of two deferred active CIP projects in FY 2026•Postpones implementation of “Acceptable” CIP projects by 2 years, to FY 2028•Funds Reserve for emergency repairs•Offers financial relief first three years30 Department of Public WorksSummary of Average Single-Family Bill 31 Department of Public WorksSummary of Increase in Single-Family Bill 32 Department of Public WorksConsideration of Other Rates 33 Online Rate Calculator:https://egov1.cityofpasadena.net/BillEstimator Avg. Monthly SFR Sewer ServiceAvg. Monthly SFR Water Service
Department of Public WorksRecommendations
34 1.Find proposed actions exempt from California Environmental Quality Act (CEQA);2.Conduct a Public Hearing to receive public comments on Sewer Use Fee Rate Structure and Adjustments;3.Consider all protests in accordance with Prop. 218;4.Close Public Hearing and Approve Revised Proposed Sewer Use Fee Rate Structure and Adjustments or provide alternate direction; and5.Direct City Attorney to prepare amendment to Sewer Use Charge Ordinance Department of Public WorksQuestions – Sewer
35 QR Code for Online Rate Calculator
Department of Public Works
36 EndEnd of Presentation
Department of Public Works
37 Fund Expenditures
Department of Public Works5-Year Forecast
38 FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Actual Budget Forecast Proposed Forecast Forecast Forecast Forecast ForecastBeginning Amount Available for Appropriations 1,849,139 (176,833) (176,833) 911,825 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) RevenuesSewer Use Charge 3,582,733 4,201,179 3,754,945 4,201,179 4,306,208 4,413,864 4,524,210 4,637,316 4,753,248 Storm Drain Use Charge 3,387,120 3,417,994 3,185,410 3,594,658 3,684,524 3,776,637 3,871,053 3,967,830 4,067,025 Investment Earnings 72,057 268,453 81,359 209,822 215,068 220,444 225,955 231,604 237,394 Total Revenues 7,041,910 7,887,626 7,021,714 8,005,659 8,205,800 8,410,945 8,621,218 8,836,750 9,057,667 ExpensesPersonnel 1,986,904 2,077,514 1,893,674 2,094,154 2,167,449 2,232,473 2,299,447 2,368,430 2,439,483 Services and Supplies 2,751,889 2,685,561 2,854,758 2,694,927 2,748,826 2,803,802 2,859,878 2,917,076 2,975,417 Contributions To Other Funds 646,461 635,893 642,225 648,464 674,403 701,379 729,434 758,611 788,956 Other Expenses - - - - - Total Expenses 5,385,254 5,398,968 5,390,657 5,437,545 5,590,678 5,737,654 5,888,759 6,044,117 6,203,856 Operating Income/(Loss) 1,656,656 2,488,658 1,631,057 2,568,114 2,615,122 2,673,291 2,732,459 2,792,633 2,853,811 Ending Amount Available for Appropriations 3,505,795 2,311,825 1,454,224 3,479,939 3,835,061 3,008,352 2,240,811 1,533,444 887,255 Contributions to Capital Projects 3,800,000 1,400,000 1,400,000 2,260,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Reserve for Capital Projects 6,673,070 8,903,335 8,903,335 8,888,561 11,148,561 14,648,561 18,148,561 21,648,561 25,148,561 Expended from Capital Projects (1,452,363) (14,774) (14,774) Project Close Outs - Return Unspent Reserve (117,372) Net Income/(Loss) - Ending Amt less Contributions(176,833) 911,825 54,224 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) (2,612,745) Fund 205 - Sewer and Storm Drain Fund
Department of Public WorksOperating Forecast
•Total fees collected provide for sufficient revenue to cover operational maintenance work only.•Operating Income is insufficient to cover required preventative maintenance and capital improvements in the CIP39 FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Actual Budget Forecast Proposed Forecast Forecast Forecast Forecast ForecastBeginning Amount Available for Appropriations 1,849,139 (176,833) (176,833) 911,825 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) RevenuesSewer Use Charge 3,582,733 4,201,179 3,754,945 4,201,179 4,306,208 4,413,864 4,524,210 4,637,316 4,753,248 Storm Drain Use Charge 3,387,120 3,417,994 3,185,410 3,594,658 3,684,524 3,776,637 3,871,053 3,967,830 4,067,025 Investment Earnings 72,057 268,453 81,359 209,822 215,068 220,444 225,955 231,604 237,394 Total Revenues 7,041,910 7,887,626 7,021,714 8,005,659 8,205,800 8,410,945 8,621,218 8,836,750 9,057,667 ExpensesPersonnel 1,986,904 2,077,514 1,893,674 2,094,154 2,167,449 2,232,473 2,299,447 2,368,430 2,439,483 Services and Supplies 2,751,889 2,685,561 2,854,758 2,694,927 2,748,826 2,803,802 2,859,878 2,917,076 2,975,417 Contributions To Other Funds 646,461 635,893 642,225 648,464 674,403 701,379 729,434 758,611 788,956 Other Expenses - - - - - Total Expenses 5,385,254 5,398,968 5,390,657 5,437,545 5,590,678 5,737,654 5,888,759 6,044,117 6,203,856 Operating Income/(Loss) 1,656,656 2,488,658 1,631,057 2,568,114 2,615,122 2,673,291 2,732,459 2,792,633 2,853,811 Ending Amount Available for Appropriations 3,505,795 2,311,825 1,454,224 3,479,939 3,835,061 3,008,352 2,240,811 1,533,444 887,255 Department of Public Works5-Year Forecast
