The project will begin in the immediate future. A press release will be sent for a ribbon cutting ceremony in the spring.
ENVIRONMENTAL IMPACT:
There is no environmental impact related to this item.
LEGAL ANALYSIS:
The City Attorney has approved the agreement and resolution as to form.
FINANCIAL IMPACT:
The grant is in the amount of $3,000. The project is expected to stay within this amount and additional city funds are not requested at this time.
Budget Amendment BA #24-08-03
Description Account Revised/
Adopted
Budget
Proposed
Budget
Budget
(diff)
Amendment
Other Agency
Revenue
101-000-0000-42300 - $ 3,000 $3,000
Special
Departmental
101-110-0011-52200 $10,000 $13,000 $3,000
STRATEGIC PLAN:
This item is not applicable to the Strategic Plan.
RECOMMENDATION:
That the City Council adopt Resolution 7488:
1. Accepting an award of grant funds in the amount of $3,000 from the Metropolitan Water District of Southern California; and,
2. Authorizing the City Manager, or her designee, to execute the Agreement with the Metropolitan Water District of Southern California, amendments and other related documents, and to take all such other actions, as may be required to secure the grant funds and implement the approved grant under the Community Partnering Program.
SUBMITTED BY: NOTED AND APPROVED:
Patrick Gallegos Jill R. Ingram
Patrick Gallegos, Assistant City
Manager
Jill R. Ingram, City Manager
Prepared by: Lauren Barich, Management Analyst
ATTACHMENTS:
A. Resolution 7488
RESOLUTION 7488
A RESOLUTION OF THE SEAL BEACH CITY COUNCIL
APPROVING A GRANT AGREEMENT WITH THE
METROPOLITAN WATER DISTRICT OF SOUTHERN
CALIFORNIA FOR THE ACCEPTANCE OF $3,000
UNDER THE COMMUNITY PARTNERING GRANT
PROGRAM
WHEREAS, the nonfunctional fountain in the City of Seal Beach (“City”) Courtyard was selected as a beautification project for the City’s Staff Engagement Team (SET); and,
WHEREAS, the Metropolitan Water District of Southern California offers funding to eligible entities through the Community Partnering Program (CPP) for waterrelated educational outreach projects; and, WHEREAS, the City submitted an application to receive a CPP grant to convert the nonfunctional fountain into a waterwise demonstration garden on July 26, 2023; and,
WHEREAS, the Municipal Water District of Orange County submitted a letter of support for the City’s application; and,
WHEREAS, the City was selected to receive a Community Partnering Program grant in the amount of $3,000 for the Courtyard Waterwise Demonstration Garden on September 7, 2023; and,
WHEREAS, the City desires to accept the CPP grant award.
NOW, THEREFORE, THE SEAL BEACH CITY COUNCIL DOES HEREBY RESOLVE:
Section 1. The foregoing recitals are true and correct and are hereby adopted by reference as though set forth in full.
Section 2. The City Council hereby accepts the $3,000 CPP grant from the Metropolitan Water District of Southern California.
Section 3. The City Council approves and authorizes the City Manager, or her designee, to execute for and on behalf of the City of Seal Beach, the CPP grant agreement, amendments and other related documents, and to take all such other actions, as may be required to secure the grant funds and implement the approved grant.
PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 12th day of February, 2024 by the following vote:
AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members
Schelly Sustarsic, Mayor
ATTEST:
Gloria D. Harper, City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Gloria D. Harper, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution 7488 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 12th day of February, 2024.
Gloria D. Harper, City Clerk
Agenda Item K
AGENDA STAFF REPORT
DATE: February 12, 2024
TO: Honorable Mayor and City Council
THRU: Jill R. Ingram, City Manager
FROM: Iris Lee, Director of Public Works
SUBJECT: Proposition 218 Protest Public Hearing – Water Rate and Sewer Rate Adjustments
________________________________________________________________ SUMMARY OF REQUEST:
That the City Council open the public hearing to accept comments on the proposed Water and Sewer Rates, and continue the item to February 26, 2024, to allow for additional public review time.
BACKGROUND AND ANALYSIS:
Background:
The City’s Water and Sewer utilities are funded entirely by fees received from the ratepayers, also known as Water Enterprise and Sewer Enterprise funds, respectively. All associated expenditures, such as operating and maintenance costs, capital improvements, and reserves are funded through rate-funded revenues, and not the General Fund.
Rates are regularly evaluated as part of the City’s annual budgeting process to ensure projected revenues are sufficient to cover all Water and Sewer utilityrelated expenditures. The City’s last rate adjustment was approved in February 2021; however, the rates are no longer sufficient to balance ongoing operating costs.
On June 12, 2023, the City Council unanimously authorized retaining Raftelis Financial Consultants, Inc. (“Raftelis”) to conduct a Water and Sewer Rate Study to ensure the City’s plan for critical infrastructure maintenance and funding for capital improvement projects are in alignment. This would include meeting established reserve policies, continued reinvestment into the aging infrastructure to ensure system reliability, inflationary cost increases, preparation of current and future mandates, and ensure water quality is met.
Water Utility System:
The City owns and maintains a water system and is responsible for ensuring safe and reliable water for drinking, irrigation, and fire protection. These essential services are accomplished through a strategic combination of highly qualified operators and administrative support staff, which includes City departments such as the Public Works Department, City Manager’s Office, City Clerk’s Office, and the Finance Department. Together, the water system’s two (2) reservoirs, two (2) booster stations, four (4) production wells, 73.5 miles of pipeline, and over 5,300 services are properly maintained.
