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HomeMy WebLinkAbout2019-09-17; City Council; ; Public hearing date for a new potable water rate structure and proposed multi-year rates for potable water, recycled water and wastewaterMeeting Date: To: From: Staff Contact: Subject: Sept. 17,2019 Mayor/ President and City Council/ Board Scott Chadwick, City Manager/ Executive Manager Ligeia Heagy, Management Analyst Ligeia.Heagy@carlsbadca .gov or 760-603-7360 Vicki Quiram, Utilities Director/ General Manager Vicki.Quiram@carlsbadca.gov or 760-438-2722 CA Review Dl!AJ Public hearing date for a new potable water rate structure and proposed multi-year rates for potable water, recycled water and wastewater Recommended Actions 1. Adopt a Resolution of the Board of Directors of the Carlsbad Municipal Water District setting Nov. 19, 2019, as the date for a public hearing regarding a potable water rate structure modification and proposed two-year rates for potable water and recycled water. 2. Adopt a Resolution of the City Council of the City of Carlsbad setting Nov. 19, 2019, as the date for a public hearing regarding proposed two-year rates for wastewater. Executive Summary On Dec. 18, 2018, the Board of Directors of the Carlsbad Municipal Water District (CMWD Board) approved Resolution No. 1611 authorizing execution of a professional services agreement with Carollo Engineers, Inc. (Carollo) for the 2019 Utilities Cost of Service Study {Study). The Study was recently completed and recommends increasing the revenue for each utility to provide adequate funding to properly operate, maintain and renew the utility infrastructure systems. A utility revenue increase is met by rate increases and/or the use of fund reserves to reduce rate impacts. At the public hearing, staff will recommend using both methods to mitigate rate impacts to customers. For potable water, the Study recommends a 1% revenue increase effective Jan. 1, 2020, and another 2% revenue increase effective Jan. 1, 2021. Potable water rates have been held flat for the last two years. Staff will recommend a combination of potable water rate increases and the use of reserve funds to meet the revenue requirements in calendar years (CY) 2020 and 2021. For recycled water, no revenue increase is needed at this time. Recycled water rates have also been held flat for the last two years. Staff will recommend that recycled water rates remain the same through CYs 2020 and 2021. For wastewater, the Study recommends a 3% revenue increase effective Jan. 1, 2020, and another 3% revenue increase effective Jan. 1, 2021. Wastewater rates have been held flat for September 17, 2019 Item #14 Page 1 of 18 the last four years. Staff will recommend a combination of wastewater rate increases and the use of reserve funds to meet the revenue requirements in CYs 2020 and 2021. The City of Carlsbad and Carlsbad Municipal Water District (CMWD) are required to notify customers at least 45 days in advance of a public hearing for City Council and the CMWD Board consideration of changes to the rate structures and schedule of rates. City Council and CMWD Board approval is needed to establish the date of the public hearing. Staff therefore requests that the City Council and the CMWD Board set the public hearing date for Nov. 19, 2019. Discussion CMWD provides reliable, safe drinking (potable) and recycled water to homes and businesses within a 32.3-square mile service area (Exhibit 4). Currently, there are approximately 30,170 potable and recycled water connections within the service area. CMWD is estimating a 1% increase in demand for fiscal year (FY) 2019-20 and a 1.8% increase by FY 2020-21. The demand increase is due largely to new development. The City of Carlsbad operates a third infrastructure system that collects wastewater in an approximately 30-square mile service area (Exhibit 5). This system must meet stringent regulations as it conveys wastewater from homes and businesses to the Encina Water Pollution Control Facility (EWPCF) for treatment. Currently, there are approximately 24,000 wastewater connections within the service area. A portion of the water from EWPCF is further treated at the Carlsbad Recycled Water Facility (CRWF) and is redelivered to customers through the CMWD recycled water system for landscape irrigation and other industrial-type uses that require process water. Cost of Service Study Process Carollo recently completed the Study on behalf of the city and CMWD. The principal objectives of the Study were as follows: 1) Water and Sewer Revenue Sufficiency Analysis -Develop three separate multi-year forecasting Microsoft Excel models for potable water, recycled water and wastewater. These models contain the necessary data to determine the level of annual revenue required to meet each system's projected annual operating, debt service and capital cost requirements while maintaining adequate reserve levels. 