Seal Beach City Council
February 26, 2024

recommending that the City Council count those written protests, as well as any additional written protests submitted in connection with the new majority protest process so that persons who have submitted a written protest do not need to submit new written protests. Persons who have submitted a written protest may also elect to rescind the protest, if desired.

Tabulation of the written protests will be undertaken separately for the proposed water rate adjustment and proposed sewer rate adjustment. If, according to the final tabulation, written protests against the rate adjustment (submitted by record owners of Identified Parcels and/or water and sewer customers, as applicable, with only one protest per parcel counted) exceed more than 50% of the Identified Parcels, a majority protest exists, and the City Council shall not impose the water or sewer rate increase, as applicable. If the final tabulation is less than 50% of all the parcels in the City, the City Council may consider implementing the phases rate increases beginning June 1, 2024, and then on January 1 for each year from 2025 through 2028 as outlined in the rate study.

Majority Protest Procedures
Proposition 218 authorizes the City to adopt procedures for the conduct of a public hearing and majority protest proceedings. Staff believes that such procedures would help the public, the City Clerk, and City Council understand how protests will be counted for each parcel. A draft set of procedures is attached to this report for the Council’s consideration.

ENVIRONMENTAL IMPACT:

This item is not subject to the California Environmental Quality Act (“CEQA”) because CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of water and sewer rates under Public Resources Code Section 21080(b)(8). The proposed rates are proposed to meet operating expenses, purchase necessary supplies and equipment, meet financial reserve needs, and fund capital projects necessary to maintain service within the existing service area. Furthermore, 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 approved the resolutions as to form.

FINANCIAL IMPACT:

If the anticipated adjustment in water and sewer rates had taken effect on April 1, 2024, the projected revenue is as follows:

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
Because the water and sewer rates are not expected to take effect on April 1, 2024, some revenue expected in the rate study will not be collected. Each month of delay in implementation of the new rates after April 1st is equal to approximately $170,000 of uncollected revenues. As a result, approximately $340,000 in rate revenue would not be collected. This means that some portion of the anticipated capital and operating costs would either be subsidized by the general fund (or deferred).

Furthermore, the cost associated with additional outreach and re-noticing is estimated at $60,000. This amount will be brought to City Council for consideration as a separate item.

STRATEGIC PLAN:

This item is not applicable to the Strategic Plan.

RECOMMENDATION:

1. That the City Council re-open the public hearing that was opened on February 12, 2024 and continued to February 26, 2024, take any remaining public comments, close the public hearing, conclude the pending majority protest process for the water and sewer rates adjustment, and take no further action to adopt the rates adjustment pursuant to the pending process; and,

2. Adopt Resolution 7496 to: (1) set a new public hearing to consider the proposed water and sewer rates adjustment and associated rate study; and (2) authorize the City Manager to notify customers and record owners of the proposed water and sewer rates adjustment in accordance with Proposition 218; and,

3. Adopt Resolution 7497 to adopt procedures applicable to the conduct of the public hearing majority protest proceedings.

SUBMITTED BY: NOTED AND APPROVED:

Iris Lee Jill R. Ingram
Iris Lee, Director of Public Works Jill R. Ingram, City Manager ATTACHMENTS:

A. Rate Study
B. Resolution 7496 Setting New Public Hearing
C. Resolution 7497 Adopting Majority Protest Procedures Water and Wastewater Financial Plan and
Rate Study
Draft Final Report / December 28, 2023

CITY OF

SEAL BEACH
This page intentionally left blank to facilitate two-sided printing. 445 S. Figueroa St., Suite 1925
Los Angeles, CA 90071
www.raftelis.com
December 28, 2023
Ms. Iris Lee
Director of Public Works
City of Seal Beach
211 Eighth Street
Seal Beach, CA 90740
Subject: Water and Wastewater Financial Plan and Rate Study Dear Ms. Lee,
Raftelis Financial Consultants, Inc. (Raftelis) is pleased to provide this Water and Wastewater Financial Plan and Rate Study Report (Report) for the City of Seal Beach (City) to establish a financial plan and water and wastewater rates that are based on the City’s cost to serve water and collect wastewater.

The major study objectives include:
• Developing financial plans for the water and wastewater enterprises to ensure revenue is sufficient to pay for operation and maintenance (O&M) and capital investment • Ensuring debt coverage ratios are adequate for future debt • Establishing sufficient reserves
• Setting water and wastewater rates to achieve the above goals It has been a pleasure working with you and your staff, and we thank you and City staff for the support provided during the study.

Sincerely,

Steve Gagnon, PE Sarah Wingfield
Senior Manager Lead Consultant
4 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table of Contents

1. Executive Summary................................................................................................................................... 8

1.0. Study Background.......................................................................................................................................................... 8

1.1. Water - Results and Recommendations ........................................................................................................................ 8

1.2. Wastewater - Results and Recommendations............................................................................................................. 11

2. Water Financial Plan ............................................................................................................................... 13

2.0. Water System Background .......................................................................................................................................... 13

2.1. Key Assumptions.......................................................................................................................................................... 13

2.2. Revenues from Current Rates...................................................................................................................................... 14

2.3. Water Operating and Maintenance Expenses............................................................................................................. 17

2.4. Water Capital Improvement Projects (CIP).................................................................................................................. 19

2.5. Water Existing and Proposed Debt Service.................................................................................................................. 19

2.6. Financial Reserve Policy............................................................................................................................................... 20

2.7. Status Quo Financial Plan (Financial Plan without Revenue Increases) ...................................................................... 20

2.8. Proposed Financial Plan............................................................................................................................................... 22

3. Water Five-Year Rates............................................................................................................................ 26

3.0. Water Rates and Charge ............................................................................................................................................. 26

3.1. Pass-Through Rates..................................................................................................................................................... 27

4. Water Bill Impacts.................................................................................................................................... 28

5. Wastewater Financial Plan...................................................................................................................... 30

5.0. Wastewater System Background................................................................................................................................. 30

5.1. Key Assumptions.......................................................................................................................................................... 30

5.2. Revenues from Current Rates...................................................................................................................................... 31

5.3. Operating and Maintenance Expenses........................................................................................................................ 32

5.4. Capital Improvement Projects (CIP)............................................................................................................................. 32

5.5. Existing and Proposed Debt Service............................................................................................................................. 33

5.6. Financial Reserve Policy............................................................................................................................................... 33

5.7. Status Quo Financial Plan (Without Revenue Increases)............................................................................................. 34

5.8. Proposed Financial Plan............................................................................................................................................... 35

6. Five-Year Wastewater Rates .................................................................................................................. 39

