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HomeMy WebLinkAbout2003-08-14 - Resolution No. 03-11RESOLUTION NO. 03-I1 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT ADOPTING LOCKE RANCH SEWER MAINTENANCE CHARGE AND ELECTING TO HAVE SUCH SEWER MAINTENANCE CHARGE COLLECTED ON THE FISCAL YEAR 2003-04 TAX ROLL AND RESCINDING RESOLUTION 02-02 WHEREAS, in October 1977, the City of Yorba Linda transferred and conveyed ownership of the Locke Ranch sewer system to the Yorba Linda Water District; and, WHEREAS, the Yorba Linda Water District ("District" herein) Rules and Regulations for Rendition of Sanitary Sewer Service include a provision that sewer maintenance charge is adopted by separate Resolution entitled Locke Ranch Sewer Maintenance Charge; and, WHEREAS, the Board of Directors of the Yorba Linda Water District have from time to time adopted Ordinances and Resolutions to set and change the Sewer Maintenance Charge rates charged by the District; and, WHEREAS, the Locke Ranch sewer system is outside the existing District boundaries; and. WHEREAS, under authority of the California Water Code Sections 31 100 and 31 101.5 the District may provide sewer service and levy sewer maintenance charges on property located outside of the District boundaries and under California Health and Safety Code Sections 5471 and 5473 may elect to have the County of Orange Auditor/Controller collect such charges on the Orange County Property Tax roll; and, WHEREAS, the Sewer Maintenance Charge is not a type of fee or charge to which Proposition 218 applies, because it is not imposed upon a parcel or upon a person as incident of property ownership but for sewer service only upon customers who have actually connected to the Districts sewer system; and, WHEREAS, the election of the Board of Directors to collect the Sewer Maintenance Charge for the Locke Ranch area annually on the property tax bill rather than as a separate bill does not change the nature of the charge or make it subject to Proposition 218; and, WHEREAS, the Board of Directors adopted Resolution No. 02-02 on July 25, 2002 for the purpose of establishing the Locke Ranch Sewer Maintenance Charges; and, WHEREAS, on August 14, 2003 at a Regular Board of Directors meeting, the Board of Directors accepted a staff report that recommends establishing Sewer Maintenance Charge rates for fiscal year 2003-04. NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the Yorba Linda Water District to adopt Sewer Maintenance Charge as follows: Section 1. The Yorba Linda Water District Locke Ranch Sewer Maintenance Charge for Fiscal Year 2003-04 is hereby approved and adopted at $42.00 per year per residential or commercial sewer connection. Section 2. The Yorba Linda Water District Locke Ranch Sewer Maintenance Charge is hereby fixed in the amounts and against the owners of parcels with sewer connections as shown in Exhibit "A" attached hereto and by this reference incorporated herein. Section 3. The Board of Directors elects to have the County of Orange Auditor/Controller collect the charges fixed herein on the tax roll in the same manner, by the same persons, and at the same time as and together with and not separately from County of Oranee taxes. Section 4. The Yorba Linda Water District Locke Ranch Sewer Maintenance Charge is imposed pursuant to the authority provided in Water Code Sections 31 101.5 and adopted in accordance with the requirements of law. Section i. The General Manager or his designee is authorized and directed to file with the County of Orange Auditor/Controller a copy of this Resolution together with the listing of parcel numbers and amounts of charges shown in Exhibit "A" and such other documentation as the County Auditor/Controller may require in order to accomplish the purposes of this Resolution. Section 6. Resolution No. 02-02 is hereby rescinded effective immediately following the adoption of this Resolution. PASSED AND ADOPTED this 14th day of August 2003 the following called vote AYES: Armstrong, Beverage, Korn, Mills, Summerfield NOES: None ABSENT: None ABSTAIN: None resident Summ i eld Yorba Linda Water District Secre,ertson Yorba Linda Water District YORBA LINDA WATER DISTRICT LOCKE RANCH SEWER MAINTENANCE CHARGE 2003-04 FISCAL YEAR EXHIBIT "A" This Exhibit is a table that lists parcel number, sewer connection and amount charged. Due to the length of this exhibit, it is not included in this agenda packet. If the Board or public want to review the Exhibit, it is available in the office of the General Manager. 