HomeMy WebLinkAbout2008/02/05 Item 14
ITEM TITLE:
SUBMITTED BY:
REVIEWED BY:
CITY COUNCIL
AGENDA STATEMENT
2/05/2008, Item / <I
PUBLIC HEARING TO CONSIDER THE PROPOSED
RESTRUCTURING OF THE SEWER SERVICE RATES
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING AN INCREASE IN SEWER
SERVICE RATES FOR FISCAL YEARS 2007-08 THROUGH
2009-10
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA SETTING THE AMOUNT TO BE DEPOSITED
INTO THE SEWERAGE FACILITIES REPLACEMENT FUND
DIRECTOR OF ENGINEERING AND GENERAL SERVICES '0.~_
CITY MANAGER <S'T...J;; r \:>12 IS, 0
ASSISTANT CITY MANAGER~ '!
4/5THS VOTE: YES D NO ~
BACKGROUND
The sewer service charge is paid by all users who are connected to the City's wastewater collection
system. Revenues derived from this fee are used to fund the cost of wastewater treatment, system
maintenance and operation.
On July 19, 2005, the City Council approved a five-year rate plan, based on the recommendations of a
Sewer Rate Study prepared by Camp Dresser & McKee, Inc. ("CDM"). The rate plan set the schedule
for the adjustment of sewer service fees for Fiscal Year 2005-06 through Fiscal Year 2009-10. However,
since then, the adopted rate plan has not met the revenue objectives due to a variety of reasons. The
primary reasons for the inadequacy of the adopted rates were due to a combination of factors; baseline
customer data used in the 2005 Rate Study was over-estimated, in addition there have been
unanticipated shortfalls in the growth projections for new accounts contrary to the assumptions in the
rate study, which formed the basis ofthe adopted rate plan.
A recent study by Camp Dresser & McKee, Inc. ("COM") has determined that, over the long term, the
adopted rate plan would not generate the projected revenues, hence compromising the ability of the fund
to meet its obligations for wastewater treatment, system operation and maintenance. It is therefore
necessary that the City take the appropriate actions to adjust the rate schedule and avoid this potential
fiscal impact.
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It was for this reason that the City Council approved Resolution 2007-302 on December 18, 2007
declaring its intention to increase sewer service charges and set a Public Hearing for February 5, 2008 to
consider the issue.
ENVIRONMENTAL REVIEW
The Environmental Review Coordinator has reviewed the proposed activity for compliance with the
California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as
defined under Section 15378 of the State CEQA Guidelines because it does not involve a physical
change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the
activity is not subject to CEQA. Thus, no environmental review is necessary.
RECOMMENDATION
Council conduct the public hearing to take and consider public testimony and adopt the following
resolutions:
I. Resolution of the City Council of the City of Chula Vista approving an increase in sewer service
rates for Fiscal Years 2007-08 through 2009-10
2. Resolution of the City Council of the City of Chula Vista setting the amount to be deposited into
the Sewerage Facilities Replacement Fund.
BOARDS/COMMISSION RECOMMENDATION
Not applicable.
DISCUSSION
Sewer Service Charee Uodate
The City of Chula Vista's sewer service charge is made up of three different fees: the Sewer Service
Fee, Sewerage facilities Replacement Fee and the Storm Drain Fee (see diagram below).
Sewer Fees Relationship Diagram
I Sewer Service Charge. I
Sewer Service Fee
Varies
(Dependent on quantity
and quality offtow)
Sewerage Facilities Replacement Fee
SFR$I.97/Month
MFRlComm $O.lI/hcf
Stonn Drain Fee
SFR $O.701M0nth
MFRlComm $O.06/hcf
I
I
I
Sewer Service Fund
City Maintenance & Operations
Metro Treatment Costs
Sewererage Facilities Replacement Fund
Sewer Rehab Projects
Stonn Drain Fund
Stonn Drain Projects
NPDES Compliance
Consequently, revenue generated by the City's sewer service charge is distributed between three
separate funds. The City is proposing to adjust the Sewerage facilities Replacement fee and the Sewer
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Service fee. The Storm Drain fee is not being re-evaluated or adjusted as part of this effort; however it
will be included in a future workshop regarding funding infrastructure needs.
On July 19, 2005, the City Council approved a five-year rate plan, which set the schedule for the
adjustment of sewer service fees for Fiscal Year 2005-06 through Fiscal Year 2009-10 based on the
findings and recommendations of the "Cost of Service and Rate Study for Sewer Services" prepared by
Camp Dresser & McKee, Inc. ("CDM").
Since then, the adopted rate plan has not met the revenue objectives primarily because baseline customer
data used in the 2005 Rate Study was over-estimated coupled with a significant shortfall in growth
projections for new accounts contrary to the assumptions in the previous rate study.
Consequently, the City retained CDM to prepare another study dated October 2007 (see Attachment A)
with the primary goal of achieving the following objectives:
I. Existing Rates: To re-evaluate the performance of the adopted rate plan and its potential ability
to meet the revenue requirements based on the revised projected growth rate of the City.
2. Cost Allocation: To re-evaluate the cost allocation amongst the various user classes to ensure
that it was proportional to use and equitable.
3. Single-Family Residential Billing Method: To re-evaluate the sewer-billing method for single-
family residential users and address the concerns those customers had regarding the impact of
residual winter irrigation usage on their sewer bill.
4. Financial Plan: To develop a financial plan, which returns the Sewer Service Revenue Fund to
self-sufficiency, and further rebuilds the reserve balance to an optimal level.
Findings
. Existing Rates
It has been determined that the existing rates (see Attachment B) were inadequate and have not/will
not generate the revenues needed to meet the obligations of the fund for wastewater treatment,
system operation and maintenance. Therefore, the rates needed to be adjusted and in some cases
increased. A new rate schedule (see Attachment B) is being proposed.
The primary reasons for the inadequacy of the adopted rates were due to a combination of factors;
baseline customer data used in the 2005 Rate Study was over-estimated and a shortfall in the growth
projections for new accounts.
Customer Data - 2005 Rate Study
The City of Chula Vista bills its customers in three different ways. Customers within Otay Water
District's (Otay) jurisdiction are billed monthly for water and sewer services on the same bill by
Otay. Customers in Sweetwater Authority's (Sweetwater) jurisdiction who reside in the pre-
annexation area are billed for sewer services bi-monthly by the City's Finance Department. The
remaining customers who are in the Montgomery area of the city who are in either Sweetwater's or
CAL-American's jurisdiction are billed for sewer services annually on the property tax bill by the
City's Engineering & General Services Department. All these billing units maintained independent
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databases that were not linked. Ultimately the customer data, which was used in the 2005 study, was
assembled from these databases. Through a recent audit of these systems, in preparation for the 2007
study, it was determined that the baseline customer data used in the 2005 study was significantly
higher than it should have been (See Table 1 & Figure 1). Consequently, the revenue requirement
was spread over more customers than actually existed, resulting in rates that were lower than they
should have been, and revenue that was significantly lower than projected with the difference
compounding after the application of an overly optimistic growth rate.
Table 1 - Number of Customer Accounts
05/06
06/07
07/08
08/09
09/10
10/11
11/12
FY 2005-06 Sewer Rate
Study
48370
50570
52790
55018
57240
FY 2007-08 Sewer Rate
Study
46399
47020
47550
48080
48620
49170
49720
Difference
Fiscal Year
-1971
-3550
-5240
-6938
-8620
l!! 65000
Gl
E 60000 --- FY 2007-08
.s 55000 Sewer Rate
Ul
:l 50000 Study
0
.... 45000
0
... 40000 -- FY 2005-06
Gl Sewer Rate
..c
E 35000 Study
:l 30000
Z
f''O ~ 'f>'" g, ""~"",, ,," ~,,'l,.
",," ""co S- ~<s ,,<S- ,,"
<s
Fiscal Year
Figure 1 - Account Projections
Shortfall in the projected growth rate of new accounts
The revenue generated by the Sewer Service Revenue Fund primarily depends on the number of
customers on record and the amount of billable flow generated by these customers. The 2005 Cost
of Service Study was based on customer usage data from the two prior years, FY 2003-04 and FY
2004-05. At that time, the City of Chula Vista was experiencing a high influx of new development,
which seemed to be on track to continue for a significant amount of time. Unfortunately, shortly
after the adoption of the rate schedule, development peaked and went into a significant downturn
that has impacted the revenues for the past two years and is projected to continue to have a negative
impact. An analysis of the actual customer data utilized in this study compared to the projections
used in the previous study shows that the actual number of customers and billable flow for the last
two years was significantly lower than what was projected. This further exacerbated the situation
and ultimately resulted in revenues being significantly lower than the 2005 Study projections.
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Therefore, the combination of the inadequate rates and the declioe in the growth rate resulted in
fewer paying customers, lower sewage volume, and consequently lower than expected revenue for
the fund. Single-Family Residential User growth has dropped from 5% to 1.15%. This has resulted
in a decline in expected revenues over the five-year period analyzed. Had the baseline customer
data been accurate, and had growth continued as previously predicted, the adopted rates would have
been adequate to cover expenses.
. Costs Allocation
Costs to be allocated
As earlier indicated, the Sewer Service Revenue Fund is primarily used to fund the cost of
wastewater treatment ("Metro Expenditures"), as well as maintenance and operation of the City's
wastewater collection system. The table below shows the estimated costs to be met in Fiscal Year
2007-08. These percentages are typical for this fund.
PROJECTED MAINTENANCE AND OPERATIONS EXPENSE FY 2007-08
Description Amonnt Percenta!!e
A WW Maintenance & Operation (incl. support services) $ 9,789,100 33.2%
B Capital Expenditure to Maintain Collection System $ 1,300,800 4.4%
C Otay Water District - Billing Services $ 356,000 1.2%
D Spring Vallev Costs (Capital Proj ects & M &0) $ 736,200 2.5%
E Metro Cost - Wastewater Treatment $ 18,273,300 58.6%
F Estimated One-time Credit for Prior Year Metro Expenditures ($1,000,000)
Total $ 29,455,400 100.0%
Metro Expenditures
The City is billed for wastewater treatment based on the quantity and quality (strength) of the
sewage generated. The above table shows that the wastewater treatment costs represents
approximately 59% of the fund's obligation. This is due to the fact that the City of San Diego
allocates all the costs for treatment (including the maintenance and operation of the Metro system,
and Capital Improvement Projects) to all participating agencies in proportion to the quantity and
quality of sewage they each contribute to the system. The City of Chula Vista's proportionate share
is based upon the current flow of approximately 9% of the total flow in the Metro system.
City's Operation and Maintenance Expenditures
The City of Chula Vista had been developing at a very fast pace. Consequently, the addition of new
sewer mains to the collection system required the addition of new staff and equipment to maintain
these facilities. The City's in-house maintenance, operations (M & 0) and capital costs represent
approximately 38% of the operating budget. The City continues to benchmark with other agencies
throughout the region and the results of surveys indicate that the City's costs for M & 0 are
comparable with those of other agencies of similar size or characteristics with one notable
difference. The State Water Resources Control Board (SWRCB) monitors sewage spills in the
region as a way of determining how effective agencies are in managing their wastewater collection
systems. In Fiscal Year 2005-06 the average number of spills per 100 miles recorded by the
SWRCB for Orange, Riverside, and San Diego Counties were as follows: Orange County -1.5;
Riverside County - 1.0; and San Diego County 3.6. In that fiscal year, the City of Chula Vista had
an average of 0.3 spills. Therefore, Chula Vista's spill rate for the year was 92% lower than the
County average, a testament to the City's diligent management of the wastewater collection system.
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Cost Allocation by User Class
CDM has developed a proposed revenue plan, which not only corrects for customer base and growth
rate, but also includes refinements to the cost allocation among the various user classes based on
quantity and quality of flow discharged by each user class. Attachment C shows the account and
flow distribution of the various users of the system who are obligated to share in the cost of
maintaining and operating this system. Single-family residential customers represent approximately
91 % of the customer base and generate approximately 61% of the flow. Multi-family residential
and commercial customers makeup the remaining 9% and generate 39% of the flow. These
percentages form the underlying basis of the cost allocation. Attachment D shows the existing cost
allocation and the proposed re-allocation. Adoption of CDM's recommendations will make the rate
structure even more proportional to use and also more equitable.
. Single-family Residential Billing Method - Implementation of a "Return Factor" for
Single-Family Residential Customers
A previous analysis of the City's sewer customer billing data indicated that the City's current
approach of billing single-family residential customers based on the lowest two winter months of
water usage is a fair and equitable method and is used by a majority of large utilities in the United
States. However, over the last few years, a significant number of customers seem to continue to
irrigate even during the lowest-use winter months. Since the usage within that period is the basis of
the customer's sewer bill for the fiscal year, a re-valuation of the currently assumed 100% return
factor for this user class determined that implementing a ninety percent (90%) return factor,
(assuming that 10% of the water used during this period by the customer was used for irrigation, and
90% was used inside the house and returned to the sewer system) still achieved mass balance. This
reduced return factor was validated through a comparison of billed sewer volume conveyed to Metro
and customer billed estimates.
. Independent Study to verify the "Return Factor" for Single Family Residential Customers
Although staff is currently recommending that the City implement a 90% return factor for single-
family residential customers at this time, this recommendation is based on the review of similar
studies by other agencies in the region, and validation by a mass-balance analysis. However, since
the flow generation characteristics of this user class may vary from region to region, staff will be
seeking a grant to conduct a limited study involving Chula Vista residents, to determine the "actual"
return factor for an "average" single-family residential household in the City of Chula Vista. This
may involve installing meters at sewer laterals, tracking the number of users per household, and
other relevant factors that impact sewage generation. The goal of this study would be to determine
an "actual" rate of return for Chula Vista residents compared to County averages and help ensure
that return rate assumptions are most reflective of our city.
Recommendations - Proposed Rate Plan
The current rate plan, which was adopted in July 2005, for FY 2005-06 through FY 2009-10,
represented an overall annual increase in revenue requirement of 7.5% for the first three years and
3.5% for the two years thereafter. Although, the last Cost of Service Study by CDM developed a
five-year financial plan for FY 2007-08 through FY 2011-12, CDM recommended the adoption ofa
three-year plan (FY 2007-08 to FY 2009-10) due to a variety of current/near-term issues that could
have significant impacts on future rates. The major issue is the potential upgrade of the Point Loma
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Treatment Plant from an advanced primary treatment plant to a secondary treatment plant, currently
estimated to cost approximately $700 million to $1 billion. The City of San Diego has decided to
request another waiver-results are not anticipated for up to another year. It is for this reason that
staff concurs with CDM's recommendation to adopt a three-year rate plan. The proposed rate plan,
being scheduled for Council consideration on February 5, 2008, represents an overall increase in
revenue requirement of 5% for the remainder of Fiscal Year FY 2007-08, and two consecutive 9.9%
increases for the two years thereafter. This would be in lieu of the scheduled 3.5% increases.
July 2005
July 2006
July 2007
February 2008
July 2008
July 2009
Adopted Rate
Increases
7.5 Percent
7.5 Percent
7.5 Percent
Proposed Rate
Increases
Effective Date
3.5 Percent
3.5 Percent
5.0 percent
9.9 percent
9.9 percent
Sewer Facilitv ReDlacement Fee UDdate
The Sewerage facilities Replacement Fee, which is a component of the sewer service charge, was
established in 1987 as a funding mechanism for the rehabilitation and/or replacement of structurally
deficient sewer facilities. This goal is achieved through the implementation of a comprehensive Sewer
Rehabilitation Program.
Sewer Rehabilitation Program
The Sewer Rehabilitation Program is a $1.4 million/year program, which involves the relining or
replacement of aging pipelines within the City's wastewater collection system. It also funds the
reconstruction of existing pump stations. This program' has so far been driven by the information
gathered through a comprehensive video monitoring program. City crews using specialized vehicles
equipped with video cameras televise and evaluate the conditions of various lines within the collection
system. Using data gathered through this process, a priority list is developed of locations that need to be
rehabilitated or replaced. Subsequently, these lines are improved as part of an annual Capital
Improvement Program which the City funds every year.
The current fee, funding level, and cost allocation were last evaluated in 2005 as part ofthe Wastewater
Master Plan Update, which was done concurrent with the General Plan Update. More recently, staff
reviewed the historical records i.e. findings of previous monitoring efforts, required improvements and
cost of the required improvements and made the following determination:
a. Program Status
Video Monitoring - Current data in the system indicates there are approximately 477 miles of
sewer lines in the City's wastewater collection system as of the beginning of FY 2007-08. To
date, Public Works crews have televised a net 155 miles of sewer lines mostly located within the
western portion of the City. This represents approximately 32% of the entire collection system,
which means that approximately 68% or 322 miles remain to be televised (mostly in the
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eastern/newer section of the City). It is expected that the remaining portion of the system will
be televised within the next 10 years, after which the process will be repeated.