2) Cost of Service Analysis -Complete a thorough cost allocation process to reflect the appropriate distribution of system costs to system function_s and ultimately rate classes, or different types of customers, e.g., single-family or industrial, based upon data such as average day, maximum day and peak-hour demands to ensure a fair and equitable distribution of costs by rate classification . 3) Rate Calculation -Review each utility's existing rate structure and develop modifications, as appropriate, to ensure that its rates reflect accepted industry practice and an equitable distribution of costs, while enhancing transparency and adherence to cost-based pricing principles. September 17, 2019 Item #14 Page 2 of 18 Additionally, Carollo took a holistic look at each utility system and its relationship with all of the customer classes to ensure compliance with all applicable laws, including Proposition 218. Potable and Recycled Water -Existing Rate Structures The existing rate structures consist of a base monthly delivery charge and a volumetric usage charge. The base monthly delivery charge is a fixed charge paid regardless of water consumption and is proportionate to the size of the customer's water meter. This fixed delivery charge recovers fixed operating costs such as staffing, customer service and utility billing, as well as a portion of the cost to keep the CMWD's infrastructure in service including operations, maintenance and capital replacement funding. The volumetric usage charge is imposed based on actual water consumption and recovers the cost of purchased water, variable operating costs such as electricity and chemicals, and approximately 50% of capital costs that are not funded using existing reserves. Potable and Recycled Water -Proposed CY 2020 Rate Structure The Study recommends one rate structure change for potable water -eliminating the Tier 3 category for the multi-family rate structure. Because of shifting customer demands, the Tier 3 usage demand is very low (5%). Eliminating Tier 3 and adjusting the rates for Tier 2 ensures the rate structure reasonably reflects the proportional cost of providing service to each tier. The Study does not recommend changes to the existing recycled water rate structure. Potable Water Rates Potable water rates have not been increased for the last two years because the utility had sufficient reserve funds to meet its operating, maintenance and capital replacement costs. In order to meet the Study's recommended potable water revenue requirement, staff will be recommending a combination of reserve funding and rate increases beginning Jan. 1, 2020 and beginning Jan . 1, 2021. Per law, rates are allocated to customer classes, e.g., single-family, commercial or irrigation, based on each class's proportionate share of the system, which is why there is variation in rate increases across customer classes. The proposed increase in potable water rates is primarily driven by increases in the cost of water purchased from the San Diego County Water Authority (SDCWA), increases in cost of desalination water and increases in operating costs due to inflation. CMWD is a member agency of SDCWA and purchases all its potable water from SDCWA. This purchase comprises approximately 56% of CMWD's total annual operating budget and includes 2,500 acre-feet annually of desalinated water, which is a local drought- resilient water supply. SDCWA projected high increases in the cost of treated water for FY 2019-20. However, SDCWA is mitigating rate impacts to member agencies through a planned draw on their rate stabilization fund of approximately $22 million for FY 2019- 20 and $38 million for FY 2020-21. September 17, 2019 Item #14 Page 3 of 18 Due to CMWD's specific allocated share of SDCWA fixed costs and projected water purchases for FY 2019-20 and FY 2020-21, the effective increase in SDCWA purchase costs for CMWD is approximately 3.5%. The SDCWA increase is primarily driven by: 1) Decreased water sales demand forecast after the fourth rainiest year since 1999 and the outcomes from drought regulation and water conservation 2) An approximate 5% increase in Metropolitan Water District's (MWD) water rates and transportation charges 3) Increased Capital Improvement Program (CIP) expenditures due to increases in cost of steel and cement/concrete and shortage of skilled labor 4) Expenditures associated with shared reservoirs 5) Construction of new seawater intake-discharge facilities at the desalination plant in Carlsbad to comply with updated environmental standards Though CMWD plans to increase capital investment based on asset management and utility master plans, the impact to CMWD's rates in the next two years will be minimal as existing capital replacement reserves will be used to fund capital improvements. The current and proposed potable water rates by customer class are shown in Exhibit 3. Recycled Water