1 I I Yorba Linda Water District Sewer Maintenance Charge Report Fiscal Year 2003-04 August 2003 ''The mission of Yorba Linda Water District is to provide water for municipal, industrial, fire protection, and agricultural uses that meets or exceeds all local, state and_federal standards, to provide a reliable and efficient sewer system; and to provide courteous and responsive Service at the most economically responsible cost to our customers. " EXECUTIVE SUMMARY The purpose of this report is to present recommendations to the Yorba Linda Water District's Board of Directors regarding the Sewer Maintenance Charge for Fiscal Year 2003-04. This charge is imposed to recover sewer maintenance and repair expenses from all connections to the sewage collection system owned and/or directly maintained by the District. The District's Sewer Maintenance Charge is not imposed on sewer connections maintained by the City of Yorba Linda. In fiscal 2003-04, operating expenses exceed revenues from all sources by about $189,000. Staff recommends an increase of $12.00 per year or $1.00 per month. It is further recommended the other components in the rate structure increase proportionately. The Board of Directors last adjusted sewer maintenance charges in August 2001 to reduce operating losses the fund experienced for five straight years. Svwei :1(ntntennm e Owive Kepi I - f utn( Yem 200_'-03 BACKGROUND & SERVICE AREA Division 12 of the California Water Code empowers the District to provide water and sewer service. In 1959, the area served by the then newly formed District needed a sewage collection system. In response to these needs, the Yorba Linda Water District established policies and procedures to build and maintain a comprehensive sewer collection system. The District's present sewer systern now serves connections both inside and outside of its political boundary. See attached map. Within its political boundary, the District owns and maintains nearly 120 miles of various diameter sewer pipes and one sewer lift station. This area (referred to herein as "Western Service Area") serves about 9,970 single family, commercial, industrial and public school accounts, and 1.235 multiple dwelling units (condominiums, mobile homes and apartments) for a total of about 11,200 services. Outside of its political boundary, the District also owns and maintains approximately 18 miles of sewer system. In this area (referred to herein as "Locke Ranch"), there are about 1,560 single family, commercial, industrial and public school sewer connections. These customers, however, receive their water service from the Southern California Water Company. In 1977, the District and City of Yorba Linda entered into an agreement that divided jurisdiction for planning, construction and maintenance of sewer facilities. The Citv's sewer jurisdiction begins at the eastern boundary of the District's "Locke Ranch" area and continues east to the City's eastern boundary. Included within the City jurisdiction is land in the District's Improvement District No. 1 and Improvement District No. 2. A portion of the City-owned sewer system in Improvement District No. I drains into the District's "Locke Ranch" sewer system. Inadequate maintenance of City sewers would have eventually, caused problems to the District sewers, so the 1977 agreement created a small area of overlapping jurisdiction (referred to herein as "Overlap Area"). In this Overlap Area the City is responsible for planning and constructing capital improvements and replacements, and the District is responsible for maintenance. Since the District is responsible for maintaining these sewers, the agreement also authorized the District to bill its Sewer Maintenance Charge directly to these customers. There are approximately 26 miles of sewer pipelines and 2,980 single family, commercial and industrial sewer connections in the "Overlap Area." The City is responsible for maintenance in the rest of its sewer jurisdiction. CUSTOMER BASE District sewer connections are classified into four major categories: Residential - single family home, Residential - multiple unit , Commercial & Industrial, and Public Schools. Table I illustrates the number of connections by category and service area within the District. Server aloihleaaaie Cline,0r Report - FUC171 ~'NV =00203 Table 1 Number of Sewer Connections by Category and Service Area Western Locke Overlap Cateuorv S ervice Area Ranch Area Total Residential - single family home 9,643 1,519 2,959 14,121 Residential - multiple unit 1,234 0 0 1,234 