Completed Improvements - To date the City has completed over 30,000 l.f (7.5 Miles) of
required improvements at a cost of approximately $4.4 million.
b. Revenue Requirements - Although future monitoring efforts will . be focused on the
eastern/newer portion of the City, which may result in a lower level of rehabilitation and/or
replacement, there is the potential that unanticipated replacement projects, and the findings from
the current Infiltration & Inflow (I & I) Study, could result in additional expenditures. Therefore,
staff recommends setting the fee such that it continues to generate the same level of revenue as it
does today ($1.4 million).
c. Review of the cost allocation among the user classes - The estimated cost of service of $1.4
million per year was then used as the basis to allocate costs to the various user classes in
proportion to the quantity of wastewater contributed, and to develop the revised fees for each
user class. Using the same customer data as was used in the Cost of Service Study by COM,
staff determined that the current cost allocation needed to be changed. Since the City now has a
consumption-based sewer service fee structure for all users, staff recommends that the Sewer
Facility Replacement Fee also be revised to a consumption-based fee for all users. Staff is
recommending a new fee of $O.l8/Hundred Cubic Feet (hct). Consequently, single-family
residential users who are currently billed a flat fee of $1.97/month, will now pay $O.l8/hcf.
Although, each user's fee will be dependent on actual usage, the "average" single-family
residential user will pay $1.62/month. For multi-family dwellings and commercial users, fees
will be increased from $O.llIhcf to $0.18/hcf. The detailed cost allocation calculation is shown
in Attachment E.
Table 2
Proposed Sewerage facilities Replacement Fee Update
User Class Current FY08 FY09 I FYIO
$/hcf
Single-Family $1. 97/month $0.18 $0.18 $0.18
Multi-family $O.ll/hcf $0.18 $0.18 $0.18
Commercial $O.II/hcf $0.18 $0.18 $0.18
Overall Rate Imnacts
Single-Family Residential Users
In July 2007, the City implemented the previously adopted rates, which represented a 7.5% percent
increase in revenue requirement from the prior year. Although, a 5% increase in revenue requirement is
being recommended for February 2008, it will have almost a zero net impact on the average single-
family residential user, who will see a net reduction of four cents on their bill. The minimal impact is
primarily due to the implementation of a 90% return factor and the reduction of the sewerage facilities
replacement fee component of the sewer service charge. Attachment F shows the impact of the
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proposed increases on single-family residential users at various levels of usage from FY 2007-08
through FY 2009-10.
Multi-Family Residential and Commercial Customers
The individual impacts to these classes of customers will vary in accordance with their water
consumption (sewage generation). Collectively, the impacts on these user classes are shown in greater
detail in Attachment F.
Comoliance with Prooositioo 218
Pursuant to the California Supreme Court decision in the Bighorn-Desert View Water Agency v. Verjil,
local governments must comply with the notice and majority protest proceedings of Article 13D, section
6 (a) of the California Constitution when seeking an increase in sewer fees. The City had complied with
these requirements; the City provided written notice by mail of the proposed fee increase to the record
owner of each identified parcel upon which the proposed fee increase is imposed. The notice included
the amount of the proposed increase in the fee, the basis upon which the amount of the proposed fee
increase is calculated, the reason for the proposed increased fee, together with the date, time and
location of a public hearing on the proposed fee increase. Tonight, the City shall conduct a public
hearing upon the proposed fee increase. At the public hearing, the City Council shall consider all
protests both written and oral against the proposed fee or charge. If written protests against the
proposed fee or charge are presented by a majority of the owners ofthe identified parcels, the City shall
not impose the increase in the fee.
Council will also be considering the resolutions setting a new amount for the sewerage facilities
replacement fee, revising the fee structure and setting new sewer service rates for Fiscal years 2007-08
through 2009-10.
Community Outreach
Notices (Attachment G) declaring the City's intention to restructure the sewer service rates were sent to
52,902 property owners who will be impacted by the proposed rate adjustment. The notice explained
the reasons for the increase, the impact of the rate change on customer bills, the majority protest process
and also invited ratepayers to attend a public hearing to be held 45 days later (February 5, 2008). In
addition, the recent Sewer Rate Study by CDM was also made available to ratepayers through the City's
website in a downloadable format.
In response to the notice, the Engineering & General Services Department received calls from a number
of residents regarding the proposed rate restructuring, and their concerns were generally centered on the
following issues:
a. Rate Impact - a nwnber of cal1ers asked to review their account to see what the impact
would be, based on available information. It is apparent that, although the City transitioned to
a consumption-based rate structure over four-years ago, a significant number of callers were still
uninformed about the City's billing method, and did not realize that their sewer bills were
dependent on their winter consumption, hence the reason for the fluctuations in their bill. Once
the billing method was explained to them their concerns were slightly allayed. However, some
were opposed to the idea of any increase no matter the reason.
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b. Fixed Income - a number of callers were interested in the process for qualifying for the
special "low Income" rate. The low -income classification allows users who meet the
Federal Housing and Urban Development (HUD) guidelines to pay a discounted rate (i.e.
70% of the adopted rate).
In addition to the calls, the City also received protest letters (38 as of January 22, 2008) from some
residents indicating their opposition to the proposed increases. Tonight the City Clerk will confirm
the final number of protest letters received at the close of the public hearing. The reasons for their
protest also seemed to be consistent with those listed above.
Since the implementation of the consumption-based rate structure in 2003, staff has been using a
variety of methods to reach out and educate ratepayers on this billing method. Some of the methods
include the following:
1. Announcements on monthlylbi-monthly bills - During the winter period, a special message
is shown on customer bills (primarily Otay customers on the east side of the City and those
customers on the west side billed by the City) reminding customers that it is that time of the
year again when they have to adjust their sprinklers because their usage within that period
will have an impact their sewer bill (See Attachments H.A and H.B).
2. Announcement in the Spotlight - Staff has also placed announcements in the "Spotlight"
magazine informing residents of the City's billing process and letting them know what they
should do to ensure that their bill reflects their usage.
3. City Website - The Engineering Department's Web Page on the City's website also shows
ratepayers how their rates are determined. It has copies of both the current and previous rate
studies shown in a downloadable format. These studies show how the rates are determined
and what the funds derived is used for.
Comoarison of City of Chula Vista's Sewer Service Fee with Other Local Al!:encies
While acknowledging that every agency's cost for operating its wastewater collection system varies in
accordance with its unique characteristics (size, age of system, demographics etc.), Attachment I shows
a comparison of the sewer service charge an "Average Single-Family Residential User" all the
participating agencies in the Metro system, whose treatment costs per million gallons, is the same as
Chula Vista's.
DECISION MAKER CONFLICT
Staff has reviewed the property holdings of the City Council Members and has determined that the
effect of the decision contemplated by this action on the public officials' interest in real property also
affects ten percent or more of all property owners in the public official's jurisdiction or 5,000 property
owners in the jurisdiction of the official's agency in substantially the same manner. Therefore, pursuant
to California Code of Regulations sections 18707 and 18707.1, the Public Generally Exception applies.
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FISCAL IMP ACT
If a majority protest does not occur related to the proposed sewer rate adjustments and if the City
Council subsequently approves the proposed sewer rate adjustments and increases, it is anticipated that
the City will generate sufficient revenues to meet projected fund expenditures for Fiscal Years 2007-08
through 2009-10. The Sewer Service Revenue Fund started Fiscal Year 2007-08 with an un-
appropriated balance of approximately $4.1 million. If the proposed increases were not approved, that
balance would drop to $0.8 million by the end of the fiscal year. With the proposed rate adjustment, the
fund balance would increase to $1.4 million and then start to recover in the ensuing years. This fee
adjustment will increase the fund revenues by approximately $11.6 million, over the next two-and-a-half
years.
If the fee increase is not approved, the City may address the resulting shortfall through a transfer from
the General Fund or by making operational cuts. Since the City cannot control the sewage generation or
treatment costs, the only other area of control will be the City's in-house operations and capital
expenditures. Reductions in these areas will impact our pipe cleaning, pipe monitoring and pipe
rehabilitation programs. The City's excellent spill-prevention record can be attributed to these programs.
Consequently, cuts in these programs could make the wastewater collection system more susceptible to
sewer spills, which could then result in significant penalties from the State Water Resources Control
Board. Therefore, the approval of the proposed rate increases is crucial to the City's ability to provide a
high level of operation and maintenance of the City's wastewater collection system.
Furthermore, approval of the proposed sewer facility replacement re-allocation will ensure that the
City's cost allocation for each user group better correlates to their estimated impacts on the system.
This fee adjustment will continue to generate approximately the same level of revenue as it does today
($1.4 million) over the next two-and-a-half years. The Sewer Facility Replacement Fund currently has
an unappropriated balance of approximately $3.3 million.
ATTACHMENTS
A. Cost of Service and Rate Study For Sewer Services - October 2007
B. Existing and Proposed Rate Schedules
C. Account and Flow Distribution by User Class
D. Existing and Proposed Cost of Service Allocation
E. Sewer Facility Replacement Fee Cost Allocation/Fee Determination
F. Rate Impacts on Various User Classes
G. Public Hearing Notice
H. Sample Bills showing Special "Winter Period" Notification Message
I. Other Cities Rates- Single-Family Residential User Comparison
Prepared by: Anthony Chukwudolue, Senior Civil Engineer, Engineering & General Services Department
J: IEngineerlAGENDA ICAS2008\02-05-08\Sewer Rate Increase-FY2007-08.ac.doc
14-11
City of Chula Vista
~.:{Tl\C H }I\tl<\ fr-
Cost of Service and Rate Study for Sewer Services
October 2007
Prepared by:
CDM
111 Academy, Suite 150
Irvine, California 92617
14-12
CDM
Contents
Executive Summary ........................................................................................................... ES-l
Section 1 Introduction .......................................................................................................1-1
1.1 Background ................ ............ ..... ...... ...... ........... ...... ......... ..... ........... ...1-1
1.2 Purpose ............ ......... ...... ....... ...... .... ...................... ................. ........... ...1-4
1.3 Scope of the Study.........:.....................................................................1-5
Section 2 Revenue.............. ............. .......................... ....... ..... ....................... ....... ...............2-1
2.1 User Classifications.and Customer Growth ....................................2-1
2.2 Billing Method .....................................................................................2-2
2.3 Existing Sewer Rates ...........................................................................2-4
2.4 Sewer Service Fee Revenue Under Existing Rates..........................2-5
2.4.1 Revenue Under Existing Rates .............................................2-5
2.4.2 Other Revenues ......................................................................2-6
2.4.3 Interest Income ...........................................,...........................2-6
Capital Improvement Program.......................................................................3-1
Revenue Requirements ....................................................................................4-1
4.1 Operations and Maintenance Expense.............................................4-1
4.2 Debt Service Requirements ................................................................4-2
4.3 Transfer of Revenues to the Sewer Facilities Replacement Fund.4-2
4.4 Transfers of Revenues to the Storm Drain Fund ............................4-2
4.5 Bad Debt Write-offs......... ......... ...... ................. ...... ............ .... ........... ...4-2
4.6 Routine Capital Outlays .....................................................................4-2
Section 5 Cash Flow Analysis ..........................................................................................5-1
5.1 Proposed Revenue Adjustments .......................................................5-1
Section 6 Cost of Service Analysis ...................................................................................6-1
6.1 Cost of Service to be Allocated ..........................................................6-1
6.2 Wastewater Parameters ......................................................................6-2
6.2.1 Volume Related Costs............................................................6-2
6.2.2 Wastewater Strength Costs...................................................6-2
6.2.3 Customer Costs........ ........................... ................................... .6-2
Allocation to Wastewater Parameters ..............................................6-3
6.3.1 Allocation of Capital Costs ...................................................6-3
6.3.2 Allocation of Operating Expense .........................................6-3
Allocation of Cost to Customer Classes ...........................................6-4
6.4.1 Customer Classifications........ ..... ... ........... ... ....... .... .... ....... ... 6-4
6.4.2 Units of Service .......................................................................6-5
6.4.3 Unit Costs of Service ..............................................................6-6
6.5 Customer Class Costs of Service .......................................................6-7
Section 7 Rate Design ........................................................................................................7-1
7.1 Proposed Sewer Rates....................................................................:....7-1
7.2 Appeal Process....................... .................... ... ................ .......................7-2
7.3 Rate Revenue Comparison.................................................................7-2
7.4 Proposed Rates ....................................................................................7-3
7.5 Rate Comparisons ...............................................................................7-5
Section 3
Section 4
6.3
6.4
14-13
COM
Executive Summary
The City of Chula Vista (City) requested Camp Dresser & McKee (CDM) to conduct
an update of the cost of service and rate study for sewer service. The purpose of the
study is to evaluate the existing sewer rates, review and evaluate revenues and
revenue requirements, and perform cost of service and rate analyses to ensure equity
among customer classes. This report documents the results of the study and
recommends sewer rates that the City should charge its customers in the study
period.
Throughout this study, fiscal years will be termed as follows: Fiscal Year 2007-2008 is
shown as FY 07-08, FY 2008, or just 2008 herein.
The objective of this report is to support development of fair and equitable rates that
can be easily implemented and updated for the City's sewer system for the study
period of FY 07-08 through FY 11-12 and a five-year financial plan that will secure
financial stability of the sewer enterprise.
This financial plan was developed based on information that was readily available at
this time (from both the City of Chula Vista and the City of San Diego). Since the City
of Chula Vista receives wastewater treatment services from the City of San Diego
Metropolitan Wastewater District (Metro) and those costs are a significant component
of the fund's obligation, any major policy decisions (i.e., current consideration to
upgrade the Point Lorna treatment Plant from an advanced primary treatment plant
to a secondary treatment plant) will definitely impact the financial plan. The City will
have to re-evaluate the rates developed through this study should that situation or a
similar situation with significant unanticipated financial impacts arise.
The sewer service fees collected by the City of Chula Vista are primarily used to
maintain and operate the wastewater collection system and pay for the cost of
wastewater treatment. In addition to the sewer service fee, users also pay a sewer
facilities replacement fee and a storm drain fee as part of their monthly fbi-monthly
service charge. However, the storm drain fee was not analyzed in this study.
Revenues generated through the storm drain fee and sewer facilities replacement fee
are later transferred into the Storm Drain Fund and Sewer Facilities Replacement
Fund respectively.
We recommend the results of this study be used to make sewer rate adjustments
effective this fiscal year and the next two years. Beyond that time frame, significant
changes, such as potential cost increases from Metro, are likely to occur and a new
analysis should be conducted.
Summary of Findings and Recommendations
1. The City is currently serving approximately 47,000 individual sewer customer
accounts. The study anticipates continued increases in the number of sewer
customers throughout the study period. The projected growth rate varies
ES-1
14-14
tDII
Executive Summary
depending on the customer category. Below are the annual percentage growth
rates used for the various customers; the rates were based on the review of
historical trends in the City within the last 2 years.
Table ES-1
Projected Growth by Customer Class
Customer Class FY 08-09 FY 09-10 FY 10-11 FY 11-12
Single-Family Residential 1.15% 1.15% 1.15% 1.15%
Multi-Family Residential 1.0% 1.0% 1.0% 1.0%
Mobile Homes 1.0% 1.0% 1.0% 1.0%
Commercial Low 1.0% 1.0% 1.0% 1.0%
Commercial Medium 0.0% 0.0% 0.0% 0.0%
Commercial High 0.0% 0.0% 0.0% 0.0%
Special Users 0.0% 0.0% 0.0% 0.0%
2. Sewer utility revenues are principally derived from sewer service fees. Other
revenue sources include industrial waste permits, miscellaneous fees, and interest
income among others. The Operating Fund is currently self-supporting, although
using existing reserve balances, and the proposed financial plan does not provide
for any future transfers from any other sources.
3. The sewer utility's annual revenue requirements consist of operations and
maintenance (O&M) expenditures, routine capital outlays, write-offs of
uncollectible accounts, and transfers to the replacement fund and storm drain
fund. O&M expenses, including capital outlays, are projected to increase from
$29,455,400 in FY 07-08 to $34,118,600 in FY 11-12.
4. By definition, cost of service is the annualized revenue requirements net of
revenue credits from other miscellaneous sources that need to be met through
sewer rates. The City's estimated 2008 test year cost of service to be met from
sewer rates totals $26,742,400. Revenue derived from charges for service under
current rates is estimated to be $25,469,000 for FY 07-08 excluding revenues
derived from Sewer Facilities Replacement Charges and Storm Drain Charges.
Therefore, the adopted rates are inadequate and do not generate sufficient
revenues to meet the revenue requirements.
5. Although not the subject of this rate study, also of note is the Sewer Utility Capital
Improvement Program (CIP) which is projected to total $9,101,300 over the next
five years - from FY 07-08 through FY 11-12. Projects include sewer replacements,
and annual improvements to the sewer system. To finance the capital program,
several funding sources are planned to be used, including sewer facility
replacement fees, storm drain fees, sewer capacity charges, transfers from the
General Fund, and existing fund balances in the capital funds. Consequently,
ES-2
14-15
CDM
Executive Summary
capital costs will be offset by other funding sources and hence do not affect this
study
6. The purchase of additional Metro capacity is not included toward current CIP as
negotiations are underway. A reserve has been created towards paying for
additional capacity, but it will not be adequate, and additional debt may have to
be issued to cover the remainder of capacity costs. This debt will be serviced by
the Trunk Sewer Capital Reserve Fund and will not affect rates detailed in this
report.
7. Required revenue increases throughout the study period are based on an analysis
of the sewer utility's revenues and revenue requirements. Our analyses indicate
sewer utility revenues will require the following increases for FY 07-08 through
FY 11-12. There will be an initial 5.0% increase to the currently effective FY 07-08
rates and the subsequent rate increases will be in lieu of the previously adopted
rate increases.