Based on Raftelis’ detailed financial plan analysis, the February 2021 rate adjustments are no longer sufficient to balance the operating costs due to:
1. Successful water conservation of 21% during the last major drought along with the Winter 2023 atmospheric rivers that reduced outdoor irrigation use.
This resulted in approximately $600,000 in lost revenue;
2. Increased wholesale import and groundwater costs;
3. Aging infrastructure and deferred maintenance;
4. Overall inflationary impacts; and,
5. On-going introduction of new legislation.
Water Enterprise Fund Reserve Policy:
The Water Rates have been constructed with a financial plan that corrects the structural deficit and sufficiently fund operations, capital and reserves. A reserve policy was set based on the types of risk the utility faces. • Operating Reserves – to cover day-to-day expenses and maintain sufficient funds to cover operating cash flows, periods of reduced water sales, or unforeseen costs.
o Minimum 20% of Operating & Maintenance expenditures
o Target: 25% of Operating & Maintenance expenditures
• Capital Replacement Reserves – to cover a portion of upcoming annual capital expenditures and mitigate unexpected capital needs. o Minimum 25% of average 5 - year CIP
o Target: 30% of average 5 - year CIP
• Debt Reserve – to cover debt repayments when cash flow to debt service is insufficient and prevents default.
o Minimum 20% of total debt services
o Target: 25% of total debt services
Proposed Water Debt:
To maintain effective operations, it is necessary to secure Water utility revenue through low-interest State Revolving Loans and market-debt loans. This approach
ensures ongoing expenditures can be sustained until the anticipated rategenerated revenues come into effect.
Staff will continue to pursue external funding sources to reduce debt issuances, if possible.
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Market Debt
Issuance $13M $9M
State Loan (SRF) $11M
Wholesale Water Purchase Cost Pass-Through:
The City purchases water from wholesale agencies and has no control over those charges. The City has estimated future wholesale rates; however, if wholesale rates are higher than predicted, the City will pass-through the increase in wholesale water purchase costs as allowable by Government Code Section 53756.
The pass-through amount will not exceed the increase in cost. The pass-through will be calculated at the increase in wholesale water purchase costs divided by annual water use.
Water Bill Components:
Water Rates have two components – (1) fixed charges; and (2) variable volumetric charges. Fixed charges are a function of meter size and is a charge without respect to use. Volumetric charges are calculated based on the amount used multiplied by the rate per unit. The unit is measured in hundred cubic feet (“HCF”), which is approximately 748 gallons.
Proposed Water Rates:
Current Water Rate structures will remain the same. That is, a fixed charge by meter size, plus a volumetric rate that is broken down into the following:
• A two-tiered Single-Family Residential, Multi-Family Residential, and Leisure World customer class based on consumption; and, • A single-tiered rate structure for Commercial, Irrigation, Sunset Aquatic Park, and City customer class based on consumption.
The tables below illustrate the proposed rate and charge increases for the next five (5) years. These adjustments were calculated by forecasting revenue, expenses and reserves to establish adequate cost-to-debt ratio.
Proposed Water Fixed Charges ($/month)
Description Current FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Fixed Rates (All
Customers)
5/8" $24.25 $32.25 $40.32 $47.17 $52.83 $58.11
3/4" $24.25 $32.25 $40.32 $47.17 $52.83 $58.11
1" $36.07 $47.97 $59.97 $70.16 $78.58 $86.44
1 1/2" $69.88 $92.93 $116.17 $135.92 $152.23 $167.45
2" $105.71 $140.59 $175.73 $205.61 $230.28 $253.31
3" $188.08 $250.15 $312.68 $365.84 $409.74 $450.71
4" $312.94 $416.20 $520.25 $608.70 $681.74 $749.92
6" $616.21 $819.56 $1,024.45 $1,198.61 $1,342.44 $1,476.68 8" $985.61 $1,310.86 $1,638.58 $1,917.13 $2,147.19 $2,361.91 10" $1,410.78 $1,876.34 $2,345.42 $2,744.14 $3,073.44 $3,380.78 6" Leisure World $616.21 $819.56 $1,024.45 $1,198.61 $1,342.44 $1,476.68 2’’ Aquatic Park $159.53 $212.17 $265.21 $310.30 $347.53 $382.28 Private Fire Line
Charges
4" $25.20 $33.51 $41.89 $49.01 $54.89 $60.38
6" $73.18 $97.33 $121.66 $142.34 $159.43 $175.37
8" $155.95 $207.41 $259.27 $303.34 $339.74 $373.72
10" $280.46 $373.01 $466.26 $545.52 $610.98 $672.08
Proposed Water Volumetric Charges ($/hcf)
Description Tier Definitions
(hcf) Current FYE 2024
FYE
2025
FYE
2026
FYE
2027
FYE
2028
Residential
Tier 1 0-17 $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 17+ $3.69 $4.91 $6.13 $7.18 $8.04 $8.84
Multi-Family
Residential
Tier 1 0-17* $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 17+ $3.65 $4.85 $6.07 $7.10 $7.95 $8.75
Leisure World
Tier 1 0-17** $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 17+ $3.65 $4.85 $6.07 $7.10 $7.95 $8.75
Commercial $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Irrigation $3.57 $4.75 $5.94 $6.94 $7.78 $8.56
City $3.53 $4.69 $5.87 $6.87 $7.69 $8.46
Aquatic Park $3.95 $5.25 $6.57 $7.68 $8.61 $9.47
* Multi-Family tier allocations are determined by multiplying the hcf definition shown above (17 hcf) by the number of dwelling units for a given account. For example, the tier allocation for a Multi-Family account with two dwelling units would be equal to 17 hcf X 2 dwelling units = 34 hcf bimonthly. ** Leisure World tier allocations are determined in the same manner as MFR, by multiplying dwelling units by the individual allocation of 17 hcf.