Commercial & Industrial 322 36 56 414 Public Schools 7 3 0 10 Total 11,206 1,558 3,015 15,779 SEWER MAINTENANCE CHARGE & .RATE STRUCTURE The Sewer Maintenance Charge is billed only to users of the District's sewage collection system. Board policy objectives for the sewer rate structure and charges are threefold: 1) It must generate the required revenue, 2) It must be fair and equitable to all customers, and 3) It must be simple to administer and implement. Prior to 1992, all customers paid the same maintenance charge. In 1992, the District conducted a study that found commercial, industrial, and school categories discharged more effluent than single family residential and, on a per unit basis, multiple unit residential discharged slightly less than a single family residential. In response to this study, the Board revised the rate structure so that each category paid a proportional share of maintenance costs based on discharge into the sewer system. The current Sewer Maintenance Charge, adopted by Resolution No. 01-12, is as follows: A. Commercial-Industrial and Public Schools: 1. For all sewer customers in this category who use water meter readings, the rate is as follows: a. First 2,200 cubic feet per month of water consumption per month at $2.50 per month. b. All water consumption in excess of 2,201 cubic feet per month: $2.10 per 1,000 cu. ft. 2. Alternatively, for customers who have a sewer meter or who can demonstrate to the District's satisfaction that 100% of the water meter reading ends up in the District's sewer system, the rate is as follows: a. First 1,100 cubic feet per month at $2.50 per month b. All metered use in excess of 1,101 cubic feet per month at $2.30 per 1,000 cu. ft. B. Residential: 1. Residential - individually metered $2.50 per month 2. Residential - master teetered $1.7-5 per month per unit Semei 1AI- tenna,e Chailae Repar! f l_&Year 2003 03 1 The District collects the Sewer Maintenance Charge by adding it to the water bill of customers where the District provides water service and the customer also has a sewer connection. The "Locke Ranch" customers do not receive water service or a bill from the District. The California Health and Safety Code authorizes the District to levy a sewer maintenance charge outside of its political boundary and authorizes the County of Orange Auditor/Controller to collect the charge on the property tax roll. For "Locke Ranch," this is the preferred method of collecting the charge, because it is easy to administer (the District sends the approved list to the county, and they add it to the tax roll) and inexpensive (the county charges less than $1,000). To place the charge on the tax roll, a Resolution is required instructing the County of Orange to collect the charge on behalf of the District. In 1997, the District studied an alternative to directly bill the "Locke Ranch" customers. This alternative was rejected because it 1) increased billing costs for printing, postage and mailing (estimated at more than $1,000 per year), 2) could lead to customer confusion and greater percentage of delinquent or non-payments because these customers receive a water bill from the Southern California Water Company not the Yorba Linda Water District, and 3) options to collect delinquent and/or non-payment accounts are very limited because the District does not have the jurisdiction to terminate a water service. Even though the direct billing alternative was rejected, the Board of Directors agreed that should facts and/or circumstances change then staff - - will re-evaluate this alternative. PROPOSITION 218 STATEMENT The District's General Counsel advises that the Sewer Maintenance Charge is exempt from the requirements of Proposition 218. Proposition 218 applies to fees or charges "imposed upon a parcel or upon a person as an incident of property ownership." The Sewer Maintenance Charge is not imposed on a parcel, or person, by virtue of their property ownership but instead is only imposed on parcels or persons who have actually connected to the sewer system. The election by the Board to collect the Sewer Maintenance Charge on the property tax bill in "Locke Ranch," rather than by way of a separate bill, does not change the nature of the charge or make it subject to Proposition 218. SEWER OPERATING FUND The District owns, operates, and maintains specialized equipment to clean sewer lines and has specially trained employees to operate and maintain the facilities and equipment. The Sewer Operating Fund allocates resources to clean an average