Rates There will be no proposed rate increases for recycled water. Staff will recommend the recycled water rates stay the same for CYs 2020 and 2021. Wastewater Structure There are no proposed changes to the existing wastewater rate structure. However, the Study recommends moving breweries into their own classes to better track them and assist with establishing a rate that is commensurate with their impact on the wastewater system. Brewery waste is typically very high in biochemical oxygen demand (BOD) and total suspended solids (TSS) concentrations. The high concentrations can lead to increased degradation of wastewater infrastructure and drive higher treatment costs. Customers would be migrated into one of the four new brewery classes once their business is identified as a brewery via the city's business license application process. Currently, there are approximately 10 breweries in Carlsbad. Customers in the brewery category are split into separate rate classes depending on whether or not they also operate as a restaurant. The rates for each class are developed based on the assumption that half of a user's wastewater is generated by brewing and half is from the restaurant or general commercial operation (restrooms, breakrooms, etc.). The BOD and TSS loading assumptions are adjusted for each type of user accordingly. For breweries that haul their brewing waste offsite for treatment, those without restaurants will be charged a rate equal to the C2 commercial rate, and those with restaurants will be charged a higher rate. Breweries that fall into the B2 and B4 classes -in other words, those that do not haul their brewery waste for outside treatment, would have higher rates than those that do haul their waste for outside treatment. September 17, 2019 Item #14 Page 4 of 18 The use of classes for breweries also assists staff in identifying breweries and ensuring that these businesses are in compliance with waste discharge requirements. The proposed new brewery classes are shown below. Bl -Brewery without a restaurant and hauls waste for outside treatment B2 -Brewery without a restaurant and does not haul waste for outside treatment B3 -Brewery with a restaurant and hauls waste for outside treatment B4 -Brewery with a restaurant and does not haul waste for outside treatment Additionally, staff will create outreach material about the brewery classes and rates and begin working with businesses to help them meet requirements for placement into the Bl and B3 classes. In recognition of the high concentration of waste produced, several breweries have already begun diverting this waste stream and would therefore fall into the Bl or B3 class now. The proposed new brewery classes are shown in Exhibit 3. Wastewater Rates Wastewater rates have been held flat for the past four years, as the utility experienced lower than anticipated expenditures for several years in a row that increased the reserves and allowed staff to hold the rates flat. The revenue increase that staff will recommend at the public hearing is 3% effective for one year beginning Jan. 1, 2020, and 3% for one year · beginning Jan. 1, 2021. A portion of wastewater operating reserves will be used to offset the rate increases. The proposed rate increases are needed primarily for: • Encina's three-year 100% CalPERS retirement liability payoff • Increased energy and chemical costs • Capital budget for Encina infrastructure of $99 million over the next 15 years • Inclusion of a more accurate, data driven long-range assessment of city capital costs, not previously included in the CIP, provided by the Asset Management Master Plan. The city's approved FY2019-20 CIP includes approximately $63 million over the next 15 years_for assessment, repair and rehabilitation of the sewer system that will extend the useful life of the system assets; • Basic increases in the city's operating costs due to inflation. The current and proposed wastewater rates by customer class for wastewater are shown in Exhibit 3. Proposition 218 Notice The city and CMWD must notify customers at least 45 days in advance of holding a public hearing regarding changes to utilities rate structures and rates. The city and CMWD will mail written notices of the proposed changes to the wastewater, potable water and recycled water rate structures and schedule of rates to all property owners and utility customers via U.S. mail on Oct. 1, 2019. Customers have the right to protest the changes by submitting their concerns in writing to the City Clerk's office any time before close of the public hearing. September 17, 2019 Item #14 Page 5 of 18 If less than a majority of protests are received, the City Council and CMWD Board will consider the proposed changes to the potable water rate structure and schedule of rates for wastewater, potable water and recycled water at a public hearing at the Council Chamber, 1200 Carlsbad Village Drive, Carlsbad, California, at 