STAFF REPORT. DATE: May 11, City Council. Robert A. Clarke, Interim Public Works Director Sue Gedestad, Assistant Public Works Director

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1 STAFF REPORT DATE: May 11, 2010 TO: FROM: City Council Robert A. Clarke, Interim Public Works Director Sue Gedestad, Assistant Public Works Director SUBJECT: Water and Sanitary Sewer Rate Approval and Davis Waste Removal Contract Amendment Recommendation 1. Hold the Public Hearing; and 2. Approve the attached ordinances for sanitary sewer and water rates. Rates would become effective August 1, Approve the resolution authorizing the City Manager to execute the contract amendment with Davis Waste Removal for contractor rates for FY 10/11. Summary Sewer: The recommended rate increase equates to a $1.23 monthly increase for single family residential customers with average winter water consumption. Single-family residential customers account for 51% of revenue collected. As with the water rate, actual rates vary customer to customer based on actual water usage. Water: For single family residential customers with average water usage, the rate increase equates to a $1.76 monthly increase. Single-family residential customers account for 58% of revenue collected. Fiscal Impact These rates would generate the necessary revenue for operations, maintenance and replacement projects. Total revenue estimated to be collected by utility rates is $12.4 for sanitary sewer and $10.9 million for water. These funds are separate from other City funds and are accounted for in their respective enterprise accounts. The sanitary sewer revenue collected is apportioned as follows: FY 9/10 FY 10/11 Item ($ Millions) Operations & Maintenance $7.20 $7.20 CIP - Repair/Replacement $0.42 $0.50 CIP - WW Trtmt $4.30 $4.73 Total Rate Revenue $11.92 $12.43 The water revenue collected is apportioned as follows: FY 9/10 Item ($ Millions) FY 10/11 Operations & Maintenance $6.60 $6.70 CIP - Repair/Replacement $1.22 $1.20 Surface Water Project $2.62 $3.00 Total Rate Revenue $10.44 $ City Council Meeting 05-1

2 Water and Sanitary Sewer Rate Approval and Davis Waste Removal Contract Amendment Council Goals Maintain and improve the infrastructure Achieve long-term financial stability Conserve natural resources and protect the environment Sanitary Sewer Previously at the February City council meeting, staff recommended a 6% rate increase, which was based on the most current cost information available in November/December when rates are developed. However, with more updated cost data resulting from the George Tchobanoglous and Ed Schroeder Charrette process, staff believes a lower rate is sufficient and is now recommending a 3% rate increase. The recommended rate would increase the average single family residential account s monthly rate from $41.10 to $42.33, $1.23 per month. Waste Water O&M Division 09/10 08/09 07/08 06/07 Human Resources 3,632,318 3,752,559 3,589,387 3,195,567 Other Resources 2,739,974 2,810,313 2,733,685 2,639,651 Capital Outlay 8,000 7,000 30, ,900 Internal Service Charges 189, , , ,165 Inter-Departmental Charges 670, , , ,051 TOTAL $7,240,304 $7,441,896 $7,115,024 $6,626,334 The chart below shows the rate variability and the number of customers in each rate range. Assuming no change in water consumption from the previous year the single family residential rate payers would be distributed as follows: (As examples, customers who use 0% to 20% of the average, 8.34 ccf, will pay $21.14 to $25.38 per month, and customers using 180% to 275% more than the average will pay approximately $59.28 to $79.39 per month.) Single-Family Sewer Rates Based on Average Winter Water Use % of Average Monthly Number Water Usage Rate of Accounts 0-20% $ $ % $25.39 $ % $29.62 $ , % $ $ , % $ $ , % $ $ , % $ $ % $ $ % $ $ % $ $ Capped (20.ccf) Over $ Total 12, City Council Meeting 05-2