7. Wastewater Bill Impacts .......................................................................................................................... 40 List of Tables
Table 1-1: Proposed Water Revenue Adjustments.............................................................................................. 9 Table 1-2: Current and Proposed Five-Year Monthly Water Fixed Charges..................................................... 10 Table 1-3: Proposed Five-Year Volumetric Rates ($/hcf).................................................................................. 11 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 5
Table 1-4: Proposed Wastewater Revenue Adjustments .................................................................................. 11 Table 1-5: Proposed Five-Year Wastewater Fixed Charges ($/bi-monthly)...................................................... 12 Table 1-6: Proposed Five-Year Wastewater Volumetric Rates ($/hcf).............................................................. 12 Table 2-1: Cost and Water Purchase Inflation Assumptions ............................................................................. 13 Table 2-2: Water Account and Demand Growth ................................................................................................ 14 Table 2-3: Current Water Monthly Fixed Charges ($/month)............................................................................. 14 Table 2-4: Current Volumetric Water Rates ($/hcf)............................................................................................ 15 Table 2-5: Current Water Accounts.................................................................................................................... 15 Table 2-6: Current Private Fire Accounts........................................................................................................... 16 Table 2-7: Projected Water Use......................................................................................................................... 16 Table 2-8: Projected Water Rate Revenue with Current Rates......................................................................... 16 Table 2-9: Projected Water Non-Rate Revenues .............................................................................................. 17 Table 2-10: Projected Water Supply and Demand ............................................................................................ 17 Table 2-11: Water Supply Unit Costs................................................................................................................. 18 Table 2-12: Water Supply Costs ........................................................................................................................ 18 Table 2-13: Total Water O&M Costs .................................................................................................................. 19 Table 2-14: Five-Year Water CIP....................................................................................................................... 19 Table 2-15: Water Debt Service......................................................................................................................... 19 Table 2-16: Water Proposed Debt...................................................................................................................... 20 Table 2-17: Water Reserve Policies................................................................................................................... 20 Table 2-18: Water Status Quo Financial Plan.................................................................................................... 21 Table 2-19: Water Revenue Increases .............................................................................................................. 22 Table 2-20: Water Proposed Financial Plan ...................................................................................................... 23 Table 3-1: Current and Proposed Five-Year Bi-Monthly Water Fixed Charges ................................................ 26 Table 3-2: Proposed Five-Year Volumetric Rates ($/hcf).................................................................................. 27 Table 5-1: Wastewater Inflation Assumptions.................................................................................................... 30 Table 5-2: Current Wastewater Accounts .......................................................................................................... 31 Table 5-3: Estimated Wastewater Flows (hcf) ................................................................................................... 31 Table 5-4: Current Wastewater Monthly Fixed Charges.................................................................................... 31 Table 5-5: Current Volumetric Wastewater Charges ($/hcf).............................................................................. 32 Table 5-6: Projected Wastewater Rate Revenue under Current Rates............................................................. 32 Table 5-7: Projected Wastewater Non-Rate Revenues..................................................................................... 32 Table 5-8: Total Wastewater O&M Costs........................................................................................................... 32 Table 5-9: Five-Year Wastewater CIPs.............................................................................................................. 33 Table 5-10: Current Wastewater Debt Service .................................................................................................. 33 Table 5-11: Proposed Wastewater Debt Service............................................................................................... 33 Table 5-12: Wastewater Reserve Policies ......................................................................................................... 34 Table 5-13: Wastewater Status Quo Financial Plan .......................................................................................... 34 Table 5-14: Wastewater Revenue Adjustments................................................................................................. 35 Table 5-15: Wastewater Proposed Financial Plan............................................................................................. 36 Table 6-1: Proposed Five-Year Wastewater Fixed Charges ($/bi-month) ........................................................ 39 Table 6-2: Proposed Five-Year Wastewater Volumetric Rates ($/hcf).............................................................. 39 List of Figures
Figure 2-1: Water Operating Financial Plan....................................................................................................... 24 Figure 2-2: Water Capital Funding Plan............................................................................................................. 24 Figure 2-3: Water Debt Coverage ...................................................................................................................... 25 6 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Figure 2-4: Water Ending Reserve Balances..................................................................................................... 25 Figure 4-1: Water Bill Impacts ............................................................................................................................ 28 Figure 4-2: Leisure World Water Bill Impacts .................................................................................................... 28 Figure 4-3: Aquatic Park Water Bill Impacts ...................................................................................................... 29 Figure 5-1: Wastewater Operating Financial Plan ............................................................................................. 37 Figure 5-2: Debt Coverage Ratio ....................................................................................................................... 37 Figure 5-3: Capital Funding Sources ................................................................................................................. 38 Figure 5-4: Wastewater Ending Reserve Balances (All Reserves) ................................................................... 38 Figure 7-1: Wastewater Bill Impacts by Customer Class................................................................................... 40 Figure 7-2: Leisure World Wastewater Bill Impacts........................................................................................... 40 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 7
This page intentionally left blank to facilitate two-sided printing. 8 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

1. Executive Summary

1.0. Study Background
In 2023, the City of Seal Beach engaged Raftelis to conduct a Water and Wastewater Financial Plan and Rate Study (Study) to help its utilities adapt to the post-COVID 19 environment, and maintain adequate debt coverage for the foreseeable future. Inflationary pressure not seen for 40-years, increased wholesale water costs from the Orange County Water District and the Municipal Water District of Orange County and reduced water sales have impacted the financial health of the water and wastewater utilities. This rate study proposes rates to keep the utilities financially healthy so that they can continue to provide water and wastewater service.

The last comprehensive rate study was completed in late 2020 and rates were adopted in May of 2021. The last study included a cost of service analysis and rate structure design. This study uses the cost of service and rate structure from the prior study and does not propose changes to the rate structure.

1.0.1. STUDY OBJECTIVES
The study’s objectives include the following:
• Develop financial plans for the water and wastewater enterprises to ensure the utilities meet operation and maintenance (O&M) costs and capital costs
• Develop sufficient reserves
• Establish a plan for proposed debt issuances and ensure adequate debt coverage • Assess customer bill impacts from the proposed rate increases

1.1. Water - Results and Recommendations

1.1.1. WATER REVENUE NEEDS
The following items affect the City’s revenue needs (also known as revenue requirements) and thus its rates.

The City’s expenses include O&M expenses and capital expenses, including debt service. » Capital investment requirements: The City plans to invest approximately $40 million in its water infrastructure over the next five fiscal years. The capital replacement projects will be funded through a combination of rate funding, debt, and external funding sources. A more detailed discussion of the projected capital improvement projects to be funded through the five-year CIP is provided in Table 2-14.
» Rising inflation: The capital expenditures described above have been impacted by inflation. Cost estimates for capital projects have increased by 1.5 times due to recent inflation1. The City’s operating expenditures in categories such as: general, personnel, utilities, equipment and materials etc., are also rising due to inflation.
» Reserve Funding: The City currently has two primary reserves: an operating and a capital replacement reserve. The operating reserve target, modeled in this study, is 25% of annual O&M expenses or 1 The price of water: Increasing cost estimates for VenturaWaterPure raise concerns | News | vcreporter.com CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 9
approximately 90 days of operating expenses. The capital replacement reserve minimum is 25% of the average annual cash funded CIP expenses.
» Debt Coverage Requirements: The City currently has debt and proposes to issue future debt. The City enters into a covenant with its bondholders in which it pledges to set rates so that it collects 1.2 times its expenses. This is known as a debt service coverage requirement of 1.20.

1.1.2. PROPOSED WATER REVENUE ADJUSTMENTS AND RATE INCREASES The City’s rising capital and operational costs will require additional revenue to continue to provide safe and reliable water. The cumulative revenue increases required to meet expenditures are shown below in Table 1-1.

The revenue increases shown for each fiscal year are compared to current fiscal year ending (FYE) 2024 revenue, shown as revenue adjustments.

Table 1-1: Proposed Water Revenue Adjustments
Fiscal Year FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Effective Date April 1, 2024 January 1, 2025 January 1, 2026 January 1, 2027 January 1, 2028 Revenue
Adjustment $508,000 $3,089,000 $4,980,000 $6,579,000 $7,977,000

1.1.2.1. Current and Proposed Fixed Charges
The current and proposed monthly fixed charges by customer class are shown in Table 1-2. Note that all rates shown below are in monthly terms however the City bill bi-monthly except for Leisure World.

The rates shown in the “Current” column are effective as of January 1, 2024. The FYE 2024 rates are to be implemented on April 1, 2024. All other years (FYE 2025-2028) will be implemented on January 1 of the respective fiscal year.
10 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 1-2: Current and Proposed Five-Year Monthly Water Fixed Charges Description Current
(1/1/2024) 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
CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 11
The proposed volumetric rates by class are shown in Table 1-3. The implementation schedule for volumetric rates will be the same as the fixed charges described above.

Table 1-3: Proposed Five-Year Volumetric Rates ($/hcf)
Description Tier Definition
(hcf)
Current
(1/1/2024)
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.

1.2. Wastewater - Results and Recommendations

1.2.1. WASTEWATER REVENUE NEEDS
The wastewater enterprise has similar cost pressures as the water utility and the City must plan for infrastructure repairs to its wastewater system. The City is planning for approximately $16 million (in today’s dollars) in capital replacement projects from FYE 2024 to FYE 2028. These projects will be financed through a combination of rate (cash) and debt funding. The City will continue to pursue more advantageous external funding sources as they become available.

1.2.2. PROPOSED WASTEWATER REVENUE ADJUSTMENTS AND RATE INCREASES As described above, the City’s rising capital and operational costs will require additional revenue to continue to provide wastewater collection services. The revenue increases required to do so are shown below in Table 1-4. The cumulative revenue increases are in addition to the revenue collected in FYE 2024.

Table 1-4: Proposed Wastewater Revenue Adjustments
Fiscal Year FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Effective Date April 1, 2024 January 1, 2025 January 1, 2026 January 1, 2027 January 1, 2028 Revenue
Adjustment $194,000 $1,133,000 $1,844,000 $2,482,000 $2,943,000 12 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

1.2.3. CURRENT AND PROPOSED WASTEWATER RATES
The City’s current and proposed wastewater rates and charges, for the five-year study period, are shown below in Table 1-5 and Table 1-6. The fixed charges are shown in monthly terms.

The implementation date for the new rates April 1, 2024 (FYE 2024); for every subsequent year, the rate increases will be implemented on January 1 of the respective fiscal year.

Table 1-5: Proposed Five-Year Wastewater Fixed Charges ($/monthly) 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 (monthly) $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 $1.47
Table 1-6: Proposed Five-Year Wastewater Volumetric Rates ($/hcf) 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
CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 13

2.Water Financial Plan
This section describes the Water Financial Plan and the assumptions used to project operating and capital expenses, as well as reserve policies and debt coverage requirements that determine the overall rate increases needed for a sustainable water enterprise.

2.0. Water System Background
The City has access to both surface water and groundwater sources. The City gets approximately 85% or more of its water from groundwater as allocated by the Orange County Water District (OCWD). The City has three active wells that draw water from the 350 square mile Orange County Basin, which is managed OCWD. The City has a limit, or basin pumping percentage (BPP), above which the City is assessed an additional charge (i.e., Basin Equity Assessment). Groundwater production at or below the BPP is charged a Replenishment Assessment. The City also has access to imported water through the Municipal Water District of Orange County (MWDOC), which sells surface water from the Metropolitan Water District of Southern California (MWD).