6:00 p.m. on Tuesday, Nov. 19, 2019. The public hearing must be held a minimum of 30 days before changes to the rate structures or rate increases can be enacted. Fiscal Analysis At the Nov. 19, 2019 public hearing, the proposed potable water rate structure and rate increases, if approved, will be effective Jan. 1, 2020, and Jan. 1, 2021, respectively, and will provide adequate funding to properly operate and maintain Carlsbad's water and wastewater systems and provide adequate funding of reserves. Exhibit 3 shows the current and proposed rate changes for each utility. The three divisions in the Utilities Department (potable water, recycled water and wastewater) each have their own separate dedicated budgets, which are called "enterprise funds." . Enterprise funds exist to provide a specific service, and they are funded by ratepayers (customers) and user fees, not by taxes. The enterprise fund establishes a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for those services. The monies collected for providing the specific services cannot be used for anything else. The ratepayers also own all the infrastructure associated with the services being provided. CMWD supplies potable water and recycled water, and the city provides wastewater services. Recommended Potable Water Rate Increase: .After holding rates flat for the past two years, the Study recommends increasing potable water revenue by 1% beginning Jan. 1, 2020, and by 2% beginning Jan. 1, 2021. For CY 2020, the 1% rate revenue increase will impact each class of rate differently due to the cost of service adjustment and restructuring of the rates. For example, the customer demand analysis of the updated cost of service study found that irrigation customers are responsible for slightly more peak usage costs than under the current rate structure. Thus, the irrigation volumetric rate for CY 2020 has an increase above the overall 1% rate revenue increase. The Study also recommends adjusting the fixed delivery charges to help account for shifting demand patterns between classes to more closely align revenue collection with where costs are incurred. For example, the fixed delivery charge for a 5/8" meter is proposed to increase approximately 1.21% from $24.72 to $25.02, an increase of $0.30. The fixed delivery charge for a 3/4" meter is proposed to increase approximately 1.20% from $33.36 to $33.76, an increase of $0.40. The recommended increase in the potable water rates is also influenced by the current desalination rate associated with purchasing 2,500 acre-feet of water under the Uniform Member Agency Purchase Contract (UMAPC). The current UMAPC desalination rate is approximately $2,788 per acre-foot, in comparison to the SDCWA blended rate of approximately $1,750 per acre-foot. Staff estimates the purchase of desalinated water would not have been necessary if customers used water consistently at the winter demand level and September 17, 2019 Item #14 Page 6 of 18 did not exhibit a seasonal peak in demand. Based on the supply cost allocation approach used in the cost of service study, the cost of providing desalinated water was allocated to customers that place a high-peak demand on the water system, such as residential customers above the average single-family residential winter water use, agricultural and irrigation customers. A target operating reserve of 40% of operations and maintenance, better than anticipated financial results and long-range financial planning have helped temper the recommended potable water rate increase by creating surplus operating reserves that CMWD can utilize to reduce rate increases in the near-term. A portion of the operating reserves would be used to soften the recommended potable water rate increases for the next three to five years. Operating reserves are projected to total approximately $25.8 million, or 55% of operations, at the end of FY 2020-21. Staff will recommend using approximately $420,000 (~1.6%) of reserves during FY 2019-20 and approximately $144,000 (~0.60%) of reserves in FY 2020-21. Based on the study projections, the operating reserve would be further reduced until it reaches the goal level of 40% of operations in FY 2023-24. If the rates were held flat for the next two years, ratepayers would experience spikes in rate increase in the following years. In addition to the use of operating reserves in FY 2019-20, approximately $2 million in capital reserves will be used to fund CIP projects. The capital fund will be replenished in FY 2020-21, however it is anticipated that the capital funds will be drawn down beginning in FY 2021-22 as annual capital expenditures are expected to increase. All proposed potable water rates are shown in Exhibit 3 and reflect the utility's cost of providing potable water services for the uprnming calendar years. Recommended Recycled Water Rate: No increase in recycled water revenue for the next two