3 Water and Sanitary Sewer Rate Approval and Davis Waste Removal Contract Amendment For informational purposes only, the chart below shows estimated residential sewer rates for the next 4 years. These rates are estimates only and continue to project a major plant upgrade. Potentially less expensive alternatives will be pursued that could lower the future years projections. Rates are adopted annually and adjustments will be proposed to rates in future years as necessary. Estimated Single Family Residential Sewer Rates Current Adopted Flat Rates 09/10 Single Family $41.10 Proposed Estimated Typical Monthly Bill 10/11 11/12 12/13 13/14 $42.33 $44.86 $47.55 $ % 6% 6% 6% Water The rate increase assumes $3 million for 10/11 expenditures for the surface water project. In February, staff considered a more significant rate increase. However, acknowledging that there is ongoing discussion regarding the status of the Surface Water Project, with details to evolve over the course of the next year, staff concluded a 5% increase was sufficient to cover Fiscal Year 10/11 expenditures. Given the scope and cost of the project, it is evident that rates will have to increase significantly over the next few years as cost projections become clearer. Water O&M Division 09/10 08/09 07/08 06/07 Human Resources 3,375,680 3,313,198 3,081,634 2,797,633 Other Resources 2,257,474 2,328,018 2,234,815 2,211,385 Capital Outlay 16,000 54, , ,625 Internal Services Charges 458, , , ,157 Inter-Departmental Charges 473, , , ,701 TOTAL $6,581,579 $6,656,448 $6,362,150 $5,980,501 The chart below shows estimated water rates for the next 4 years. This rate assumes a $3 million surface water project expenditure for FY10/11. Projected rates reflect continuation of the project with city expenses estimated to be $145 million over the life of the project. Estimated Single Family Residential Water Rates Current Adopted Rates 09/10 Single Family $36.74 Proposed Estimated 10/11 11//12 12/13 13/14 $38.50 $47.40 $57.04 $ % 23% 20% 20% Sanitation Staff is not recommending any rate increases for the customer sanitation rate. The action being sought is the approval of a contract amendment with Davis Waste Removal (DWR) to increase the contractor rates the city pays to DWR to provide sanitation services. The Franchise Agreement allows a yearly CPI adjustment. The amendment reflects the 2.159% CPI adjustment City Council Meeting 05-3

4 Water and Sanitary Sewer Rate Approval and Davis Waste Removal Contract Amendment Conclusion Below is a comparison and summary of current monthly city utility rates and proposed rates for the average single family residential account. Rate Comparison From FY 09/10 to FY 10/11 Current Proposed Difference Sanitary Sewer (1) $ $ $ 1.23 Sanitation Storm Sewer = 2 components below Drainage (2) Water Quality Water (3) Totals $ $ $3.08 (1) Based on city average winter water consumption of 8.34 ccf. (2) Rates are calculated on an average lot size of 7500 S.F. (3) Rates based on city average water consumption of 18 ccf. Attachments 1. Sanitary Sewer Rate Ordinance 2. Water Rate Ordinance 3. Resolution for Amendment 5 to DWR Contract 4. Amendment 5 to DWR Contract for Contractor Rates (copy) City Council Meeting 05-4

5 ORDINANCE NO XXXX ORDINANCE OF THE CITY OF DAVIS AMENDING CHAPTER (a) and (b) OF THE DAVIS MUNICIPAL CODE RELATING TO SEWER RATES THE CITY COUNCIL OF THE CITY OF DAVIS DOES HEREBY ORDAIN AS FOLLOWS: Section 1. follows: Section (a) and (b) of the Davis Municipal Code is hereby amended to read as SECTION SCHEDULE OF CHARGES. On and after August 1, 2010, the schedule of charges for sewer use shall be as follows: Both Residential and Commercial customers are charged a basic flat rate plus a variable charge. The variable charge is based on the average of the previous year s water use for the months of November through February (winter water usage) measured in hundreds of cubic feet (ccf) and multiplied by the variable rate below. (a) Residential Fixed & Commodity Rates Fixed Charges Variable Per account Per unit (per ccf) Single Family $2.68 $18.46 $2.54 Single Family Condo $2.68 $14.05 $2.54 M2 Duplex $2.68 $14.05 $2.54 M3 Triplex $2.68 $15.45 $2.54 M4 Quadplex $2.68 $15.62 $2.54 M5 5+units $2.68 $10.55 $2.54 MH Mobile Homes $2.68 $10.92 $2.54 For each group living dwelling, including fraternities, sororities, senior citizen houses, convents, rectories, residence halls, lodging houses, and any other dwelling in which five or more unrelated individuals reside, the rate shall be based on an equivalent number of dwelling units calculated by dividing the total number of people by five within allowable facility occupancy according to the use permit or building code. (b) Commercial and Industrial (1) Commercial Basic Variable Classes $/mo acct $/ccf C1 Office/Retail $2.68 $4.48 C2 Laundry $2.68 $4.55 C3 All Other $2.68 $4.48 C4 Conv. Hosp. $2.68 $4.69 C5 Auto/Srv Station $2.68 $4.78 C6 Restaurants $2.68 $6.40 C7 Industrial (1) $2.68 $4.81 For Industrial uses, the rate will be calculated on an individual basis using the same BOD, TSS, and flow rates as the other commercial classes City Council Meeting 05-5