Sewer Utility System:
The City also owns and maintains a Wastewater (or also known as Sewer) collections system. This system consists of 181,000 linear feet of pipeline, approximately 800 manholes, and six (6) pump stations. Similar to the Water Utility System, the Sewer Utility System is supported by technical and administrative staff through a rate-supported Sewer Enterprise fund.
Sewer Enterprise Fund Reserve Policy:
The Sewer Rates have been constructed with a financial plan that corrects the structural deficit and sufficiently funds operations, capital and reserves. A reserve policy was set based on the types of risk the utility faces. • Operating Reserves – to cover day-to-day expenses and maintain sufficient funds to cover operating cash flows, periods of reduced revenue, or unforeseen costs.
o Minimum 25% of Operating & Maintenance expenditures
o Target: 25% of Operating & Maintenance expenditures
• Capital Replacement Reserves – to cover a portion of upcoming annual capital expenditures and mitigate unexpected capital needs.
o Minimum 25% of average 5 - year CIP
o Target: 25% of average 5 - year CIP
• Debt Reserve – to cover debt repayments when cash flow to debt service is insufficient and prevents default.
o Minimum 10% of total debt services
o Target: 10% of total debt services
Proposed Sewer Debt:
The required Sewer Utility revenue to properly sustain operations will require market-debt issuance. This will allow expenditure to continue while the proposed rate-generated revenues catch up.
Staff will continue to pursue more favorable external funding sources to reduce debt issuance, if possible.
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Market Debt
Issuance $14M
Sewer Bill Components:
Sewer Rates have two components – (1) fixed charges; and (2) variable volumetric charges. Fixed charges are a function of customer classification and are charges without respect to use. The City does not measure wastewater flow, but instead estimates flows based on water use by applying a return-to-sewer factor (“RTS”) to non-residential water use. Volumetric charges, therefore, are calculated based on the amount water used multiplied by the rate per unit.
Proposed Sewer Rates:
The current Sewer Rate structures will remain the same. • Single Family Residential: fixed charge; and,
• Other Customer Classes: fixed charge plus volumetric rate based on water consumption.
The table below illustrates the proposed rate and charge increases for the next five (5) years. These adjustments were calculated by forecasting revenue, expenses and reserves to establish adequate cost-to-debt ratio.
Proposed Sewer Fixed Charges ($/month)
Description Current
(1/1/2024) FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Single Family
Residential $24.02 $32.43 $40.21 $47.85 $54.07 $57.85
Multi-Family
Residential $0.61 $0.82 $1.02 $1.22 $1.37 $1.47
Commercial $0.61 $0.82 $1.02 $1.22 $1.37 $1.47
City $0.61 $0.82 $1.02 $1.22 $1.37 $1.47
Leisure World – Fixed
Charge $0.61 $0.82 $1.02 $1.22 $1.37 $1.47
Leisure World – Flat
Rate $1,099.03 $1,483.69 $1,839.78 $2,189.33 $2,473.95 $2,647.12 Aquatic Park – Sewer
Service Equity Charge $498.75 $673.31 $834.91 $993.54 $1,122.70 $1,201.29 Aquatic Park – Sewer
Capital Equity Charge $661.00 $892.35 $1,106.51 $1,316.75 $1,487.93 $1,592.08 Navy – Sewer Meter $0.61 $0.82 $1.02 $1.22 $1.37 $1.47
Proposed Sewer Volumetric Charges ($/hcf of water)
Description Current FYE
2024
FYE
2025
FYE
2026
FYE
2027
FYE
2028
Multi-Family Residential $4.00 $5.40 $6.70 $7.97 $9.00 $9.63 Commercial $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
City $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
Navy – Sewer Meter $0.24 $0.32 $0.40 $0.48 $0.54 $0.58
Proposition 218 Requirements:
Water and sewer rate adjustments are subject to Proposition 218’s public hearing and majority protest procedures. On December 11, 2023, City Council directed the public notification in compliance with Proposition 218, and set a public hearing date of February 12, 2024.
At the conclusion of the public hearing, the City Clerk will complete the tabulation of all written protests received from record property owners, water customers, and sewer customers, including those received during the public hearing. Only one protest will be accepted per property parcel. The City Clerk will then report on the results to the City Council.
If the final tabulation of the written protests submitted against the Water Rate adjustments exceeds more than 50% of all the parcels in the City, a majority protest exists, and the City Council shall not impose the Water Rate increase. If the final tabulation is less than 50% of all the parcels in the City, the City Council would
consider implementing the Water Rate increases effective April 1, 2024, and then on January 1 for each year from 2025 through 2028.
