HomeMy WebLinkAboutItem 4.10 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:
________________________________________________________________
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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