2.1. Key Assumptions
The Study Period is FYE 2024 to FYE 2028, with proposed rate increases presented for the same period.

Various assumptions were incorporated into the Study based on discussions with and/or direction from City staff. These include the projected number of accounts, future water demand, and inflationary factors.

2.1.1. INFLATIONARY COST ASSUMPTIONS
The inflation factors are used to project costs over the Study period. Inflationary factors are presented in Table 2-1. Budgeted values were provided for both FYE 2023 and 2024, therefore the factors shown below are applied to years FYE 2025 and forward. Orange County Water District (OCWD) provided wholesale rates in their forecast; those were then used to project future groundwater charges. MWDOC also provided a forecast for FYE 2025 through FYE 2027.

Table 2-1: Cost and Water Purchase Inflation Assumptions Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 General Budget 5.0% 5.0% 3.0% 3.0%
Personnel Budget 8.0% 8.0% 8.0% 8.0%
Utilities Budget 8.0% 7.0% 6.0% 5.0%
OCWD Budget per forecast per forecast per forecast per forecast MWDOC Budget 7.0% 6.0% 6.0% 6.0%
Capital Budget 6.0% 5.0% 4.0% 3.0%

2.1.2. ACCOUNT GROWTH AND WATER DEMAND ASSUMPTIONS
To estimate future water rate revenue, Raftelis estimated account growth (i.e., new connections) and changes in annual water demand as shown in Table 2-2. The study assumes no increase in water use from FYE 2023 which is conservative and reflects state programs seeking to reduce water use (Making Water Conservation a Way of California Life). Raftelis assumed no account growth since the City is mostly built out and sees little increase in accounts. The drop in water demand for the commercial class in FYE 2026 is based on the loss of 14 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Parkwood Estates, which is water sold to the Golden State Water Company. Golden State Water Company desires to serve water to Parkwood Estates.

Table 2-2: Water Account and Demand Growth
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Account Growth 0.0% 0.0% 0.0% 0.0% 0.0%
Demand Factors
Residential 100% 100% 100% 100% 100%
Commercial 100% 100% 95% 100% 100%
Irrigation 100% 100% 100% 100% 100%

2.2. Revenues from Current Rates
Raftelis developed a five-year Water Financial Plan, which models anticipated revenues and expenses. To calculate the projected revenue (without rate adjustments), the number of accounts is multiplied by the monthly fixed charge (Table 2-3) and the total water use is multiplied by the volumetric rate (Table 2-4). Current monthly fixed charges are shown below in Table 2-3, and current volumetric ($/hcf) charges are shown in Table 2-4.

Table 2-3: Current Water Monthly Fixed Charges ($/month) Description
FYE 2024
(Effective
Jan 1, 2024)
Fixed Rates (All Customers)
5/8" $24.25
3/4" $24.25
1" $36.07
1 1/2" $69.88
2" $105.71
3" $188.08
4" $312.94
6" $616.21
8" $985.61
10" $1,410.78
6" Leisure World $616.21
2’’ Aquatic Park $159.53
Private Fire Line Charges
4" $25.20
6" $73.18
8" $155.95
10" $280.46
CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 15
Table 2-4: Current Volumetric Water Rates ($/hcf)
Description
Tier
Definitions
(hcf)
FYE 2024
(Effective Jan
1, 2024)
Residential
Tier 1 0-17 $3.49
Tier 2 17+ $3.69
Multi-Family Residential
Tier 1 0-17* $3.49
Tier 2 17+ $3.65
Leisure World
Tier 1 0-17** $3.49
Tier 2 17+ $3.65
Commercial $3.49
Irrigation $3.57
City $3.53
Aquatic Park $3.95
* 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.

Table 2-5 and Table 2-6 present the number of accounts by meter size for all customers and private fire connections, respectively, in FYE 2023. Note that these remain constant due to the assumption of zero account growth (Table 2-2); therefore, only the first year is shown.

Table 2-5: Current Water Accounts
Description FYE 2023
5/8'' 349
3/4'' 3,835
1" 818

1.5" 111
2" 191
3" 14
4" 14
6" 7
8" 2
10" 2
12'' 0
Leisure World (6'') 1
Total 5,344
16 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 2-6: Current Private Fire Accounts
Description FYE 2023
4'' 20
6'' 14
8" 18
10" 14
Total 66
Table 2-7 shows the distribution of water use by class and tier for the study period. Water demand remains constant (except for the minor decrease in commercial use due to the absence of Parkwood Estates) per the assumption in Table 2-2. All values are shown in hundred cubic feet (hcf).

Table 2-7: Projected Water Use
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Residential
Tier 1 303,953 303,953 303,953 303,953 303,953
Tier 2 83,627 83,627 83,627 83,627 83,627
Subtotal 387,580 387,580 387,580 387,580 387,580
Multi-Family Residential
Tier 1 92,553 92,553 92,553 92,553 92,553
Tier 2 26,747 26,747 26,747 26,747 26,747
Subtotal 119,300 119,300 119,300 119,300 119,300
Leisure World 409,431 409,431 409,431 409,431 409,431
Commercial 162,422 162,422 154,301 154,301 154,301
Irrigation 56,200 56,200 56,200 56,200 56,200
City 6,011 6,011 5,711 5,711 5,711
Aquatic Park 6,152 6,152 6,152 6,152 6,152
Total Use (hcf) 1,147,096 1,147,096 1,138,674 1,138,674 1,138,674 Table 2-8 summarizes the projected revenues from current rates. Fixed charges (Table 2-3) are multiplied by number of accounts (Table 2-5) and to obtain yearly fixed charge revenues. For total private fire service revenues, the values in Table 2-3 are multiplied by the number of accounts in Table 2-6 and by 12 to calculate yearly revenue.

Revenues from volumetric rates are calculated by multiplying the current volumetric rate (Table 2-4) by the projected water use in hundred cubic feet (hcf) (Table 2-7). This calculation is repeated for all meter sizes and tiers or customer classes and then summed to arrive at the total volumetric revenue shown in Table 2-8. Due to the assumptions of zero account growth and minimal changes to water demand, the projected water revenues remain roughly constant across the study period.

Table 2-8: Projected Water Rate Revenue with Current Rates Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Fixed Charges $2,128,682 $2,193,122 $2,193,122 $2,193,122 $2,193,122 Commodity Charges $4,031,938 $4,031,938 $4,002,534 $4,002,534 $4,002,534 Total $6,160,620 $6,225,060 $6,195,656 $6,195,656 $6,195,656 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 17
The utility also derives revenues from other non-rate sources. These revenues consist of miscellaneous revenues (which include turn on, turn off fees, late charges, etc.) and capacity fees as summarized in Table 2-9.

Table 2-9: Projected Water Non-Rate Revenues
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Misc Rev $25,755 $26,013 $26,273 $26,535 $26,801
Capacity Fees $1,313 $1,326 $1,339 $1,353 $1,366
Total $25,755 $26,013 $26,273 $88,288 $95,876

2.3. Water Operating and Maintenance Expenses

2.3.1. WATER SUPPLY COSTS
Line 1 of Table 2-10 shows the total water demand (sales) for each year of the Study period. The City, like all other water purveyors, loses water during the transmission and distribution due to losses from leaks in distribution pipelines and paper losses from meter reading and billing errors. The City must account for this loss in estimating the supply needed to meet its demand. The City has an approximate 8 percent water loss. To project the required water supply, the following equation is used to calculate water production:

Total Water Demand / [1 - Water Loss] = Total Water Production The estimated amount of well water and imported water is also shown in Table 2-10. The City anticipates, if conditions allow, to receive 100% of its water from groundwater beginning in FYE 2026 and throughout the duration of the study.

Table 2-10: Projected Water Supply and Demand
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Total Water
Demand (AF) 2,633 2,633 2,614 2,614 2,614
Water Loss (%) 8% 8% 8% 8% 8%
Well Water (AF) 2,417 2,560 2,823 2,823 2,823
Imported Water (AF) 427 284 0 0 0
Total Water
Production (AF) 2,844 2,844 2,823 2,823 2,823
Wholesale water purchase rates or charges, from OCWD and MWDOC, are projected in Table 2-11 based on projections provided by those agencies and the escalation assumptions in Table 2-1. 18 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 2-11: Water Supply Unit Costs
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE
2028
Volumetric Costs
OCWD
($/Acre
Foot) $624 $665 $699 $733 $769
MWDOC (Jul-Dec)
($/Acre
Foot) $1,209 $1,294 $1,371 $1,454 $1,541
MWDOC (Jan-Jun)
($/Acre
Foot) $1,256 $1,344 $1,425 $1,510 $1,601
Fixed Costs
MWDOC Annual Retail Service
Connection
Per
equivalent
meter $14.25 $15.25 $16.31 $17.46 $18.68
MWDOC Readiness to Serve (Jul-Dec) Per month $6,615 $7,078 $7,503 $7,953 $8,430 MWDOC Readiness to Serve (Jan-Jun) Per month $7,464 $7,987 $8,466 $8,974 $9,513 MWDOC Capacity Charge (Jul-Dec) Per month $5,365 $5,741 $6,085 $6,450 $6,837 MWDOC Capacity Charge (Jan-Jun) Per month $5,365 $5,741 $6,085 $6,450 $6,837 MWDOC Choice Program Per month $6,182 $6,615 $7,012 $7,432 $7,878 South Coast Air Quality Management
District Per year $15,000 $15,750 $16,538 $17,034 $17,545 State Water Resources Control Board Per year $31,983 $33,582 $35,261 $36,319 $37,409 State Controllers Office Per year $99 $104 $109 $112 $116 The water supply unit costs are then multiplied by the respective units (e.g., $/AF, per month, per meter) to obtain the City’s wholesale water purchase costs (Table 2-12).