If the final tabulation of the written protests submitted against the Sewer Rate adjustments exceed more than 50% of all the parcels in the City, a majority protest exists, and the City Council shall not impose the Sewer Rate increase. If the final tabulation is less than 50% of all the parcels in the City, the City Council would consider implementing the Sewer Rate increases effective April 1, 2024, and then on January 1 for each year from 2025 through 2028.
ENVIRONMENTAL IMPACT:
This item is not subject to the California Environmental Quality Act (“CEQA”) because it is not a “project” as defined under Section 15378(b) of the state CEQA Guidelines. This item is also exempt from CEQA pursuant to Section 15061(b)(3) of the Guidelines because it can be seen with certainty that the approval of Water and Sewer Utility Rates will not have a significant effect on the environment.
LEGAL ANALYSIS:
The City Attorney has reviewed this report as to form.
FINANCIAL IMPACT:
The anticipated increase in Water and Sewer revenue required to sustain proper utility operations, is summarized below:
Projected Water Utility Revenue
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Projected
Revenue $6.7M $9.3M $11.2M 12.8M $14.2M
Projected Sewer Utility Revenue
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Projected
Revenue $2.5M $3.4M $4.1M $4.8M $5.2M
STRATEGIC PLAN:
This item is not applicable to the Strategic Plan.
RECOMMENDATION:
That the City Council open the public hearing to accept comments on the proposed Water and Sewer Rates, and continue the item to February 26, 2024, to allow for additional public review time.
SUBMITTED BY: NOTED AND APPROVED:
Iris Lee Jill R. Ingram
Iris Lee, Director of Public Works Jill R. Ingram, City Manager ATTACHMENTS: None
Photo courtesy of Ken Lund (Flickr)
City of Seal Beach
Water and Wastewater Utility Financial Plan
& Rate Study – PUBLIC HEARING
February 12, 2024
2 Agenda
• Review Financial Plan and Proposed
Rates
• Critical Needs
• FAQ's
• Council Action Recommendations
• Open Public Hearing
Raftelis Water and Wastewater Financial Plan
Project Team
3 Steve Gagnon, PE (AZ)
Project Manager
Sarah Wingfield
Lead Analyst
▪ 24+ years experience
▪ 15+ years in Orange County
setting water and wastewater
rates
▪ e: [email protected]
Gina DePinto, APR
Communications
▪ e: [email protected] ▪ 34+ years experience
▪ Former PIO in county, city,
special district agencies,
including OCWD
▪ e: [email protected]
City of Seal Beach Staff
Factors Affecting Utility Financial Health and
Driving the Need for Rate Increases
4 1. Debt Service Coverage: 1.2 times; City currently not meeting requirements
2. Inflation: after the COVID-19 Pandemic
• Higher labor and material cost
3. Lower Water Use (drought & rain) = decreased revenue. Estimated FY 2021 revenue loss = $600k, volume down by 21%
4. Wholesale Water Costs
• Increased OCWD water wholesale costs (partly due to PFAS) • MWDOC: Import water wholesaler
5. Aging Infrastructure / Deferred Maintenance
6. New Legislation and Regulations – Making Conservation a CA Way of Life Inflation
5 The Utility Index vs Normal Goods (CPI)
6 Examples of Other Water and Wastewater Rate
Increases (Bill Impacts)
• Mesa Water District recently revised rates two
years into a 5-year rate study due to increased
OCWD rates, inflation, and capital
• Trabuco Canyon recently revised rates three
years into the prior rate study due to inflation and
increased capital costs
• San Dieguito Water District (Encinitas) – July 1,
2024, rate increases. Loss of local lake water is
increasing residential bills by around 15%
• Huntington Beach – July 1, 2024, rate increase.
• Pasadena –Wastewater utility has been
implementing CPI increases since 2007
• Burbank
7 Bill Increase (%) FY 2024 FY 2025
Mesa Water District 13% 10%
Trabuco Canyon
Water 33% 18%
Wastewater 16% 16%
San Dieguito Water District 15% 12%
Huntington Beach
Water 10% 10%
Wastewater 13% 16%
Pasadena (Draft)
Water 25% 12%
Wastewater 152% 16%
Burbank 10% NA
What Affects Utility Costs
• Size: Seal Beach population = 25,000
• Water sources
• Age of system/pipes
• Historical investment/maintenance
• Property tax revenue
• Elevation
8 Source: Manny Teodoro Newsletter 2/1/2024
Top Concerns in the Water Industry
9 Source: AWWA State of the Water Industry 2023
10 Water
Financial Plan &
Proposed Rates
Financial Outlook Without Revenue Increases
(or bond issuances)
11 Proposed Monthly 5-Year Fixed Charges
12 Water Date Effective ->>
Rates Effective
1/1/2024 4/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Monthly Fixed Charges
All Customers
5/8'' $24.25 $32.25 $40.32 $47.17 $52.83 $58.11
3/4'' $24.25 $32.25 $40.32 $47.17 $52.83 $58.11
