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Home My WebLink About4.10 Zone 7 Water Rate Adj STAFF REPORT CITY CLERK File #1000-20 CITY COUNCIL DATE:October6, 2015 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager SUBJECT: Approval ofCorrespondence to Zone 7 Water Agency Regarding Water Rate Adjustments Prepared by Roger Bradley, Assistant to the City Manager EXECUTIVE SUMMARY: The City Council will consider authorizing the Mayor to sign a letter regarding a proposed increase in the water rates by the Zone 7 water agency. FINANCIAL IMPACT: As evaluated by Zone 7, its proposed water rate increasewould impact the District’s Water Enterprise Fund by increasing water purchase expenses by $2,685,400 or 32.2%. In terms of theaverage Dublin residential customer,this represents an impact of $17.69 on each bimonthly bill or a 16.3% increase. RECOMMENDATION: Staff recommends that the City Council authorize the Mayorto sign a letter on its behalf to Zone 7 regarding the revised water rates that Zone 7 is currently considering. Submitted ByReviewed By Assistant to the City ManagerAssistant City Manager DESCRIPTION: ________________________________________________________________ . ITEM NO4.10 Page 1 of 2 The Zone 7 Water Agency (Zone 7) is considering water rate adjustments,which would be effective January 1, 2016. This rate adjustment is due to aprojectedincrease of 32.2% or $2,685,400 to the District’s Water Enterprise for 2016. This is estimated to increase the average Dublin residential customer bill by 16.3% or $17.69 bimonthly in 2016. Zone 7 has engaged a consultant (Raftelis) to prepare a Water Rate Study and has met with the Dublin San Ramon Services District,and the other retailers within the Zone, as their work has progressed. Zone 7 is scheduled to formally consider the rates at its October 21, 2015 Board meeting. However,as of the date of the preparation of this agenda item, the Water Rate Study has not been finalized nor has Zone 7 management formulated a specific recommendationon the rate increase. Accordingly, at this time,there is no concrete proposal to consider for support or oppose. Rather, clear communication of policy level concerns with the concepts being considered would be appropriate. These would be in the form of a letter to Zone 7 Board President Palmer(Attachment 1). The proposed letter addresses the following key policy concerns: An appropriate drought period surcharge is acceptable but any such surcharge must be temporary and sunset when the drought is over and appropriate and defensible operating reserve targets are met; While there may be merit to alternative rate structures incorporating different rates to different retailers (based on peaking factors and fixed costs of service),such a fundamental change to the “across the Board” rate setting methodology that Zone 7 has used for decades should not be implemented quickly and further discussions with all retailers and the community should continue; Rate increases that are driven by the need for renewal and replacement of infrastructure are appropriate after a critical and current review of specific capital needs and timing; Multi-year rate setting (ideally up to five years) is desirablein order tocreate budget certainty and to reduce the need for complicated rate analyses and approval each year; and An aggressive public outreach and engagement process must be undertaken in the weeks leading up to the rate decision to ensure public openness and transparency associated with the decision. Based on these concerns and the financial impact to Dublin residents, Staff recommends that the City Council authorize the Mayor to send a letter to the Zone 7 Board of Directors expressing the City’s concernsabout the proposedincrease. NOTICING REQUIREMENTS/PUBLIC OUTREACH: . None ATTACHMENTS: 1.Letter of correspondence to Zone 7 Water Agency regarding water rate adjustments. Page 2 of 2 October 6, 2015 Ms. Sarah Palmer, President, Board of Directors Zone 7 Agency 100 North Canyon Parkway Livermore, CA 94551 RE: Proposed Zone 7 Water Rate Adjustments 100 Civic Plaza Dear President Palmer and Members of the Board; Dublin, California 94568 Phone: (925) 833-6650 Fax: (925) 833-6651 On behalf of the City of Dublin, I would like to offer the follo being considered by Zone 7. Dublin is appreciative of the impact conservation levels achieved by Tri-Valley water users has had on Zone 7 revenue and reserves. While there have been several Board and Committee meetings as we is