Effective Date Adopted Rate Proposed Rate
Increases Increases
July 2005 7.5 Percent
July 2006 7.5 Percent
July 2007 7.5 Percent
January 2008 - 5.0 percent
July 2008 3.5 Percent 9.9 percent
July 2009 3.5 Percent 9.9 percent
July 2010 3.5 percent
July 2011 3.5 percent
8. A cost of service approach is used to develop rates for sewer service. This means
that customers are charged based on their proportional usage of facilities. The
proposed rates are consistent with State Water Resources Control Board (SWRCB)
guidelines and recognized rate industry standards as described in the Wastewater
Environment Federation (formally Wastewater Pollution Control Federation) rate
manual. Rates are set to recover the cost of service (maintenance, operation and
treatment). Wastewater treatment costs are dependent on the quantity and quality
of the effluent that is treated at the plant. In the San Diego Metro system, the
quality of the effluent is measured by two components; chemical oxygen demand
(COD) and total suspended solids (TSS). Consequently, rates are developed using
uniform unit costs for volume, chemical oxygen demand (COD) and total
suspended solids (TSS). These are applied to loadings and demands for service
from each customer category. The resulting cost of service rate schedule is based
on a uniform cost of service and recognizes different loadings for each customer
class.
9. Based upon results from the detailed cost of service study for the FY 07-08
through FY 11-12 test years, the proposed schedule of sewer rates shown in Table
ES-3
14-16
an
Executive Summary
17 have been developed to recover the utility's cost in an equitable and practical
manner from all customers served. The proposed rates have higher fixed charges
and volume charges than the rates previously adopted and scheduled to go into
effect. The rates currently scheduled to go into effect will not produce the
necessary level of revenue.
10. Based on the findings of a recent City staff review of the historical records (i.e.,
findings of previous monitoring efforts, required improvements) and cost of the
required improvements, it is recommended that the Sewer Facilities Replacement
Fee be amended as follows: for all users the fee will be set at $0.18 per HCF.
Single-family users will no longer be charged a flat fee of $1.97 and for multi-
family/non-residential users the fee will be increased from $0.11 to $0.18 per HCF.
11. The average single-family residential (SFR) customer is estimated to have an
average monthly water usage of 10 hundred cubic feet (HCF) or 120 HCF per year.
Table 17 shows a comparison of typical SFR monthly sewer bills under the
scenarios reviewed in this study.
Briefly, the average household pays $34.30 per month under the existing rates.
The rate structure changes proposed in this study incorporate cost of service
restructuring and results in an average monthly FY07-08 SFR bill of $34.26. This
means that a typical single-family residential customer will pay $0.04 per month
less under the proposed rates than under the adopted rates due primarily to the
reduction of the return factor as discussed below and the reduction of the sewer
facilities replacement fee for residential users. Detailed charges for other SFR
accounts with varying water usage are shown in Table 17.
12. Each customer class was assigned a return factor based on the average amount of
water that is conveyed through the sewer system. In previous studies, single-
family residential customers were billed as if 100 percent of the water entering
their residence was returned to the sewer system. Some of the water used by
single-family residential customers, even in winter, does not go back into the
sewer system due to landscape irrigation and other outdoor uses. By comparing
billed water flows to the sewer flows billed by Metro, the single-family residential
customer class has been assigned a 90 percent return factor in this study reflecting
the assumption that only 90 percent of water used will be conveyed through the
sewer system. Therefore, a typical customer using 10 HCF of water will only be
billed for sewer service based on a 90 percent return factor or 9 HCF. This
reduction in billed volume is the reason for the reduction in the typical SFR bill.
13. The City of Chula Vista bills its customers in three different ways. Customers
under Otay Water District's (Otay) jurisdiction are billed for water and sewer
services monthly on the same bill by Otay. Customers in Sweetwater Authority's
(Sweetwater) jurisdiction who reside in the pre-annexation area are billed for
sewer services bi-monthly by the City's Finance Department. The remaining
customers who are in the Montgomery area of the City who are in either
Sweetwater's or CAL-American's jurisdiction are billed for sewer services
ES-4
14-17
1:DM
Executive Summary
annually on the property tax bill by the City's Engineering & General Services
Deparbnent. All these billing units had independent databases that were not
linked. Ultimately the customer data, which was used in the 2005 study, was
assembled from these databases. Through a recent audit of these systems, in
preparation for this new study, it was determined that the baseline customer data
used in the previous study was significantly higher than it should have been.
Consequently, the revenue requirement was spread over more customers than
ultimately existed, resulting in rates that were lower than they should have been,
and lower revenue than projected.
14. In addition, just prior to the 2005 Study, the City of Chula Vista was experiencing
an influx of new development, which seemed to be on track to continue for a
significant amount of time. Unfortunately, shortly after the adoption of the rate
plan, development peaked and went into a significant downturn, which seems
inclined to continue for the next few years. That has ultimately impacted the
revenues for the past two years. Consequently, the customer data used in this
study is significantly different from the previous study. The updated data
indicates that the projections of customer data (Le., number of customers and
billable flow) were significantly higher than what actually occurred, which further
impacted the revenues. Therefore, the combination of the inadequate rates and the
decline in the growth rate resulted in fewer paying customers, lower sewage
volume, and consequently lower than expected revenue for the utility. Residential
single-family growth has dropped from 5 percent to 1.15 percent. This has
resulted in a decline in expected revenues of approximately $2 million in FY07-08
and some $17.5 million over the period analyzed. Had the baseline customer data
been accurate, and had growth continued as previously predicted, the adopted
rates would have been adequate to cover expenses.
65000
60000
I!!
" 55000
E
0
-
.. 50000
:l
(.)
-
0 45000
~
"
.<:l
E 40000
:l
z
35000
30000
s;:,"" s;:,~ s;:,<' s;:,'o ~ s;:,'o s;:,'ll ,,<:> ,," ,,'j,
'j,G 'j,G rf 'j,G 'j,G G 'j,G 'j,<:> ~ 'j,<:>
'];
Year
-+- Current Model
-+- Prior Model
Figure ES-1 - Previous and Current Study Estimates - Number of Customers
ES-5
14-18
tDM
Executive Summary
15. As a result of not meeting revenue projections, expenses have exceeded revenues
and operating reserves are declining. Figure ES 2 below illustrates the difference
between current and previous study estimates. The lower line (red) reflects
revenue estimates based on adopted rates from the previous study, and the higher
line (green) reflects revenue estimates based on proposed rates for the current
study.
40.0
35.0
30.0
. 25.0
!!
.
Q 20.0
c
~ 15.0
;;;
10.0
5.0
0.0
2008
2009
2011
2012
2010
Fiscal Year
r::::::::J O&M Expense (Last Study)
......Re-.enuewith7.5% increases (Last Study)
I!::::l!I Q&M Expense (1his Study)
....-Re\9!lue with 5% increases (This Study)
Figure ES-2 - Previous and Current Study Estimates - Revenues & Expenditures
16. Another important element that was taken into consideration in establishing the
revenue requirements is the restoration of a healthy operating reserve balance. The
study determined that with the projected revenue increases, reserves would be at
minimal levels for the next two years but begin a steady process of returning to
recommended levels after that. The indicated minimum reserve level has been set
at a 90-day working capital balance, typical for utilities. That amount is roughly
equivalent to the City's quarterly payment to Metro and also allows for an
emergency reserve. Bond rating agencies indicate reserves closer to 180 days are
typical for utilities with higher bond ratings.
9.0
9.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2006 2009
2011
2012
2010
Year
_ Cumulati-.e Operating Fund Balance -+- Minimum Desired Balance
Figure 2 Target Reserves vs. Actual Reserve Balance
ES-6
14-19
CDU
Executive Summary
15. A 5 % mid-year increase in FY 07-08 will assure revenues will be adequate to meet
expenses and start replenishing reserves. Due to Proposition 218 requirements, a
lead-time of several months is needed to comply with all regulations.
Consequently, rates are not anticipated to go into effect until December of 2007.
Proposed Rate Schedule
Shown below is a proposed rate schedule for the next five years. However, we
recommend only rates to be effective January 1, 2008 and Fiscal Years 2008-2009 and
FY 2009-2010 be approved at this time.
TABLE 16
Proposed Rate Schedule for Fiscal Years 2008 Through 2012
2008 2009 2010 2011 2012
Meter Monthly Service Charge (1)
~ $/month $/month $1rnonth $1month $/month
Single-Family Residential 7.35 8.00 8.73 9.01 9.01
All Others
518 6.65 7.30 8.03 8.31 8.31
314 5.65 7.30 8.03 8.31 8.31
1 11.08 12.17 13.38 13.85 13.85
11/2 22.16 24.35 26.76 27.70 27.70
2 35.45 38.96 42.81 44.31 44.31
3 66.47 73.05 80.28 83.09 83.09
4 110.78 121.74 133.79 138.48 138.48
6 221.55 243.48 267.59 276.95 276.95
8 354.48 389.57 428.14 443.13 443.13
Volume CharQe (1)
$/hcf $/hcf $/hcf $/hcf $Ihcf
Residential
Single~Famjly 2.99 3.27 3.57 3.69 3.82
Multi-Family 3.05 3.33 3.63 3.75 3.88
Mobile Homes 3.05 3.33 3.63 3.75 3.88
Non-Residential
Commercial ~ Low 3.05 3.33 3.63 3.75 3.88
Commercial - Medium 4.13 4.52 4.94 5.10 5.27
Commercial- High 6.29 6.89 7.55 7.80 8.07
Special Users 2.98 3.33 3.63 3.75 3.88
(1) Includes the Sewer Facilites Replacement Fee and Storm Drain Fee
Typical Bills
The table below shows residential bills under proposed rates for various levels of
winter periods water usage. The table recognizes that effective January I, 2008
residential users will be assigned a 90% return factor to provide an allowance for
winter period irrigation usages. Figure ES-3 shows the distribution of residential
customers by usage levels from I hcf to 20 hcf. The figure shows that the average is
not only 10 hcf but the largest number of users have a sewer bill based on 10 hcf.
ES-7
14-20
1:DM
Executive Summary
TABLE 17
Comparison of Typical Single-Family Residential Monthly Sewer Bills
(1) (2) (3) (4) (5) (6) (7)
FY 2008 FY 2008 FY 2009 FY 2010 FY2011 FY 2012
Adopted Proposed Proposed Proposed Proposed Proposed
Usaae Charae Charae Charae Charae ~ ~
hcffmo. $ $ $ $ $ $
0 9.00 7.35 8.00 8.73 9.01 9.01
1 11.53 10.04 10.95 11.94 12.33 12.44
2 14.06 12.73 13.89 15.16 15.66 15.88
3 16.59 15.42 16.83 18.38 18.98 19.31
4 19.12 18.11 19.77 21.59 22.30 22.75
5 21.65 20.80 22.71 24.81 25.63 26.18
6 24.18 23.49 25.65 28.03 28.95 29.61
7 26.71 26.18 28.59 31.24 32.27 33.05
8 29.24 28.87 31.54 34.46 35.60 36.48
9 31.77 31.57 34.48 37.68 38.92 39.92
10 34.30 34.26 37.42 40.89 42.24 43.351
11 36.83 36.95 40.36 44.11 45.57 46.78
12 39.36 39.64 43.30 47.33 48.89 50.22
13 41.89 42.33 46.24 50.54 52.21 53.65
14 44.42 45.02 49.18 53.76 55,54 57.09
15 46.95 47.71 52.13 56.98 58.86 60.52
16 49.48 50.40 55.07 60.19 62.18 63.96
17 52.01 53.09 58.01 63.41 65.51 67.39
18 54.54 55.78 60.95 66.63 68.83 70.82
19 57.07 58.48 63.89 69.84 72.15 74.26
20 59.60 61.17 66.83 73.06 75.48 77.69
6,000
~
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5,000
4,000
'" ~
a:
w ~ re .
'" 8 "
" ~ " "
... . "
03,000 . ... ~
a: " .
w ... ... .
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2,000 ..
~- ~- N
. ~ .
g. .. ~
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1,000 "
0
, , , . " . , . . ,0 " '" " ~ ," ., ~ " '" '"
USAGE (HeF)
Figure ES-3- Distribution of Customers at Each Level of Usage'':!
1 New customers who do not have a "winter usage history" are set up as "an Average" customer - 10
HCF.
IThe City has a "Cap" of 20 ReF, therefore all customers who have a "winter average" of 20 RCF aT
above are billed for only 20 HeF.
ES-8
14-21
COM
Executive Summary
Rate Comparisons
CDM performed a survey of wastewater charges in cities in San Diego County and
the results are presented in Figure 3 below. The figure clearly shows rates in Chula
Vista are on the low end in the County.
70.00
60.00
50.00
40.00
i
"0
Q
30.00
20.00
10.00
0.00
tP _"'~ ~<;:o . o~ '114. d-'
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cf'",'lt. CJ'Ii ~ 4' <l &"....-
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ES-9
14-22
COM
Section 1
Introduction
1.1 Background
The City of Chula Vista is the sewer and storm drain service provider to the
residences and commercial enterprises in its service area. The city is located eight
miles south of the city of San Diego and seven miles north of the Mexico border and
covers approximately 50 square miles. The city has grown at a rapid pace, primarily
due to new development on its eastern side in addition to in-fill development on the
west. Recently growth has slowed, however.
Wastewater generated in the city is collected and sent to treatment facilities in Point
Lorna and South Bay operated by the City of San Diego Metropolitan Wastewater
Department (Metro). The City is billed by Metro based on the wastewater flow and
strength sent to these treatment plants.
In providing sewer service, the City incurs considerable expense related to the
ongoing operating and capital needs of the utility. Operating and capital expenditures
change annually because of the need for repairs and replacements to existing facilities,
the need to improve service to meet more stringent state and federal environmental
compliance requirements, and to stay abreast of inflationary trends. The City, in
recognition of the importance of financially planning for the costs to replace, improve,
and operate the sewer utility, has engaged Camp Dresser & McKee to perform a
comprehensive update to the sewer cost of service and rate study performed in 2005.
The City's priorities in the coming years include the acquisition of additional
treatment capacity. The City is currently evaluating a variety of- options for meeting
this need, some of the options being considered include a.) purchase or lease of
additional treatment capacity rights from a member agency or agencies in the Metro
system, b.) construction of an independent wastewater reclamation facility or c.)
facilitating the upsizing or acceleration of planned Metro treatment facilities to
accommodate the City's needs.
Although not part of this rate analysis given alternate funding sources, in addition,
the City also has plans for on-going upgrades and improvements of its municipal
sewer system. All these projects are included in the City's five-year capital
improvement program. A major challenge will be to balance the requirements of
expanded infrastructure with available City revenues. All planned expenditures will
need prioritization to assure that financial resources are used in the most effective
way. The City will also conduct a level of service review to ensure that the level of
service being provided is optimized and that available resources are used judiciously.
1-1
14-23
CDM
Section 1
Introduction
Sewer Service Charge
The City of Chula Vista's current Sewer Service Charge is made up of three different
fees; the Sewer Service Fee, the Storm Drain Fee and the Sewer Facilities Replacement
Fee as illustrated in the diagram below. Consequently, revenue generated by the
City's Sewer Service Charge is distributed between three separate funds. These
separate fees and funds are detailed as follows:
Sewer Fees Relationship Diagram
Sewer Service Fee
Varies
Sewer Service Charge
I
I
Storm Drain Fee
SFD $0.70/Month
MFDIComm $O.06/hcf
I
I
Sewer Fdties Replacement Fee
SFD $1.97/Month
MFDIComm $O.11Ihcf
I
I
Sewer SelVice Fund
City M&O and Metro Exp
Storm Drain Fund
Storm DrainlNPDES
Sewer Facility Replacement Fund
Sewer Rehab Projects
The Sewer Service Fee
This fee is comprised of two parts and is the focus of the study. There is a fixed
monthly fee paid by all users and a variable fee based on water consumption. The
fixed monthly fee is based on water meter size and currently ranges from $6.33 to
$337.60 per month. For the variable portion of the fee, residential and low-strength
commercial customers are charged $2.53 per Hundred Cubic Feet (HCF). Medium-
and high-strength commercial customers are charged $3.38 and $5.12 per HCF
respectively; while special user charges are individually calculated for each customer.
Sewer Service Revenue Fund - (Fund 41410)
Revenues derived from Sewer Service Fees are deposited into the Sewer Service
Revenue Fund. Funds in the Sewer Service Revenue account are used solely for the
purposes of maintaining and operating the municipal wastewater collection system,
any collection costs and wastewater treatment charges by the City of San Diego
Metropolitan Wastewater. Maintenance and operation is as dictated in Municipal
Code Section 3.20. This fund is considered the operating fund for purposes of this
study and will be discussed in detail later in the report.
Storm Drain Fee
While not part of this rate review, information regarding this fee is provided to
increase understanding of customer billing. This fee recovers a portion of the cost of
maintenance and operation of the storm drain system through two types of fees.
Single-family customers are charged a flat monthly fee, which is currently $0.70 per
month. All other customers are charged a monthly fee based on water consumption
that is currently $0.06 per HCF. This fee is collected as part of the monthly sewer
1-2
14-24
CDIIlI
Section 1
introduction
service charge. Since this fee was established in 1991, the fee has never been increased
due to the constraints of Proposition 218. Consequently, the fee does not generate
sufficient revenues to meet the obligation of the fund.