1" $36.07 $47.97 $59.97 $70.16 $78.58 $86.44
1.5" $69.88 $92.93 $116.17 $135.92 $152.23 $167.45
2" $105.71 $140.59 $175.73 $205.61 $230.28 $253.31
3" $188.08 $250.15 $312.68 $365.84 $409.74 $450.71
4" $312.94 $416.20 $520.25 $608.70 $681.74 $749.92
6" $616.21 $819.56 $1,024.45 $1,198.61 $1,342.44 $1,476.68 8" $985.61 $1,310.86 $1,638.58 $1,917.13 $2,147.19 $2,361.91 10" $1,410.78 $1,876.34 $2,345.42 $2,744.14 $3,073.44 $3,380.78 6" Leisure World $616.21 $819.56 $1,024.45 $1,198.61 $1,342.44 $1,476.68 2" Aquatic Park $159.53 $212.17 $265.21 $310.30 $347.53 $382.28 Private Fire Charges
4" $25.20 $33.51 $41.89 $49.01 $54.89 $60.38
6" $73.18 $97.33 $121.66 $142.34 $159.43 $175.37
8" $155.95 $207.41 $259.27 $303.34 $339.74 $373.72
10" $280.46 $373.01 $466.26 $545.52 $610.98 $672.08
Proposed Bi-monthly 5-Year Fixed Charges
13 Water Date Effective ->> 1/1/2024 4/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028 Bi-monthly Fixed Charges
All Customers
5/8'' $48.50 $64.51 $80.63 $94.34 $105.66 $116.23
3/4'' $48.50 $64.51 $80.63 $94.34 $105.66 $116.23
1" $72.14 $95.95 $119.93 $140.32 $157.16 $172.88
1.5" $139.75 $185.87 $232.33 $271.83 $304.45 $334.90
2" $211.41 $281.18 $351.47 $411.22 $460.57 $506.62
3" $376.16 $500.29 $625.37 $731.68 $819.48 $901.43
4" $625.87 $832.41 $1,040.51 $1,217.40 $1,363.48 $1,499.83 6" $1,232.42 $1,639.12 $2,048.90 $2,397.21 $2,684.88 $2,953.36 8" $1,971.22 $2,621.72 $3,277.15 $3,834.27 $4,294.38 $4,723.82 10" $2,821.56 $3,752.67 $4,690.84 $5,488.29 $6,146.88 $6,761.57 6" Leisure World (bi-monthly shown, but billed monthly) $1,232.42 $1,639.12 $2,048.90 $2,397.21 $2,684.88 $2,953.36 2" Aquatic Park $319.05 $424.34 $530.42 $620.59 $695.06 $764.57 Private Fire Charges
4" $50.39 $67.02 $83.77 $98.01 $109.78 $120.75
6" $146.36 $194.66 $243.32 $284.69 $318.85 $350.74
8" $311.90 $414.83 $518.53 $606.68 $679.49 $747.44
10" $560.91 $746.01 $932.51 $1,091.04 $1,221.96 $1,344.16 hcf = hundred cubic feet 1 hcf = 748 gallons of water
Proposed 5-Year Volumetric Rates ($/hcf)
14 Water Date Effective ->>
Rates Effective
1/1/2024 4/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Volumetric Rates ($ /hcf)
Residential
Tier 1 $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 $3.69 $4.91 $6.13 $7.18 $8.04 $8.84
Multi-Family Residential
Tier 1 $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 $3.65 $4.85 $6.07 $7.10 $7.95 $8.75
Leisure World
Tier 1 $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Tier 2 $3.65 $4.85 $6.07 $7.10 $7.95 $8.75
Commercial $3.49 $4.64 $5.80 $6.79 $7.60 $8.36
Irrigation $3.57 $4.75 $5.94 $6.94 $7.78 $8.56
City $3.53 $4.69 $5.87 $6.87 $7.69 $8.46
Aquatic Park $3.95 $5.25 $6.57 $7.68 $8.61 $9.47
Water FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Rate Revenues $6,160,620 $6,225,060 $6,195,656 $6,195,656 $6,195,656 Other Revenue (misc & int) $25,755 $26,013 $26,273 $88,288 $95,876 Proposed Revenue Increases $508,251 $3,089,186 $4,980,146 $6,578,749 $7,976,703 Total Revenue $6,694,626 $9,340,259 $11,202,075 $12,862,693 $14,268,235 Operating Expenses
Personnel $2,053,371 $2,367,641 $2,557,052 $2,761,616 $2,982,545 Maintenance and Operations $1,854,700 $1,954,935 $2,058,082 $2,128,491 $2,198,471 Fixed Water Purchases $427,127 $456,039 $483,721 $512,059 $542,111 Volumetric Water Purchases $2,033,990 $2,077,022 $1,973,388 $2,069,375 $2,171,009 Total Expenses $6,369,188 $6,855,637 $7,072,243 $7,471,541 $7,894,136 Current Debt Service $541,416 $529,364 $526,647 $520,603 $420,167 Proposed Debt Service $0 $845,669 $1,371,223 $1,956,686 $1,956,686 Net Yearly Cashflow* ($215,978) $1,109,589 $2,231,963 $2,913,864 $3,997,247 Rate Funded Capital $1,523,863 $0 $1,187,158 $0 $4,872,500 Net Cashflow after Capital ($1,739,841) $1,109,589 $1,044,805 $2,913,864 ($875,253) *Does not include millions in needed capital investment Water Financial Outlook with Revenue Increases
15 Total CIP $1,523,863 $13,549,658 $11,377,500 $6,612,500 $7,080,000 Debt Coverage and Reserve Balances
16 Average Monthly Water Cost Impacts
17 Average Monthly Water Cost Impacts
18 19
Wastewater
Financial Plan &
Proposed Rates
Wastewater FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Rate Revenues $2,213,306 $2,213,306 $2,213,306 $2,213,306 $2,213,306 Other Revenue (misc & int) $127,760 $51,500 $31,764 $32,082 $32,403 Proposed Revenue Increases $0 $0 $0 $0 $0
Total Revenue $2,341,066 $2,264,807 $2,245,070 $2,245,388 $2,245,709 Expenses
Personnel $1,250,518 $1,500,559 $1,620,604 $1,750,253 $1,890,273 Maintenance and Operations $1,010,720 $1,061,256 $1,114,319 $1,147,748 $1,182,181 Total Expenses $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454 Current Debt Service $545,583 $545,623 $545,183 $544,263 $542,863 Proposed Debt Service $0 $0 $0 $0 $0