years is needed. Staff recommends holding recycled water rates flat in CYs 2020 and 2021. The recycled water rate continues to be less expensive than the agricultural and irrigation rates for potable water. Carlsbad's recycled water system provides a drought-resilient local supply, helps conserve potable water and reduces reliance on imported water. The proposed recycled water rates are shown·in Exhibit 3 and reflect the utility's cost of providing recycled water services for CYs 2020 and 2021. Recommended Wastewater Rates: After holding the rates flat for the past four years, the Study recommends increasing wastewater revenue by 3% for CY 2020 and an additional 3% for CY 2021. Staff will recommend using wastewater reserves over the next several years to partially offset rate increases. A portion of the operating reserves would be used to soften the recommended wastewater rate increases for the next three to five years. Based on the Study projections, approximately $3.2 million (~42%) of operating reserves in FY 2019-20 and $100,000 (~1.3%) of operating reserves in FY 2020-21 will be used to smooth rate increases. Operating reserves are projected September 17, 2019 Item #14 Page 7 of 18 to total approximately $3 million, or 40% of operations, at the end of FY 2020-21. Additionally, $4.5 million of existing capital reserves in FY 2019-20 and $13.8 million of existing capital reserves in FY 2020-21 will be used to fund capital improvements. In order to maintain sufficient reserves, wastewater increases are necessary. The proposed wastewater rates are shown in Exhibit 3 and reflect the utility's cost of providing wastewater services for the upcoming calendar years. These rates include new classes for breweries to ensure that breweries are accounted for and charged rates that are commensurate with their impact to the wastewater system. Example Monthly Bill: The following table provides an estimate of impacts to a monthly bill for each enterprise if the above increases are adopted at the public hearing on Nov. 19, 2019: Current Bill Proposed Bill (Jan. Proposed Bill 1, 2020) (Jan. 1, 2021) Potable Water1a $68.81 $70.55 $72.42 Wastewater1b $27.81 $28.66 $29.52 Total Single Family Residential $96.62 $99.21 $101.94 Recycled Water2 $1,422.23 $1,422.23 $1,422.23 1. Assumes an average single-family residence: a. Potable Water: 5/8" meter using 11 units per month b. Wastewater: Pays a flat monthly charge 2. Recycled Water: Industrial Park site with 1.5" meter using 350 units in a summer month (currently, a potable irrigation user would pay $1,899.79 with the same size meter). Multi-Year Rates: Staff recommends using a multi-year rate approach to keep the utilities on the same rate setting schedules. Proposition 218 requires noticing customers of the public hearing and potential changes to the rate structures and rate schedule. Combining the noticing spreads the costs among all three utilities, thereby increasing economies of scale. While a 40% reserve funding level was established in FY2019-20 budget, the city and CMWD will be proposing a more detailed reserve policy for the utilities that uses best practices and includes rate stabilization fund accounts. Staff will work with the finance department to develop a written utilities reserve policy for consideration by the City Council and CMWD Board at a future date. Next Steps Schedule for Rate Structure Adoption and Multi-Year Rates Implementation The following schedule will allow the city and CMWD to implement a new potable water rate structure and multi-year rates for wastewater, and potable and recycled water in a timely manner. • Sept. 17, 2019 Set the public hearing for Nov. 19, 2019 • Oct. 1, 2019 Mail Notice of Public Hearing and proposed utilities rate changes September 17, 2019 Item #14 Page 8 of 18 • Nov. 19, 2019 Hold the public hearing and set CY 2020 and 2021 rates • Jan. 1, 2020 Implement CY 2020 rates • Jan. 1, 2021 Implement CY 2021 rates Staff will work with the finance department to expand the current utilities reserve policy to present to the City Council and CMWD Board for consideration during the FY 2020-21 budget process. Environmental Evaluation (CEQA) This project is exempt from the California Environmental Quality Act (CEQA) per State CEQA Guidelines Section 15273(a) -modification, structuring, restructuring, or approval of rates, tolls, fares, or other charges by public agencies. Public Notification and Outreach The California Constitution, Article XIIID, Section 6, states that local governments must hold a Majority-Protest Public Hearing and notify property owners and customers at least 45 days in advance of public hearings related to proposed water, recycled water and wastewater rates. At the public hearing, if it is determined that a majority of affected customers and property owners have submitted formal protests, the proposed fee changes must be rejected. This is a requirement