6 If no previous use is available, the variable rate established for a similar business may be used. If more than one user class is supplied by one meter, the highest user class factor will be used to compute the total rate. All other portions of the Chapter shall remain the same. INTRODUCED on the 11 th day of May, 2010, and PASSED AND ADOPTED by the City Council of the City of Davis on the XX day of May, 2010 by the following vote: AYES: NOES: ATTEST: Ruth Uy Asmundson, Ph.D. Mayor Zoe S. Mirabile, CMC City Clerk City Council Meeting 05-6

7 ORDINANCE NO. XXXX AN ORDINANCE OF THE CITY OF DAVIS AMENDING CHAPTER 39 OF THE DAVIS MUNICIPAL CODE RELATED TO WATER RATES THE CITY COUNCIL OF THE CITY OF DAVIS DOES HEREBY ORDAIN AS FOLLOWS: SECTION SCHEDULE OF BASE RATE CHARGES. For utility bills generated on and after August 1, 2010, the monthly base rate for all accounts, with the exception of Condominium Common area customer accounts, independent of water consumption shall be as follows: Meter Size Monthly Base Rate Charge FY 2010/11 5/8- and 3/4-inch $ inch $ /2-inch $ inch $ inch $ inch $ inch $ inch $ For La Buena Vida: The monthly base rate for the 272 dwelling unit meters and the 68 common meters at the residential buildings shall be 80% of the monthly base rate for 3/4-inch meters. The monthly base rate for the two (2) common area meters shall be 80% of the monthly base rate for the actual size of the meters. SECTION SCHEDULE OF METERED RATE CHARGES. For water used beginning September 1, 2010, the bi-monthly water consumption charge for all metered rate customers shall be as follows: User Classification Use Tiers Unit Charge Single Family Residential (use per dwelling unit) Tier 1: 0-36 ccf Tier 2: >36 ccf $ 1.50 $ 1.90 Multifamily Residential (use per dwelling unit) Tier 1: 0-14 ccf Tier 2: >14 ccf $ 1.42 $ 1.90 Small Commercial/Industrial (use per account) Tier 1: ccf Tier 2: >115 ccf $ 1.41 $ 1.90 Large Commercial/Industrial (use per account) Tier 1: ccf Tier 2: >619 ccf $ 1.51 $ 1.90 Irrigation (use per acre) Tier 1: ccf $ 1.41 Tier 2: >363 ccf $ 1.90 Municipal Water Usage All consumption $ City Council Meeting 05-7

8 La Buena Vida: The water consumption charge shall be calculated by totaling all the consumption for all meters related to the association, then applying the limits as specified by the single family residential rates, and allowing 272 dwelling units for the association regardless of the total number of meters. (Example: Tier 1 = (0 36 ccf) x 272 dwelling units = ccf, charged at $1.30 per ccf. All bi-monthly water consumption above a total of 9792 ccf shall be charged at the tier 2 rate of $1.69 per ccf). (This example is for information only.) INTRODUCED on the 4 th day of May, 2010, and PASSED AND ADOPTED by the City Council of the City of Davis on the XX day of May, 2010 by the following vote: AYES: NOES: ATTEST: Ruth Uy Asmundson, Ph.D. Mayor Zoe S. Mirabile, CMC City Clerk City Council Meeting 05-8