Net Yearly Cashflow* ($465,755) ($842,632) ($1,035,035) ($1,196,876) ($1,369,608) Rate Funded Capital $3,350,412 $530,000 $721,500 $8,395,000 $4,956,000 Net Yearly Cashflow ($3,816,167) ($1,372,632) ($1,756,535) ($9,591,876) ($6,325,608) *Does not include millions in needed capital investment Wastewater Utility Costs Exceed Revenue
20 Proposed 5-Year Monthly Wastewater Rates
21 Wastewater Current 4/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028 Fixed Charges
Single Family Residential (Flat Charge) $24.02 $32.43 $40.21 $47.85 $54.07 $57.85 Multi-Family Residential (Customer Serv. Charge) $0.61 $0.82 $1.02 $1.22 $1.37 $1.47 Commercial (Customer Serv. Charge) $0.61 $0.82 $1.02 $1.22 $1.37 $1.47 City (Billing Charge) $0.61 $0.82 $1.02 $1.22 $1.37 $1.47 Leisure World - Customer Serv. Charge) $0.61 $0.82 $1.02 $1.22 $1.37 $1.47 Leisure World - Flat Rate $1,099.03 $1,483.69 $1,839.78 $2,189.33 $2,473.95 $2,647.12 Aquatic Park - Sewer Service Equity Charge $498.75 $673.31 $834.91 $993.54 $1,122.70 $1,201.29 Aquatic Park - Sewer Capital Equity Charge $661.00 $892.35 $1,106.51 $1,316.75 $1,487.93 $1,592.08 Navy (Customer Serv. Charge) $0.61 $0.82 $1.02 $1.22 $1.37 $1.47 Volumetric Rates ($ / hcf)
Multi-Family Residential $4.00 $5.40 $6.70 $7.97 $9.00 $9.63 Commercial $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
City $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
Navy - Sewer Meter $0.24 $0.32 $0.40 $0.48 $0.54 $0.58
Proposed 5-Year Bi-Monthly Wastewater Rates
22 Wastewater Current 2/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028 Fixed Charges
Single Family Residential (Flat Charge) $48.04 $64.85 $80.42 $95.70 $108.14 $115.71 Multi-Family Residential (Customer Serv. Charge) $1.22 $1.65 $2.04 $2.43 $2.75 $2.94 Commercial (Customer Serv. Charge) $1.22 $1.65 $2.04 $2.43 $2.75 $2.94 City (Billing Charge) $1.22 $1.65 $2.04 $2.43 $2.75 $2.94 Leisure World - Customer Serv. Charge) $1.22 $1.65 $2.04 $2.43 $2.75 $2.94 Leisure World - Flat Rate $2,198.06 $2,967.38 $3,679.55 $4,378.67 $4,947.89 $5,294.25 Aquatic Park - Sewer Service Equity Charge $997.50 $1,346.63 $1,669.82 $1,987.08 $2,245.40 $2,402.58 Aquatic Park - Sewer Capital Equity Charge $1,322.00 $1,784.70 $2,213.03 $2,633.50 $2,975.86 $3,184.17 Navy (Customer Serv. Charge) $1.22 $1.65 $2.04 $2.43 $2.75 $2.94 Volumetric Rates ($ / hcf)
Multi-Family Residential $4.00 $5.40 $6.70 $7.97 $9.00 $9.63 Commercial $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
City $4.00 $5.40 $6.70 $7.97 $9.00 $9.63
Leisure World $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Navy - Sewer Meter $0.24 $0.32 $0.40 $0.48 $0.54 $0.58
Wastewater Financial Outlook with Revenue
Increases
23 Wastewater FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Rate Revenues $2,213,306 $2,213,306 $2,213,306 $2,213,306 $2,213,306 Other Revenue (misc & int) $130,665 $74,396 $73,529 $82,143 $99,647 Proposed Revenue Increases $193,664 $1,133,213 $1,843,750 $2,482,320 $2,943,285 Total Revenue $2,537,635 $3,420,915 $4,130,585 $4,777,770 $5,256,238 Expenses
Personnel $1,250,518 $1,500,559 $1,620,604 $1,750,253 $1,890,273 Maintenance and Operations $1,010,720 $1,061,256 $1,114,319 $1,147,748 $1,182,181 Total Expenses $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454 Current Debt Service $545,583 $545,623 $545,183 $544,263 $542,863 Proposed Debt Service $0 $0 $0 $910,720 $910,720
Net Yearly Cashflow* ($269,186) $313,476 $850,479 $424,786 $730,202 Rate Funded Capital $3,350,412 $530,000 $721,500 $0 $0
Net Yearly Cashflow* ($3,619,598) ($216,524) $128,979 $424,786 $730,202 *Does not include millions in needed capital investment Total CIP $3,350,412 $530,000 $721,500 $8,395,000 $4,956,000 Debt Coverage and Reserve Balances
24 Average Wastewater Cost Impacts
25 Average Wastewater Cost Impacts
26 Average Single-Family Residential
Total Water and Wastewater Bill
27 Total Increase: $54 bi-monthly or $27 monthly
Summary
• The utilities are not meeting debt coverage ratios
› Makes it difficult to issue debt to fund needed capital reinvestment › City has ongoing disclosure requirements to inform investors on items that may affect the bonds
• Inflation, lower water use, and revised capital needs have significantly impacted the cost of providing these critical water and wastewater services • Proposed rate increases will restore the utilities’ financial health allowing the City to continue to secure and deliver safe, reliable water and wastewater services • These services receive no revenue from tax dollars. The funds we collect for these services are used to operate and reinvest in these systems. • Modern, resilient, and reliable water and wastewater systems require investment.