of Proposition 218, passed by California voters in 1996, to limit methods by which local governments can create or increase taxes, fees and charges without taxpayer consent. Any affected customers and property owners interested in objecting to the increases may file a signed written protest with the City Clerk. The written protest must contain the address of service, the rate change being protested and be received prior to close of the public hearing. While protestors may appear at the hearing and be heard on the matter, only written protests are considered as part of the majority protest. Staff will take the following actions at least 45 days prior to the Nov. 19, 2019, public hearing date: • Notify affected customers and property owners by mail of the public hearing • The Notice (Exhibit 3) will provide information related to the public hearing • The Notice will provide information regarding the proposed rates • In addition, information about the Majority-Protest Public Hearing and proposed rates will be posted on the city's website at www.carlsbadca.gov/finance. Information regarding public notifications of this item such as mailings, public hearing notices posted in the newspaper and on the city website will be available in the office of the city clerk. Exhibits 1. City Council Resolution. 2. CMWD Board Resolution. 3. Notice of Public Hearing and Proposed Multi-Year Rates. 4. CMWD Water Service Area Map. 5. City of Carlsbad Wastewater Service Area Map. September 17, 2019 Item #14 Page 9 of 18 RESOLUTION NO. 2019-185 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, SETTING NOV. 19, 2019, AS THE DATE FOR A PUBLIC HEARING REGARDING PROPOSED TWO-YEAR RATE INCREASES FOR WASTEWATER SERVICES. WHEREAS, the California Constitution Article XIII D § 6(a)(2) requires local governments hold a majority-protest hearing and notify customers not less than forty-five (45) days in advance of the hearing before increasing in wastewater service rates; and WHEREAS, the city is proposing wastewater service rate increases in January 2020 and January 2021;and WHEREAS, a majority protest public hearing is required to be held regarding the increases in wastewater rates. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council of the City of Carlsbad hereby sets a majority-protest public hearing for Tuesday, Nov. 19, 2019, in accordance with applicable law. PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the City Council of the City of Carlsbad, California and the Board of Directors of the Carlsbad Municipal Water District Board of the City of Carlsbad, California on the 17th day of September 2019, by the following vote, to wit: AYES: Hall, Blackburn, Bhat-Patel, Schumacher, Hamilton. NAYS: None. ABSENT: None. r r~ Jk,tor 6o"1eZ1 Otf'I~ "\I> BARBARA ENGLESON, City Clerk CJ Cl nt (SEAL) ,,11111111111111,,,l ,,,11 CA b ,,,,, ~~0~ ril "0 ~ ·"•'·""~ ~~ .. •· ··-.\J~~ tJ.../~··· .. -v\ \o(~y~)oJ ~ ·• .. "'-~···· .... ·· .;: ¾ (' .. • ....... : .... •·~,,. :# "1-1-,,11 l.lFOf"'";,,,,-" l//111rn1111l\\\\\\: September 17, 2019 Item #14 Page 10 of 18 RESOLUTION NO. 1622 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT OF THE CITY OF CARLSBAD, CALIFORNIA, SETTING NOV. 19, 2019, AS THE DATE FOR A PUBLIC HEARING REGARDING A PROPOSED POTABLE WATER RATE STRUCTURE MODIFICATION AND PROPOSED TWO-YEAR RATES FOR POTABLE WATER AND RECYCLED WATER SERVICES. WHEREAS, the California Constitution Article XIII D § 6(a)(2) requires local governments hold a majority-protest hearing and notify customers not less than forty-five (45) days in advance of the hearing before increasing water service rates; and WHEREAS, CMWD is proposing potable water service rate increases in January 2020 and January 2021; and WHEREAS, a majority protest public hearing is required to be held regarding the increases in potable water rates. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of Carlsbad Municipal Water District of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the Board of Directors of the Carlsbad Municipal Water District hereby sets a majority-protest public hearing for Tuesday, Nov. 19, 2019, in accordance with applicable law. PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California and the City Council of the City of Carlsbad, California on the 17th day of September 2019, by the following vote, to wit: AYES: Hall, Blackburn, Bhat-Patel, Schumacher, Hamilton. NAYS: None. ABSENT: None. September 17, 2019 Item #14 Page 11 of 18 EXH 3 DRAFT -text for the actual brochure that will be mailed to the public BROCHURE COVER Notice of Majority Protest Public Hearing on Proposed Maximum Potable Water and Wastewater Rate Increases Tuesday, Nov. 19, 2019, at 6 p.m. City of Carlsbad City Council Chambers 1200 Carlsbad Village Drive Carlsbad,CA 92008 This notice contains information on proposed changes to the water rate structure and proposed multi-year rates for water and