Table 2-12: Water Supply Costs
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Volumetric Costs
OCWD $1,508,479 $1,702,158 $1,973,388 $2,069,375 $2,171,009 MWDOC (Jul-Dec) $265,104 $189,108 $0 $0 $0
MWDOC (Jan-Jun) $260,407 $185,757 $0 $0 $0
Subtotal $2,033,990 $2,077,022 $1,973,388 $2,069,375 $2,171,009 Fixed Costs
MWDOC Annual Retail Service
Connection $76,152 $81,437 $87,137 $93,237 $99,764
MWDOC Readiness to Serve (JulDec) $79,378 $84,935 $90,031 $95,433 $101,159 MWDOC Readiness to Serve (JanJun) $89,573 $95,843 $101,594 $107,689 $114,151 MWDOC Capacity Charge (Jul-Dec) $64,380 $68,887 $73,020 $77,401 $82,045 MWDOC Capacity Charge (Jan-Jun) $64,380 $68,887 $73,020 $77,401 $82,045 MWDOC Choice Program $6,182 $6,615 $7,012 $7,432 $7,878 South Coast Air Quality Management
District $15,000 $15,750 $16,538 $17,034 $17,545
State Water Resources Control Board $31,983 $33,582 $35,261 $36,319 $37,409 State Controllers Office $99 $104 $109 $112 $116
Subtotal $427,127 $456,039 $483,721 $512,059 $542,111
Total Water Purchase Costs $2,461,117 $2,533,061 $2,457,109 $2,581,434 $2,713,120 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 19

2.3.2. O&M EXPENSES
Total projected O&M expenses (including water purchase costs) are shown in Table 2-13 based on the assumptions in Table 2-1.

Table 2-13: Total Water O&M Costs
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Maintenance and Operations $3,908,071 $4,322,576 $4,615,134 $4,890,107 $5,181,016 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 $6,369,188 $6,855,637 $7,072,243 $7,471,541 $7,894,136

2.4. Water Capital Improvement Projects (CIP)
The projected five-year inflated CIP for the water utility is provided below in Table 2-14. All values have been inflated with the capital inflation factors shown above in Table 2-1. Note that two projects - WT0904 Beverly Manor Water Pump Station Rehabilitation and WT2103 LCWA Watermain Lining - are modeled to be funded through State Revolving Fund (SRF) loans. Total CIP costs, including the SRF loan projects, are shown in the last line of the table.

Table 2-14: Five-Year Water CIP
Water Capital Improvement - 501 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Total – All Water CIP Projects $1,523,863 $13,549,658 $11,377,500 $6,612,500 $7,080,000

2.5. Water Existing and Proposed Debt Service
Table 2-15 shows the City’s existing debt service obligations. The City’s Water Enterprise has two outstanding debt obligations: the West Orange County Water Board (WOCWB) loan and the Orange County Transit Authority (OCTA) loan.

Table 2-15: Water Debt Service
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 West Orange County Water
Board Loan (WOCWB)
Principal $89,493 $83,900 $83,900 $83,900 $83,900
Interest $14,357 $7,352 $7,352 $7,352 $7,352
Subtotal $103,850 $91,252 $91,252 $91,252 $91,252
OCTA
Principal $415,737 $415,737 $415,737 $415,737 $311,803
Interest $21,828 $22,376 $19,658 $13,614 $17,113
Subtotal $437,566 $438,113 $435,395 $429,352 $328,916
Total Existing Debt $541,416 $529,364 $526,647 $520,603 $420,167 The City proposes to issue new debt to fund necessary CIP projects required to deliver safe and reliable water.

Table 2-16 shows projected proposed debt for the duration of the study period. The City plans to use a combination of SFR and market debt funding. The model assumes an interest rate and term for the SRF loan of 2.5% over 30 years. The assumed interest rate and term for the market debt is 5% over 30 years. 20 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 2-16: Water Proposed Debt
Description FYE 2025 FYE 2026 FYE 2027 FYE 2028
Proposed SRF Loan
Amount $11,000,000
Estimated Annual Payment $0 $525,554 $525,554 $525,554
Proposed Market Debt
Amount $13,000,000 $9,000,000
Estimated Annual Payment $845,669 $845,669 $1,431,432 $1,431,432 Total Proposed Debt Service $845,669 $1,371,223 $1,956,686 $1,956,686

2.6. Financial Reserve Policy
The City maintains two reserves: an operating and a capital replacement reserve. The operating reserve minimum is 20% of annual O&M expenses, or approximately 70 days of operating expenses, and the maximum target is 25% of annual O&M costs, or 90 days of operating expenses. This study (in Figure 2-4) uses the 25% of annual O&M costs as the operating reserve target as it is more common based on Raftelis’ experience. The capital replacement reserve minimum is 25% of average five-year CIP costs. The City is also required to maintain a debt service coverage ratio of 1.20. Table 2-17 shows the reserve targets used in the study’s financial plan for which to compare ending reserve balances.

Table 2-17: Water Reserve Policies
Reserve Policy FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Operating Reserve -
501
Target
25% of O&M
expenses $1,592,297 $1,713,909 $1,768,061 $1,867,885 $1,973,534 Capital Replacement
Reserve
Minimum
25% of five-year
avg. CIP costs $379,176 $650,683 $946,783 $1,049,925 $1,217,425 Total Reserve Target $1,971,473 $2,364,591 $2,714,844 $2,917,810 $3,190,959

2.7. Status Quo Financial Plan (Financial Plan without
Revenue Increases)
The Status Quo Financial Plan (Table 2-18) shows the City’s financial plan without revenue increases. The City is currently operating at a deficit as shown by the net revenue line and net cashflow in the final line of the table.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 21
Table 2-18: Water Status Quo Financial Plan
Description 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 Misc Revenues $25,755 $26,013 $26,273 $26,535 $26,801
Total Revenues $6,186,375 $6,251,073 $6,221,929 $6,222,192 $6,222,457 Operating Expenses
Maintenance and
Operations $3,908,071 $4,322,576 $4,615,134 $4,890,107 $5,181,016 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 Subtotal $6,369,188 $6,855,637 $7,072,243 $7,471,541 $7,894,136 Net Revenue ($182,813) ($604,564) ($850,314) ($1,249,349) ($1,671,678) Existing Debt Service $541,416 $529,364 $526,647 $520,603 $420,167 Cashflow before CIP ($724,229) ($1,133,929) ($1,376,960) ($1,769,952) ($2,091,846) Rate-Funded CIP $1,523,863 $6,511,258 $7,415,900 $6,612,500 $7,080,000 Net Cashflow ($2,248,092) ($14,683,587) ($12,754,460) ($8,382,452) ($9,171,846) 22 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

2.8. Proposed Financial Plan
Table 2-19 shows the proposed revenue increases for the Water Enterprise. The revenue increases shown are cumulative in relation to current FYE 2024 revenue. The increases are needed to fund operating expenses, achieve reserve policy targets, fund the long-term capital program, and pay debt service. The first rate increase is planned take place in April of 2024; all subsequent adjustments are assumed to take effect on January 1 st of
each fiscal year.

Table 2-19: Water Revenue Increases
Fiscal Year FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Effective Date April 1, 2024 January 1, 2025 January 1, 2026 January 1, 2027 January 1, 2028 Approximate
Revenue Increase $508,000 $3,089,000 $4,980,000 $6,578,000 $7,976,000 The Proposed Financial Plan, shown in Table 2-20, incorporates the revenue increases shown in Table 2-19.

