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HomeMy WebLinkAbout2009-06-23; City Council; Minutes (3)MINUTES JOINT MEETING OF: THE CARLSBAD CITY COUNCIL AND MUNICIPAL WATER DISTRICT (Joint Special Meeting) DATE OF MEETING: June 23, 2009 TIME OF MEETING: 6:00 p.m. PLACE OF MEETING: City Council Chambers CALL TO ORDER: Mayor/President Lewis called the Joint Special Meeting to order at 7:00 p.m. ROLL CALL: was taken by the Assistant City Clerk/Secretary as follows: Present: Council/Board Members Lewis, Kulchin, Hall, Packard and Blackburn. Absent: None. PUBLIC HEARING: 14.AB #19.875 - PROPOSED WATER AND SEWER RATE INCREASES. Senior Accountant Helga Stover and Robb Grantham, representing PCS Group, gave the staff report and PowerPoint Presentation (on file in the Office of the City Clerk). Mr. Grantham reviewed the objectives of the water and sewer rate design for the District and City; reviewed the issues to be considered when developing drought water rate pricing; and reviewed the development process for the rates. He also explained the current water rate structure. Mr. Grantham described the public outreach process sand noticing processes. He stated that the consensus was to continue to charge for water use on a unit cost basis. He said the tiered water rate structure for single family residences is based on units of water used. He added that this approach is not used for commercial users because the water usage is not uniform. Mr. Grantham then explained the difference between base costs of water used and peak costs of water used, adding that agricultural customers had the largest peak demand usage. Mr. Grantham addressed single family residential water use, stating that analysis has shown that 50% of the bills sent to Carlsbad residents are for 12 units of water used or less. He explained the comparison between the current water rate structure and the proposed water rate structure, adding that those who use 12 units or less will still be affected by the increase in costs of purchased water from the Water Authority. He clarified the Recycled Water Program, stating that the projections made on the program were based on Fiscal Year 2007-08. He said that over the course of the year recycled water had been monitored and its usage had increased significantly. Mr. Grantham added that a lower cost per unit rate from $2.97 to $2.52 could be recommended while still adhering to the cost of service because of the usage. Ms. Stover addressed the agricultural rate stating it should be $4.10 per unit and not $4.44 as reflected in the notice mailed to consumers. The following options were reviewed for the Council/Board: June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT Option 1: • Maximum Rate increase of 18% over all user categories. • Amount required to fund operating costs and build the reserve. Ms. Stover stated that this option would add $1 to $2 million to the reserve or provide 55 days or 15% of annual operations. She also said that the Board's reserve policy is to fund the reserve of about 40% of the operating budget or about 145 days of expenditures. Ms. Stover then reviewed the proposed water rate increase for residential, non residential, agricultural, irrigation and recycled under Option 1. Ms. Stover acknowledged that Carlsbad ratepayers have been conserving at about 5% this past year and said the Board could also consider Option 2. Option 2: Slightly Lower Variable Rate • Maximum Rate increase for fixed rate • Average 15.5% increase overall all user groups She cautioned that if revenues received were not sufficient to fund operations, the Board would be asked to raise rates again at later date. Ms. Stover suggested that staff monitor and provide the Board with quarterly reports. She added that Option 2 could build the reserve to $450,000 or a 42 day balance. Ms. Stover then reviewed Option 2 water rates for residential, non residential, agricultural, irrigation and recycled users. Ms. Stover explained that if the Council/Board did not adopt the resolutions approving the rate increased the impact to the water fund would be a loss of approximately $800,000 to $900,00 per month and the wastewater fund would lose approximately $75,000 per month. Ms. Stover reported that over 40 protest letters of the water rate increase were received by the City/District to date. RECESS: Mayor/President Lewis declared a five minute recess at 7:25 p.m. RECONVENE MEETING: Mayor/President Lewis reconvened the Council/Board Meeting with five Council/Board Members present at 7:31 p.m. Mayor/President Lewis opened the duly noticed Public Hearing at 7:32 p.m. Mercedes Martin of Carlsbad came forward to address the Council/Board. Ms. Martin informed Council/Board that she had sent the City/District a protest letter. Ms. Martin explained that she was protesting the tier levels, stating that she felt tier level 2 should be expanded to allow a higher cutoff of water usage. She said she felt that that larger lots have not been taken into consideration when developing the rate structure. She added that she currently conserved water but due to the size of