Storm Drain Fund (Fund 30110)
Revenues in the Storm Drain Fund are derived from Storm Drain Fees paid by all
users for the operation and maintenance of the City's Storm Drain System including
underground drainage systems charmels and ditches. Also competing for this limited
fund source are costs associated with complying with the requirements of the
National Pollutant Discharge Elimination System (NPDES). Because fee revenue is not
sufficient to meet budgetary requirements, the general fund currently subsidizes
storm drain activities. Details of the Storm Drain Fund are shown in the table below.
Storm Drain Fund
Description 2008 2QQ2 .<.Q.1Q 2011 2012
$ $ $ $ $
Source of Funds
Funds on Hand at Beginning of Year (374.200) (566,500) (753.100) (934,000) (1,109,100)
Stann Drain Fees (Transfer from Operating) 546,205 551,904 557,653 563,444 569,332
Pennit Fees 400,000 400,000 400,000 400,000 400,000
Total Funds Available 572,005 385,404 204,553 29,444 (139,768)
Use of Funds
Fees and Services 342,100 342,100 342,100 342,100 342,100
Transfer to GENERAL FUND 343,700 343,700 343,700 343,700 343,700
Transter to REPLACEMENT FUND 179,726 179,726 179,726 179,726 179,726
Other Transfers Out 273,000 273,000 273,000 273,000 273,000
Total Use of Funds 1,138,526 1,138,526 1,138,526 1,138,526 1,138,526
Funds on Hand at End of Year (566,521 ) (753,122) (933,973) (1,109,082) (1,278,294)
[1] Interest on available storm drain fund computed at a 3.5% annual interest rate
Sewer Facilities Replacement Fee:
This fee is not the subject of the CDM study however an internal review has resulted
in recommendations outlined below. This recovers the cost of sewer rehabilitation
and replacements through two types of fees. Single-family customers are currently
charged a flat monthly fee, which is currently $1.97 per month. All other customers
are charged a monthly fee based on water consumption that is currently $0.11 per
HCF.
Based on the findings of a recent City staff review of the historical records (i.e.,
findings of previous monitoring efforts, required improvements) and cost of the
required improvements, it is recommended that the fee be amended as follows: for
single-family residential users the flat monthly fee of $1.97 will be removed. Under
the proposed rate schedule, all users, including single-family, multi-family and non-
residential users, will be charged $0.18 per HCF.
1-3
14-25
Section 1
Introduction
Sewer Facilities Replacement Fund (Fund 42800)
Revenues in the Sewer Facilities Replacement Fund are derived from Sewer Facilities
Replacement Fees paid on a monthly basis by all users connected to the City's
wastewater collection system. This fund is primarily used for the replacement and
rehabilitation of deteriorating municipal facilities. This fee is collected on a monthly
basis with the Sewer Service Charge. Details of the Sewer Facilities Replacement Fund
are shown in the table below. The table reflects the proposed changes in the Fees.
Sewer Facility Replacement Fund - 42800
Line Fiscal Year Ending June 30
No. Description 2008 ~ 2010 2011 2012
$ $ $ $ $
Source of Funds
1 Funds on Hand at Beginning of Year 3.382.608 1.689.548 1,781,406 1,884,944 2,000,262
2 Connection Fees 0 0 0 0 0
3 Sewer Facility Replacement Fees 1,392,368 1,406,632 1,421,013 1,435,491 1,450,228
4 Transfer in from Loan Payments 179,726 179,726 179,726 179,726 179,726
5 Interest Income 205,358 60,700 64,200 68,000 72,200
6 Total Funds Available 5,160,060 3,336,606 3,446,344 3,568,162 3,702,415
Use of Funds
7 Major Capital Improvements [2] 3,321,300 1,400,000 1,400,000 1,400,000 1,400,000
Bond Reserve Account Requirement 0 0 0 0 0
8 Automotive Equipment 0 0 0 0 0
9 Transfer out to Sewer Service Rev 149,212 155,200 161,400 167,900 174,600
10 Transfer out to General Fund
11 Tolal Use of Funds 3,470,512 1,555,200 1,561,400 1,567,900 1,574,600
12 Funds on Hand at End of Year 1,689,548 1,781,406 1,884,944 2,000,262 2,127,815
[1} Interest on available capital funds computed at a 3.5% annual interest rate.
[2} Shown on Table 3 as funding source "R",
1.2 Purpose
The purpose of this sewer rate study is to:
. Review and analyze the City's historical data and project future requirements and
resulting revenue needs;
. Plan for financing of the municipal capital improvement program proposed by the
City;
. Meet the financial requirements of system improvements;
. Analyze the cost of providing service by customer class;
. Develop an equitable sewer rate structure based on proper customer classification;
1:DM 1-4
14-26
1::DM
Section 1
Introduction
. Design sewer rates based on cost of service, which will generate adequate
revenues to support revenue requirements.
1.3 Scope of the Study
This 2007 update to the 2005 rate study includes three phases: Financial Planning,
Cost of Service Analysis, and Rate Design.
. Financial Planning: Revenue requirements are projected for a five-year period
from FY 07-08 through FY 11-12. Financial planning involves estimation of annual
O&M and capital expenditures, inter-fund transfers, annual reserve requirements,
operating and capital revenues, and the determination of required annual sewer
service revenues from rates and charges.
. Cost of Service: Cost of service involves the apportioning of annual revenues
required from rates to the different user classes in proportion to their demands on
the sewer system.
. Rate Design: Rate design involves the development of a fixed and variable
schedule of sewer rates for each of the different user classes to reflect the required
revenue adjustments made during the financial planning phase.
This report includes six sections besides the Executive Summary and the Introduction.
Sections 2 through 7 present study results. These sections discuss in detail the
financial planning phase, cost of service analysis, and rate design phase.
1-5
14-27
1:DM
Section 2
Revenue
Revenue for the sewer utility is derived from sewer service charges, industrial waste
permits, miscellaneous revenues, and interest income from operations. This section
provides a description of those revenue sources.
2.1 User Classifications and Customer Growth
The level of future revenue from user fees the City can expect to receive is a function
of the number of customers served, the quantity of sewer flow, and the level of
current rates. Development of projected revenues under existing rates provides the
benchmark upon which to evaluate the need for revenue adjustments throughout the
five-year study period,
Seven classes of customer are recognized. They include single-family, multi-family,
mobile homes, low-strength commercial, medium-strength commercial, high-strength
commercial and special users (high-volume users and variance accounts). The study
assumes modest future growth in the City service area. Table 1 shows the projected
number of customer accounts, wastewater flow, and revenue assuming existing rates
for FY 07-08 to FY 11-12.
TABLE 1
Projected Number of Accounts, Volume, and Revenue
Revenue
Fiscal Average Total Under
Year Ended Number of WW Existing
June 30 Accounts Volume Rates
he! $
2007 47,020 8,172,900 23,526,500
2008(1) 47,550 8,256,900 25,469,000
2009(1) 48,080 8,342,200 25,730,200
2010(1) 48,620 8,428,100 25,993,700
2011 (1) 49,170 8,514,700 26,259,200
2012(1) 49,720 8,602,800 26,529,000
(1) Projected revenue under adopted FY 07-08 rates.
The City of Chula Vista also provides a low-income rate, which is 70% of the single-
family residential adopted rate. This rate is available to single~family residential users
who meet the City's income requirements for "low-income slatus." The City uses the
Federal Department of Housing and Urban Development's (H.U.D) guidelines as a
basis of approval.
2-1
14-28
aiM
Section 2
Revenue
2.2 Billing Method
The City strives to establish sewer rates that are fair and equitable, so the billing
method for each user class is designed to match its estimated cost of service. Rates
have been designed to recover fixed costs of maintenance and operation of the
system, which is more dependent on the size of the collection system than on the
amount of flow in the system. The rates also recover variable costs for wastewater
treatment, which is based on the quantity and quality of the "treated sewage.
Consequently, users pay a sewer service charge that is made up of two components: a
fixed service charge and a variable commodity charge. Together these two
components comprise the customer's total Sewer Service Charge.
Fixed Service Charge: This charge applies to all users including residential,
commercial & industrial, and institutional users. Based upon meter size, the charge
allows the City to break out and recover the fixed costs of service that the City incurs
irrespective of the amount of flow that goes through the system (e.g., billing and
administrative costs, certain portions of the maintenance costs and debt service).
Commodity Charge: This charge varies and is dependent on the amount of
wastewater discharges (as measured by water used) and the user's strength
classification
Monthly Sewer Service Fee: Fixed Service Charge + Commodity Charge
Commodity Charge: (Sewer Rate x Rate of Return x Water Used)
The Rate of Return is the percentage of the amount of water used by a user that is
ultimately discharged into the wastewater collection system.
Single-Family Residential Users
Single-family residential customers - These customers pay a uniform monthly fixed
service charge based on meter size (assumed to be 5/ 8ths inches for all single-family
residential customers -SFR). The fee is currently $6.33/ month exclusive of storm drain
and sewer facilities replacement fees. In addition, variable commodity charge based
on water consumption is paid. The City of Chula Vista uses a customer's "Winter
Average" to set their sewer service fee for the fiscal year. This concept is explained in
greater detail below.
Winter Water Usage Approach
In July 2003, the Chula Vista City Council approved a major change in the way the
Sewer Service Charge is determined for single-family homes. The structure was
changed from a flat-fee structure where all homes paid the same fee, to" a
consumption-based structure, which was based on the amount of water used which
typically correlates to the amount of sewage generated. Under this new structure, the
sewer service charge is determined by using the lowest average water consumption of
two consecutive winter months; the winter months are the six months from
2-2
14-29
CDII
Section 2
Revenue
November through April. The underlying assumption being that most customers
significantly reduce or turn off irrigation sprinklers during the winter season.
Therefore, the water consumption during that period generally correlates to the
amount of sewage discharged, hence the use of this data as the basis of the rates.
A previous analysis of the City's sewer customer billing data indicated that the City's
current approach of billing single-family residential customers the lowest two months
of water usage is a fair and equitable method and is used by a majority of large
utilities in the United States. However, since a significant number of customers seem
to continue to use water outside the home even in the lowest use winter months, it is
therefore appropriate to bill for less than the total amount of the water used during
the winter period. A 90 percent return to sewer factor (return factor) is used to
develop the proposed rates shown in this report as compared to the previous rate
study which utilized a 100 percent return factor. This reduced return factor is
validated by a mass balance calculation of billed sewer volume conveyed to Metro
and customer billed estimates.
In addition, the City also has a cap on billable flow for single-family residential
customers. Based on the findings of a previous study, the City adopted a cap of 20
HCF. That means that single-family residential customers are capped at 20 HCF per
month. The cap was put in place to avoid charging single-family residential customers
for any residual irrigation usage that may have occurred during the winter period.
The study determined that with a 90% rate of return and a cap of 20 HCF for single-
family residential customers and an appropriate rate of return for all other user
classes, the total amount of billable flow approximately equals the amount of flow
treated at the plant ("mass balance").
Multi-Family Users
Multi-family users pay a fixed service charge based on the meter size and a variable
commodity charge that is calculated either of two ways:
a. If the individual units do not have their own meters, then the entire complex is
billed as a multi-family location on a "Master Meter" with a rate of return of
79% (84 % for Mobile Homes).
b. If each unit has its own individual meter, it is billed as single-family home (Le.,
based on winter average).
Commercial Users
Commercial users also pay a fixed service charge based on their meter size and a
variable commodity charge that is based on the strength classification of the user.
Commercial users are classified as low-strength, medium-strength or high-strength
users. In addition, the billable flow for commercial users assumes a rate of return of
90% of water consumed.
2-3
14-30
mM
Section 2
Revenue
Special Users
There are two types of special users: High-Volume Users and Variance Accounts are
both discussed in greater detail below.
High-Volume Users:
The State Water Resource Control Board guidelines for agencies establishing revenue
programs such as this require that commercial and industrial customers who
discharge over 25,000 gallons per day (gpd) of wastewater have their sewer service
charges determined individually based on flow as well as Chemical Oxygen Demand
(COD) and Total Suspended Solids (TSS) or estimated strength.
The City currently has seven (7) accounts in this classification.
Prudential Overall Supply
Scripps Hospital
Sharp Medical Center
County of San Diego
Fredericka Manor
Laura Smith
B.F. Goodrich
Sewer Variances
The City also has customers who have been granted special rates based on other
criteria because their recorded water usage did not reflect sewage discharged. In
accordance with the provisions of Chula Vista Municipal Code, these customers pay
processing fees and go through an application process where each component of their
sewer discharge is investigated and a special rate based on cost of service is
determined by staff. The City currently has 11 accounts in this classification.
Duke Energy
First Church of Christ
Sweetwater Union High School
Canyon Community Church
Inland Industries
Ecology Auto Parts
Paseo Del Rey Church
CV Elementary Schools
Southwestern College
Santa Fe Tortilleria
Otay Landfill
2.3 Existing Sewer Rates
The existing rate schedule is presented below in Table 2.
2-4
14-31
~M
Section 2
Revenue
TABLE 2
Existing Sewer Rate Schedule
FY 2008
Monthly
Service
~
$/mo
Single-Family Residential
9.00
All Others
5/8
314
1
11/2
2
3
4
6
8
9.00
9.00
13.22
23.77
36.43
65.97
108.17
213.67
340.27
Volume
Charae
$/hcf
Residential
Single-Family
Multi-Family
Mobile Homes
Non-Residential
Commercial - Low Strength
Commercial- Medium Strength
Commercial- High Stength
Special User
2.53
2.53
2.53
2.53
3.38
5.12
Varies
In addition to the Sewer Service Fees, all users pay a Sewer Facilities Replacement fee
and a Storm Drain Fee, which are all integrated, into the monthly Sewer Service
Charges. All SFR customers are currently charged $1.97 a month, while
MFDjCommercial customers are billed $O.l1jHCF. SFR customers are billed a storm
Drain Fee of $0.70 a month while MFDjCommercial are billed $0.06jHCF.
2.4 Sewer Service Fee Revenue Under Existing Rates
Revenue for financing the City's sewer system is derived principally from sewer
service charges. Other revenues are received from miscellaneous revenues and
interest income.
2.4.1 Revenue Under Existing Rates
Revenue under existing rates is obtained by applying the current rate schedule,
shown in Table 2, to the projected number of customers served by the City and
estimated wastewater flow. Table 1 shows that the City will collect approximately
$25,469,000 in FY 07-08 for sewer services, excluding Storm Drain Charge and Capital
Facilities Charge revenues.
2-5
14-32
CDM
Section 2
Revenue
2.4.2
Other Revenues
Other revenue sources include industrial waste permits; pump station maintenance
fees, reimbursements, and miscellaneous revenue. Total revenue from these sources is
estimated to be approximately $393,100 in FY 07-08.
2.4.3
Interest Income
Interest income varies from year-to-year depending on the investment of available
monies in the Sewer Operating Fund. Investment income projections are based on
available fund balances using an average annual interest rate of 3.5 percent
throughout the study period. Estimated interest income for FY 07-08 totals $121,700.
2-6
14-33
Section 3
Capital Improvement Program
The City has developed a sewer utility capital improvement program (CIP) to address
municipal sewer systems need in terms of projects necessary to bolster and reinforce
its existing infrastructure facilities. A summary of the sewer capital improvement
program, which reflects the planned expenditures for each year during the study
period, is shown in Table 3. The program is estimated to total $9,101,300 for FY 07-08
through FY 11-12; however, there are projects that may be carried over from FY 06-07.
Sewer projects include the purchase of additional Metro capacity, sewer replacements,
and annual upgrades and improvements to the sewer system.
Since these capital costs are not going to be funded from the operating fund directly,
they are provided for informational purposes only and will not affect rates
TABLE 3
Proposed Major Capital Improvement Program
Uno Funding Rscal Year EndillQ June 30
No. DesaiDtion Source (1) 2008 2009 2010 2011 2012 Total
$ $ $ $ $ $
1 Sewor Facili4' Replacement Fund
2 Gls.orthophotographyfTopography R 17.000 17,000
3 G St Pump Station Improvements R (1,000,000) (1,000,000)
4 _ Rehabilitalion FY05-06 R (100,000) (100,000)
5 _ Rehabilitalion FY06-07 R (187,473) (187,473)
6 InIICfN and Infiltration Study R 174,300 174,300
7 G St _ betv.een 2nd and 4th R 1,750,000 1,750,000
8 CSt__4th and 5th R 600,000 600,000
9 Garrett St Sev-.er betwgen Davidson & E: R 480,000 480,000
10 Ovic Center Renovations-PhaSe 3 R 80,000 80,000
11 __ Rehabilitation FY 07-08 R 1,507,473 1,507,473
12 Future Sev.er Rehabilitation R 0 1,400,000 1,400,000 1,400,000 1,400,000 5,600,000
0
13 Trunk Sewor Fund 0
14 Main 51 betv.een Hilltop ard Fresno T 30,000 30,000
15 Special Sewer Fund 0
16 ClP Mgmt and Equip Purchase SP 50,000 50,000
17 CIP Advanced f1anrOng SP 100,000 100,000
18 Total 3,501,300 1,400,000 1,400,000 1,400,000 1,400,000 9,101,300
(1) SO= storm [)ain Fund, T=TlU'lkSev.erCapital Reserve Fund, R'" Repla::ement Fl.I'ld, (): Operaing Fund, SP= Spada! SeY.erFund
mM
3-1
14-34
Section 4
Revenue Requirements
Revenue Requirements of the utility consist of operation and maintenance expenses
and annual capital costs. The latter includes debt service, which the utility currently
does not have, and routine capital outlays for equipment replacements.