40 FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Actual Budget Forecast Proposed Forecast Forecast Forecast Forecast ForecastBeginning Amount Available for Appropriations 1,849,139 (176,833) (176,833) 911,825 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) RevenuesSewer Use Charge 3,582,733 4,201,179 3,754,945 4,201,179 4,306,208 4,413,864 4,524,210 4,637,316 4,753,248 Storm Drain Use Charge 3,387,120 3,417,994 3,185,410 3,594,658 3,684,524 3,776,637 3,871,053 3,967,830 4,067,025 Investment Earnings 72,057 268,453 81,359 209,822 215,068 220,444 225,955 231,604 237,394 Total Revenues 7,041,910 7,887,626 7,021,714 8,005,659 8,205,800 8,410,945 8,621,218 8,836,750 9,057,667 ExpensesPersonnel 1,986,904 2,077,514 1,893,674 2,094,154 2,167,449 2,232,473 2,299,447 2,368,430 2,439,483 Services and Supplies 2,751,889 2,685,561 2,854,758 2,694,927 2,748,826 2,803,802 2,859,878 2,917,076 2,975,417 Contributions To Other Funds 646,461 635,893 642,225 648,464 674,403 701,379 729,434 758,611 788,956 Other Expenses - - - - - Total Expenses 5,385,254 5,398,968 5,390,657 5,437,545 5,590,678 5,737,654 5,888,759 6,044,117 6,203,856 Operating Income/(Loss) 1,656,656 2,488,658 1,631,057 2,568,114 2,615,122 2,673,291 2,732,459 2,792,633 2,853,811 Ending Amount Available for Appropriations 3,505,795 2,311,825 1,454,224 3,479,939 3,835,061 3,008,352 2,240,811 1,533,444 887,255 Contributions to Capital Projects 3,800,000 1,400,000 1,400,000 2,260,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Reserve for Capital Projects 6,673,070 8,903,335 8,903,335 8,888,561 11,148,561 14,648,561 18,148,561 21,648,561 25,148,561 Expended from Capital Projects (1,452,363) (14,774) (14,774) Project Close Outs - Return Unspent Reserve (117,372) Net Income/(Loss) - Ending Amt less Contributions(176,833) 911,825 54,224 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) (2,612,745) Fund 205 - Sewer and Storm Drain Fund
Department of Public WorksCash in Sewer/Stormwater Fund 41•Highlighted rows total in each fiscal year reflects total cash in fund.
FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030Actual Budget Forecast Proposed Forecast Forecast Forecast Forecast ForecastBeginning Amount Available for Appropriations 1,849,139 (176,833) (176,833) 911,825 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) RevenuesSewer Use Charge 3,582,733 4,201,179 3,754,945 4,201,179 4,306,208 4,413,864 4,524,210 4,637,316 4,753,248 Storm Drain Use Charge 3,387,120 3,417,994 3,185,410 3,594,658 3,684,524 3,776,637 3,871,053 3,967,830 4,067,025 Investment Earnings 72,057 268,453 81,359 209,822 215,068 220,444 225,955 231,604 237,394 Total Revenues 7,041,910 7,887,626 7,021,714 8,005,659 8,205,800 8,410,945 8,621,218 8,836,750 9,057,667 ExpensesPersonnel 1,986,904 2,077,514 1,893,674 2,094,154 2,167,449 2,232,473 2,299,447 2,368,430 2,439,483 Services and Supplies 2,751,889 2,685,561 2,854,758 2,694,927 2,748,826 2,803,802 2,859,878 2,917,076 2,975,417 Contributions To Other Funds 646,461 635,893 642,225 648,464 674,403 701,379 729,434 758,611 788,956 Other Expenses - - - - - Total Expenses 5,385,254 5,398,968 5,390,657 5,437,545 5,590,678 5,737,654 5,888,759 6,044,117 6,203,856 Operating Income/(Loss) 1,656,656 2,488,658 1,631,057 2,568,114 2,615,122 2,673,291 2,732,459 2,792,633 2,853,811 Ending Amount Available for Appropriations 3,505,795 2,311,825 1,454,224 3,479,939 3,835,061 3,008,352 2,240,811 1,533,444 887,255 Contributions to Capital Projects 3,800,000 1,400,000 1,400,000 2,260,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Reserve for Capital Projects 6,673,070 8,903,335 8,903,335 8,888,561 11,148,561 14,648,561 18,148,561 21,648,561 25,148,561 Expended from Capital Projects (1,452,363) (14,774) (14,774) Project Close Outs - Return Unspent Reserve (117,372) Net Income/(Loss) - Ending Amt less Contributions(176,833) 911,825 54,224 1,219,939 335,061 (491,648) (1,259,189) (1,966,556) (2,612,745) Fund 205 - Sewer and Storm Drain Fund
Department of Public WorksCIP Budget Book
42 Department of Public WorksCIP – Contributions to Capital•The Amounts in the CIP Book as Adopted or Proposed are presented in the Contributions to Capital Projects line for year FY 2024.•8•From the CIP Budget – the Appropriated through FY 2023 will closely follow the total of FY 2023 Contributions to Capital Projects plus Reserve for Capital. Small variance due to timing.43
Department of Public WorksCIP – Contributions to Capital •Totals: $10,303,335, which equals the total approved and funded projects in FY 2024.44
Department of Public WorksFY 2024 CIP Budget Book
•Priority 1 – Funded only by Sewer Facility Fees (Development Fees). •Priority 4 and 6, only two CIP with some Sewer Fee funding still unexpended.45 MK0
Slide 45
MK0 FY25 Budget Sheet shows Proposed shown here for FY25 as unfunded since nu funds available Markarian, Kris, 2024-04-26T22:06:20.125