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HomeMy WebLinkAbout1982-12-14; City Council; 7231; Sewer user chargesti' \D 0 b LB#Z IEPT. CM flTG. 12/14/82 rl TITLE SEWER USER CHARGES N W I 6' rl I N I+ c t ? a n 0 Q .. z 0 F 0 a $ 2 => 0 0 A. CIl OF CARLSBAD - AGENDk BILL DEPT. HD. CITY Am.% CITY MOR.-* ~~ RECOMMENDED ACTION: It is recommended that Council introduce Ordinance No. 70 6 adjusting- sewer service fees and rescinding Resolution No. 6244. A two-thirds vote is required. ITEM EXPLANATION: An analysis of the cost of maintaining the city sewer system and of paying Carlsbad's share of treatment indicates that by June 30, 1983 the Sanitation Fund will be in a deficit condition. The City now charges each sewer user $3.25 per month to defray the cost of system maintenance. Rising costs over the past three years have reached the point where revenues will no longer cover costs. Future cost increases for secondary sewage treatment and full cost recovery will further increase costs in the next two years. An analysis of costs and revenues is shown in the attached report. On December 1, 1982, the City had collected $750,000 from sewer users for upgrading Encina. The $2.00 surcharge which has been included on the monthly bill is scheduled to be removed this month. Instead of removing the $2.00 charge, it is suggested that Council continue to collect $5.25 per month from each user and use the revenues for system maintenance. Later in 1983, it may be necessary to increase the user charge even further but that action can be deferred at this time. Monthly charges in other agencies: Oceanside $9.90 San Marcos $5.75 Escondido $8.75 Buena Sanitation $15.17 Vista $10.00 Encinitas $3.00 Leucadia $5.00 EXHIBITS: 1. Memorandum from Finance Director on Sewer Rates dated December 2, 1982. 2. Ordinance No. 706 Lf* 1 December 2, 1982 TO: / CITY MANAGER ASSISTANT CITY MANAGER/ ADMINISTRATION UTILITIES DIRECTOR FROM: Finance Director SEWER RATES BACKGROUND In October, 1979, the City Council set the sewer rates that are currently in effect. Discounting the sewer surcharge that was assessed in October 1981, there has been no rate increase for basic collection and treatment of waste water in over three years. The City has now reached a decision point that requires a sewer rate increase for basic collection and treatment. This increase can take several forms over the next few years but a plan for covering the higher costs of waste water treatment is necessary. RECOMMENDATION The staff is recommending that the Council adopt a rate increase of at least $2.00 to help avoid substantial deficits. in the sanitation fund in the next two years. ENCINA BUDGET The Encina Budget for 1982-83 is about $385,000 for Carlsbad. According to the Encina Director, this cost will double by 1983-84 due to the cost of secondary treatment. The City's cost for 1983-84 will therefore, be about $800,000 for Encina water treatment next year. CARLSBAD-SANITATION DEPARTMENT BUDGET The City's sanitation budget for 1982-83 is $427,000. Although secondary treatment will not impact the City's waste water collection costs, salary adjustments and inflation will. We expect the sanitation department budget to increase by about 6% to 10% per year. A 6% increase annually will equate to a 1983-84 budget of about $453,000 and a 1984-85 budget of $480,000. Sewer revenues are approximately $50,000 per month or about $600,000 per year. Interest earnings will amount to approximately $30,000 in 1982-83 giving a total income of about $630,000 this year. SEWER RATES Con't. 12/2/82 THE TOTAL BUDGET The City pays the cost of the Sanitation Department and Encina from revenue generated by the sewer service fee. For 1982-83 the projected fund balance looks like this: Ending Balance 6-30-83 $211,702 $629,000 $812,400 $28,702 Sanitation Department $427,000 Encina 385,400 $812,400 Sanitation (1 1 Beginning Balance Estimated 7-1-82 Revenue Budqet (1) ENTERPRISE ACCOUNTING FOR THE SANITATION FUND During 1982-83 the City will begin accounting for the sanitation fund as an enterprise. The primary difference will be the accumulation of depreciation on sewer fixed assets and the collection of overhead charges from other city departments. Depreciation on city fixed