4.1 Operations and Maintenance Expense
Operation and maintenance (O&M) expense includes the cost of operating and
maintaining sewer collection, treatment and disposal of wastewater, and maintenance
of system facilities. Expenses include the cost of personnel, utilities (gas and electric),
chemicals, and miscellaneous materials and supplies to operate the sewer system on a
routine basis. Expenses also include payment to the General Fund for overhead costs.
Since O&M costs are an ongoing annual obligation of the City, they must be met from
sewer service charge revenue.
Table 4 presents a summary of the projected O&M expenses for the City's sewer
system. The forecasted expenditures are based upon the City's budget and the effect
of inflation in future years. Total operation and maintenance expense, including
capital outlay, is projected to increase from $29,455,400 in FY 07-08 to $34,118,600 in
FY 11-12. The Metro and Spring Valley costs shown on Lines 11 and 12 include both
O&M and capital costs.
TABLE 4
Operations and Maintenance Expense
No.
Description
2008
$
WW Support Services
1 Wastewater Engineering 541,900
2 WW Operations Admin 147,600
3 WW Maintenance 3,590,400
4 Lift Station/Pool Maint. 570,800
S Sewer Billing and Collection 116,300
6 Sewer Service Supplies and Services 112,700
7 Sewer Service Risk Management 50,100
8 Transfer to General Fund 4,587,700
9 Transfer to 03 Refunding COP 21,000
10 Total WW Support Services 9,738,500
11 Metro Cost 17,273,300
12 Spring Valley 736,200
13 Other Professional Svcs. 50,600
14 Clay Water District Processing 356,000
15 Total O&M Expense* 28,154,600
16 Capital Outlay 1,300,800
17 Total O&M Expense 29,455,400
* - Total excludes Capital Outlay
mill
14-35
Fiscal Year Ending June 30
2009 2010 2011 W2
$ $ $ $
552,800 S63,600 574,700 586,000
150,700 153,700 156,800 159,900
3,864,579 3,937,900 4,012,600 4,088,600
582,300 594,000 605,900 618,000
119,300 122,200 125,300 128,500
115,100 117,400 119,700 122,000
51,600 53,100 54,700 56,300
4,679,400 4,773,000 4,868,500 4,965,900
21,500 21,900 22,300 22,700
10,137,279 10,336,800 10,540,500 10,747,900
18,381,000 20,005,000 21,437,600 22,509,500
412,200 134,800 320,000 280,300
52,100 53,700 55,300 57,000
366,700 377,700 389,000 400,700
29,349,279 30,908,000 32,742,400 33,995,400
926,000 423,400 605,400 123,200
30,275,279 31,331,400 33,347,800 34,118,600
4-1
mM
Section 4
Revenue Requirements
4.2 Debt Service Requirements
The City currently does not have any existing outstanding bond indebtedness.
4.3 Transfer of Revenues to the Sewer Facilities
Replacement Fund
As part of the sewer service charge, a sewer facilities replacement fee of $1.97 per
dwelling unit per month is currently charged to residential customers. Non-
residential customers are currently charged $0.11 per HCF of water usage but in no
case less than $1.97 per meter. The rates will change to $0.18 per HCF for all users
effective January 1, 2008. Total revenues collected will be transferred to the Sewer
Facilities Replacement Fund.
4.4 Transfers of Revenues to the Storm Drain Fund
Similar to the sewer facilities replacement fee, the City also has a storm drain fee of
$0.70 per single-family dwelling unit per month. Non-residential customers are
charged $0.06 per HCF of water usage per meter. It is anticipated that the Operating
Fund will make a series of transfers to the Storm Drain Fund matching revenues
collected.
4.5 Bad Debt Write-offs
This study assumes bad debt write-offs of $300,000 annually based on historical
trends. The majority of the write-offs are from customers in the pre-annexation area of
the City who are billed by the City's Finance Department. Since the sewer billing is
not done in conjunction with the water bill, the City does not have the ability to shut-
off water service in order to collect these bills.
4.6 Routine Capital Outlays
Routine capital outlays, which are financed from annual system earnings, include
estimates for vehicle replacements, a new vactor truck, and other additions and
replacements to system equipment.
4.7 Otay Water District Billing and Collection Charges
A portion of the City (primarily east of 1-805) is billed for sewer service by the Otay
Water District ("Otay''). Otay bills the City on a per account basis for providing this
service. It is currently estimated that Otay will bill the City an average of $390,000
over the next 5 years. While this amount is quite significant, there are several benefits
associated with this arrangement. For example since the sewer bill is collected with
the water bill, the City has a low "bad debt" percentage for customers in that area
compared to the other areas where the City does not have a similar arrangement and
has less leverage to deal with delinquent accounts.
4-2
14-36
CDIUI
Section 5
Cash Flow Analysis
5.1 Proposed Revenue Adjustments
To provide for the continued operation of the sewer utility on a sound financial basis,
revenue must be sufficient to meet revenue requirements. This section of the report
analyzes the revenue increases needed to meet future revenue requirements.
The pro forma operations statement or cash flow summary presented in Table 5
provides a basis for evaluating the timing and level of sewer revenue increases
required to meet the projected revenue requirements during FY 07-08 through FY 11-
12. In order to meet projected revenue requirements and to maintain desired
operating and capital reserve fund balances, the following increases are proposed:
Effective Date Increases
January 1, 2008 5.0 percent
July 1, 2008 9.9 percent
July 1, 2009 9.9 percent
July 1, 2010 3.5 percent
July 1, 2011 3.5 percent
The magnitude of the increases shown above has been selected in order for total
sewer revenue to meet revenue requirements and avoid transfers from any other
funds, so that the Sewer Service Revenue fund can remain self-supporting. Estimated
sewer revenue under existing rates is shown on line 1 of Table 5. The annual revenue
shown is the same as in Table 1. Additional operating revenues from any proposed
rate increases are shown on Lines 2 through 7. Other revenues and interest income are
shown on lines 10 through 15.
Operation and maintenance expenses, transfers to other funds, and bad debt
write-offs are shown on lines 18 through 24. Line 19 shows the transfers to the Sewer
Replacement Fund and Line 20 presents the transfers to the Storm Drain Fund
scheduled for each year.
The cash flow indicates the recommended revenue increases will be sufficient to meet
all the needs of the utility throughout the study period with the proposed 5.0 percent
increases effective January 1, 2008; 9.9 percent for the second and third; and 3.5
percent after that It is anticipated that the Operating Fund will be self-sufficient and
no transfers from any other sources will be necessary although reserves are currently
being used to meet revenue requirements. Table 5 shows that annual fund balances
will remain positive but below a minimum desired balance defined as 90 days O&M.
5-1
14-37
CII'tt
TABLES
Operating Fund Flow of Funds
Une
No.
Description
2
3
4
5
6
Revenue:
Wastewater Service Charges Under Existing Rates
Additional Service Charge Revenue Required:
Revenue Months
Increase Effective
5.00% 6
9.90% 12
9.90% 12
3.50% 12
3.50% 12
Year
2008
2009
2010
2011
2012
7
Total Additional Service Charge Revenue
8
9
10
11
12
13
14
15
16
Total Wastewater Service Charge Revenue
Other Revenues
Facilitites Replacement Charge Revenue
Storm Drain Charge Revenue
Relmb - C1P Projects
Transfer In from Swr Facility Repl
Interest Income From Operations [1]
Interest Income From Restricted Reserves [1]
Reimbursement from General Fund
17
Total Operating Revenues Available
18
Revenue Requirements:
Operation and Maintenance Expense
19
20
21
22
23
Debt Service
Transfer to Replacement Fund
Transfer to Storm Drain Fund
Transfer Out to Other Funds
Bad Debt Write-Off.
Routine Capital Outlay
24
Total Revenue Requirements
25
26
Net Operating Funds Available
Beginning Operating Fund Balance
27 Cumulative Operating Fund Balance
28 Minimum Desired Balance [2]
2008
$
25,469,000
636,700
636,700
26,105,700
393,100
1,392,400
546,200
100,000
149,200
121,700
o
150,000
Section 5
Cash Flow Analysis
Rscal Year Endin~ June 30
2009 2010 2011
$ $ $
2012
$
25,730,200 25,993,700 26,259,200 26,529,000
1,286,500
2,674,700
3,961,200
29,691,400
393,100
1,406,600
551,900
o
155,200
42,100
o
150,000
1,299,700
2,702,000
2,969,500
6,971,200
32,964,900
393,100
1,421,000
557,700
o
161,400
76,500
o
150,000
1,313,000
2,729,600
2,999,900
1,165,600
8,208,100
34,467,300
393,100
1,435,500
563,400
o
167,900
142,700
o
150,000
1,326,500
2,757,700
3,030,700
1,177,500
1,218,700
9,511,100
36,040,100
393,100
1,450,200
569,300
o
174,600
216,500
o
150,000
28,958,300 32,390,300 35,724,600 37,319,900 38,993,800
28,154,800 29,349,279 30,908,000 32,742,400 33,995,400
1,392,400
546,200
o
300,000
1,300,800
1,406,600
551,900
o
300,000
926,000
1,421,000
557,700
o
300,000
423,400
1,435,500
563,400
o
300,000
605,400
1,450,200
569,300
o
300,000
123,200
31,694,000 32,533,779 33,610,100 35,646,700 36,438,100
(2,735,700)
4,163,000
1,427,300
7,038,700
[1] Estimated based on 3.5% interest rate.
[2] Estimated at 90 days of operation and maintenance expense.
14-38
(143,479) 2,114,500
1,427,300 1,263,821
1,673,200
3,398,321
2,555,700
5,071,521
1,283,821 3,398,321 5,071,521 7,627,221
7,337,300 7,727,000 8,185,600 8,498,900
5-2
CDIII
Section 5
Cash Flow Analysis
However, the fund balance grows over the five-year plan period. This minimum
desired balance is considered a reasonable working capital balance for a wastewater
utility and is a target that can be used to justify higher bond rating.
Figure 1 shows a graphical summary of the revenue under the proposed rates with
revenue requirements. The figure indicates that revenue under the proposed rates is
not sufficient to cover operation and maintenance and capital expenses for FY 07-08
and that drawdown of reserves will be necessary. However, no appreciable draw
downs are anticipated in FY 08-09 through FY 11-12 once the Operating Fund
becomes self-sufficient
40.0
35.0
30.0
~ 25.0
.l!!
Q
Q 20.0
<
0
.. 15.0
iE
10.0
5.0
0.0
2008 2009 2010 2011
2012
Fiscal Year
I!::!':J Oty's Operating Expense r::::J Metro/Spring Valley Costs
c::::::::I Replacements and Stormwater ___Rate Revenue with increases
Figure 1 Sewer Operating Fund Summary
Figure 2 below shows the projected reserve balances against the desired level of
reserves. The figure shows that with the projected revenue increases reserves will be at
minimal levels for the next two years but begin a steady process of returning to
recommended levels after that.
Maintaining adequate reserves is critical to the successful financial operation of an
enterprise activity such as the Sewer Fund. The indicated minimum reserve level has
been set at a 90 day working capital balance, typical for utilities. That amount is
roughly equivalent to the utility's quarterly payment to Metro and also allows for an
emergency reserve. Bond rating agencies indicate reserves closer to 180 days are
typical for utilities with higher bond ratings.
5.3
14-39
CDM
Section 5
Cash Flow Analysis
9.0
9.0
7.0
f 6.0
.!!
8 6.0
c 4.0
~
i 3.0
2.0
1.0
0.0
2006 2009 2010 2011
Year
2012
_ Cumulatiloe Operating Fund Balance -+- Minimum Desired Balance
Figure 2 Target Reserves vs. Actual Reserve Balance
5-4
14-40
COM
Section 6
Cost of Service Analysis
The cost of service analysis is a critical element in a rate study. The total revenue
requirements net of revenue credits from miscellaneous sources, is by definition, the
cost of providing service. This cost of service is then used as the basis to develop unit
rates for the wastewater parameters and to allocate costs to the various user classes in
proportion to the quantity of wastewater contributed and the strength of wastewater.
In this study, FY 07-08 is referred to as the "test year", therefore, FY 07-08 revenue
requirements are used in the cost allocation process.
6.1 Cost of Service to be Allocated
The annual revenue requirements or costs of service to be recovered from charges for
wastewater service consist of the elements of O&M expense and capital related costs.
O&M expense includes cost directly related to the collection, treatment and disposal of
wastewater, and maintenance of system facilities. Capital related costs represent routine
capital outlays.
The test year cost of service to be recovered from wastewater service charges is
estimated at $26,742,400. As shown in Table 6, the total cost of service comprises net
operating expenses and capital costs are offset by other funds.
TABLE 6
Allocation of Revenue Requirements
Test Year 2008
Line Operating Capital and
],!Q. ~ Other Costs I2li!
$ $ $
Total Revenue Requirements
1 Operation & Maintenance Expense 28,154,600 28,154,600
2 Total Debt Service 0 0
3 . Routine Capital Outlay 1,300,800 1,300,800
. Bad Debt Write-offs 300,000 300,000
5 Transfer To Replacement Fund 1 ,392,400 1,392,400
6 Transfer To Storm Drain Fund 546,200 546,200
7 Subtotal 29,000,800 2,693,200 31,694,000
Less Other Operating Revenue
B Other Revenues 393,100 393,100
9 Reimbursements and Transfers 399,200 399,200
10 Replacement Fee Revenue 1,392.400 1,392,400
11 Storm Drain Fee Revenue 546,200 546,200
12 Interest Income 121,700 121,700
13 Subtotal 1,061,000 1,791,600 2,852,600
Adjustments
,. Adjustment for Annual Cash Balance 2,884,900 (149,200) 2,735,700
15 Adjustment to Annualize Rate Increase (636,700) (636,700)
16 Subtotal 2,248,200 (149,200) 2,099,000
17 Cost of Service to be Recovered from Rates 25,691,600 1,050,800 26,742.400
6-1
1 4-41
Section 6
Rate Design
In determining the annual cost of service revenues required from rates, revenues from
other revenue sources such as miscellaneous revenue, Storm Drain Fee revenue, and
Replacement Fee revenue are deducted from the appropriate cost element. In addition,
adjustments are made to account for cash balances.
6.2 Wastewater Parameters
The total cost of sewer service is analyzed by system functions in order to equitably
distribute costs of service to the various classes of customers.
For this analysis, sewer utility costs of service are assigned to three basic functional cost
components (wastewater parameters)
~ volume related costs
~ strength related costs
~ customer related costs
Functional cost components relate to services provided and not activities of the utility
as set out in the O&M budget.
6.2.1
Volume Related Costs
. Volume costs are those which vary directly with the quantity of wastewater
contributed and include:
. Capital costs related to the investment in the system facilities which are sized on
the basis of wastewater volume,
. O&M expense related to those facilities, and
. The expense of treatment chemicals and electric power associated with the
volume of wastewater treated.
6.2.2 Wastewater Strength Costs
. Consist of the O&M expense and capital costs related to wastewater treatment
facilities designed to remove pollutants, (Metro)
. Are based principally on the amount of pollutants in the wastewater.
. Are further separated into COD and TSS.
6.2.3
Customer Costs
. Customer costs are those, which tend to vary in proportion to the number of
customers served.
. These include billing and collection expenses and general administration.
gDM ~2
14-42
CIlIUI
Section 6
Rate Design
The separation of costs of service into these principal components provides the means
for further allocation of such costs to the various customer classes on the basis of their
respective volume, strength, and customer requirements for service.
General Fund Transfers were previously allocated entirely to customer costs, but after
changes to the accounting system due to the conversion to an enterprise fund
allocation adjustments had to be made. Costs were rolled up differently and therefore
costs that were previously volume related were rolled into the general fund transfer.
To compensate for this the General Fund Transfer has been split between volume and
customer costs. Those are the costs incurred by the City for transporting wastewater
to Metro and billing customers which City overheads support.
6.3 Allocation to Wastewater Parameters
The allocation of O&M and capital costs to the wastewater parameters selected
involves the following:
. Identification of functional O&M and capital costs of the wastewater system
. Determination of O&M and capital cost allocation percentages for the wastewater
parameters
O&M expense items are allocated directly to appropriate cost components, while the
allocation of capital costs is based upon a detailed allocation of related capital
investment. The separation of costs into functional components provides a means for
distributing such costs to the various classes of customers on the basis of their
respective responsibilities for each particular type of service.
6.3.1 Allocation of Capital Costs
Capital costs include routine capital improvements. A reasonable method of assigning
capital costs to functional components is to allocate such costs on the basis of the
capital investment.
All of the City's facilities are designed only to convey wastewater. The City currently
owns no facilities designed to treat wastewater. Hence all capital costs are allocated
100% to the volume component.