her lot her water rate usage will fall into the third tier. June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT Ms. Martin requested that the Council/Board reconsider the cutoff points of water usage for the different tiers; asked that an appeal process be put in place for individuals to apply for additional water allowances based on lot size; and, assign staff to act as water conservation ambassadors to advise homeowners of ways to reduce water consumption. Mayor Pro Tern/Vice President Kulchin informed Ms. Martin that the Water District does have water ambassadors available and advised her to contact the District to arrange a visit. Dale Kubacki of Carlsbad came forward to address the Council/Board. Mr. Kubacki spoke in opposition to the water rate increase. He said the flyer that was mailed to residents was very confusing. He explained that he felt the new rate structure disregarded those whose water usage was 7 units or under. Mr. Kubacki also asked why the City was asking for a 21% increase when the San Diego County Water Authority increased their water rates by 11.9% this past year. At the request of Mayor/President Lewis, Mr. Grantham explained that the rate increase of the County Water Authority was 11.9% last year, and the pass-through increase to the City was 12.3%. He continued that this year, the pass-through to the City is 20%. In response to an inquiry from Mayor/President Lewis, Mr. Grantham stated that the pass-through increase in rates from the Metropolitan Water District was 21.5%. Rick Lance of Carlsbad came forward to address the Council/Board. Mr. Lance spoke in opposition to the tiered water rate increase. He said that he felt that the tiered rate structure would penalize a property owner with a large property trying to maintain his landscape. He suggested that the City/District stop selling water meters because of the water shortage. Chris Kate of Carlsbad came forward to address the Council/Board. Mr. Kate stated he was concerned because he felt that Assembly Bill 2882, that addresses allocation-based conservation water rates was improperly referenced in the staff report. In response to an inquiry from Mayor/President Lewis, Mr. Kate cited Irvine Ranch as a model that established its water rate structure on the assessment of each lot size based on need. He explained that the baseline established water usage levels for survival and/or basic sanitary purposes for the number of people living within the dwelling. He added that landscape irrigation is not taken into account and was considered discretionary usage with a tiered rate structure. Council/Board Member Packard asked if the City of Irvine surveyed the number of people living within a dwelling on a monthly basis. Mr. Kate replied that Irvine had used this water rate program since the early 90s and began with the assumption that there were four residents per dwelling that would require a certain amount of water use. He added that over time, the onus was put on the residents to come forth and update the information about the property, thus resetting their baseline water rate. Bob Wojick of Hofman Planning and Engineering, came forward to address the Council/Board. Mr. Wojick stated he was representing the Army/Navy Academy, who was opposed to the sewer rate increase. He explained that his company had discovered what it believed were sewer rate overcharges to the Academy. He added that there were various sewer rate charges to the Academy that included charges for a boarding school, multi-family residences, a Class 5 "other June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT institutional building" and five single family residences. Mr. Wojick said he will meet with staff in the near future regarding this matter and asked that the Academy be exempt from any approved sewer rate increases until the matter is resolved. James Eaton of Carlsbad came forward to address the Council/Board. Mr. Eaton thanked Carlsbad for supporting the desalination plant. Mr. Eaton spoke in opposition to the tiered water rate structure. He said that many of the larger property owners reside in old Carlsbad, are retired and living on fixed incomes. He felt that taxpayers should only pay the increase passed onto the district and not pay for any additional costs. Mr. Eaton asked for consideration for property owners with larger parcels. Peter McKauf representing the Carlsbad Strawberry Fields, came forward to address the Council/Board. Mr. McKauf stated that in 2008 agricultural businesses were mandated by the Metropolitan Water District During to reduce water usage by 30%. He said that the Carlsbad Strawberry Fields reduced its water consumption by 44%, but also incurred a reduction of crop yield. Mr. McKauf stated he disagreed with the consultant's presentation on the amount of water usage by agriculture during peak months. He said that the Carlsbad Strawberry Fields drew less than 7% of its water during peak months and draws three-quarters of its irrigation water during off peak months. Mr. McKauf added that approximately 10% of his production costs was spent on water and he