wastewater services. For more information about the public hearing process or the proposed changes, please call 760-602-2420, or visit the city's website at www.carlsbadca.gov/finance. INSIDE Proposed changes to water and wastewater rates The Carlsbad Municipal Water District, a subsidiary district of the City of Carlsbad, provides reliable safe drinking water and recycled water within its service area, and purchases 100 percent of its drinking water from the San Diego County Water Authority (SDCWA). The cost to purchase imported water continues to increase. The District proactively plans for increases in costs associated with operations, maintenance, and replacement of aging or failing infrastructure. To accommodate these anticipated increases in cost, an increase in potable water rates over the next two years is being proposed. Potable water rates were held flat the last two years. No rate increase is proposed for recycled water. The City of Carlsbad owns and maintains a sanitary sewer system that provides customers with wastewater collection and conveyance services to a jointly owned wastewater treatment plant (Encina). The City proactively plans for increases in costs associated with operations, maintenance, and replacement of aging or failing infrastructure. The City also pays a percentage share of the operation, maintenance, and capital replacement costs at the Encina plant. To accommodate these anticipated increases in cost, an increase in wastewater rates over the next two years is being proposed. This will be the first increase in four years, as the City has successfully held rates flat for that time frame. If the Carlsbad Municipal Water District Board of Directors and the City of Carlsbad City Council approve the rate increases at the public hearing on Nov. 19, 2019, the new rates for the upcoming year will be effective Jan. 1, 2020 and the second year will be effective on Jan . 1, 2021. The proposed rates will enable the District and the City to continue to provide quality services in a fiscally responsible manner by funding ongoing operations, maintenance, and replacement of the water and wastewater system, as well as maintaining adequate operating reserves. How your water rate is calculated To meet the revenue needs for purchasing imported water and maintainihg the distribution system, the proposed rate changes in the following tables are being recommended. Proposed rates are allocated to each customer class based on their proportionate use of the water system. There are two components to the water rates: the usage charge and the monthly delivery charge. The usage charge is the charge for the volume of water used. The monthly delivery charge is a fixed charge based on the size September 17, 2019 Item #14 Page 12 of 18 of the meter. Residential meters are typically 5/8" to 1". Larger meters are primarily for larger water demands, such as commercial buildings. Monthly Potable Water Delivery Charge Two Year Maximum Rate Increase ----~--•--!.!!nit =_748 gall~I}~.--•,,·•·~•~·-··· .... 1/1/2020 1/1/2021 Current Proposed Proposed Meter Size: 5/8" $ 24.72 $ 25.02 $ 25.52 3/4" $ 33.36 $ 33.73 $ 34.44 1" $ 50.62 $ 51.25 $ 52.28 1.5" $ 93.79 $ 94.98 $ 96.88 2" $ 145.58 $ 147.45 $ 150.40 2.5" $ 206.07 $ 208.67 $ 212.84 3" $ 266.52 $ 269.88 $ 275.28 4" $ 439.10 $ 444.79 $ 453.68 6" $ 870.76 $ 882.05 $ 899.69 8" $ 1,388.75 $ 1,406.76 $ 1,434.89 10" $ 1,993.06 $ 2,018.92 $ 2,059.30 Residential Water Rates Residential rates are grouped into tiers, with Tier 1 having the lowest per unit rate and the Tier 2 having an incrementally higher rate. The tier rate that is charged depends on a customer's actual water usage. Tier 1 is designed to meet wate.r use essential for internal residential use. Tier 2 is designed to meet exterior landscaping requirements for typical residential property. The water rate structure is designed to be more consistent with actual demand, ensure adequate cost recovery for water services, and ensure adequate reserve funding. Non-Residential Water Rates Non-residential customers have different water usage needs than residential cu stomers; therefore, the usage charge is a flat per unit rate rather than a tiered rate. Examples of non-residential customers include commercial, agricultural, and irrigation. Water Usage Charge Two Year Maximum Rate Increase 1 unit = 748 gallons Current Tier Tier 1 (0-10 units) Tier 2 (>10) Tier 3 (19+ units) ($/unit) Current $ $ $ 3.94 4.69 7.00 1/1/2020 ($/unit) Proposed $ $ n/a 4.13 4.42 1/1/2021 ($/unit) Proposed $ $ n/a 4.21 4.51 September 17, 2019 Item #14 Page 13 of 18 Tier 1 (0-5 units) Tier 2 (>10) Tier ;3 (11+ YRits) Commercial Agricultural Rates Irrigation Rates Recycled Water Rates $ $ $ $ $ $ 3.87 4.67 6.97 4.22 4.53 5.16 $ 3.87 $ 4.94 $ $ $ n/a 4.27 4.62 5.31 $ 3.95 $ 5.04 $ $ $ n/a 4.36 4.71 5.41 The recycled water rate will remain unchanged. The recycled water cost is estimated