6.3.2
Allocation of Operating Expense
Projected net operating expense for the test year is allocated to cost components on
the basis of an allocation of O&M expense as shown in Table 7. O&M expense for the
test year is allocated to cost components in the same manner as capital costs, based on
the design criteria of the plant facilities. The allocation of Metro costs is based on
annual billing.
6-3
14-43
Section 6
Rate Design
6.4 Allocation of Cost to Customer Classes
The total cost responsibility of each customer class may be estimated by distributing
the cost of service allocated to functions in Tables 7 among the classes based on the
respective service requirements of each class.
TABLE 7
Allocation of Operation and Maintenance Expense to Functional Cost Components
Test Year 2008
Strength
Line Total Suspended
No. Cost Component Exoense Volume COD Solids Customer
$ $ $ $ $
WW Support Services
1 I/'NJ Engineering 541,900 0 0 0 541,900
2 WW Operations Admin 147,600 0 0 0 147,600
3 WW Maintenance 3,590,400 2,692,800 0 0 897,600
4 Lift StationlPool Maint 570,800 281,404 138,134 151,262 0
5 Sewer Billing and Collection 116,300 0 0 0 116,300
6 Sewer Svc Supplies and Services 112,700 0 0 0 112,700
7 Sewer Svc Risk Management 50,100 0 0 0 50,100
s Transfer to General Fund 4,587,700 1,940,597 0 0 2,647,103
9 Transfer to 03 Refunding COP 21,000 21,000 0 0 0
10 Total WW Support Services 9,738,500 4,935,802 138,134 151,262 4,513,303
11 Metro Cost 17,273,300 8,515,737 4,180,139 4,577,425 0
12 Spring Valley 736,200 736,200 0 0 0
13 Other Professional Svc 50,600 50,600 0 0 0
14 Otay Water District Processing 356,000 175,508 86,152 94,340 0
15 Total Operation & Maintenance 28,154,600 14,413,846 4,404,424 4,823,027 4,513,303
16 Percent 51.20% 15.64% 17.13% 16.03%
The allocation of costs of service into the principal service requirement components
(customer, volume and strength related) provides a means for further allocation of
costs to the various customer classes on the basis of their respective volume and
strength.
6.4.1
Customer Classifications
For purposes of cost of service analysis and rate design, sewer customers are classified
to reflect groups of customers with similar service requirements and who are served
at a similar average cost. Sewer customers are currently separated by the City into the
following classes:
. Single-Family Residential (includes low-income residential)
. Multi-Family Residential (includes mobile homes)
. Commercial - Low Strength
CDM 64
14-44
Section 6
Rate Design
. Commercial - Medium Strength
. Commercial - High Strength
. Special Users (includes High Volume Users and Variance Accounts)
6.4.2
Units of Service
The determination of customer class responsibility for costs of service requires that
each general customer class be allocated a portion of the volume, strength and
customer costs of service according to its respective service requirements, and that all
costs directly associated with a specific customer class be allocated to that class.
The estimated test year service requirements or units of service for the various customer
classes are shown in Table 8. Cost responsibility by customer class is based on each
class' share of units of service. That is, if a class contributed one-third of the wastewater
flow it will be assigned one-third of volume related costs. The same is done for
strength-related costs and customer costs. Metered water and wastewater data for FY
05-06 and partial FY 06-07 flows were used to estimate customer usage by customer
category and to balance total wastewater plant loadings. Equivalent units in column 5
reflect additional dwelling units as well as an adjustment for larger meter sizes,
TABLE 8
Estimated Units of Service
Test Year 2008
(1) (2) (3) (4) (5)
Strength
Line Wastewater Suspended Number of Equivalent
No. Customer Class Volume COD Solids Accounts Units
he! lbs Ibs
Residential
1 Single-Family 4,694,000 16,408,000 4,834,500 43,300 43,300
2 Multi-Family 1,756,800 6,140,900 1 ,809,400 2,252 6,036
3 Mobile Homes 0 0 0 0 0
Non.Residential
4 Commercial - Low 699,900 2,446,600 720,900 1,435 3,465
5 Commercial - Medium 138,800 866,400 303,200 201 461
6 Commercial - High 156,000 1,947,100 681,500 196 471
7 Low Income 0 0 0 0 0
8 Golf Courses Club Houses 0 0 0 0 0
7 Special Users 290,000 905,000 271,500 161 1,053
8 Total 7,735,500 28,714,000 8,621,000 47,545 54,786
a.
6-5
14-45
CIlIII
Section 6
Rate Design
Estimates of the wastewater volume of each class are based upon water usage records
and include an estimated return factor for water reaching the wastewater system. The
estimated total wastewater volume for test year 2008 is 7,735,500 HCF. Infiltration is not
included, but the return factor for single-family users has been reduced from 100% to
90% to account for incidental outside water usage during the winter period that does
not return to the sewer. Estimated strengths and return factors used in this study are
shown in Table 9.
TABLE 9
Wastewater Characteristics
Wastewater Strengths
Customer
Classification
Return
Factor
%
COD
mglL
TSS
mg/L
Single- Family Residential (1)
Multi-Family Residential
Mobile Homes
Commercial - Low
Commercial - Medium
Commercial - High
Special Users
(1) Winter period usage.
90
79
84
90
90
90
Varies
560
560
560
560
1000
2000
varies
165
165
165
165
350
700
varies
6.4.3
Unit Costs of Service
Table 10 shows the development of the test year unit costs for each of the wastewater
parameters. The test year net O&M expense is allocated to volume, COD, TSS, and
customer based on the O&M allocation percentage shown in Line 16 of Table 7.
Capital costs are recovered through a separate fee and are therefore excluded from
this analysis. The unit costs of service shown in Line 5 of Table 10 are developed by
dividing Line 3 by Line 4.
6-6
14-46
an
Section 6
Rate Design
TABLE 10
Development of Unit Costs
Test Year 2008
Strenqth
Line Suspended
No. IQm! Volume COD ~ Customer
$ $ $ $ $
1 Net Operating Expense 25,691,600 12.345,700 4,404,400 4,823,000 4,118,500
2 Capital Costs 1,050,800 1,050,800 0 0 0
3 Total Cost of Service 26,742,400 13,396,500 4,404,400 4,823,000 4,118,500
4 Total Units of Service 7,735,500 28,714,000 8,621,000 54,786
hef pounds pounds Eq. meters
5 Total Unit Costs of Service - $/unit 1.7318 0.1534 0.5594 75.1739
6.5 Customer Class Costs of Service
The cost responsibility of each customer class is determined by applying the unit cost
of service shown in Table 10 to the units of service estimated for a class (shown in
Table 8). The cost of service allocated to each customer class is summarized in
Table 11.
Table 12 shows a comparison of the cost of service for each customer class with
revenue under existing rates, indicating the impact of cost of service allocation on
each class. A 5.0 percent annualized increase in the level of sewer revenue is needed
to meet the projected revenue requirements for FY 07-08. The cost of service analysis
ensures that the test year 2008 revenue requirement of $26,742,400 is met.
The result of the cost of service analysis is very informative. Table 12 shows that most
customers have been paying close to their fair share of cost of service. The table
indicates that single-family, multi-family, commercial and special-user customers cost
allocation does not match their cost allocation and needs to be revised. .
6-7
14-47
1:DM
Section 6
Rate Design
TABLE 11
Allocation of Costs of Service to Customer Classes
Test Year 2008
StrenQth
Line Suspended
No. Total Volume = Solids ~
$ $ $ $ $
Unit Cost of Service 1.7318 0.1534 0.5594 75.1739
Residential
Single-Family
2 Units 4,694,000 16,408,000 4,834,500 43,300
3 Cosl-$ 16,605,700 8,129,200 2,516,700 2,704,800 3,255,000
Multi.Family
4 Units 1,756,800 6,140,900 1,809,400 6,036
s Cost-$ 5,450,400 3,042,400 942,000 1,012,200 453,800
Non-residential
Commercial. low
6 Units 699,900 2,446,600 720,900 3,465
7 Cost-$ 2,251,200 1,212,100 375,300 403,300 260,SOO
Commercial - Medium
s Units 138,800 866,400 303,200 461
9 Cost-$ 577,500 240,400 132,900 169,600 34,600
Commercial - High
10 Units 156,000 1,947,100 681,500 471
11 Cost-$ 985,500 270,200 29B,700 381,200 35,400
Special Users
12 Units 290,000 905,000 271,500 1,053
13 Cost. $ 872,100 502,200 138,800 151,900 79,200
14 Total Cost of Service - $ 26,742.400 13,396,500 4,404.400 4823,000 4,118,500
15 Total Units of Service 7,735,500 28,714.000 8,621.000 54,786
TABLE 12
Comparisons of Allocated Costs of Service with Revenue Under Existing Rates
Test Year 2008
Revenue Indicated
Total Under Revenue
Line Cost of Existing Increase
No. Customer Class Service Rates (Decrease)
$ $ %
Residential
1 Single-Family" 16,605,700 16,484,300 0,7%
2 Multi~Family 5,450,400 4,903,100 11.2%
Non-Residential
3 Commercial - Low 2,261,200 2,034,000 10.7%
4 Commercial. Medium 577,500 504,100 14.6%
5 Commercial. High 985,600 834,300 18.1%
6 Special Users 872,100 709,200 23,0%
7 Total 26,742,400 25,469,000 5.0%
* includes 250 low-income users
6-8
14-48
CIlIll
Section 7
Rate Design
In general, class cost of service allocations serve as a "guide" to the necessity for, and
extent of, rate adjustments. Other considerations such as the change from previous
rate levels, public reaction to rate changes, past local policies and practices, and local
regulations may modify indicated cost of service adjustments. The end result of any
rate adjustment process, however, should be rate schedules, which are simple to
apply, clearly understood, and as equitable to each customer class as possible.
7.1 Proposed Sewer Rates
The cost of service analysis provides the basis for adjusting sewer service charges. The
cost of service allocation study provides the unit costs of service used in the rate
design process and gives a basis for determining whether resultant rates will recover
costs of service from customer classes and provide the total level of revenue required.
Table 13 presents the Proposed Rate Schedule for FY 2008 compared to Adopted 2008
rates. The Proposed 2008 Rates for Single-Family Residential Customers shown at the
right do not appear to vary much from the Adopted 2008 Rates but careful
examination shows that both the fixed Sewer Service Fee and the variable charge is
slightly higher. However, the fixed Sewer Facilities Replacement Fee has been
eliminated based on a cost of service analysis performed by City staff and replaced
with a variable fee. The results of these changes can be seen in typical bills shown in
Table 17 discussed below.
TABLE 13
Existing and Proposed Rate Schedule
Sin le-Famil Residential
Pro osed 2008
Fixed Variable
Service Fee Fee
6.65 2.81
0.18
0.70
7.35 2.99
Sewer Service Fee
Sewer Facilities Re laeement Fee
Storm Drain Fee
SFR - Sewer Rate
Ado led 2008
Fixed Variable
Service Fee Fee
6.33 2.53
1.97
0.70
9.00 2.53
Commercial - Low Stren th
Ado led 2008
Fixed Variable
Service Fee Fee
Varies 2.53
0.11
0.06
Varies 2.70
Pro osed 2008
Fixed Variable
Service Fee Fee
Varies 2.81
0.18
0.06
Varies 3.05
Sewer Service Fee
Sewer Facilities Re laeement Fee
Storm Drain Fee
Commercial LS- Sewer Rates
Table 13 also provides an illustration of how Low-Strength Commercial Customer
Fees vary from Single-Family Residential. The Sewer Service Fees vary by meter size
and the Sewer Facilities Replacement and the Storm Drain Fees are both collected
7-1
14-49
azt
Section 7
Rate Design
from a variable fee. The net effect of this can be seen by comparing the bottom lines of
the two customers, which shows the combined sewer rates.
7.2 Appeal Process
The sewer variance review process ("appeal process") was amended in 2005 to
provide a mechanism for single-family residences to ask for a re-evaluation of their
sewer bill. This was done because some customers believed that their water usage
was not accurately evaluated due to a leak, excessive landscaping, or pool
maintenance, and that one or more of these elements affected their sewer service
charges.
The proposed rates incorporate a 90 percent return to sewer (return factor) for single-
family dwellings. This return factor takes into account the 10 percent of water used
during the winter period for purposes other than domestic use therefore reducing the
need for the appeals process. However, those residents who experience a leak during
the winter averaging period, and determine that their winter average may have been
impacted by the leak will still have an opportunity to apply for an adjustment.
7.3 Rate Revenue Comparison
Table 14 presents a summary of the revenue under the existing rates, cost of service
and revenue under proposed rates for each customer class for test year 2008. The table
shows that the proposed rate schedule will fairly recover the cost of providing sewer
service from all of the customer class. Adoption of the proposed rates would cause
varying charge increases for certain users.
TABLE 14
Comparison of Customer Revenue Under Proposed Rates
With Test Year Cost of Service
Test Year 2008
Proposed Rates
Estimated
Test Year Revenue Revenue As a
2008 Under Under Pecent of
Line Cost of Existing Proposed east of
No. Customer Class Service Rates Rates Service
$ $ $ %
Residential
1 Single-Family 16.605.]00 16.484,300 16,643.600 100.2
2 Multi-Family 5,450.400 4,903.100 5.418,100 99.4
Non-Residential
3 Low 2,251,200 2.034.000 2.243.000 99.6
4 Medium 577.500 504.100 576.600 99.8
5 High 986.600 834.300 981,400 99.6
6 Special Users 872.100 709.200 878,700 100.8
7 Total 26.742.400 25.469.000 26.741.400 100.0
7-2
14-50
COM
Section 7
Rate Design
7.4 Proposed Rates
The calculated rates needed to meet the obligation of the sewer service revenue fund
for FY 07-08 through FY 11-12 are shown in Table 15 below and illustrate the rate
changes for all customer classes. The rates in Table 15 exclude the Storm Drain and
Sewer Facilities Replacement Fees. Table 16 shows the proposed Rate Schedule for FY
07-08 through FY 11-12, which includes the Storm Drain and Sewer Facilities
Replacement Fees. These are the rates recommended for adoption.
TABLE 15
Proposed Rale Schedule for Fiscal Years 2008 Through 2012
= = ZQ1Q = =
Meter Monthly Service Charqe (1)
~ $/month $/month $/month $/month $Imonth
Single-Family Residential 6.65 7.30 8.03 8.31 8.31
All Others (Meter Size in Inches)
518 6.65 7.30 8.03 8.31 8.31
314 6.65 7.30 8.03 8.31 8.31
1 11.08 12.17 13.38 13.85 13.85
11/2 22.16 24.35 28.76 27.70 27.70
2 35.45 38.96 42.81 44.31 44.31
3 66.47 73.05 80.28 83.09 83.09
4 110.78 121.74 133.79 138.48 138.48
6 221.55 243.48 267.59 276.95 276.95
8 354.48 389.57 428.14 443.13 443.13
Volume Charge (1)
$Ihcf $lhcf $/hcf $/hcf $Ihcf
Residential
Single Family 2.81 3.09 3.39 3.51 3.64
Multi.Family 2.81 3.09 3.39 3.51 3.64
Mobile Homes 2.81 3.09 3.39 3.51 3.64
Non-Residential
Commercial - Low 2.81 3.09 3.39 3.51 3.64
Commercial - Medium 3.89 4.28 4.70 4.86 5.03
Commercial - High 6.05 6.65 7.31 7.56 7.83
Special Users Yaries Varies Varies Varies Yaries
Total Revenue 26,105,700 29,691,400 32.964,900 34,467.300 36.040,100
(1) Does not includes the Sewer Facilities Replacement Fee and Stann Drain Fee
7-3
14-51
un
Section 7
Rate Design
TABLE 16
Proposed Rate Schedule for Fiscal Years 2008 Through 2012
2008 2009 2010 2011 2012
Meter Monthly Service Char~e (1)
~ $/month $/month $Imonth $/month $/month
Single-Family Residential 7.35 8.00 8.73 9.01 9.01
All Others
5/8 6.65 7.30 8.03 8.31 8.31
3/4 6.65 7.30 8.03 8.31 6.31
1 11.08 12.17 13.38 13.85 13.85
11/2 22.16 24.35 26.76 27.70 27.70
2 35.45 38.96 42.81 44.31 44.31
3 66.47 73.05 80.28 83.09 83.09
4 110.78 121.74 133.79 138.48 138.48
6 221.55 243.48 267.59 276.95 276.95
6 354.48 389.57 428.14 443.13 443.13
Volume Charne (1)
$/hcf $Ihcf $/hef $/hcf $/hcf
Residential
Single-family 2.99 3.27 3.57 3.69 3.82
Multi-family 3.05 3.33 3.63 3.75 3.88
Mobile Homes 3.05 3.33 3.63 3.75 3.88
Non-Residential
Commercial - low 3.05 3.33 3.63 3.75 3.86
Commercial - Medium 4.13 4.52 4.94 5.10 5.27
Commercial - High 6.29 6.69 7.55 7.80 8.07
Special Users 2.98 3.33 3.63 3.75 3.88
(1) Indudes the Sewer Facilites Replacement Fee and Storm Drain Fee
Table 17 shows that the sample monthly bills for single-family residential customers for
FY 07-08 through FY 11-12. The proposed charges include the $0.70 per month Storm
Drain Charge and the $0.18 per HCF Facilities Replacement Charge.