As shown below, expenses will exceed revenue in FYE 2024, however the revenue increases implemented in FYE 2024 and future years will create positive cashflows so that the City can build reserves. Line 13 is calculated on the average yearly cash balance assuming an interest rate of 3%.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 23
Table 2-20: Water Proposed Financial Plan
Line Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 1 Rate Revenues $6,160,620 $6,225,060 $6,195,656 $6,195,656 $6,195,656 2 3 Revenue Adjustments
4 FYE 2024 $508,251 $2,054,270 $2,044,567 $2,044,567 $2,044,567 5 FYE 2025 $1,034,916 $2,060,056 $2,060,056 $2,060,056
6 FYE 2026 $875,524 $1,751,047 $1,751,047
7 FYE 2027 $723,080 $1,446,159
8 FYE 2028 $674,874
9 Total Revenue
Adjustments
$508,251 $3,089,186 $4,980,146 $6,578,749 $7,976,703
10 11 Other Revenues
12 Misc Rev $25,755 $26,013 $26,273 $26,535 $26,801
13 Interest Income $0 $0 $0 $61,752 $69,075
14 Subtotal $25,755 $26,013 $26,273 $88,288 $95,876
15 16 Total Revenues $6,694,626 $9,340,259 $11,202,075 $12,862,693 $14,268,235 17 18 Expenses
19 Maintenance and
Operations $3,908,071 $4,322,576 $4,615,134 $4,890,107 $5,181,016 20 Fixed Water Purchases $427,127 $456,039 $483,721 $512,059 $542,111 21 Volumetric Water
Purchases $2,033,990 $2,077,022 $1,973,388 $2,069,375 $2,171,009 22 Subtotal $6,369,188 $6,855,637 $7,072,243 $7,471,541 $7,894,136 23 24 Net Revenue $325,438 $2,484,622 $4,129,832 $5,391,152 $6,374,100 25 26 Existing Debt Service $541,416 $529,364 $526,647 $520,603 $420,167 27 Proposed Market Debt $0 $845,669 $845,669 $1,431,132 $1,431,132 28 Proposed SRF Loan* $0 $0 $525,554 $525,554 $525,554
29 30 Cashflow before CIP ($215,978) $1,109,589 $2,231,963 $2,913,864 $3,997,247 31 32 Rate-Funded CIP $1,523,863 $0 $1,187,158 $0 $4,872,500 33 Net Cashflow ($1,739,841) $1,109,589 $1,044,805 $2,913,864 ($875,253) *The State Revolving Fund Loan (SRF) assumes a 2.5% interest rate and that payments begin the year after the project is complete – thus the payments are modeled one year delayed as shown.

Figure 2-1 through Figure 2-4 display the proposed financial plan information of Table 2-20 in graphical format.

The figures show the study period plus two additional years (FYE 2029 and 2030). Figure 2-1 shows the City’s expenses (O&M, debt, CIP) through the various stacked bars; current and proposed revenue are shown by the gray and orange lines, respectively. The red portion of the stacked bar represents either an operating yearly deficit when it is below the x-axis and a positive cash balance when it is at the top of the stacked bars. 24 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Figure 2-1: Water Operating Financial Plan
Figure 2-2 shows the capital funding plan for water CIP projects. The dark blue bars represent CIP costs funded by rate revenue (known as PAY-GO or cash); the light blue bars represent CIP costs funded by debt. As shown below, the City anticipates funding the capital projects through a combination of rate revenue and debt issuance.

Figure 2-2: Water Capital Funding Plan
Figure 2-3 shows projected water debt coverage (debt coverage ratio). The City is projected to meet its debt coverage requirement of 1.20 as shown by the calculated debt coverage line (orange line) in FYE 2025. The gray line shows the required debt coverage ratio of 1.20.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 25
Figure 2-3: Water Debt Coverage
Figure 2-4 shows the projected ending total reserve balances. The operating reserve target shown in Table 2-17 is represented by the blue line and is equal to 90 days of operating expenses. The total reserve target for both the operating and capital reserves is represented by the red line and is equal to the sum of operating and capital reserve targets shown in Table 2-17. As shown below, the City is projected to reach the reserve target by FYE 2027 and maintain adequate reserve funding for the remainder of the study period. The cash balance in FYE 2027 is above the reserve target due to debt funding of capital – as soon as the bond proceeds are used, reserves decrease to target levels.

Figure 2-4: Water Ending Reserve Balances
26 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

3.Water Five-Year Rates

3.0. Water Rates and Charge
Table 3-1 and Table 3-2 show current and proposed monthly water rates and charges for the five-year study period. The City bills bi-monthly and certain customers are billed monthly. All values below are increased by taking the current year rate (starting in FYE 2024) and escalating them to yield the revenue increases shown in Table 1-1. The City performed a cost of service study as part of the prior rate study completed in December 2020, which distributes costs to customer classes. Increasing rates uniformly distributes costs to customer classes in proportion to the prior cost of service study. The first rate increase is planned to take effect on April 1st; all subsequent years will have rate increases put into effect on January 1st of the respective fiscal year.

Table 3-1: Current and Proposed Five-Year Monthly Water Fixed Charges Description Current
(1/1/2024) 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 $672.08
CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 27
Table 3-2: Proposed Five-Year Volumetric Rates ($/hcf)
Description Tier Definitions
(hcf)
Current
(1/1/2024)
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.

3.1. Pass-Through Rates
The City estimated the future costs of wholesale water it purchases from OCWD and MWDOC. If the estimates prove to be too low, the City will pass through the increased cost of water (above its current assumed costs of water) to its customers. This pass through will be calculated as follows as the estimated increase in fiscal year water purchase costs assumed in this study divided by the fiscal year water use. The pass-through will not exceed the increase in the City’s water purchase costs.
28 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

4.Water Bill Impacts
Figure 4-1 shows the monthly bill impacts assuming the most prevalent meter size and the average water use for each of the customer classes. Customer bill impacts will vary with each customers’ meter size and water use.

The Single-Family Residential water bill impacts for the most prevalent meters (i.e., ¾”) is just over $18 monthly.

Figure 4-1: Water Bill Impacts
Figure 4-2 and Figure 4-3 show the monthly bill impacts for Leisure World and Aquatic Park. Leisure World is based on average water use of
Figure 4-2: Leisure World Water Bill Impacts
CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 29
Figure 4-3: Aquatic Park Water Bill Impacts
30 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

5. Wastewater Financial Plan
This section describes the Wastewater Financial Plan assumptions to project operating and capital expenses, as well as reserve policies and debt coverage requirements that determine the overall revenue increases to promote financial stability.

5.0. Wastewater System Background
The City collects wastewater and transmits it to the Orange County Sanitation District (OCSD) for treatment.

The wastewater system is made up of approximately 181,000 feet of gravity sewers, approximately 800 manholes, and 6 pump stations and their force mains.

5.1. Key Assumptions
The Study Period is FYE 2024 to FYE 2028, with proposed rate increases presented for the same period.

Various assumptions were incorporated into the Study based on discussions with and/or direction from City staff. These include the projected number of accounts, future water demand, and inflationary factors.

5.1.1. INFLATIONARY COST ASSUMPTIONS
Table 5-1 shows the inflation factors used for the wastewater operating and capital expense projections. Note that, where applicable, these values are the same as those used for the water utility. The inflation factors are used to project costs across the study period. The factors are applied to all years beginning in FYE 2025.

Table 5-1: Wastewater Inflation Assumptions
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 General Budget 5.0% 5.0% 3.0% 3.0%
Personnel Budget 8.0% 8.0% 8.0% 8.0%
Utilities Budget 8.0% 7.0% 6.0% 5.0%
Capital Budget 6.0% 5.0% 4.0% 3.0%

5.1.2. ACCOUNT GROWTH AND WASTEWATER USE ASSUMPTIONS
Two factors are used to estimate future wastewater rate revenue: (1) account growth from new connections, and (2) changes in annual wastewater demand (Table 5-2 and Table 5-3). Raftelis assumed zero account growth since the City is mostly built out and constant sewer discharge during the Study Period as sewer discharge is more stable compared to water use.

Table 5-2 presents the number of accounts across the five-year study period. They study assumes the same number of accounts for the study period.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 31
Table 5-2: Current Wastewater Accounts
Class FYE 2023
Residential 4,048
Multi-Family 602
Commercial 276
City 8
Leisure World 1
Aquatic Park 5
Navy 1
Total 4,941
Table 5-3 shows projected estimated wastewater flow for the classes whose rate structure includes a volumetric component. SFR customers are billed a fixed charge. Sewer flows are estimated from water use by applying a 90% return to sewer factor for Commercial customers and 50% for City customers. Note that these values are projected to remain constant due to the assumption of zero account growth.

Table 5-3: Estimated Wastewater Flows (hcf)2
Class FYE 2023
Multi-Family 104,902
Commercial 150,772
City 3,084
Navy - Sewer Meter Accounts 20,744
Total Estimated Flows (hcf) 279,502

5.2. Revenues from Current Rates
Raftelis developed a five-year Wastewater Financial Plan, which models anticipated revenues and expenses.

To calculate the projected revenue (without rate adjustments), the number of accounts is multiplied by the monthly sewer fixed charges and sewer discharge is multiplied by the volumetric sewer rate. Current monthly fixed charges are shown in Table 5-4; current volumetric ($/hcf) charges are shown in Table 5-5.

