TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Erick Lee, Public Works Director
Katherine Doherty, City Engineer
Tim Birthisel, Senior Civil Engineer
Anna Luke-Jones, Senior Management Analyst
SUBJECT:Title
Conduct Public Hearing and Consideration of a Resolution Adopting New Water Rates and Charges Effective November 1, 2022, Through November 1, 2026, and All Protests to the Proposed Water Rates (Public Works Director Lee).
(Estimated Time: 1 Hr.)
A) CONDUCT PUBLIC HEARING
B) ADOPT RESOLUTION NO. 22-0079
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council:
A. Conduct a public hearing to consider adopting new water rates and charges (“rates”), commencing November 1, 2022;
B. Consider the Proposition 218 written protests submitted to the City Clerk (and not withdrawn) by the close of the public hearing to determine whether a majority protest exists; and
C. In the absence of a majority protest, consider adopting the attached Resolution No. 22-0079 adopting the annual proposed rate increases effective November 1, 2022 through November 1, 2026.
FISCAL IMPLICATIONS:
The City has adopted Financial Policies that provide guidance on the setting of user fees for each enterprise fund at a rate that fully covers direct and indirect costs of providing the service, as well as planned capital improvements. As an enterprise fund, the City’s Water Fund should therefore operate as a self-sustaining fund and provide full cost recovery for the water services provided to residential and commercial customers. However, the current rates have remained unchanged since 2014, and therefore, new water rates are being proposed to align the rates with current operational and capital costs necessary to maintain the City’s water system and provide water services. If adopted, the new water rates will include a rate structure transition from tiered rates to uniform rates. Although the actual rates paid by ratepayers will vary based on water usage, bi-monthly water bills for average ratepayers would increase by approximately $24.65 (which equates to an increase of $12.33 per month)
The City is required to undertake a Proposition 218 majority protest process in order to pass-on potential water rate increases to its property owners/rate payers. Proposition 218 allows municipalities to consider and approve automatic rate adjustments for up to five years. At the end of this five-year term, in order to raise water rates again, the City will be required to initiate and undertake another Proposition 218 process. Notably, if less than 50% + 1 of the City’s property owners/rate payers protest in writing the water rate adjustment through the Proposition 218 process, then the City Council may adopt the attached resolution approving the annual rate increases.
The first increase would become effective November 1, 2022, which will then be reflected on customer bills beginning January 1, 2023. However, if more than 50% + 1 of the City’s property owners/rate payers submit written protests to the proposed rate increases, then the attached resolution could not be adopted. Under this scenario, water customers would continue to pay the current rates under the current tiered structure and the City’s Water Fund would continue to be underfunded. Additionally, there is no time restriction for when the City could initiate a new Proposition 218 process for proposed increases to the water rates. Therefore reconsideration of increases to these rates could occur at any time should this procedure fail.
BACKGROUND:
The City Council last increased water rates as part of a Proposition 218 process for the period of 2009 to 2014, which implemented increases between 9% and 17% each year. Those rate increases allowed the City to perform large-scale, meaningful infrastructure improvements and continue to operate the water system in a safe and reliable manner.
Over the past three years, the City has invested approximately $50 million into the maintenance and replacement of its water system. Recent projects include:
- Pacific Avenue & Artesia Boulevard Water Main Replacement
- Vista Drive Water Main Replacement
- Manhattan Avenue Water Main Replacement
- Highland Avenue and 1st Street Water Main Replacement
- Sepulveda Boulevard Water Main Replacement
- 8th Street to 11th Street Water Main Replacement
- Block 35 Elevated Tank Painting Project
- Peck Reservoir Replacement
Below is a timeline of the Proposition 218 activities that have occurred to date:
October 2020 - April 2022
In October 2020, the City contracted with Stantec Consulting Services, Inc. to update the Water Master Plan, which evaluated the capacity of the water network, including domestic usage and fire flow analysis, to identify which pipes should be upsized to ensure that the system operates as intended. At that time, the City also contracted with Raftelis Financial Consultants, Inc. to develop a Water Rate Study by analyzing the City’s water system data and propose future water rates that both balances a concern for keeping costs affordable while adequately reinvesting in the water system to ensure long-term water quality, reliability, and sustainability. Raftelis completed the Water Rate Study in April 2022.
April 5, 2022, City Council Meeting
The City Council heard a presentation on the findings of the water rate analysis conducted by Raftelis and adopted Resolutions No. 22-0043 (which initiated the Proposition 218 process and set the Public Hearing date and time) and No. 22-0044 (which adopted procedures in connection with the Proposition 218 process for considering the proposed water rate fee increases).
April 15, 2022 - June 7, 2022, Proposition 218 Notice and Protest Period
The City postmarked the Proposition 218 Notice (Attachment), which was sent to all property owners/rate payers (required) and occupants/tenants (courtesy). Proposition 218 requires a 45-day protest period, and the City provided 53 days.
April 21, 2022, Community Meeting
City staff, along with Raftelis, hosted an informational community meeting to review and discuss the water rate analysis, the basics of water rate billing and the Proposition 218 process. This meeting was held in person in the City Council Chambers as well as on Zoom. A video of this meeting is available on the City’s website at www.manhattanbeach.gov/waterrates.
April 21 & 28 and May 5, 12, 19, & 26, 2022, The Beach Reporter Ads
Along with other public outreach, the City published ads in The Beach Reporter each week during the protest period to remind property owners and ratepayers of the Proposition 218 notice, including the URL to the information page on the City website and any updated information (Community Meeting date, video of Community Meeting on website, Water Rate Study available on the website etc.).