Column 1 is the winter period water usage. The typical customer uses about 10 HCF.
However due to the reduced return factor the typical customer will only be billed for 9
HCF effective January 1, 2008. Column 2 of Table 17 shows the monthly sewer bill for
single-family residential customers with usage ranging from zero to 20 HCF under
existing rates. With the current cap set at 20 HCF, usage above 20 HCF is charged for
only 20 HCF. Column 3 shows what the wastewater bill is effective July 1, 2008 under
the rates already adopted. The fourth column indicates sewer bills based on Proposed
2008 Rates to be effective January 1, 2008. The remaining columns show single-family
residential typical bills for FY 2009 to FY 2012.
7-4
14-52
a:n
Section 7
Rate Design
TABLE 17
Comparison of Typical Single-Family Residential Monthly Sewer Bills
(1) (2) (3) (4) (5) (6) (7)
FY 2008 FY 2008 FY 2009 FY 2010 FY2011 FY 2012
Adopted Proposed Proposed Proposed Proposed Proposed
~ ~ ~ ~ Charae ~ Charoe
hcf/mo. $ $ $ $ $ $
0 9.00 7.35 8.00 8.73 9.01 9.01
1 11.53 10.04 10.95 11.94 12.33 12.44
2 14.06 12.73 13.89 15.16 15.66 15.88
3 18.59 15.42 16.83 18.38 18.98 19.31
4 19.12 18.11 19.77 21.59 22.30 22.75
5 21.65 20.80 22.71 24.81 25.63 26.18
6 24.18 23.49 25.65 28.03 28.95 29.61
7 26.71 26.18 28.59 31.24 32.27 33.05
8 29.24 28.87 31.54 34.46 35.60 36.48
9 31.77 31.57 34.48 37.68 38.92 39.92
10 34.30 34.26 37.42 40.89 42.24 43.35 I
11 36.83 36.95 40.36 44.11 45.57 46.78
12 39.36 39.64 43.30 47.33 48.89 50.22
13 41.89 42.33 46.24 50.54 52.21 53.65
14 44.42 45.02 49.18 53.76 55.54 57.09
15 46.95 47.71 52.13 56.98 58.86 60.52
16 49.48 50.40 55.07 60.19 62.18 63.96
17 52.01 53.09 58.Q1 63.41 65.51 67.39
18 54.54 55.78 60.95 66.63 68.83 70.82
19 57.07 58.48 63.89 69.84 72.15 74.26
20 59.60 61.17 66.83 73.06 75.48 n.69
7.5 Rate Comparisons
CDM performed a survey of wastewater charges in cities in San Diego County and
the results are presented in Figure 3 below. The figure clearly shows rates in Chula
Vista are on the low end in the County.
70.00
60,00
SO.OO
40.00
.
a
0
Q
30.00
20.00
10.00
0.00
/#///~/~~/~/J///?
(jff'~ v.f"<q,J,.$- ~ l <<.,~ ~'b .,,(,0 V'.Jf''b ~~ rl'l..<I;- A A (:l
.g-'b v'<:' 0 $' <<:i ~~ ve~ it# '$''<$''
~..:., '<"~..:., ~ ~
.J..~ .J..~ eft #
.# # ~
f?<:f' <:r.~ Q1f
CItyJDlstrlet
Figure 3 - Monthly Sewer Bill Comparison
7-5
14-53
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Attachment C
ACCOUNT & FLOW DISTRIBUTION BY USER CLASS
User Class # of Accts % Flow (HCF) %
A Single-Family Residential Users 43,300 91.07% 4,694,000 60.7%
B Multi-Family Residential User 2,252 4.74% 1,756,800 22.7%
C Low-Strength Commercial Users 1,435 3.02% 699,900 9.0%
D Medium-Strength Commercial Users 201 0.42% 138,800 1.8%
E High-Strength Commercial Users 196 0.41% 156,000 2.0%
F Special Users 161 0.34% 290,000 3.7%
Total 47,545 100.0% 7,735,500 100.0%
ACCOUNTS %
. B
4.74%
D C
3.02%
D D
0.42%
. E
0.41%
14-55
FLOW %
. B
22.7%
o C
9.0%
o 0
. E1.8%
2.0%
. F
3.7%
Attachment D
Existing Cost Allocation
Multi-Family
19%
Commercial Low
8%
Commercial Med
2%
Commercial High
3%
Special Users
3%
Single-Famiiy
65%
.Single-Family
o Commercial Med
. Multi-Family
. Commercial High
o Commercial Low
. Special Users
Proposed Cost Allocation
Mult~Family
20%
CofTl'1"ercial Low
8%
Comnercial Med
2%
Comnercial High
4%
Single-Family
63%
. Single-Family
o Comnercial Med
. Mult~Family
. Comnercial High
o Conmercial Low
. Special Users
14-56
Attachment E
RE-EV ALUATION OF THE SEWER FACILITIES REPLACEMENT FEE
43,800 43,300 43,798 44 302
4,748,]62 4,693,959 4,747,945 4,802,582
6]% 6]% 6]% 6]%
$850,6]6 $849,544 $850,60] $85] ,682
$0.18 $0.18 $0.18 $0.18
14-57
Attachment F
Rate change impact on various levels of Single-Family Residential Users
Single-Family Residential Users
Winter Adopted Proposed Difference Adopted Proposed Difference Adopted Proposed Difference
Average FY 2008 FY 2009 FY 2010
0 $ 9.00 $ 7.35 1$1.65\ $ 9.25 $ 8.00 ($1.25) $ 9.75 $ 8.73 {$1.02\
1 $ 11.53 $ 10.04 {$1.49\ $ 11.87 $ 10.95 $0.92 $ 12.45 $ 11.94 ($0.51)
2 $ 14.06 $ 12.73 {$1.33\ $ 14.49 $ 13.89 $0.60 $ 15.15 $ 15.16 $0.01
3 $ 16.59 $ 15.42 ($1.17) $ 17.11 $ 16.83 $0.28 $ 17.85 $ 18.38 $0.53
4 $ 19.12 $ 18.11 1$1.01\ $ 19.73 $ 19.77 $0.04 $ 20.55 $ 21.59 $1.04
5 $ 21.65 $ 20.80 1$0.85\ $ 22.35 $ 22.71 $0.36 $ 23.25 $ 24.81 $1.56
6 $ 24.18 $ 23.49 1$0.69\ $ 24.97 $ 25.65 $0.68 $ 25.95 $ 28.03 $2.08
7 $ 26.71 $ 26.18 {$0.53\ $ 27.59 $ 28.59 $1.00 $ 28.65 $ 31.24 $2.59
8 $ 29.24 $ 28.87 ($O.37) $ 30.21 $ 31.54 $1.33 $ 31.35 $ 34.46 $3.11
9 $ 31.77 $ 31.57 ($0.20\ $ 32.83 $ 34.48 $1.65 $ 34.05 $ 37.68 $3.63
10 $ 34.30 $34.26 ($0.04\ $ 35.45 $ 37.42 $1.97 $ 36.75 $ 40.89 $4.14
11 $ 36.83 $ 36.95 $0.12 $ 38.07 $ 40.36 $2.29 $ 39.45 $ 44.11 $4.66
12 $ 39.36 $ 39.64 $0.28 $ 40.69 $ 43.30 $2.61 $ 42.15 $ 47.33 $5.18
13 $ 41.89 $ 42.33 $0.44 $ 43.31 $ 46.24 $2.93 $ 44.85 $ 50.54 $5.69
14 $ 44.42 $ 45.02 $0.60 $ 45.93 $ 49.18 $3.25 $ 47.55 $ 53.76 $6.21
15 $ 46.95 $ 47.71 $0.76 $ 48.55 $ 52.13 $3.58 $ 50.25 $ 56.98 $6.73
16 $ 49.48 $ 50.40 $0.92 $ 51.17 $ 55.07 $3.90 $ 52.95 $ 60.19 $7.24
17 $ 52.01 $ 53.09 $1.08 $ 53.79 $ 58.01 $4.22 $ 55.65 $ 63.41 $7.76
18 $ 54.54 $ 55.78 $1.24 $ 56.41 $ 60.95 $4.54 $ 58.35 $ 66.63 $8.28
19 $ 57.07 $ 58.48 $1.41 $ 59.03 $ 63.89 $4.86 $ 61.05 $ 69.84 $8.79
20 $ 59.60 $ 61.17 $1.57 $ 61.65 $ 66.83 $5.18 $ 63.75 $ 73.06 $9.31
Rate change impact on various levels of Commercial Users
Low-Strength Commercial- Average customer uses 45 hcfj month with a 1 inch meter
$ 115.69
$17.57 $ 123.82
Difference
Adopted
Difference Adopted
$9.20
Difference Adopted
$ 119.75
$26.86
Medium- Strength Commercial- Average customer uses 63 hcfj month with a 1 inch meter
Difference Adopted
$26.78
Difference Adopted
$ 204.87
$44.46
Difference
Adopted
$ 210.39
$ 215.76
$64.12
High-Strength Commercial- Average customer uses 73 hef/ month with a 1 inch meter
Adopted
Difference Adopted
$58.96 $ 357.25
Difference Adopted
$ 349.60
$91.82
Difference
$ 364.65
$129.00
J:\Engineer\SEWER\2007\SEWER RATE STUDY CDM 200f'4l!.."5!,nt F.doc
NOTICE OF PUBLIC HEARING
SEWER RATE INCREASE
February 5, 2008 · 4 pm
Council Chambers
276 Fourth Avenue, Chula Vista
14-59
~Vt-
=:i1:~ ~
~~~~
""'"~~~
CITY OF
CHULA VISTA
COST ALLOCATION
Replacement and
Storm Drain:
6%
Operation and
Maintenance:
34%
PROPOSED CHANGES
The proposed rate adjustment only impacts the Sewer Service
Fee and the Sewer Facility Replacement Fee, and are as follows:
I. Return Factor - Currently single-family residential customers
are assigned a commodity charge each fiscal year based on
100% of the average of their two lowest consecutive winter
month water use. If adopted, it will be based on 90% of the
winter average.
2. Sewer Facilities Replacement Fee - The Sewer Facilities
Replacement Fee for single-family residential customers is
currently billed at a fiat rate of $1.97/month and $.Oll/hcf
for all other users. If the proposed rate schedule is adopted
all users including single-family, multi-family and commercial
will henceforth be billed at $0.18/hcf.
HOW IS MY SEWER BILL CALCULATED?
Sample Calculation of Monthly Bill for
an "Average" Single-Family Residential User.
All single-family residential users are billed for service based on
their water usage during the winter period (November to April)
Nov/Dec Jan/Feb Mar/April
20hcf 24hcf 26hcf
Lowest Winter Use = 20 hcf
Winter Average = 20/2 = I Ohcf (Basis of Monthly Fee)
Sewer Service Charge =
(Winter Average x Sewer Rate) + Fixed Service Charge
(Current Rate = $2.53; Fixed Service Charge = $9:00)
Therefore, for this customer. Monthly Sewer Service Charge is
calculated as follows:
=( I 00% x lOx $2.53) + $9.00 = $34.30
If the proposed rate changes are adopted, it will include a 90%
Return Factor. therefore, for the same customer. using the new
sewer rate, and new fixed service charge, their Monthly Sewer
Service Charge:
=(90% x lOx $2.99) + $7.3S = $34.26
Proiosed 3 Year Rate Schedule
Monthly Fixed Service Charge
$lMonth $IMonth $IMonth
Single Fami]y $7.35 $8.00 $8.73
2008 2009 20 I 0
All Others (meter size in inches)
5/8 $6.65
3/4 $6.65
I $11.08
I 1/2 $22.16
2 . $35.45
3 $66.47
4 $110.78
6 $221.55
8 $354.48
$7.30
$7.30
$12.17
$24.35
$38.96
$73.05
$121.74
$243.48
$389.57
$8.03
$8.03
$]3.38
$26.76
$42.8]
$80.28
$133.79
$267.59
$428.14
Residential
Single-Family $2.99
Mu~i-Family 3.05
Mobile Homes 3.05
Non-Residential
Commercial - Low 3.05
Commercial - Med 4.13
Commercial - High 6.29
Volume Chol)!elHCF
3.27 3.57
3.33 3.63
3.33 3.63
3.33 3.63
4.52 4.94
6.89 7.55
HOW DO I OPPOSE THE RATE INCREASE?
If you oppose the proposed rate increase, your protest must
be submitted in writing to be considered, even if you plan to
attend the public hearing (see below). If written protests are
submitted by a majority of the affected property owners, the
proposed rate changes cannot be imposed.Your written protest
MUST be received prior to the close of public hearing.
Written protests must contain a description of the property,
such as the parcel number. Please also indicate the reason you
are protesting the rate increase. Please send your written
protest to:
City Clerk of the City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 9 19 I 0
FOR MORE INFORMATION
Visit www.chulavistaca.gov for more infomration about the city
of Chula Vista and your sewer service. Please note, however.
that the City of Chula Vista requires that rate increase protests
be submitted in writing. E-mail protests will not be accepted.
Who should I call with questions?
If you have questions about the proposed rates, please call city
of Chula Vista, Engineering Department - Wastewater Engineering
Section at (619) 476-5380.
14-60
NOTICE OF PUBLIC HEARING
The City of Chula Vista will hold a Public Hearing to consider
the proposed Sewer Rate Increase on February 5,2008 at 4 pm
in the Council Chambers located at 276 Fourth Avenue Chula
Vista, California.
In compliance with Proposition 218, the City is hereby notifying
all affected property owners of the proposed Sewer Rate
change effective February 5, 2008 as follows:
. Affected property owners are notified by mail about the
proposed rate increase. This notice outlines the public
hearing process (see below), publicizes the public hearing
and provides information relating to the proposed rate
increase.
. If written protests are presented by a majority of the
affected property owners prior to the close of the public
hearing, the proposed rate increase will be rejected.
This notice describes:
. Amount of proposed sewer rate increases
. Reasons for the proposed rate increase
. How the proposed rates were calculated
. How to file a protest for the proposed rates
. Where you can find more information about the
proposed increase
EXPLANATION OF RATE INCREASE
The City of Chula Vista along with 14 other participating agencies
belongs to the Metropolitan Wastewater District (Metro).The
wastewater generated in the city of Chula Vista is collected and
conveyed through the city's extensive sewer collection system
to treatment facilities in Point Loma and South bay. Chula Vista's
local collection system includes 13 pump stations and over 477
miles of sewer lines.
The primary reasons for the proposed rate increase is to
provide revenue sufficient to:
. Operate and maintain the city's Wastewater Collection
system.
. Pay the City of San Diego for the treatment of sewage
generated by the City of Chula Vista.
. Repair and replace deteriorating wastewater facilities to
maintain system reliability.
All revenue from the City's sewer charges are used exclusively
for the recovery of costs associated with providing these services.
Consequently. the rates are set to meet the estimated cost of
service.
If adopted, the proposed rate changes will be implemented
over the next three years. The proposed rates are presented
in the table on the next page.The amount of your sewer bill
will depend on your customer class (i.e., residential customer
or commercial customer) and the amount of water you use.
14-61
EXPLANATION OF RATES
The City of Chula Vista's sewer service charge is made up of
three different fees: the Sewer Facilities Replacement Fee, the
Storm Drain Fee and the Sewer Service Fee. Revenue derived
from these fees are used as follows:
Sewer Facility Replacement Fee:
Revenue derived from this fee is used to rehabilitate or replace
deteriorating sewer facilities (i.e., sewer lines, manholes, pump
stations and related appurtenant structures).
Storm Drain Fee:
This fund is used to maintain the storm drain system. It is also
used to fund costs associated with complying with the
requirements of the National Pollutant Discharge Elimination
System (NPDES).
Sewer Service Fee:
Revenue derived from this fee is used to pay the City of San
Diego (Metro) forwastewatertreatment.This fee also pays for
the maintenance and operation of the city's wastewater collection
system. The sewer service fee is made up of two components:
a fixed service charge based on water meter size and a
variable commodity charge based on water consumed.
Fixed Service Charges
All users connected to the city's wastewater collection system
pay a monthly fixed sewer service charge based upon their
meter size.
Commodity Charge - Single-Family Residential Users
All single-family residential customers currently connected to
the city's sewer collection system pay a monthly commodity
charge based on "winter water" usage:
New customers are assigned the median charge of 10 hcf and
are charged that rate until they establish their own winter water
use (i.e., two full cycles during the winter months of Nov-April).
Commodity Charge -
Multi-(ami/y Residential and Commercial Users
All multi-family residential and commercial customers currently
connected to the city's sewer collection system pay a monthly
commodity charge based on water usage.
Sewer rates are designed to exclusively recover the cost of
service.The Chart on the next page shows the cost allocation,
which is the underlying basis of the rates.