Table 5-4: Current Wastewater Monthly Fixed Charges
Customer Class
FYE 2024
(Effective Jan.
1, 2024)
Single Family Residential $24.02
Multi-Family Residential $0.61
Commercial $0.61
City $0.61
Leisure World - Fixed Charge $0.61
Leisure World - Flat Rate $1,099.03
Aquatic Park - Sewer Service Equity Charge $498.75
Aquatic Park - Sewer Capital Equity Charge $661.00
Navy - Sewer Meter $0.61
2 The City does not measure wastewater flow, but instead estimates flows based on water use by applying a return-tosewer factor (RTS) to non-residential water use. 32 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 5-5: Current Volumetric Wastewater Charges ($/hcf) Customer Class
FYE 2024
(Effective
Jan. 1,
2024)
Multi-Family Residential $4.00
Commercial $4.00
City $4.00
Navy - Sewer Meter $0.24
Table 5-6 summarizes the projected revenues from current rates. Fixed revenues also include the sewer service and capital equity charges to Aquatic Park accounts.

Table 5-6: Projected Wastewater Rate Revenue under Current Rates Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Fixed Charges $1,173,296 $1,173,296 $1,173,296 $1,173,296 $1,173,296 Volumetric Charges $1,040,011 $1,040,011 $1,040,011 $1,040,011 $1,040,011 Total $2,213,306 $2,213,306 $2,213,306 $2,213,306 $2,213,306 The utility also derives revenues from other non-rate sources. These revenues consist of miscellaneous revenues, capacity fees, and interest income as summarized in Table 5-7. Miscellaneous revenues include late charges and Fats, Oils and Grease discharge permit fees. Interest income is estimated based on yearly cash balances and a 3% interest rate.

Table 5-7: Projected Wastewater Non-Rate Revenues
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Misc Rev $31,138 $31,450 $31,764 $32,082 $32,403
Capacity Fees $3,737 $3,774 $3,812 $3,850 $3,889
Interest Income $96,621 $20,051 $0 $0 $0
Total $127,760 $51,500 $31,764 $32,082 $32,403

5.3. Operating and Maintenance Expenses
Total projected O&M expenses are shown in Table 5-8 based on assumptions in Table 5-1.

Table 5-8: Total Wastewater O&M Costs
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Maintenance and Operations $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454

5.4. Capital Improvement Projects (CIP)
The projected five-year inflated CIP is provided in Table 5-9. The values shown below have been inflated using the capital inflation rates shown above in Table 5-1.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 33
Table 5-9: Five-Year Wastewater CIPs
Sewer Capital Improvement -
503 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Total Wastewater CIP $3,350,412 $530,000 $721,500 $8,395,000 $4,956,000

5.5. Existing and Proposed Debt Service
The City’s Wastewater Enterprise has three outstanding debt obligations, with the total annual debt service shown in the last line of Table 5-10. The City anticipates taking on $14M of debt in FYE 2027. The debt service associated with this debt is shown in Table 5-11. This value represents the annual new debt payment costs that will be paid annually for the duration of the study period.

Table 5-10: Current Wastewater Debt Service
Description FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 2011 Bond Re-Funding
Principal $205,000 $215,000 $225,000 $235,000 $245,000
Interest $64,080 $54,120 $43,680 $32,760 $21,360
Subtotal $269,080 $269,120 $268,680 $267,760 $266,360
State Revolving AGMNT
10838
Principal $134,760 $138,264 $141,859 $145,547 $149,331
Interest $35,020 $31,517 $27,922 $24,233 $20,449
Subtotal $169,780 $169,780 $169,780 $169,780 $169,780
State Revolving AGMNT
10842
Principal $80,470 $82,563 $84,709 $86,912 $89,171
Interest $26,252 $24,160 $22,014 $19,811 $17,551
Subtotal $106,723 $106,723 $106,723 $106,723 $106,723
Total Existing Debt $545,583 $545,623 $545,183 $544,263 $542,863 Table 5-11 shows the proposed debt service payments for the $14M loan proposed for FYE 2027. Note that prior to the debt issuance, there are no debt service payments – these begin in FYE 2027 with the issuance.

Table 5-11: Proposed Wastewater Debt Service
FYE 2027 FYE 2028
Total Proposed Debt Service $910,720 $910,720

5.6. Financial Reserve Policy
The City currently maintains two reserves for its wastewater utility: an operating and a capital replacement reserve. This study assumes the operating reserve target is 25% of annual O&M expenses, or approximately 90 days of operating expenses, which is a common operating reserve target. The capital replacement reserve minimum is 25% of average five-year CIP costs. Table 5-12 below shows the calculated reserve targets for each reserve, as well as the total reserve target in the bottom line (equal to capital reserve target plus operating reserve target).
34 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 5-12: Wastewater Reserve Policies
Description Policy FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Operating Reserve -
503
Minimum
25% of O&M
expenses $565,310 $640,454 $683,731 $724,500 $768,113
Capital Replacement
Reserve
Minimum
25% of five-year
avg. CIP costs $230,096 $152,125 $166,575 $228,000 $274,900 Total Reserve Target $795,405 $792,579 $850,306 $952,500 $1,043,013

5.7. Status Quo Financial Plan (Without Revenue Increases) The Status Quo Financial Plan (Table 5-13) shows the wastewater financial plan without revenue increases. It projects revenues and expenses for the study period. As shown in the net cashflow line, the City is currently operating at a deficit and will continue to do so if rate increases are not implemented. This demonstrates the need for revenue increases during the study period.

Table 5-13: Wastewater Status Quo Financial Plan
Description 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 Revenues
Misc Revenues $31,138 $31,450 $31,764 $32,082 $32,403
Interest Income $96,621 $20,051 $0 $0 $0
Subtotal $127,760 $51,500 $31,764 $32,082 $32,403
Total Revenues $2,341,066 $2,264,807 $2,245,070 $2,245,388 $2,245,709 Operating 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 Subtotal $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454 Net Revenue $79,828 ($297,009) ($489,853) ($652,613) ($826,745) Existing Debt Service $545,583 $545,623 $545,183 $544,263 $542,863 Cashflow before CIP ($465,755) ($842,632) ($1,035,035) ($1,196,876) ($1,369,608) Rate-Funded CIP $3,350,412 $530,000 $721,500 $8,395,000 $4,956,000 Net Cashflow ($3,816,167) ($1,372,632) ($1,756,535) ($9,591,876) ($6,325,608) CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 35

5.8. Proposed Financial Plan
Table 5-14 shows the proposed revenue increases for the Wastewater Enterprise. The proposed revenue increases attain adequate revenue to fund operating expenses, achieve reserve policy targets, fund the long-term capital program, pay debt service, and maintain adequate debt coverage ratios. The revenue increase for FYE 2024 is proposed to take effect on April 1, 2024, while all subsequent adjustments are assumed to take effect on January 1
st of each fiscal year.

Table 5-14: Wastewater Revenue Adjustments
iscal Year FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 Effective Date April 1, 2024 January 1, 2025 January 1, 2026 January 1, 2027 January 1, 2028 Revenue
Adjustment $193,664 $1,133,213 $1,843,750 $2,482,320 $2,943,285 The Proposed Financial Plan (Table 5-15) shows the City’s financial plan including the proposed revenue increases. As shown below, the City would transition from negative yearly cashflows to positive cashflows so it can fund capital projects and build reserves. The City remains “in the red” in FYE 2024 and FYE 2025 as it plans to use reserves and strived to minimize customer bill impacts. 36 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Table 5-15: Wastewater Proposed Financial Plan
Description 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 Revenue Adjustments
FYE 2024 $193,664 $774,657 $774,657 $774,657 $774,657
FYE 2025 $358,556 $717,111 $717,111 $717,111
FYE 2026 $351,982 $703,964 $703,964
FYE 2027 $286,588 $573,175
FYE 2028 $174,377
Total Revenue
Adjustments $193,664 $1,133,213 $1,843,750 $2,482,320 $2,943,285 Other Revenues
Additional Rate Revenue $193,664 $1,133,213 $1,843,750 $2,482,320 $2,943,285 Misc Revenues $31,138 $31,450 $31,764 $32,082 $32,403
Interest Income $99,526 $42,946 $41,764 $50,061 $67,244 Subtotal $324,329 $1,207,608 $1,917,279 $2,564,463 $3,042,932 Total Revenues $2,537,635 $3,420,915 $4,130,585 $4,777,770 $5,256,238 Operating Expenses
Maintenance and
Operations $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454 Subtotal $2,261,238 $2,561,815 $2,734,923 $2,898,001 $3,072,454 Net Revenue $276,397 $859,099 $1,395,662 $1,879,769 $2,183,785 Existing Debt Service $545,583 $545,623 $545,183 $544,263 $542,863 Proposed Market Debt $0 $0 $0 $910,720 $910,720
Cashflow before CIP ($269,186) $313,476 $850,479 $424,786 $730,202 Rate-Funded CIP $3,350,412 $530,000 $721,500 $0 $0
Net Cashflow ($3,619,598) ($216,524) $128,979 $424,786 $730,202 Figure 5-1 through Figure 5-4 display the proposed financial plan information shown in Table 5-15 in graphical format. Figure 5-1 shows the City’s expenses in stacked bars and the current and proposed revenue as blue and red lines, respectively. The stacked bars show the expenses broken down into the categories displayed in the legend. The red portion of the stacked bar below the x-axis shows the operating yearly deficit.

CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY 37
Figure 5-1: Wastewater Operating Financial Plan
Figure 5-2 shows the debt coverage ratio. The debt coverage ratio is the driving factor for the need for revenue increases for the wastewater utility. Without the revenue increases, the City could not be able to borrow in FYE 2027.

Figure 5-2: Debt Coverage Ratio
Figure 5-3 shows the capital financing plan for CIP projects over the course of the study period. The dark green bars represent cash-funded (or rate funded) CIP; the light blue bars represent CIP financed with debt. 38 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY
Figure 5-3: Capital Funding Sources
Figure 5-4 shows the ending total reserve balances. The minimum operating reserve target shown in Table 5-12 is represented by the blue line and is equal to 90 days of operating expenses. The total minimum reserve target for both the operating and capital reserves is represented by the solid gray line in and is equal to the sum of operating and capital reserve targets. The projected reserve balances meet reserve targets; the driving need for revenue increases is to meet debt coverage requirements.

Figure 5-4: Wastewater Ending Reserve Balances (All Reserves)

6.Five-Year Wastewater Rates
The City’s current and proposed wastewater rates and charges, for the five-year study period, are shown below in Table 6-1 and Table 6-2. The fixed charges are shown in monthly terms.

The planned implementation date for the new rates is April 1, 2024 (FYE 2024); every year after, the rate increases are planned to be implemented on January 1 of the respective fiscal year.

Table 6-1: Proposed Five-Year Wastewater 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 $1.47
Table 6-2: Proposed Five-Year Wastewater Volumetric Rates ($/hcf) 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
40 CITY OF SEAL BEACH WATER AND WASTEWATER RATE STUDY

7. Wastewater Bill Impacts
Figure 7-1 shows customer bill impacts by customer class. The bill impact for single-family customers, who are charged a fixed charge, is just over $8 per month. The City bills bi-monthly, therefore single family customers will see just over a $16 increase on their bill. The bill impacts for other classes are based on the average sewer discharge.

Figure 7-1: Wastewater Bill Impacts by Customer Class
Figure 7-2 shows the wastewater bill impacts for Leisure World in monthly terms.

Figure 7-2: Leisure World Wastewater Bill Impacts
RESOLUTION 7496

A RESOLUTION OF THE SEAL BEACH CITY COUNCIL

DIRECTING STAFF TO INITIATE THE PROPOSITION
218 PROCESS AND SETTING A PUBLIC HEARING

RELATING TO WATER RATES AND SEWER RATES
FOR MAY 13, 2024 AT 7:00 P.M.

WHEREAS, the City of Seal Beach has a Water Utility that provides water services to residents and businesses; and,
WHEREAS, the City of Seal Beach has a Sewer Utility that provides wastewater collection services to residents and businesses; and,
WHEREAS, the cost to operate, maintain, repair and improve the City’s Water and Sewer Utility systems have increased substantially since the last rate adjustment in February 2020, and are estimated to continue increasing significantly; and, WHEREAS, the City’s currently established Water and Sewer rates are not adequate to meet increasing operating and capital improvements costs without compromise to system operations; and,
WHEREAS, Raftelis Financial Consultants (“Raftelis”) was awarded a professional services agreement to provide Water and Wastewater Financial Planning Services; and,
WHEREAS, Raftelis conducted a Water and Sewer Rate Study and prepared a draft Rate Study for both the Water and Sewer Utility Enterprise funds, which rate study was completed and dated on December 28, 2023; and, WHEREAS, on December 11, 2023, City Council adopted Resolution 7472 setting a public hearing date on February 12, 2024 and directing staff to initiate the Proposition 218 majority protest process for Water and Sewer Rate adjustments; and,
WHEREAS, on February 12, 2024, the City Council opened a public hearing to consider the proposed rate adjustments outlined in the December 28, 2023 rate study and to receive protests; and,
WHEREAS, the City Council continued the public hearing to February 26, 2024; and,
WHEREAS, on February 26, 2024, the City Council closed the public hearing and concluded the majority protest process without taking action on the proposed rate adjustments at that time; and,
WHEREAS, the City Council desires to conduct a new majority protest process and re-notice a new public hearing regarding the proposed rate adjustments in order to provide the public with more time to evaluate the proposed rates before the Council takes action; and,
WHEREAS, in order to adjust Water and Sewer rates, the City must comply with Article XIIID of the Constitution, more commonly known as Proposition 218; and, WHEREAS, an overview of the draft Water and Sewer Rate Study analysis results and recommendations were presented at the December 11, 2023 and February 12, 2024 City Council meetings; and,
WHEREAS, this Resolution and the actions set forth below are not subject to the California Environmental Quality Act (“CEQA”) because CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of water and sewer rates under Public Resources Code Section 21080(b)(8). The proposed rates are proposed to meet operating expenses, purchase necessary supplies and equipment, meet financial reserve needs, and fund capital projects necessary to maintain service within the existing service area. Furthermore, 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.

NOW, THEREFORE, THE SEAL BEACH CITY COUNCIL DOES HEREBY RESOLVE:

Section 1. The City Council hereby directs staff to initiate the Proposition 218 majority protest process for Water and Sewer Rate adjustments.

Section 2. The City Council hereby sets a new public hearing for the proposed adjustments to the Water and Sewer Rates for May 13, 2024 at 7:00 p.m. in the City Council Chambers.

Section 3. The City Council hereby authorizes the City Manager to mail notice in accordance with Proposition 218 regarding the Public Hearing and the proposed changes to the Water and Sewer Rates as required by law and any supplemental direction provided by the City Council.

PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 26th 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 7496 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 26th day of February 2024.

Gloria D. Harper, City Clerk
RESOLUTION 7497

A RESOLUTION OF THE SEAL BEACH CITY

COUNCIL ADOPTING PROCEDURES IN

CONNECTION WITH THE CONDUCT OF A

PUBLIC HEARING AND MAJORITY PROTEST

PROCEEDINGS RELATING TO INCREASED

WATER OR SEWER SERVICE CHARGES IN

ACCORDANCE WITH ARTICLE XIIID OF THE

CALIFORNIA CONSTITUTION AND THE
PROPOSITION 218 OMNIBUS IMPLEMENTATION
ACT
WHEREAS, Article XIII D of the California Constitution and the Proposition 218 Omnibus Implementation Act (Government Code Section 53750, et seq.) (the “Implementation Act”) impose certain procedural and substantive requirements for imposing new or increased property-related fees and charges, as defined in Article XIII D (“Charges”), including the requirement to conduct a public hearing and majority protest proceedings for consideration of Charges; and, WHEREAS, neither Article XIII D of the California Constitution nor the Implementation Act provide specific guidance for the conduct of the public hearing and majority protest proceedings; and,
WHEREAS, City Council desires to adopt procedures for the conduct of its public hearings and majority protest proceedings for consideration of Charges which are consistent with Article XIII D and the Implementation Act.

NOW, THEREFORE, THE SEAL BEACH CITY COUNCIL DOES HEREBY RESOLVE:

Section 1. In accordance with Article XIII D and the Implementation Act, the City Council hereby approves the Procedures for the Conduct of a Public Hearing and Majority Protest Proceedings Relating to New or Increased Water or Sewer Service Charges, as set forth in Exhibit A, attached hereto and incorporated herein by reference (the “Procedures”).

Section 2. This Resolution shall take effect upon its adoption.

PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 26th 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 7497 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 26th day of February 2024.

Gloria D. Harper, City Clerk

EXHIBIT A

CITY OF SEAL BEACH

PROCEDURES FOR THE CONDUCT OF A

PUBLIC HEARING AND MAJORITY PROTEST PROCEEDINGS

RELATING TO PROPOSED INCREASED WATER AND SEWER SERVICE

CHARGES
The following Procedures have been adopted by the City Council of the City of Seal Beach for the purpose of conducting a public hearing and majority protest proceedings required by Article XIII D of the California Constitution for consideration of proposed increased water and sewer service charges.

S7296-0001\2927031v3.doc 1
A. Definitions

1. “Customer of Record” means the person whose name appears on the City’s records as the person who contracted for, and became obligated to pay for, water or sewer service, as appropriate, for the Identified Parcel, and includes tenants of Identified Parcels who are directly liable to pay the charge for water or sewer service, as appropriate.

2. “Identified Parcel” means the parcel of real property to which the Proposed Increase will apply.

3. “Proposed Increase” means the City’s proposed increase to the applicable rates used to calculate the charges for water or sewer service, as appropriate.

4. “Record Owner” means the owner of an Identified Parcel whose name and address appears on the last Orange County equalized secured property tax assessment roll (the “Assessment Roll”), or in the case of any public entity, the State of California, or the United States, means the representative of that public entity at the address of that entity known to the City.