assets is estimated to be about $100,000 to $150,000 annually. Overhead charges should not change the cost of running the sewer system substantially since some charges are already paid by the sanitation department. The addition of depreciation costs will add $100,000 to the $812,400 already budgeted for the sanitation fund bringing the 1982-83 total cost to $912,400. Under this system, the pro- jected fund balance will be a deficit at the end of 1982-83: Beginning Sanitation Ending Balance E st i ma t e d Budget on B a1 an ce 7-1-82 Revenue Enterprise basis 6-30-83 $211,702 $629,000 $912,400 <71,698) As you can see, the implementation of Enterprise Accounting will cause the sanitation fund to have a $71,700 deficit balance by year-end. -2- 3 Under the Enterprise System the projected expenditure for the next three years will be as follows: Estimated Sanitation Budqet 1982-83 1983-84 1984-85 Sanitation Dept. $427,000 $453,000 $480,000 Encina 385 , 400 800,000 850,000 TOTAL $912,400 $1,358,000 $1,440,000 Depreciation 100,000 105,000 110,000 SEWER SERVICE RATES The rates paid by the city's sewer service customers are based on the cost to run the sewer system; both the sanitation depart- ment and the Encina treatment plant. The necessary sewer fee can be calculated approxirdately by dividing the cost to run the system by the number of EDU's billed by the city. For example, in 1982-83 the city will spend $912,000 to run the system. The city presently bills about 14,000 EDU's so the necessary sewer fee per EDU can be approximated by dividing $912,000 by 14,000 EDU's. This calculation yields a fee of about 5.43 per month to pay all costs. Our current fee is $3.25 per month, about $2.00 below the necessary rate. The cushion that allows the city to set a rate below the $5.43 fee is made up of two parts. First there is a beginning balance in the fund of about $212,000. This can be used to offset costs as long as the balance lasts. Second, the city has not yet implemented a full cost recovery- enterprise-system for the sewer fund, so costs such as depreciation of lines is not yet included in the rates. FUND BALANCE ANALYSIS The following analysis gives a picture of what can be expected to occur over the next three years in sewer rates if Encina operating costs are as expected. The assumptions used are: 1. 2. 3. 4. About 390 residential and 395 commercial/industrial EDU's are added to the system in 1983-84 and 1984-85. (total 785 per year) The city desires to use the enterprise approach to sewer system accounting. Encina costs will be as projected above. Revenue estimates include interest and lateral fees as well as sewer service charges. -3- ,I A. NO RATE INCREASES B. Beginning Ending Balance Revenue Expenditures Balance 1982-83 $212,000 $629,000 $ 912,400 $ (71 , 400) 1983-84 (71,400) 660,000 1,358,000 469,400) 1984-85 (769,400) 690,000 1,440 , 000 4,518,783 If no rate increase is adopted in the next few years we can expect the sewer fund to be over $1.5 million in the red by June 1985. $1 rate increase January 1983 $1 rate increase July 1983 $1 rate increase July 1984 Beginning Ending Balance Revenue Expenditures Balance 1982-83 $ 212,000 $ 713,000 $ 912,400 $ 12,600 1983-84 12,600 1,000,000 1,358,000 345,400) 1984-85 (345,400) 1,244,000 1,440,000 641,400) A rate increase of $3.00 over the next 30 months will still leave the fund with a $540,000 deficit in 1984-85. C. $2 rate increase January 1983 $1 rate increase July 1983 $1 rate increase July 1984 Beginning Ending Balance Revenue Expenditures Balance 1982-83 $212,000 $ 800,000 $ 912,400 $ 99,600 1983-84 99,600 1,183,230 1,358,000 45,170) 1984-85 <75,170) 1,430,000 1,440,000 45,140) Even a $4.00 increase in the 30 months between January, 1983 and June 1985 leaves the sewer fund in a deficit position. However, an $85,000 deficit could possibly be made up by controls on expenditures, improving revenues or speeding cash flow - efforts that are presently either already being made or planned for the future. -4- __-. 