\;/8 '05e!0 ueS
n I!WJed
OIVd
e5elsod 'son
PIS IJSJd
0[616 VJ 'E15'^ E[nYJ ',nu,^v Y1JnOj 9LZ \fJSIA \f1nH:>
'f"D I'D 'y,)O 'J~O JO AlD
O'fJ.. -no~~~ .,w..-
U lAY VVAI t:K UI::iI til("',
2554 Sweetwater Springs Blvd.
Spring Valley. CA 91 97&2004
Billing Inquiries: (6191 87D-Z777
All Other Inquiries: 18191 67D-Z222
Monday - Friday 8 afT! to 5 pm
Please visit U$ at www.ot.aywilter.gov
It!
dAUTO.'5-PIGIT 9191319 PS5 41576RA26-A-3
46331 AV 0,312
11.1.""111,1","11..11..,1,11"1.1,,1,,,11...1,11,,,11,"11
- -
--
special message
---: - T'he SEVfER CHARGE ahGWl1 i$ for the CITY Of' CHULA. VISTA.
'" Plea5e cDntac:t tho CITY OF CHULA VISTA 111: 619-47&-5380. for any
SewER relatecl Q".stivnlio Pleaso COntact OTAY WATER DISTRICT
M 61.870-2777 for wator related quostione.
(LandseallO& in the taU an" winter require Slgnifil:ilfttly less watOt.
Water uso: botween Novembot' Z007 and April aoua is llsed to
determine YOuI' Sewer ServIco Chi:lllltl beginning 'n "Illy. Cutting
bal:k on watertng will help ,"ou s,aVo on JI'Our water bill .ad noxt
yoa.... sewer chargos.
TakG the 2Q..GaIl.., Challon!!'Je and help tI\O rvsion &tretclllb watGt
suppllos durins these historically drJ' condlfIG..... Fljlr tipli on liawlng
../ water arapnd ~ollr hDme, vlslC WW'W.otaywater.gov ami c:liI:k on
c:on&ervallon. V-lSit the Water Consal"latian Ganlen at Cuyamaca
COllege at www..thoSIo1l'den.o....
.,/ 1'h.attJc YViIl for ~r prompt payment.
your monthly usage
5
4
3
2
1
o
~ Current
1lIr"- Usage
~ W~9~m;or'r-M......
account In ormation
"':'>
ACCOUNT NUMBER:
SERVICE ADDRESS:
lAST PAYMENT DATE:
~
l
,~"
AMOUNT: $0.00 ~.,
SERVICE FROM:
DUE DATE:
11/27/07 TO:
12118/07 "-
01/19/0B -')
meter reading
:I
I
Meier Number
PI'aviOU5
Reeding
1628
Current
Reading
1628
Consumption
18975047
o
current charges
DESCRIPTION
- -' -Ctii.lla VistaSewer CliarQ"e ...--
SD CWA Infrastructure Access
Water System Fee
TOTAL CURRENT CHARGES
AMOUNT
.. - -.--
$26.02
$2.69
$8.57
$37.28
. .
amount due '
Previous Balance
Payments
Credits Applied
Total Current Charges
TOTAL AMOUNT DUE
$0.00
$0.00
$0.00
$37.28
$37.28
o J F M A M J J A SON 0
ThiS Yi:at tI Cla)'S: 0 Ufliagt:: 0 Avg, Per Day: 0.00
1 UNrr = 100CUaICFTIHCFI OF WATER I HCF=748 GALLONS
._____... KEEP THIS PQRJ19!'!..'.:~~~~~~~~~ ......._... ....___._ ____~.................... ~______""__-=-.-=-~."'.;'.. _ _ _ _ _ _ _ _'_ _ ~.
PAYMENT COUPON
PLEASE RETURN THIS PORTION ALONG WITH YOUR PAYMENT
PLEASE MAKE YOUR CHECK PAYABL.E TO:
OTAYWATER DISTRICT
o PLEASE CHECK BOX FOR CHANGES (SEE BACK)
ACCOUNT NUMBER:
SERVICE ADDRESS:
SERVICE FROM:
DUE DATE:
11127/07
01/19/08
TO:
1211B/07
DUE AND PAYABLE UPON PRESENTATION
amount due
TOTAL AMOUNT DUE BY DUE DATE $37.28
IIIIII~ IIII~ 1I11~1 ill mil 1111111111 ""I~1 11111 III mllllli 11111 111111111111111 11111111
OTAYWATER DISTRICT
P.O. BOX 51375
LOS ANGELES, CA 90061.6675
11,1"11...11,",1,1....11,]'1.,11..1,"1,1,1,1,,,1.1.1.11.,,1
209190217000037280
14-63
-6AMflr:
~'1+-
(&j.... m~"~Y)
SWIeT~ C:U~
~fiANCr DI?r.
6t ~\.IID ..., TttI
Ct TY~
AMOUNT DUE: $
35.71
?
.).
--...
i'~'
Please ...
pa'l8'l
Please Pay.Amount Due By 01130/2008
January
SMTWTFS
1 2 3 4 5
6 7. . 8 9 10
13 14 15 16 17
-".
"III
20 21
27 28
22 23 24
29 . 31
11 12 -
18 19
25 26
:r
If you have any questions, please call
Monday-Friday from 8:00 to 5:00.
(619) 691-5117
~
Special
Message
IMPORTANT NOTICE TO RESIDENTIAL CUSTOMERS!
The 'Winter Average Period' (November 2007 to April 2008) has started. Your water usage during this period will be used to
determine your Sewer Service Charge for the next fiscal year beginning on or after July 2008. Efforts to conserve water by adjusting
your sprinkler systems accordingly during the winter months should be beneficial to your overall blliing rate for next year. Please visit
our website at www.chulavistaca.gov/sewer.htmlfor more information on how your blli is calculated.
Reference Number:
Service Address:
Service Period:
Water Use*:
Due Date:
11/03/2007 to 12128/200/&1- ""...T....y)
9
01/30/2008
Previous Balance: $
Payment Received:
.... Sewer Charge:
Balance Due:
35.71
35.71-
35.71
35.71
"'100 Cubic Feet(748 Gallons) Per unit
?
Hearing impaired residents can call the City's TOO at (619) 585-5647.
PLEASE WRITE YOUR REFERENCE NUMBER ON YOUR CHECK. There is a $25.00 charge for returned checks.
A 1 0% PENALTY WILL BE APPLIED TO PAYMENTS RECEIVED AFTER THE INDICATED DUE DATE. Additional finance charges of
11/2% per month wlli be calculated on balances over 30 days delinquent.
Payments accepted any time at the drop box on the north east comer of the City Hall Building, or at the Finance Department from
8:00 AM to 5:00 PM, Monday through Friday. If paying in person, please bring this entire blli with you.
lIame a la ciudad de Chula Vista al telefono (619) 585-5659 si desea obtener informacion en Espanol sabre 105 cambios a la forma
de cobrar del selvicio de aguas negras. Residentes con problemas auditivos pueden lIamar al telefono especial de la ciudad al (619)
585-5647.
Information
Informacion
?
PAYMENT COUPON
PLEASE MAKE YOUR CHECK OR MONEY ORDER PAYABLE TO:
CITY OF CHULA VISTA
Reference Number:
Service Period:
Due Date:
Amount Due:
11/03/2007 to 12128/2007
01/30/2008
$35.71
O PLEASE CHECK BOX IF ADDRESS IS INCORRECT
AND INDICATE CHANGE(S) ON REVERSE SIDE.
Amount Paid:
I
Service Address
Billinq Address
CITY OF CHULA VISTA
SEWER BilLING DIVISION
PO Box 120755
Chula Vista, CA 91912-385;;
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14-64
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14-65
RESOLUTION NO. 2008-
NA
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING AN INCREASE IN SEWER
SERVICE RATES FOR FISCAL YEARS 2007-08 THROUGH
2009-10
WHEREAS, the sewer service charge is the fee paid by all users who are connected to
the City's wastewater collection system to fund the cost of wastewater treatment and
maintenance ofthe system; and
WHEREAS, on July 19, 2005, the City Council approved a five-year rate plan, which set
the schedule for the adjustment of sewer service fees for Fiscal Year 2005-06 through Fiscal
Year 2009-10 based on the findings and recommendations of the "Cost of Service and Rate Study
for Sewer Services" prepared by Camp Dresser & McKee, Inc. ("CDM"); and
WHEREAS, the adopted rate plan has not met the revenue objectives due to a
combination of factors, including, but not limited to, the overestimation of the baseline customer
data used in the 2005 Rate Study and the unanticipated shortfalls in the growth projections for
new accounts; and
WHEREAS in April 2007, the City retained CDM to prepare another study to re-evaluate
the performance of the adopted rate plan, re-evaluate the cost allocation among the various user
classes to ensure that it was proportional to use and equitable, re-evaluate the sewer-billing
method for single-family residential users, and develop a financial plan; and
WHEREAS, CDM has completed the "Cost of Service and Rate Study for Sewer
Services" dated October 2007 and has determined that the existing rates were inadequate and
would not generate the revenues needed to meet the obligations of the fund for wastewater
treatment, system operation and maintenance, and that rates needed to be adjusted and in some
cases increased; and
WHEREAS, at the current sewer rate level, necessary expenditures will exceed Fiscal
Year 2008 revenues by $3.3 million; and
WHEREAS, the adoption of the proposed sewer rate structure, set forth in the attached
Exhibit A, will ensure that the City recovers sufficient revenues to meet projected expenditures
for the maintenance and operation of the City's sewer collection and treatment system for Fiscal
Year 2008 through 2010; and
WHEREAS, on December 18, 2007, City Council approved Resolution No. 2007-302
declaring its intention to increase sewer service charges and set a Public Hearing for February 5,
2008 to consider the issue; and
H\ENGINEERIRESOSIResos2008\02-05-08\Reso-Sewer-Service-lncrease-Public-He~riT ,~r=tl:rdOC
Resolution 2008-
Page 2 of3
WHEREAS, the City Council finds that the City has complied with the requirements of
California Constitution Article 13D, Section 6; and
WHEREAS, the City Council finds that the City provided written notice by mail of the
proposed increase in sewer service charges to the record owners of each identified parcel upon
which the increased charge is proposed for imposition and that the notice included the amount of
the charge increase, the basis upon which the amount of the proposed charge increase was
calculated, the reason for the proposed charge increase, together with the date, time, and location
of the public hearing on the proposed charge increase; and
WHEREAS, the City Council held a public hearing on February 5, 2008 to consider the
proposed increase in sewer service charges; and
WHEREAS, the City Council considered all protests, both oral and written, to the
proposed increase in sewer service charges; and
WHEREAS, the City Council finds that the revenues derived from the increased sewer
service charges will not exceed the funds required to provide the property related service; and
WHEREAS, the City Council finds that the revenues derived from the increased sewer
service charges shall not be used for any purpose other than that for which the charge was
imposed; and
WHEREAS, the City Council finds the amount of the sewer service charges imposed
upon any parcel as an incident of property ownership shall not exceed the proportional cost of
the service attributable to the parcel; and
WHEREAS, the City Council finds that the sewer service charges imposed are for a
service actually used by, or immediately available to, the owner of the property; and
WHEREAS, the City Council finds that written protests against the proposed increased
sewer service charges have not been presented by a majority of owners of the identified parcels.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City ofChula Vista
that it approves an increase in sewer service rates as depicted in the attached Exhibit A for fiscal
years 2007-08 through 2009-10.
Presented by:
Approved as to form by:
Jack Griffin
Director of Engineering and
General Services
'-~-(~~ II ~~ ~
Ann Moore (;I-
City Attorney
H.\ENGINEER\RESOS\Resos2008\02-0S.08\Reso.Sewer-Service-1nCl'case-PubliC-HC;lrif ,~r~1f~e_dOC
EXHIBIT A
Proposed Rate Schedule FY 2008-FY 2010
Meter Size FY 2008 FY 2009 FY 2010
Monthlv Fixed Service Charee
$/Month $/Month $/Month
Sinde Familv $7.35 I $8.00 $8.73
All Others
5/8 $6.65 $7.30 $8.03
3/4 $6.65 $7.30 $8.03
I $11.08 $12.17 $13.38
I 1/2 $22.16 $24.35 $26.76
2 $35.45 $38.96 $42.81
3 $66.47 $73.05 $80.28
4 $110.78 $121.74 $133.79
6 $221.55 $243.48 $267.59
8 $354.48 $389.57 $428.14
Volume ChareelHCF
Residential
Single Familv $2.99 $3.27 $3.57
Multi Familv $3.05 $3.33 $3.63
Mobile Homes $3.05 $3.33 $3.63
Non-Residential
Commercial-Low $3.05 $3.33 $3.63
Commercial - Med $4.13 $4.52 $4.94
Commercial - High $6.29 $6.89 $7.55
Soecial Users Varies Varies Varies
*HCF - Hundred Cubic Feet
Rates Include Storm Drain Fee and Sewer Facilities Replacement Fee
H:\ENGINEER\RESOS\Resos2008\02-0S-08\Reso-Sewer-Service-rncrease-PlIblic-Hearif 4r=ti'1:r.doc
RESOLUTION NO. 2008-
NB
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA
VISTA SETTING THE AMOUNT TO BE DEPOSITED INTO THE
SEWERAGE FACILITIES REPLACEMENT FUND
WHEREAS, on June 16, 1987, the City Council created a sewerage facilities replacement
fund to pay the cost of refurbishment and/or replacement of structurally deficient sewerage
facilities, including related evaluation, engineering, and utility modification costs; and
WHEREAS, pursuant to Municipal Code section 3.18.010, the monies deposited into the
Fund shall be derived from the revenue collected from the monthly sewer service charge set for
forth in Municipal Code section 13.14.110; and
WHEREAS, pursuant to section 3.18.010, the City Council shall set by resolution or
ordinance the amount to be deposited into the sewerage facilities replacement fund; and
WHEREAS, on July 19, 2005, Council approved Ordinance No. 3015 which set forth, in
an uncodified section of the ordinance, a table showing how the sewerage facilities replacement
fund would be funded for Fiscal Years 2005-06 through 2009-10; and
WHEREAS, since then City staff has re-evaluated the sewerage facilities replacement
fund requirements and determined that the funding for the sewerage facilities replacement fund
needed to be adjusted.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City ofChula Vista
that the Sewage Facilities Replacement Fund shall be funded according to the following table.
SEWERAGE
USERCLASS
Single-Family - A Variable Rate per RCF'
Multi-Family - A Variable Rate per RCF'
Commercial- A Variable Rate per RCF'
("HCF" means 100 cubic feet of water)
$0.18
$0.18
$0.18
Presented by:
Approved as to form by:
Jack Griffin
Director of Engineering and
General Services
H:\ENGINEER\RESOS\Resos2008\02-05~08\Sewerage Facility Replacement Fund ~adjustment revised by ec.doc
,.~/ {2L~ f'-
Ann Moore
City Attorney
14-69
17M-#! Lf
To: Chula Vista Mayor and Council:
From: Larry BI"ilfdder President, Chula Vista Taxpayers Association
Re: Proposed Sewer Rate Increase
Date: February 5, 2008
All responsible Chula Vistans sympathize with the Mayor and Council's efforts to deal
with tough economic times. As you know, the Chula Vista Taxpayers Association is
dedicated to responsible stewardship for important public infrastructure assets. Weare
aware that the processing of sewage is an inherently expensive endeavor. We do not
automatically oppose govermnent expenditures as long as they are necessary, fairly
financed and efficiently uti1ized to provide the public with the best value for its dollar
over the long run.
In the case of the proposed Sewer Rate Increase, we have some serious concerns.
1) An alreadv substantial base cost. Normally it would be comforting to observe that
city sewer customers currently pay significantly less than those provided sewer
service by the Otay Water District. Unfortunately, Otay serves a very small
number of sewer customers and therefore suffers from expensive reverse
economies of scale. City sewer fees should be much less expensive.
Although Otay raised sewer fees for East County residents substantially over a
four year period, that was a planned correction to end an era of East County
residents having their sewer fees subsidized (actually being charged less than the
cost of providing the service) predominantly at the expense of ratepayers in Chula
Vista. To have multiple 10% a year rate increases in the absence of correcting
such an injustice is troubling.
The Council has already approved a hefty increase of about 33% in sewer rates
over 5 years. Lessened population growth should also result in a significant
reduction in some expected costs. To now require a 53% increase over the same
period of time is int."lH",ted by some as pointing to either excess or shortcomings
in the system.
2) The DrosDect of discriminatorv rates directed at businesses and aoartment
dwellers. Unless it can be demonstrated that these groups have been subsidized, it
is very hard to understand how for example "low strength" users on a one inch
meter would deserve an approximately 30% increase in their bills over a two year
period. Would they be paying more to process a gallon of sewage than anyone
else served by Chula Vista?
3) The oossibilitv ofusinll sewer funds as a crutch to oostoone necessarv
restructUrinll in other arms of citv ~vernment. In particular, concerns (which we
hope are unfounded) have been expressed that the city's capital improvement and
replacement timetable could be manipulated to provide a professional refuge for
underutilized city workers. White we could appreciate the humani1arian
motivation for doing so. It would not fiscally responsible.
4) An aDnarent lack ofDroductivitv increases over time. Effective ongoing
strate~c planning and prudent investment should be resulting in ~lautial
money saving productivity enhancements. As an example, despite inflationary
pressure on wages, hea1thcare, electricity etc. - ifle cost of p- u..idiugsewer
service to Otay Water Distrid customers is anticipated to only be about 4.5%
bigher in FY 2lMllt than it was in FY 2006. Why is the city not enjoying similar
good news?
We encourage you not to approve the proposed rate increase until you are satisfied that
these and similar concerns have been adequately addressed.
M ,J.J
R --C)
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