will not be able to continue his business while sustaining the proposed agricultural rate increase. He suggested that the Council/Board consider adopting an interim price structure that reflects the 21% rate increase pass-through from the San Diego County Water Authority. He asked that the Board create an agriculture sustainable committee to review and present to the Board a comprehensive rate structure to assist growers in Carlsbad. Mr. McKauf also suggested that state law be changed to allow the use of reclaimed water on edible crops. Mr. McKauf also asked the Council/Board to suspend any disbursement of funds from the Agricultural Mitigation Committee until the City knows whether or not the business is viable. Mike Mellano, grower of the Carlsbad Flower Fields, came forth to address the Council/Board. Mr. Mellano informed the Council/Board that he had submitted a letter of protest to the City/District. He said that his company was working diligently to alleviate concerns and issues relating to water conservation. He further stated his company also did not use water during peak months, adding that the Flower Fields water usage occurred during the months of November, December, February and March. He stated that the proposed rate structure will not permit agriculture to be sustainable. Mr. Mellano reminded the Council/Board that the citizens of Carlsbad stated that they want agriculture to continue in Carlsbad. He requested that agriculture water rates remain unchanged until further review and that reclaimed water rates return to the January 2008 level. In response to an inquiry from Council/Board Member Blackburn, Mr. Mellano said that the Flower Fields has used reclaimed water in conjunction with potable water because of the high salt level in the reclaimed water. June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT Chris Calkins, President of CB Ranch Enterprises of the Flower Fields, came forward to address the Council/Board. Mr. Calkins said he too provided a protest letter to the City/District. He requested that the Council/Board adopt only pass-through water increase and not adopt the service and operating costs. Mr. Calkins stated that under the City's new proposed reclaimed water rates, the Flower Fields will pay approximately 100% more for reclaimed water than it had the previous year. He said he did not understand the policy the Water District was following that would undo the sustainability of agriculture in the City. Mr. Calkins referenced the Flower Fields as one of two areas in the City that have non-peak water usage. He also said that the Flower Fields is an area in the city that voters stated they wanted to keep as agriculture. Mr. Calkins explained that no other entity in the city is required to use water; however, the Flower Fields is required by the City's Conditional Use Permit to plant and grow flowers, and cannot stop without giving the City a five year notice. He added that the Flower Fields is currently charged for water usage under the multi-family tier not agriculture rates. Mr. Calkins asked Council/Board to adopt a policy that reflected the obligations for those unique uses that have an obligation to farm. Mayor Lewis closed the duly noticed Public Hearing at 8:24 pm. Mr. Ball suggested that the Council/Board acknowledge the number of written protests received. Assistant City Clerk/Secretary Karen Kundtz reported that the City/District had received 36 protest letters and a petition with 10 signatures protesting the increase, for a total of 46 protests. In response to an inquiry from Council/Board Member Blackburn, Mark Stone, Deputy Public Works Director, said that the Ordinance relating to the Drought Management Program identified level 3 as the level in which the city would issue a moratorium on water meters. Council/Board Member Blackburn asked how long it would take to rebuild the reserve fund if Option 1 or Option 2 were adopted. Ms. Stover replied that the current reserve balance is between 5-10 percent. She explained that Option 1 would add between $1 and $2 million to the reserve which would bring the fund to 15%. She said that subsequent increases would be needed to get the fund to the 40% level which could take several years. Ms. Stover explained that Option 2 would add approximately $500,000 dollars to the reserve this fiscal year. Mr. Blackburn asked if there were hardship allowance procedures associated with the rate increases. Mr. Stone said a hardship variance was cited in the Drought Ordinance. He explained that if a property or business owner believed that a hardship was placed on them, a request can be submitted to the Water District for consideration. Mr. Blackburn also asked about a solution to the requests from the Strawberry and Flower Fields if Option 1 or 2 were adopted. June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT Mr. Stone said he did not have the answer to this question and further review was required. He explained that the majority of the increase was associated with purchased water costs. He added that the remaining costs were the City/District's costs, but are