1. D. Approximate Rate Method $ required from fees/# EDU Available Beginning Ending EDU Balance Revenue Expenditures Balance Rate * 1982-83 14,000 $212,000 $912,400 $ 912,400 $212,000 6.10 1983-84 14,785 212,000 1,358,000 1,358,000 212,000 7.50 1984-85 15,570 212,000 1,440,000 1,440,000 212,000 7.55 * ( Based on a rate increase at January 1983) As you can see from this example, the sewer rate would have to be raised by $4.25 from 3.25 to $7.50 per month per EDU in the next two years to allow for a balanced budget. RECOMMENDATION The staff recommends that the sewer rates be increased by $2.00 per EDU for residential customers (from $3.25 to $5.25) and per partial increases for all other customers in January 1983. This increase will balance the fund for the remainder of 1982-83. If the decision is to use an increase of less than $2.00, appro- priate rate adjustments for future years will have to be cal- culated, The staff's position is that an increase of at least $2.00 shouldbe implemented to avoid substantial deficits and largvrate adjustments in the next few years. {inancdDirector JE:gb -5- 1 2 z 4 E € E s 1c 11 li n -6 i3 le 19 20 21 22 23 24 25 26 27 20 ORDINANCE NO. 7064 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA AMENDING TITLE 13, CHAPTER 13.12 OF THE CARLSBAD THE AMENDMENT OF SECTION 13.12.020 TO ADJUST SEWER SERVICE MUNICIPAL CODE BY THE DELETION OF SECTION 13.12.040 AND BY WHEREAS, the City Council of the City of Carlsbad does, from time to time, establish sewer service fees to support the City's sewer maintenance operations; and WHEREAS, it has become necessary to increase the sewer service fee to pay the cost of operations for 1982-83; and WHEREAS, the City Council did on July 15, 1980 adopt Resolution No. 6244 establishing a sewer surcharge to fund capital improvements to the Encina Waste Water Treatment Facility; and WHEREAS, these improvements have now been fully funded by the collection of said surcharqe The City Council of the City of Carlsbad, California does ordain as follows: SECTION 1: Resolution No. 6244 is hereby rescinded and all collection of sewer surcharge fees shall cease. SECTION 2: That Title 13, Chapter 13.12 of the Carlsbad Municipal Code is amended by the deletion of Section 13.12.040 follows: persons w and by the amendment of Section 13.12.020 to read as 3.12.020 Sewer Service Charges Established. All ose premises in the City are served by a connection to the City sewer system whereby sewage or other waste material is disposed of through such system shall pay a sewer service charge as established by this section: , t L 9 10 11 12 D 19 20 21 22 23 24 25 26 27 28 1. A. B. 2. A. B. C. D. E. F. MONTHLY SEWER SERVICE CHARGE Re s id en t i a1 For each single family dwelling For each unit a duplex, flat, apartment, court, multiple dwelling, mobile home comp le x' or t r a i 1 er court Commercial & Industrial For each unit of a motel, hotel, rooming, lodging or boarding house, ten units or less - each additional unit over ten - each unit with kitchen facilities Bakeries, markets with disposals, mortuaries and restaurants Schools and all other commercial uses not listed above Car washes, wash racks, laund-ries and other enterprises where water is the primary commodity to carry on said business and said water is discharged into the sanitary sewer system Each enterprise where water is the primary commodity to carry on said business, said water characteristics exceed the sewer service area average for suspended solids (S.S.) For each unit of an office of commercial building or any establishment having facilities for trailers, campers or boats. EFFECTIVE DATE: This ordinance shall be * thirty days after its adoption, and the City Clerk $5 . 25 5.25 2.10 1.60 5.25 10.25 5.25 5.25 per EDU 0.52 per each 100 cubic feet 0.52 x (180 - S.S. - 360) 5.25 effective shall certify to the adoption of this ordinance and cause it to be published at least once in the Carlsbad Journal within fifteen days after its adoption. I 2. 5' I. ~- 1 2 3 4 5 6 7 s 9 10 11 19 20 21 22 23 24 25 26 27 28 ’ INTRODUCED AND FIRST READ at a regular meeting of the Carlsbad City Council held on the 14th day of ~eceprs3er I 19 82 , and thereafter PASSED AND ADOPTED at a regular meeting of said City Council held on the 21st day of Decerrlser 1982 by the followii,g vote, to wit: AYES: Council lkn-bers Casler, lkwis, Kulchb, Chick and Prescott NOES: None ABSENT: None %?iLWL#@A MARY H. ASLER, Mayor ATTEST : CITY CLERK 4 I 3. .