9 RESOLUTION NO. 10-XXX, SERIES 2010 RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE AMENDMENT NO. 5 TO THE AGREEMENT WITH DAVIS WASTE REMOVAL COMPANY, INC. FOR WASTE REMOVAL SERVICES WHEREAS, the City of Davis and Davis Waste Removal Company, Inc. have an agreement dated October 1, 2004; and WHEREAS, the City of Davis and Davis Waste Removal Company, Inc. are desirous of amending the October 1, 2004 agreement with an amendment dated May.11, 2010, for contractor payments effective August 1, NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Davis hereby authorize the City Manager to execute Amendment No. 5 to the October 1, 2004 agreement, and perform any other actions needed to implement this resolution. PASSED AND ADOPTED by the City Council of the City of Davis on this 11 th day of May, 2010 by the following vote: AYES: NOES: ATTEST: Ruth Uy Asmundson, Ph.D. Mayor Zoe S. Mirabile, CMC City Clerk City Council Meeting 05-9

10 AMENDMENT NO. 5 TO AGREEMENT DATED OCTOBER 1, 2004 BETWEEN CITY OF DAVIS AND DAVIS WASTE REMOVAL COMPANY, INC. WHEREAS, the agreement dated October 1, 2004, by and between the City of Davis ("City") and Davis Waste Removal Company, Inc. ("Contractor") provides for periodic adjustments to rates due to changes in the Consumer Price Index; and WHEREAS, the City and Contractor have agreed on an updated Exhibit A, and the following paragraphs. NOW, THEREFORE, the parties hereto agree that the agreement referred to above shall be amended as follows: Section II 3.A) Compensation Rate The new base rate exhibit for contractor payments for August 1, 2010 to July 31, 2011 is attached as Exhibit A. All prior amendments to this agreement are repealed to the extent they conflict with the terms hereof. All other terms and covenants contained in said agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment No. 5 to be signed on this day of, CITY OF DAVIS DAVIS WASTE REMOVAL CO., INC. By: Bill Emlen City Manager By: Paul E. Hart President Attachment: Exhibit A City Council Meeting 05-10

11 LANDFILL AT 38.19/TON + COM REC *** CONTRACTOR SANITATION COMPENSATION MONTHLY RATES BY TYPE OF SERVICE BUSINESS AND COMMUNALLY SERVICED RESIDENCES (CITY FEES NOT INCLUDED) (@ $38.19/ton) INDIVIDUALLY SERVICED RESIDENCES CART SERVICE LEVEL OF SERVICE PER MONTH LEVEL OF ----1X/WK X/WK X/WK X/WK X/WK X/WK SERVICE MID- ALL 1X/WK ALL 2X/WK ALL 3X/WK ALL 4X/WK CART WEEK SAT MD-WK +SAT MD-WK +SAT MD-WK +SAT MD-WK +SAT CURBSIDE $ $46.93 $50.55 $83.02 $88.48 $ $ $ $ $ $ $ $81.21 $86.66 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ HANDICAPPED $27.22 EACH ADD'L CART $29.26 $34.69 $58.14 $70.82 $90.60 $99.65 $ $ $ $ $ NO GARBAGE $15.22 BIN SERVICE LEVEL OF ----1X/WK X/WK X/WK X/WK X/WK X/WK-- SERVICE MID- ALL 1X/WK ALL 2X/WK ALL 3X/WK ALL 4X/WK YARDS WEEK SAT MD-WK +SAT MD-WK +SAT MD-WK +SAT MD-WK +SAT 1 $77.93 $90.69 $ $ $ $ $ $ $ $ $ DROP BOX SERVICE 1.5 $ $ $ $ $ $ $ $ $ $ $ ========== ========= ========= ========= 2 $ $ $ $ $ $ $ $ $ $ $ LEVEL OF SERVICE PER 2.5 $ $ $ $ $ $ $ $ $ $ $ YARDS PICK UP 3 $ $ $ $ $ $ $ $ $ $ $1, $ $ $ $ $ $ $ $ $1, $1, $1, ** DOES NOT INCLUDE LANDFILL FEES ** 5 $ $ $ $ $ $ $1, $1, $1, $1, $1, YARDS $ $ $ $ $ $1, $1, $1, $1, $1, $1, $2, YARDS $ YARDS $ EACH ADD'L YARD $53.89 $59.32 $ $ $ $ $ $ $ $ $ YARDS $ YARDS $ ADD SURCHARGE FOR CUSTOMER OWNED COMPACTORS $ PER COMPACTED YD $57.87 $63.31 $ $ $ $ $ $ $ $ $ NO GARBAGE SERVICE LEVEL OF PER SERVICE MONTH NONE $ City Council Meeting 05-11