DATE: JUNE 25, 2024
DEPARTMENT: ADMINISTRATION
PUBLIC WORKS
CITY CLERK’S OFFICE
CITY ATTORNEY’S OFFICE
FROM: DAVID JACOBS, PUBLIC WORKS DIRECTOR
RENE MENDEZ, CITY MANAGER
BY: CHRISTOPHER A. CALLIHAN, CITY ATTORNEY PATRICIA M. BARAJAS, CITY CLERK
JIM PIA, ASSISTANT CITY MANAGER
TITLE: WASTEWATER COLLECTION CONTINUATION
RECOMMENDED MOTION:
Approve a Resolution approving the City’s 2024-2025 Annual Rate Report for Wastewater Collection and directing collection of the fees and charges detailed in the report on the Monterey County Tax Roll and provide direction to staff on how best to mitigate short-term impacts to residents.
EXECUTIVE SUMMARY:
At the June 18, 2024, Council meeting, the City Council held a duly noticed public hearing to determine the official number of written protests received on the proposed collection of wastewater collection fees and charges by Monterey One Water (M1W) on the property tax roll by Monterey County. After the count by the City Clerk, it was determined that the 50% + 1 voter threshold was not reached. As part of the ensuing discussion by the Council, the Council continued this item to the June 25, 2024, meeting with direction to staff, which is discussed below.
It is important for the Council to reach a decision and provide direction as necessary because effective July 1, 2024, M1W will no longer directly bill its customers for wastewater collection service. As proposed and as approved by the M1W Board of Directors, customer bills will be replaced by an annual fee which will be included on each affected parcel’s property tax bill issued by the County of Monterey. This change was initiated by M1W and approved by their Board of Directors and, consequently, each of the cities within M1W’s service area are now required to act with respect to the future billing of M1W’s service fees and charges. This action does not create a new fee, charge, or tax imposed by the City of Salinas; rather, this action represents a change in the process for collecting an existing charge imposed by M1W for services M1W provides to its customers. M1W will be taking final action on this change at their June 24, 2024, meeting.
DISCUSSION:
At the City Council meeting of June 11, 2024, the Council approved a Resolution approving both an agreement with the County of Monterey and a Memorandum of Understanding with Monterey One water (M1W) and authorizing the City Manager to enter into these agreements on behalf of the City of Salinas. These agreements are required to establish the new billing process. At the City Council meeting of June 18, 2024, the City Council held a duly-noticed public hearing and determined there was not a sufficient majority protest to the proposed billing change. The City Council did not, however, take action to approve collection of the annual wastewater collection service fees and charges on the property tax roll by the County of Monterey due to questions related to options to mitigate the impact of the proposed change on Salinas residents. The City Council requested additional information on costs associated with the City implementing its own direct billing system, a potential opt-out program for Salinas residents, and the City’s participation in a customer assistance program and continued their consideration of the attached Resolution approving the City’s 2024-2025 Annual Rate Report for Wastewater Collection and direction collection of the charges detailed in the report on the Monterey County Tax Roll.
Options to Reduce and/or Eliminate the Impact to Salinas Residents Staff was directed to bring back options to help eliminate and/or reduce possible impacts to Salinas property owners and residents as a result of this change. As the City reviews and discusses the options, it is important to realize that time is not on our side and costs are not considered nor reflected in the recently approved FY 24-25 City Budget. The following options were considered:
The City takes over the billing function:
There is frankly not enough time for the City to take over the billing function this year, but this is an option that could be considered next year. Based on staff’s initial review, the City would have to explore utility billing systems and staffing needs. Outlined below are three scenarios showing the various estimated costs to the City should alternative options be explored.
Scenario 1: The City takes on the utility billing function and the current financial management system can support the utility billing function. This could cost the City about $435,100.
Implementation estimate: $70,000
Ongoing license estimated: $40,000
Billing estimate (print, mail, collections): $144,761
Lien process estimate: $6,000
Customer service/staffing estimate: $174,340
Scenario 2: The cost to implement a new billing system because the City’s financial management system is not feasible could cost about $670,100.