our understanding that no formal proposal has yet to be prese consideration. Based on the latest written information available (as pre on September 16, 2015) the proposal would impact the Districts increasing water purchase expenses by $2,685,400 or 32.2%. In tethe average residential customer with Dublin, DSRSD indicates that this represents an impact of $17.69 on each bimonthly bill or a 16.3% increase. As such, these very signific approach to rate setting. Your rate consultant commented that this rate process was exceptionally fast and we agree. We are concerned about several specific matte, which may yet come before you for consideration. In condition with DSRSD, we present the following comments and concerns, which are outlined below. DROUGHT SURCHARGE WITH SUNSET DATE Dublin fully supports the need for a proposed rate increase to offset the impact of th water conservation levels achievement in the Zone 7 service areaf reserves, while prudent in the past, cannot continue indefinitel City Council (925) 833-6650 strongly urge the Board to adopt a specific sunset date or requi City Manager Board. In this way, customers can see an end to this charge as consumption increases over time. (925) 833-6650 Community Development (925) 833-6610 MULTI-YEAR RATE SETTING Economic Development Dublin is very supportive of Zone 7s effort to move to multi-year rate setting. We believe that (925) 833-6650 Finance/Admin Services there are many benefits to such an approach: increases to effici (925) 833-6640 process a rate increase each year, creation of fiscal discipline Fire Prevention (925) 833-6606 and living within the means available, public support, long te Human Resources commensurate positive effect on the Districts credit rating. We strongly encourage the Zone 7 (925) 833-6605 Parks & Community Services Board continue to work with your rate consultants to develop a l (925) 556-4500 Police STRUCTURAL CHANGES TO RATES (925) 833-6670 Public Works/Engineering The City understands that it is prudent to consider changes in rate structure such as (925) 833-6630 improve cash flow throughout the year. Your rate consultant and this new rate on an extremely fast timetable. Importantly, the new fixed charges change the allocation of costs between agencies and creates administrative DSRSD, who have adopted pass through rates. A major change in fully evaluated and implemented over a period of time to minimize the impact to all water customers in the valley and to allow consensus building among th that will, for the first time, lead to different water rates in time will allow additional outreach not only to retailers but to the consum, and in particular to our residents. www.dublin.ca.gov In support of DSRSD, the City of Dublin is adamantly opposed at this time to the adoption of a fixed dollar monthly charge. Such a fixed dollar amount cannot at this time be passed through to its customers. The District would need time to go through a rate adj level in accordance with Proposition 218. As such, DSRSD will have no way to recover a charge assessed in this manner. RENEWAL AND REPLACEMENT CAPITAL EXPENDITURES Capital replacement and rehabilitation spending is a major cost Zones outreach, deferral of select projects and serious conside appreciated and welcomed. However, the City feels that the significant increase in funding for this capital program should be more thoroughly vetted, and the need for, and benefit derived from, these expenditures should be explained to all customers. Furthermore, the City believes if all stakeholders are fully involved in the process, and the system needs are understood by all, any required rate increase will be supported by ratepayers. PUBLIC OUTREACH The City believes that an aggressive public outreach and engagement process must be undertaken in the weeks leading up to your October 21, 2015 rate decision t transparency associated with the decision. SUMMARY The City knows this is a difficult decision for you and your Board. We believe that a Zone 7 rate decision incorporating the points above will meet the financial support for the proposed rate among the retailers and the commun Sincerely, David Haubert Mayor cc: Dublin City Council Ms. Jill Duerig, General Manager, Zone 7 Mr. Nelson Fialho, City Manager, Pleasanton Mr. Marc Roberts City Manager, Livermore Mr. Bert Michalczyk, Dublin San Ramon Service District Mr. Frank Vallejo, Cal Water Mr. Chris Foss, City Manager, Dublin Mr. Greg Rogers, City Manager, San Ramon ATTACHMENT 1