We focus on ensuring the best value and the least impact on our customers. 28 29
Expenditure
Programming
Efficiency Efforts
30 1. Cross-train qualified staff to attain optimal efficiencies
2. Utilizing qualified contractors at competitive prices to ensure the best outcome
3. Actively identified outside funding opportunities
i. SRF Loan
ii. Bureau of Reclamation grant
4. Preventative vs. Reactive Maintenance
5. Include only initiatives that can be delivered
Capital Improvement Projects
WATER
1. Lampson Well Treatment System(1), (2)
2. LCWA Watermain Relining(1), (2)
3. Navy Reservoir Rehabilitation
4. Bolsa Chica Rehabilitation(1)
5. Beverly Manor Station(1), (2)
6. AMI
SEWER
1. Pump Station #35(1)
2. Sewer Mainline Improvements(1)
3. SCADA Improvements(1)
4. Seal Way Water/Sewer
5. Sunset Aquatic Station
6. Boeing Pump Station
31 (1) In progress
(2) External funding
SIGNFICANT Cost of Doing Nothing
32 • Impact to General Fund, taking away
from other City services
• Leaks, failures, and more costly
emergency repairs
• Violations and fines
• Unreliability
• Health and safety compromise
33 FAQ's and
Recommendations
Proposition 218 Substantive Requirements INFOGRAPHIC
Revenues cannot
exceed the funds
required to provide the
service
The amount of the fee cannot
exceed the proportional cost of
providing service
Revenues cannot be used
for any purpose other than
to pay for the service for
which it was charged
Use reliable data
34 Set rates proportional to the cost of providing
the service
Reasonably allocate amongst grouped
ratepayers based on a cost-of-service
Financial Assistance Programs
35 • California Financial Assistance Programs
› Low Income Household Water Assistance Program (LIHWAP) › Administered by Department of Community Services and
Development (CSD)
› www.csd.ca.gov/lihwap
› (866) 675-6623
36 Outreach
Council Meetings
Following the City Council’s approval of the agreement
to retain Raftelis to prepare the updated rate study on 6/12/23, public announcements were made at various
subsequent Council meetings regarding the process and
important dates.
Dedicated Website
https://www.2023utilityratestudy.sealbeachca.gov/ (inclu des FAQs, key dates, video resources, documents,
literature)
Informational Webinar
11/30/23 – recording also made available
on dedicated website.
Social Media
Posted events and updates through social media
channels (i.e., webinar and open house).
Local Newspaper
Articles published on 11/22/23,12/14/23, 1/25/24,
2/8/24. Public Hearing Notices were published on 1/25
and again this week on 2/1.
Press Releases
2/1/24, 1/16/24, 12/19/23, and 11/21/23. The most
recent release references tonight's public hearing and
recommended continuance to 2/26/24.
Utility Bill Inserts
Billing inserts regarding the rate study update and
schedule were sent with utility bills during the last billing cycle of 2023.
Dedicated Phone & Email
[email protected]
(562) 342-7389
• Rate Study Website
www.2023utilityratestudy.sealbeachca.gov
• Dedicated Phone Line/Email
(562) 342-7389
[email protected]
• Social Media/News Content
#sealbeachpublicworks
#cityofsealbeachca
37 Public Information
Council Action Recommendations
That the City Council opens the public hearing to accept comments on the proposed Water and Sewer Rates, and continues the item to February 26, 2024, to allow for additional public review time.
February 26, 2024 – Public Hearing Continuance
• Upon conducting a public hearing to accept comments on the proposed Water Rates, and at the close of the close of the public hearing a majority protest for Water Rates adjustments does not exist, it is recommended that City Council adopt a resolution establishing the Water Rates, effective April 1, 2024; and,
• Upon conducting a public hearing to accept comments on the proposed Sewer Rates, and at the close of the close of the public hearing a majority protest for Sewer Rates adjustments does not exist, it is recommended that City Council adopt a resolution establishing the Sewer Rates, effective April 1, 2024. 38 39
End of Presentation
(Back Up Slides Follow for
Reference If Needed)
Water - Use of Funds
• City plans $13.5M in
capital funded by a
SFR loan and market
debt in FY 2025
40 Wastewater - Use of Funds
• 75% has to do with
Personnel & O&M
41 42
Water Infrastructure
43 Sewer Infrastructure
Inflation
44 • The U.S. experienced 20 years of benign inflation right up to the City’s last water and wastewater rate studies, which were started in 2019.