Implementation estimate: $200,000
Ongoing license estimate: $80,000
Billing estimate (print, mail, collections): $144,761
Pay stations estimate: $65,000
Lien process estimate: $6,000
Customer service/staffing estimate: $174,340
Scenario 3: The estimated cost to hire a third party to administer the utility billing function is estimated at $266,000 to $300,000 annually. This is a very preliminary estimate and does not include staff time to issue a Request for Proposals, implementation of the system, monitoring the contract, and auditing the program.
Work with M1W to set up an Opt-Out option for Salinas residents.
This would require the City entering into an agreement with M1W. Staff is in discussion with M1W on this alternative and hopes to have more information at the meeting. Also, the cost to maintain a system only for Salinas would likely be cost prohibitive.
Provide funding to M1W to expand the Payment Assistant Program for both Salinas homeowners and renters.
The City of Monterey currently provides approximately $10,000 to M1W to help augment assistance to their eligible residents for their portion of the fee. This helps complement and expand the assistance for their residents. Salinas could do the same to help its residents. While we would still need to work out the details with M1W and bring back the necessary implementation action(s) in August for approval, this is the most straightforward option to implement. However, as of the time of writing this report we were still gathering information on how quickly we could set this program up. In discussing this option with the Finance Director, there is some room to tap into fund balance for up to $50,000 for this year for this purpose. However, it is important to realize that this would only be funding for the first year for residents that qualify to help with the transition. Future year funding would need to be considered and evaluated as part of the annual budget approval process.
Simply approve the Change:
Under this option, staff would work closely with M1W to monitor the impact of the change to our residents and be prepared to recommend changes next year before the FY 25/26 property tax assessments are enrolled.
Regardless of the option approved, as directed by the Council, staff would work with M1W to collect data over the course of the year to analyze and review the impact to Salinas residents resulting from this change. This is important because it would afford us the opportunity to make and advocate for any changes for the following year.
While admittedly there was simply not enough time to fully review all the options before asking the Council to decide, short of simply approving the change, the best option to help minimize the impact is to direct staff to work with M1W to enhance the Payment Assistance Program for qualified Salinas residents and bring back the necessary implementing action(s) in August for approval. The benefits of this option is that it would allow the change to move forward, provide support to help minimize the impact to qualified residents, and allow the time necessary to collect and analyze the data resulting from the change and also allow staff the time needed to fully vet the option to take over the billing process and bring it back to the Council should it become necessary to consider this change in the future.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
STRATEGIC PLAN INITIATIVE:
This action is consistent with the City Council’s goals of supporting infrastructure and environmental sustainability and supporting effective and culturally responsive government. (City of Salinas Strategic Plan 2022-2025).
DEPARTMENTAL COORDINATION:
The City Manager’s Office, City Clerk’s Office, Public Works Department, Finance Department, and City Attorney’s Office coordinated internally on the preparation of this Report and with M1W regarding the change to the billing process.
FISCAL AND SUSTAINABILITY IMPACT:
If the Council approves the change in the billing process with no further action, there will be no impact to the City’s General Fund other than the continued compensation paid by the City to M1W for services provided and future increases to that amount and to charges imposed by Monterey County related to the property tax billings. The City will continue to receive the same amount of service charges to cover the costs of providing wastewater collection services to Salinas residents.
However, as identified above, direction to provide funding to enhance the Payment Assistance Program for Salinas residents would result in a direct impact to the General Fund for FY 24/25. While it would not result in any reductions to the current approved budget, it would reduce funding available for other opportunities. For example, as part of the budget discussion, staff received direction to see if it was possible to increase the City’s community sponsorship program.
Taking over the billing function would have a significant impact on the City’s budget. For example:
Currently the City receives approximately $3.5 million annually from rate payers through M1W to maintain, repair, and improve the sewer system. Costs from this option could be funded from this source resulting in compromising and/or reducing the City’s ability to maintain the system. Another option to cover these costs would be for the City to go through the process to increase the rate, thereby adding more costs to our residents.