also uncontrolled for example, by increases in energy costs to move the water. He said that if those costs increase they have to be passed on to the customers. In response to an inquiry from Council/Board Member Packard, Cari Dale said staff would review the water rate designation of the Flower Fields with Mr. Mellano. Mr. Stone clarified for Mr. Packard that the agriculture designation also includes nurseries as well as other growers. In response to an inquiry from Mr. Packard, Mr. Grantham said that agriculture users as a whole have a higher water usage during the peak summer months. Mr. Packard asked staff to address the appearance of penalizing property owners with large parcels. Mr. Grantham replied that during the process several rate structures, the size of the tiers and a conversation regarding water budgets was reviewed. He added that Irvine Ranch did take into consideration lot size, as well as the number of people residing in the dwelling. He explained that it was decided not to use this process due to added administrative costs. He further added the process reviewed customer class and peak demand and noted that most of the customers were using 12 units or less. Vice President /Mayor Pro Tern Kulchin suggested that the City/District consider establishing a committee to review agriculture sustainability. Mayor/President Lewis stated he was concerned about the lack of funds in the District reserve account. He further stated that he felt that it was important to mitigate the concerns regarding agricultural water rate increases for the Strawberry Fields and Flower Fields. Mayor/President Lewis stated he would ask staff to return with recommendations regarding rates for agriculture. Council/Board Member Blackburn suggested that if Option 1 was adopted, that the Strawberry and Flower Fields could be subsidized by funds that would be paid into the District Reserve Account, to lessen the burden of the increased rates. Mayor/President Lewis stated he agreed with Mr. Blackburn, but would prefer to have staff return with options. Council/Board Member Packard asked if the Strawberry Fields and Flower Fields were to be treated differently than other agriculture businesses. City Attorney Ron Ball said all members of the agriculture class needed to be treated equally. He explained that the reference to AB 2882, which authorizes the tiered rates as an exception to Proposition 218, was not included in the Resolution to be adopted. He further explained that if the Council/Board did adopt the Resolution it was his suggestion that the Resolution be amended to include a reference to AB 2882. Mr. Ball added that staff could then be directed to study the rate June 23, 2009 JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT system and return with suggestions that would allow agriculture to be treated differently and/or subsidize the operations of certain businesses. City Manager/Executive Director Lisa Hildabrand asked staff if there was enough time to review the agriculture water rates before August 1, 2009 and return with options to the Council/Board. Ms. Stover replied that because this is a new system, utility billing staff has requested a month to test and input the new rate structure rates. Council/Board Member Hall stated staff should review the agriculture and recycled water rates. Mr. Hall then asked what would happen if the Council/Board is not able to discuss this item before the increase in rates occurs. Ms. Hildabrand responded that staff would commit to returning their recommendation to the Council/Board on July 28, 2009. She clarified that the request for staff review was for agriculture and recycled water rates. Mayor Pro Tern/Vice President Kulchin moved that the Council/Board adopt Resolution Nos. 2009- 165 and 1360 approving Option No. 2, water rates associated with a 5% cutback, amending Resolution No. 1360 to include a reference to AB 2882, and retaining the agriculture and recycled water rates at their current rate until staff returns with a recommendation. The motion was seconded by Council/Board Member Packard. Mr. Packard asked Ms. Kulchin to amend her motion to adopt each resolution separately. Mayor Pro Tern/Vice President Kulchin amended her motion to adopt the Resolutions separately. ACTION: On a motion by Mayor Pro Tern Kulchin, the Council adopted RESOLUTION NO. 2009-165. approving increases in sewer rates. AYES: Lewis, Kulchin, Packard and Blackburn. NOES: Hall. ABSENT: None. ACTION: On a motion by Vice President Kulchin, the Board adopted RESOLUTION NO.1360. approving water increase Option 2, (5% cutback) as amended to include a reference to AB 2882, and retaining the agriculture and recycled water rates at their current rate until staff returns with a recommendation prior to August 1, 2009. AYES: Kulchin, Hall and Packard. NOES: Lewis and Blackburn. ABSENT: None. June 23, 2009 ADJOURNMENT: JOINT SPECIAL MEETING OF THE CITY COUNCIL AND CARLSBAD MUNICIPAL WATER DISTRICT By proper motion, the Joint Special Meeting of June 23, 2009 was adjourned at 8:24 p.m. Assistant City Clerk/Secretary Sherry Freisinger Deputy Clerk