based on the cost of treatment, and operation and maintenance costs of the distribution system, as well as adequate reserve funding. Monthly Recycled Water Usage Charge Two Year Rates 1 Unit = 748 gallons Recycled Water Rates $ 3.79 $ 3.79 $ 3.79 Monthly Recycled Water Delivery Charge Two Year Rates Meter Size: 5/8." $ 23.69 $ 23.69 3/4" $ 32.69 $ 32.69 1" $ 50.70 $ 50.70 1.5" $ 95.73 $ 95.73 2" $ 149.75 $ 149.75 2.5" $ 212.84 $ 212.84 3" $ 275.90 $ 275.90 4" $ 455.93 $ 455.93 6" $ 906.18 $ 906.18 8" $1,446.47 $1,446.47 10" $2,076.82 $2,076.82 Fire Protection $ 23.69 $ 32.69 $ ,S0.70 $ 95.73 $ 149.75 $ 212.84 $ 275.90 $ 455.93 $ 906.18 $1,446.47 $2,076.82 Some customers have separate fire meters and lines for fire suppression sprinklers. The fire meters and lines require maintenance, service, and a portion of system capacity. The service connection size is the basis of the charge and can be measured either by the meter size or by the service line size. In cases where a meter is installed, which restricts the capacity of the connection and measures total water consumption, the charges will be based on the meter size. For fire lines that have a meter that is in place only to inform the District when water is drawn through the pipe and does not restrict water flows, the charge will be based on the service line size . Setting charges based on service connection size ensures legal compliance and ratepayer equity. September 17, 2019 Item #14 Page 14 of 18 Monthly Fire Protection Delivery Charge Two Year Maximum Rate Increase Meter Size: 5/8" $ 7.69 $ 7.77 $ 3/4" $ 7.82 $ 7.82 $ 1" $ 8.06 $ 8.07 $ 1.5" $ 8.67 $ 8.67 $ 2" $ 9.39 $ 9.40 $ 2.5" $ 10.24 $ 10.26 $ 3" $ 11.10 $ 11.11 $ 4" $ 13.53 $ 13.54 $ 6" $ 19.61 $ 19.62 $ 8" $ 26.91 $ 26.91 $ 10" $ 35.42 $ 35.42 $ 12" $ 56.09 $ 56.25 $ Wastewater rates 7.93 8.05 8.30 8.92 9.66 10.53 11.40 13.89 20.10 27.55 36.25 57.37 Residential customers pay a flat monthly charge for wastewater services, while most non-residential customers pay a rate per unit of water used. The proposed wastewater rate increase varies by wastewater customer class. The proposed rate increase will pay for costs associated with operations, maintenance, and replacement of aging or failing infrastructure, as well as establishing and maintaining an adequate operating reserve. Brewery Rates Previously Breweries were included in the Commercial classes. Breweries will be moved into their own classes and charged rates based on whether they also operate a restaurant, and whether they haul their brewery waste to a approved treatment facility for disposal. The rates for each class are developed based on the assumption that half of a user's wastewater is generated by brewing and half is from the restaurant or general operation (restrooms, breakrooms, etc.). The BOD and TSS loading assumptions are adjusted for each type of user accordingly. BOD and TSSS are highly corrosive to sewer manholes and pipelines. Breweries that do not haul their brewing waste offsite for treatment will be charged the applicable brewery rate. Single Family $27.81 $28.66 $29.52 Single Family w/2nd $41.72 dwlg $42.99 $44.28 Multi-Family $3.29 $3.38 $3.48 Mobile Home $3.29 $3.38 $3.48 September 17, 2019 Item #14 Page 15 of 18 Commercial II Commercial Ill Commercial IV Schools . Elementary Junior High High School Boarding School · Other $2.70 $4.10 $7.65 $0.55 $0.82 $1.10 $5.75 $2.80 $4.25 $7.87 $0.57 $0.85 $1.14 $5.91 $2.88 $4.38 $8.10 ,$0.59 $0.87 $1.17 $6.09 No current customers $2.61 $2.88 $2.97 Breweries Brewery I* n/a $2.80 $2.88 Brewery 2* n/a $9.07 $9.34 Brewery 3* n/a $7.87 $8.1 Brewery4* n/a $11.26 $11.60 ' Group VIII -Large Volume : Group IX -Industrial Pretreatment Class Ill NRG $4.53 $4.68 $4.82 *81 and 83 included in Commercial 2 or 3 previously 82 and 84 included in Commercial 4 previously Protesting the rates As the property owner/rate payer, you have the right to protest the proposed increases. Only one protest is allowed per parcel. If you choose to protest, you must submit a signed written protest to the City Clerk on or before the close of the public hearing. The written protest must contain your full name and signature, the address of the service and the rate change being protested. If it is determined that a majority of property owners have submitted a formal protest, the proposed fee change must be rejected . The protester may appear at the hearing and be heard on the matter; however a written protest is also required. Please send all protests to: Office of the City Clerk, City of Carlsbad, 1200 Carlsbad Village Drive, Carlsbad CA 92008. More information For more information about the public hearing process or the proposed changes, please call 760-602-2420, or visit the city's website at www.carlsbadca .gov/finance September 17, 2019 Item #14 Page 16 of 18 PACIFIC OCEAN 9MWD BOUNDARY NOT TO SCALE EXHIBIT 4 September 17, 2019 Item #14 Page 17 of 18