FY 2022 FY 2023 FY 2024
Actual Actual Actual
General (for Los Angeles Area)1
6.5% 5.4% 2.1%
Utilities (Electricity)2
14.6% 8.6% 7.0%
Capital 7.9% 4.9% Budgeted
OCWD rate3
4.5% 9.6% 11.8%
MWDOC Volumetric Rate4
2.4% 3.5% 5.8%
1 CPI for All Urban Consumers:Los Angeles, Long Beach, Anaheim 2 CPI for All Urban Consumers: Electricity in LA, LB and Anaheim 3 This does not assume unfavorable EPA ruling for PFAS concentrations 4 FY 2025 increases and beyond were provided by MWDOC
Inflation Factors - 2021 Study All 5 Years
General 2.2%
Utilities 2.2%
Capital 3.2%
OCWD 6.5%
MWDOC Volumetric Rate % Increase 2.4%
Water Use is Down, Therefore Revenue is
Lower
45 1. City adopted Level 2 water restrictions due to drought
2. 2022/23 Winter Storms – customers use less water for irrigation
3. State Legislation – Making Water Conservation a Way of Life seeks to lower California water use
FYE 2021 FYE 2022 FYE 2023
Total Water Volume (hcf) 1,457,089 1,481,931 1,172,884
2% -21%
Approximately $600k in lost revenue in FYE 2023!
Water Financial Health Without Rate
Increases
• Not meeting debt coverage
requirements; need 1.2x
• Will quickly deplete reserves
without revenue increases
46 Capital Improvement Projects - Water
47 Capital Improvement
Projects
FYE 2024 * FYE 2025 FYE 2026 FYE 2027 FYE 2028
Total $1,523,863 $6,142,696 $6,250,000 $5,750,000 $6,000,000 Sample Project List
• Lampson Well Treatment System
• LCWA Watermain Relining
• Bolsa Chica Well Rehabilitation
• Navy Reservoir Rehabilitation
• Beverly Manor Booster Station
• FYE 2024 only includes carry-over design funds, but no CIP construction costs due to lack of funding Water Reserves
• Operating reserve = 25% of operating expenses ≈ $1.5M • Capital reserve = 30% of average yearly cash/reserve
funding capital ≈ $1M
• Debt reserve = 25% of debt service ≈ $200 to 500k
• Total reserve goal ≈ $2.5 to $3M
48 Water Financial Plan
49 Why are the revenue increases needed?
1) They are needed to meet debt coverage ratios so the City can issue debt to fund needed capital projects
2) Keep up with inflation
3) Recover lost revenue due to lower water use
4) Fund aging Infrastructure replacement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
April 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Additional Revenue $500k $3.09M $4.98M $6.58M $7.58M
Market Debt Issuance $13M $9M
State Loan (SRF) $11M
Water Financial Plan
• The reserves are temporarily high
in FY 2027 & 2028 because debt is
funding capital
50 Wastewater Financial Health without Rate
Increases
• Not meeting debt coverage
requirements; need 1.2x
• Will quickly deplete reserves
without revenue increases
51 Wastewater Reserves
• Same targets as water
• Plan for Reserve target ≈ $1M
52 Capital Improvement Projects - Wastewater
53 Capital Improvement
Projects
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Total $3,350,412 $500,000 $650,000 $7,300,000 $4,200,000 Sample Project List
• Sewer Mainline and Manhole Repairs
• Pump Station #35
• Boeing/Sunset Aquatic/Adolfo Lopez Pump Station Improvements IIlustrates dip in FYE 25/26 in CIP due to lack of funding.
Wastewater Financial Plan
54 Why?
1) Needed to meet debt coverage ratios so the City can issue debt to fund essential capital projects
2) Keep up with inflation
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
April 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Additional Revenue $193k $1.13M $1.84M $2.48M $2.94M
Market Debt Issuance $14M
Financial Plan
• Debt coverage is driving
the rate increases, not so
much reserve balances
55 56
Total Cost Impacts -
Water and Wastewater
Average Cost Impacts - Water and Wastewater
57 Average Cost Impacts - Water and Wastewater
58 Proposition 218 Procedural Requirements
1. IDENTIFY PARCELS subject to the change
3. PROVIDE WRITTEN NOTICE to all record owners including the amount, basis upon which the amount was calculated, reason for the change, and the date/time/ location of a public hearing
4. HOLD A PUBLIC HEARING no less than 45 days from mailing the notice, consider all protests to the change - if a majority of property owners and customers protest, the change will not be adopted at that time
2. CALCULATE the amount of the change to be imposed
59 60
Community Engagement
Meeting/Event Date Time Topic
Informational Webinar Thursday, Nov. 30 6-7:30 p.m.
Overview of City water and sewer utilities,
how rates are determined, legal rate setting
in California
City Council Meeting Monday, Dec. 11 7 p.m. City Council to consider Financial Plan and rate updates
Issue Prop 218 Notice Tentatively Dec. 28
Written notice of the public hearing,
proposed rate adjustments, basis upon
which the rate adjustments were calculated,
reasons for the adjustments, and public right
to protest
Rate Study
Community
Open House
Thursday, Jan. 18, 2024 6-8 p.m.
Utility customers and community members
are invited to meet with staff and financial
experts about utility services and proposed
rates
Public Hearing Tentatively Feb. 12, 2024 7 p.m. City Council to consider proposed rate adjustments
Rates Implemented Tentatively April 2024
61 Glossary