May 5, 2022, Water Rate Study
The Water Rate Study was posted on the City website prior to May 7, which is when the Proposition 218 notice indicated that the Study would be available. The Water Rate Study is the basis for the proposed water rate increases. The methodology used to determine the rates is in accordance with the American Water Works Association’s (AWWA) Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices - M1 Seventh Edition (Manual M1). The Water Rate Study can be reviewed at www.manhattanbeach.gov/waterrates. The link is also included as an attachment to this report.
DISCUSSION:
In order to implement new customer water rates, City Council must conduct a Proposition 218 public hearing to approve or reject the new rates at least forty-five days after the Proposition 218 notices are mailed. At the public hearing, the City Council must consider all protests or objections to the proposed increases. At the conclusion of the public hearing, the City Council must tabulate the written protests against the proposed water rate increases and determine whether a majority protest exists. Unless written protests are received from a majority of rate payers (50% + 1), the rates may be adopted by a majority vote of City Council at the conclusion of the public hearing.
The City’s property owners and rate payers were given the opportunity to submit a written protest of the proposed rate increases in multiple ways:
1. Submit a written protest to the City Clerk via mail or in-person at the City Clerk’s office in City Hall by 5:00 p.m. on June 7, 2022;
2. Email a protest to cityclerk@manhattanbeach.gov by 5:00 p.m. on June 7, 2022; or
3. Provide a written protest to the City Clerk before the end of the Public Hearing on June 7, 2022.
In order for there to be a majority protest that prohibits the City Council from approving the proposed rate increases, the City must receive more than 50% + 1, or roughly 6,500 written protests. However, if less than 50% + 1 written protests are received, the City Council may adopt Resolution No. 22-0079, setting the new water rates, which would become effective commencing on November 1, 2022.
Water Rates and Annual Increases
The water rates shown in an attachment to this report represent the rate schedule for the five-year period allowed under this Proposition 218 process. The automatic rate adjustment method for years 2-5 is based on the AWWA Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices - M1 Seventh Edition (Manual M1). The proposed water rate increases would occur on November 1, 2022, 2023, 2024, 2025, and 2026 and reflect on ratepayer bills the following January. The Water Rate Study provides thorough information on the background, analysis and study results of the water program.
It is important to note that the charges for wholesale water have been built into the rates; however, there is also the possibility for additional costs for wholesale water above the amounts that have been included in the rates to be automatically passed through without going through another Proposition 218 process until 2027.
CONCLUSION:
Staff recommends that the City Council conduct a Public Hearing to consider all protests to the proposed water rates received by the close of the public hearing and, in the absence of a majority protest, adopt new water rates, effective November 1, 2022 through November 1, 2026. Should a majority protest not occur, staff recommends that City Council adopt Resolution No. 22-0079 approving the annual proposed rate increases from November 1, 2022 through November 1, 2026.
PUBLIC OUTREACH:
Public Outreach to the affected property owners and the community-at-large was conducted regarding the Water Rate Analysis, Water Rate Study and Proposition 218 process.
Proposition 218 Process Outreach
A pictorial summary of Proposition 218 Process outreach is included as an attachment to this report.
- The Proposition 218 notice was postmarked on April 15, 2022, and sent to all property owners/rate payers (required) and to tenants/occupants (courtesy).
- The Beach Reporter ads were printed on April 21, 28, May 12, 19, and 26, reminding property owners/ratepayers to read their Proposition 218 notices, promoting the community meeting, and informing the public of a link to the community meeting video, the Water Rate Study, and a water bill calculator on the City’s website.
- A Public Notice was published in The Beach Reporter on May 12 and 19, 2022, informing the community of the date, time and location of the June 7, 2022, Public Hearing.
- The City’s Communications Division included a Proposition 218 reminder in the May community newsletter. The reminder was not included in the April edition because the Proposition 218 notice was postmarked after the newsletter was published.
- The City’s Revenue Services Division placed a message on the water bill throughout the Proposition 218 process.
- A Proposition 218 Community Meeting was held on Thursday, April 21, 2022, in person in the City Council Chambers as well as on Zoom. City Staff provided a brief presentation and consultant Raftelis answered questions from the public.
- The City’s Calendar included a post regarding the Proposition 218 protest period.
- The City’s Calendar also included a post for the Community Meeting and the Public Hearing.
- The City’s social media platforms, including Facebook, Instagram and Twitter, posted updates and reminders during the Proposition 218 process.
(If adopted) New Rate Fee Outreach
If a majority protest is not reached and the City Council adopts Resolution No. 22-0079 to establish the new water rates, the following outreach will occur to prepare the community for the transition:
- The City’s Communications Division will include reminders of the rate change in the monthly community newsletter through December 2022.
- The City’s Revenue Services Division will continue including a message on the water bill throughout this entire transition so as to notify customers regarding the new fee schedule.
- A bill insert will be included in hard copy and electronic water bills prior to the new rates going into effect.
- Print ads will be published in The Beach Reporter and in-story digital ads on Beachreporter.com.
- The City’s calendar on the City website will include a post on the date the new water rates go into effect and e-notifications will be sent to subscribers.
- The City’s news section on the City website will include a post and e-notifications will be sent to subscribers.
- The City’s social media platforms, including Facebook, Instagram, and Twitter, will include posted updates and reminders of the new rates.
ENVIRONMENTAL REVIEW:
No environmental review was conducted in preparation for this recommendation.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 22-0079
2. 2022 Water Rate Study (Raftelis) (Web-Link Provided)
3. Copy of Proposition 218 Notice
4. Proposition 218 Outreach Summary
5. PowerPoint Presentation