B. Eligibility to File a Written Protest

1. Any Customer of Record or Record Owner may file a written protest against the Proposed Increase.

2. If the owner of an Identified Parcel is not shown on the Assessment Roll, such owner may file a written protest for such parcel by filing with the City Clerk a proxy from the Record Owner in a form satisfactory to the City Attorney or evidence of ownership satisfactory to the City Attorney. Any such proxy or evidence must be received by the City Clerk prior to the conclusion of the public hearing on the Proposed Increase (“Public Hearing”).

3. When an Identified Parcel is held by a partnership, as community property, in joint tenancy, or as a tenancy in common, any partner, spouse, joint tenant, or tenant in common, as the case may be, may file a written protest for such parcel.

4. An executor, administrator, or guardian may file a written protest for an Identified Parcel on behalf of the estate it represents. If such representative is shown on the Assessment Roll as paying taxes and assessments levied against the parcel, that fact shall establish the right of such representative to file the written protest. If such representative is not shown on the Assessment Roll, the representative must file with the City Clerk written documentation satisfactory to the City Attorney establishing the legal representation. Any such documentation must be filed with the City Clerk prior to the conclusion of the Public Hearing.

5. When the Customer of Record is, or an Identified Parcel is held by, a corporation or unincorporated association, a written protest may be filed by any person authorized S7296-0001\2927031v3.doc 2
in writing by the board of directors or trustees or other managing body thereof to take such action. The corporation or unincorporated association must file with the City Clerk written authorization satisfactory to the City Attorney. Any such written authorization must be filed with the City Clerk prior to the conclusion of the Public Hearing.

C. Submission of Written Protests

1. Written protests must be mailed (via U.S. mail) to the City Clerk at City Hall or delivered in person to the City Clerk at City Hall or at the Public Hearing and must be received prior to the conclusion of the Public Hearing.

2. To be counted in determining the existence of a majority protest against a Proposed Increase (“Majority Protest”), each written protest must: (i) state opposition to the Proposed Increase, (ii) identify the property covered by the protest either by street address(es) or assessor’s parcel number(s); and (iii) include an original signature (no copies) of the Customer of Record or Record Owner that is filing the written protest with respect to the Identified Parcel(s). No protest submitted orally, by email, by facsimile, or by any other electronic means will be counted in determining the existence of a Majority Protest. A written protest may state opposition to the Proposed Increase to the water charge, opposition to the Proposed Increase to the sewer charge, or opposition to both the Proposed Increase to the water charge and the Proposed Increase to the sewer charge, as applicable.

3. No protest received after the close of the Public Hearing shall be counted in determining the existence of a Majority Protest. The last pick up by the City Clerk of protests mailed or delivered to City Hall will occur at 5:00 p.m. on the date scheduled for the Public Hearing. To ensure that protests which are mailed or delivered to City Hall are received by the City Clerk prior to the close of the Public Hearing, such protests must be received by the City Clerk at City Hall prior to 5:00 p.m. on the date scheduled for the Public Hearing. The City Clerk shall endorse on each written protest the date it is filed with the City. The City Clerk shall identify any written protests which are received after the close of the Public Hearing.

4. Written protests may be withdrawn in writing at any time before the conclusion of the Public Hearing by the person who submitted the written protest.

D. Conduct of the Public Hearing; Determination of the Existence of a Majority Protest

1. At the time, date and place fixed for the Public Hearing, the City Council shall:
(i) Hear a staff presentation pertaining to the Proposed Increase to the water charge and the Proposed increase to the sewer charge;
(ii) Hear all persons interested in the matter of the Proposed Increase to the water charge and/or the Proposed Increase to the sewer charge; and S7296-0001\2927031v3.doc 3
(iii) Receive all written communications, including written protests, regarding the Proposed Increase to the water charge and the Proposed Increase to the sewer charge.

2. The existence of a Majority Protest will be determined separately for the Proposed Increase to the water charge and the Proposed Increase to the sewer charge. For the purpose of determining whether a Majority Protest exists, only one written protest for each Identified Parcel will be counted. This means that if a Customer of Record and a Record Owner each file a written protest with respect to the same parcel, only one written protest will be counted in determining the existence of a Majority Protest.

3. The Public Hearing may be continued from time to time, as the City Council determines is necessary to complete its consideration of the Proposed Increase to the water charge and the Proposed Increase to the sewer charge.

4. If the City Council determines at the close of the Public Hearing that valid written protests have been presented, and not withdrawn, representing over 50% of the Identified Parcels subject to the water charge or sewer charge, as applicable, then the City Council shall not approve the Proposed Increase to the water charge or sewer charge, as applicable.

5. If the City Council determines at the close of the Public Hearing that a Majority Protest does not exist, then City Council may adopt the Proposed Increase.

E. Leisure World
Leisure World is made of 16 residential communities, consisting of 15 stock cooperatives and 1 condominium association.

There is only one Customer of Record (Golden Rain Foundation) in Leisure World. As the only Customer of Record with respect to all of the Identified Parcels in Leisure World, the Golden Rain Foundation can submit a written protest for one or more of such Identified Parcels (by submitting a separate written protest for each Identified Parcel or submitting a written protest that identifies multiple Identified Parcels).

Each Record Owner within Leisure World also can submit a written protest for one or more of the Identified Parcels owned by the Record Owner (by submitting a separate written protest for each Identified Parcel or submitting a written protest that identifies multiple Identified Parcels). As of February 26, 2024, there are 249 parcels in Leisure World (consisting of 109 parcels in Mutuals 1- 12 and 14-16, 126 condominium units in Mutual 17, and 14 parcels owned by Golden Rain Foundation, which include the club houses and other common areas). The 109 parcels in Mutuals 1- 12 and 14-16 are owned by 15 different Record Owners, being 15 different Mutual Corporations.

Each Mutual Corporation may submit a written protest for one or more of the Identified Parcels owned by the respective Mutual Corporation. The number of parcels owned by each Mutual Corporation are as follows:

S7296-0001\2927031v3.doc 4

MUTUALS NUMBER OF PARCELS
1 17
2 14
3 6
4 6
5 8
6 7
7 5
8 6
9 8
10 4
11 5
12 7
14 6
15 8
16 2
TOTAL 109
Residents of Mutuals 1-12 and 14-16 are shareholders of Mutual Corporations, which are stock cooperatives. Shareholders may submit written comments regarding the Proposed Increase prior to the conclusion of the Public Hearing, and the City Council will consider these comments.

However, since a shareholder is not a “Record Owner” or “Customer of Record,” in accordance with Proposition 218 (Article XIII D of the California Constitution), written comments submitted by a shareholder are not counted in determining the existence of a Majority Protest. Therefore, shareholders should inform their Mutual Corporation and/or the Golden Rain Foundation if they oppose the Proposed Increase and request the Mutual Corporation and/or the Golden Rain Foundation to file a written protest representing the Identified Parcels under their respective control. As stated above, if a Record Owner and a Customer of Record both file a written protest with respect to a parcel, only one protest will be counted for the parcel.

With respect to Mutual 17, each Record Owner of a condominium unit may file a written protest on behalf of their respective unit, as each unit is a separate parcel.

Photo courtesy of Ken Lund (Flickr)
City of Seal Beach
Water and Wastewater Utility Financial Plan & Rate Study

PUBLIC HEARING CONTINUATION
February 26, 2024
2 Agenda
• Takeaways
• Council Action Recommendations
• Close Public Hearing
Takeaways

1. Need more time to review and understand the rates.
› Overview of rate structure history
› Overview of how necessary rates were determined
› Overview of CIP projects in place and delivery ability

2. Need clarity on Leisure World residents’ voting ability.

3. Need more public outreach.

4. Need to ensure impacted parties are aware of the noticing. 3 Prop 218 Procedure Highlights

1. Definitions
› Customer of Record, Identified Parcels, Proposed Increases, Record Owner

2. Eligibility to File a Written Protest
› Customer of Record or Record Owner

3. Submission of Written Protest
› By Mail or In Person by the close of the public hearing

4. Conduct of the Public Hearing/Determination of Majority Protest › Represent over 50% of Identified Parcels

5. Leisure World
› Condos vs Mutuals vs Customer of Record
4 Recommendations

1. Close public hearing and conclude majority protest process.

2. Set a new public hearing date for May 13, 2024, 7:00 p.m.

3. Re-notice for additional review and commenting time.

4. Adopt Water & Sewer Prop 218 Procedures.
› Count received protest letters towards new majority protest process, unless individuals decide to rescind.
5 • Upcoming Rate Study Open House
Thursday, April 11, 2024, 6:00 p.m.

Saturday, April 13, 2024, 10:30 a.m.

Council Chambers
• Rate Study Website
www.2023utilityratestudy.sealbeachca.gov
• Dedicated Phone Line/Email
(562) 342-7389
[email protected]
• Social Media/News Content
@sealbeachpublicworks
@cityofsealbeachca
6 Public Information