While not recommended, the General Fund could be used to cover the costs which would decrease resources for other priorities and require decreases in other areas to the approved FY 24-25 Budget and future budgets.
At the time of writing this staff report, it was unclear whether an Opt-Out option was even possible to establish with M1W. However, like the previous option, there be would an impact to the City Budget depending on how it was funded and implemented.
ATTACHMENTS:
Resolution
RESOLUTION NO. _________ (N.C.S.)
A RESOLUTION ADOPTING THE REPORT PROPOSING TO HAVE SEWER FEES AND CHARGES COLLECTED ON THE TAX ROLL FOR FISCAL YEAR 2024-25 AND DIRECTING THE CITY CLERK TO FILE A COPY OF SAID REPORT WITH THE MONTEREY COUNTY AUDITOR TO PLACE SAID FEES ON THE TAX ROLL WHEREAS, pursuant to Section 5473 of the California Health and Safety Code, Monterey One Water (M1W) and the City of Salinas are each authorized to place sewer fees and charges on the property tax roll that have been adopted by Resolution and approved by the City Council; and WHEREAS, Staff has prepared and filed a written report (Report) with the City Clerk containing a description of each parcel of real property receiving the services from M1W and the amount of the charge for each parcel; and WHEREAS, the Clerk filed the Report and caused a notice of the time and place of the public hearing to be published all in accordance with California Health and Safety Code, section 5473.1; and WHEREAS, the Clerk also caused a written notice of the filing of the Report and the date, time, and location of the public hearing, to be mailed to each person to whom any parcel or parcels of real property described in the Report to the address shown on the last equalized assessment roll available on the date the report is prepared, or as known to the Clerk; and WHEREAS, on June 18, 2024, at 4:00 p.m., the Salinas City Council conducted the public hearing on the Report and heard and considered all objections or protests thereto; and WHEREAS, the Salinas City Council determined that protests were not made by a majority of the owners of property described in the Report; and WHEREAS, the Salinas City Council has determined to adopt the Report and to collect the fees on the tax roll of Monterey County, which such fees shall constitute a lien against the parcel or parcels of land described in the Report in accordance with California Health and Safety Code sections 5473 et seq.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF SALINAS that:
The Council hereby finds and determines that the above recitals are true and correct and are incorporated herein by this reference.
The Report filed with the City Clerk contains a description of the real property parcels subject to the fees and the amount of said fees for Fiscal Year 2024-25 to be imposed thereon, and the Report is therefore approved and adopted.
The Report for the Fiscal Year 2024-25 shall be forwarded to the Monterey County Auditor/Controller and the Fees contained therein shall be collected on the tax roll in the same manner, by the same person, at the same time, together with and not separate from the general taxes.
On or before August 10, 2024, the Clerk is hereby directed to file a copy of the Report with the Monterey County Auditor/Controller, with a statement endorsed thereon over her signature that this has been fully adopted by the Salinas City Council, together with a certified copy of this Resolution, and shall request that the fees be collected on the tax bills for the taxable parcels identified in the Report along with the ordinary ad valorem taxes to be levied on and collected from owners of said parcels.
If any section, subsection, subdivision, sentence, clause, or phrase in this Resolution or any part thereof is for any reason held to be unconstitutional or invalid, ineffective by any court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Resolution or any part thereof. The Salinas City Council declares that it would have adopted each section irrespective of the fact that any one or more subsections, subdivisions, sentences, clauses, or phrases be declared unconstitutional, invalid, or ineffective.
This Resolution shall take effect immediately upon adoption.
The City Manager or his designee is hereby authorized to take all actions necessary to implement this Resolution.
PASSED AND APPROVED this 25th day of June 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
APPROVED:
____________________________________
Kimbley Criag, Mayor
ATTEST:
_________________________________
Patricia M. Barajas, City Clerk
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