TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Erick Lee, Public Works Director
Lou Vargas, Utilities Manager
Nicky Petroff, Senior Management Analyst
SUBJECT:Title
Conduct Public Hearing and Consideration of a Resolution Adopting New Wastewater Rates and Charges Effective November 1, 2023, Through November 1, 2027, and All Protests to the Proposed Wastewater Rates (Public Works Director Lee).
(Estimated Time: 15 Mins.)
A) CONDUCT PUBLIC HEARING
B) ADOPT RESOLUTION NO. 23-0051
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council:
A. Conduct a public hearing to consider adopting new wastewater rates and charges (“rates”), commencing November 1, 2023;
B. Consider the Proposition 218 written protests submitted to the City Clerk (and not withdrawn) by the close of the public hearing to determine whether a majority protest exists; and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. 23-0051 adopting the annual proposed rate increases effective November 1, 2023, through November 1, 2027.
Body
FISCAL IMPLICATIONS:
Approval of this action sets new wastewater fees effective November 1, 2023. The revenues received are projected to match the revenue requirements through June 30, 2028, as set forth in the rate study.
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 Wastewater Fund should therefore operate as a self-sustaining fund and provide full cost recovery for the wastewater services provided to residential and commercial customers. Although the actual rates paid by ratepayers will vary based on the amount of wastewater produced, bi-monthly wastewater (sewer) bills for average ratepayers would increase by approximately $5.49 (which equates to an increase of about $2.75 per month)
The first increase would become effective November 1, 2023, which will be reflected on customer bills beginning January 1, 2024. However, if a majority of the parcels subject to the City fee protest the proposed rate increase, the attached resolution cannot be adopted. If the resolution is not adopted, there is no time restriction for when the City could initiate a new Proposition 218 process for proposed increases to the wastewater rates. Therefore, reconsidering increases to these rates could occur at any time should this procedure fail.
BACKGROUND:
The City operates and maintains 81.6 miles of gravity sanitary sewer pipelines, and 5,114 feet of force mains and 2,086 manholes that serve the majority of the parcels within the City’s 3.9 square miles. The City’s wastewater collection system conveys untreated wastewater to Joint Water Pollution Control Plant (JWPCP) in Carson for treatment. The City is responsible for maintaining the gravity sanitary sewer pipelines within its limits.
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. The existing sewer fee structure is based on the use of the sewer system as it correlates to the consumption of water by the different users of the sewer system. While the current rates have allowed the City to maintain and repair the City’s sewer collections system, they do not provide the funding necessary to implement necessary critical upgrades to the sewer infrastructure and continue operations and maintenance of the system into the future.
Below is a timeline of the Proposition 218 activities that have occurred to date:
October 2022- April 2023
In October 2022, the City contracted with Black & Veatch Consulting, LLC. to develop a Wastewater Rate Study by analyzing the City’s wastewater system data and propose future wastewater rates that both balance a concern for keeping costs affordable while adequately reinvesting in its wastewater infrastructure. Black & Veatch completed the Wastewater Rate Study in April 2023.
March 21, 2023, City Council Meeting
The City Council heard a presentation on the findings of the wastewater rate analysis conducted by with Black & Veatch Consulting and adopted Resolutions No. 23-0029 (which initiated the Proposition 218 process and set the Public Hearing date and time) and No. 23-0030 (which adopted procedures in connection with the Proposition 218 process for considering the proposed wastewater rate fee increases).
March 28, 2023 - May 16, 2023, Proposition 218 Notice and Protest Period
The City postmarked the Proposition 218 Notice on March 28, 2023 (Attachment), which was sent to all property owners/ratepayers (required) and occupants/tenants (courtesy). Proposition 218 requires a 45-day protest period, and the City provided 49 days.
April 19, 2023, Community Meeting
City staff and Black & Veatch hosted an informational community meeting to review and discuss the wastewater rate analysis, the basics of wastewater rate (sewer) billing, and the Proposition 218 process. This meeting was held in person in the City Council Chambers and on Zoom. A video of this meeting is available on the City’s website at www.manhattanbeach.gov/wwrates.
March 30, April 6, 13, 20, & 27, & May 5, 2023, 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, Wastewater Rate Study available on the website, etc.).
April 28, 2023, Wastewater Rate Study Posted Online
The Wastewater Rate Study was posted on the City website prior to May 1, which is when the Proposition 218 notice indicated that the Study would be available. The Wastewater Rate Study is the basis for the proposed wastewater rate increases. The methodology used to determine the rates is in accordance with industry guidelines in Water Environment Federation’s (WEF) Financing and Charges for Wastewater System, Manual of Practice No. 27 (MoP 27). The Wastewater Rate Study can be reviewed at www.manhattanbeach.gov/wwrates. The link is also included as an attachment to this report.
DISCUSSION:
In 1996, California voters approved Proposition 218, which requires specific procedures to be followed concerning “property-related” fee increases imposed by governmental agencies. Those rate increases are subject to a “majority protest” process. If a majority of the parcels subject to the City fee protest the proposed rate increase, the City cannot impose the increase. Proposition 218 requires that the City provide all properties receiving the service for which the fee is charged with a minimum of 45 days written notice before the City Council holds a Public Hearing on a proposed rate increase.
The property owners (record owners) have the ability to "protest" the proposed rate increase until the close of the Public Hearing. If a majority of the parcels file written protests with the City (50% +1) prior to the close of the Public Hearing, the Proposition states that the City cannot implement the proposed increase. If a majority of the parcels do not protest the proposed increase, the City Council has the authority to implement the proposed rate increase.
The provisions of the Proposition 218 set criteria for property-related fees for refuse, water and sewer services. The fees must be set so that:
• The revenues generated by the fee do not exceed the cost of service.
• No property owner’s fees exceeds his/her proportionated share of the cost.
• The City does not impose a property-related fee for a service that is not available to the property owner.
The 2023 Wastewater Rate Study includes a five-year financial plan and cost of service analysis as well as the development of wastewater rates. The analysis reviewed the current rate structure in determining the needed adjustments for the next five (5) years. The study includes the following findings:
• The City’s current wastewater rates provide a minimal amount of funding to provide for basic maintenance of the sewer system.
• The rates do not provide enough funding for necessary capital improvements and system repairs.
• The last rate increase was in 2014; since that time, the cumulative annual price changes have increased by a factor of 25.4% and revenues have not kept pace with the capital needs of the system.
In order to implement new customer wastewater 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. The City Council must consider all protests or objections to the proposed increases at the public hearing. At the conclusion of the public hearing, the City Council must tabulate the written protests against the proposed wastewater rate increases and determine whether a majority protest exists. Unless written protests are received from a majority of ratepayers, the rates may be adopted by a majority vote of the City Council at the conclusion of the public hearing.
The City’s property owners and ratepayers 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 May 16, 2023;
2. Email a protest to cityclerk@manhattanbeach.gov by 5:00 p.m. on May 16, 2023; or
3. Provide a written protest to the City Clerk before the end of the Public Hearing on May 16, 2023.
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 6,800 written protests. However, if less than 50% + 1 written protest is received, the City Council may adopt Resolution No. 23-0051, setting the new wastewater rates, which would become effective commencing on November 1, 2023.
Wastewater Rates and Annual Increases
The wastewater rates shown in an attachment to this report represent the rate schedule for the five-year period allowed under this Proposition 218 process. The subsequent rate adjustments for years 2-5 continue to rely on the methodology in WEF’s MoP 27. The proposed wastewater rate increases would occur on November 1, 2023, 2024, 2025, 2026, and 2027 and reflect on ratepayer bills the following January. The Wastewater Rate Study provides thorough information on the wastewater program's background, analysis, and study results.
CONCLUSION:
Staff recommends that the City Council conduct a public hearing to consider all protests to the proposed wastewater rates received by the close of the public hearing and, in the absence of a majority protest, adopt new wastewater rates, effective November 1, 2023, through November 1, 2027. Should a majority protest not occur, staff, recommends that City Council adopt Resolution No. 23-0051 approving the annual proposed rate increases from November 1, 2023, through November 1, 2027.
PUBLIC OUTREACH:
Public Outreach to the affected property owners and the community at large was conducted regarding the Wastewater Rate Analysis, Wastewater 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 March 28, 2023, and sent to all property owners/ratepayers (required) and to tenants/occupants (courtesy).
- The Beach Reporter ads were printed on March 30, April 6, 13, 20, 27, and May 5, 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 Wastewater Rate Study, and a bill calculator on the City’s website.
- A Public Notice was published in The Beach Reporter on April 27 and May 5, 2023, informing the community of the date, time and location of the May 16, 2023 public hearing.
- The City’s Communications Division included a Proposition 218 reminder in the March and April community newsletter.
- The City’s Revenue Services Division placed a message on the customer bills throughout the Proposition 218 process.
- A Proposition 218 Community Meeting was held on Wednesday, April 19, 2023, in person in the City Council Chambers as well as on Zoom. City Staff provided a brief presentation and 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. 23-0051 to establish the new wastewater 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 2023.
- The City’s Revenue Services Division will continue including a message on customer bills 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 customer 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 wastewater 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. 23-0051
2. 2023 Wastewater Rate Study (Black & Veatch) (Web-Link Provided)
3. Copy of Proposition 218 Notice
4. Proposition 218 Outreach Summary
5. PowerPoint Presentation