of 15,000 linear feet of sewer lines per week, check the sewer lift station three times per week, and respond to several customer inquiries each month. The Fund also pays a pro-rata share of personnel costs and eight percent for supplies and services expenses. In addition, the Fund sets aside money in a depreciation account to pay for sewer replacements. Sell- -Wavllellawe Chore Rrpo)! - 1-ival1'enr 2002 03 The major revenue sources available to the Sewer Operating Fund are Sewer Maintenance Charges collected from sewer customers and interest earned on unexpended funds set asid Capital Improvements and non-operating reserves. On June 28, 2001 the Board of Directors adopted a Budget for fiscal years 2001-02 and 20 The Budget and this report were prepared using se%eral assumptions concerning revenues expenditures. Budget assumptions related to sewer operations are shown in Appendix 1. illustrates the Sewer Operating Fund budget for fiscal year 2001-02. Table 2 Scwer Operating Fund e for 02-03. and Table 2 REVENUES: Sewer charges Interest City sewer revenue other revenues Sub-Total 2003-04 $505,000 75,000 131,000 _ 5,500 $716,500 TRANSFERS: Labor for capital projects $26,607 Vehicle & equipment capital outlay 0 TOTAL Funds Available $743 1107 ESTIMATED EXPENDITURES: Personnel $443,455 Supplies & Services 201,442 Election cost 0 Vehicle & equipment depreciation transfer 42,000 Capital improvement depreciation transfer 245,000 TOTAL Expenditures 31 897 Gain (Loss) ($188 790) FINANCIAL ANALYSIS Fiscal Year 2003-04 is forecast to end with an operating loss of nearly $189,000. It is important to note the budget was based on the existing rate structure, not the rate adjustment discussed in this report. Additionally, some of the anticipated operating loss is due to expanding sewer operations for contract maintenance with the cities of Placentia and Yorba Linda. However, even if this work never materializes (and their revenues and expenses are removed from the figures in Table 2) the current operating revenues are not adequate to fund operating expenses. In spite of this imbalance between revenues and expenses, sewer fund reserves continue to increase because capital outlays are less than the annual depreciation expense. This condition is expected to change dramatically in fiscal 2003-04 when major capital expenditures will use more Sewer almutennn:e Chevy Report - Finn! ~ enr 2002-05 than S1.0 million of the sewer fund reserves. Staff' recoin mends adjusting the sewer maintenance charges to offset higher operating costs. Staff believes that continuing to draw reserves to balance operating costs is not a good long term strategy for the following reasons: 1. It sends the wrong price signals to customers. Sewer maintenance costs are going Lip and will continue to rise in the years ahead. 2. Operating costs to pay personnel and other routine expenses have increased and will continue to rise in the future. 3. Preventative maintenance is an important Board objective. To that end, the Board has made a commitment of hutnan and financial resources to achieve this goal and assure sewer system reliability. Thus more time is spent directly on sewer maintenance instead of diverting personnel to water operations when routine sewer cleaning is finished. 4. New regulations imposed by the Environmental Protection Agency and Regional Water Quality Control Board will require the District to commit financial resources for specialized vehicles (to visually inspect the system), computer software (to monitor and report on maintenance activities), and staff effort to assure compliance. 5. Construction of several sewer projects is scheduled for the upcoming five year period. Cash reserves are needed to finance these projects. RECOMMENDATION Staff recommends the Board of Directors authorize an adjustment in the sewer maintenance charges as shown below. It is important to note that staff makes this recommendation regardless of whether the contract work materializes. Bold indicates the proposed charge: A. Commercial-Industrial and Public Schools: I . For all sewer customers in this category who use water meter readings, the rate is as follows: a. First 2,200 cubic feet per month of water consumption per month: $3.50 per month. b. All water consumption in excess of 2,201 cubic feet per month: $2.94 per 1,000 cu, ft. 2. Alternatively, for customers who have a sewer meter or who can demonstrate to the District's satisfaction that 100% of the water meter reading ends up in the District's sewer system, the rate is as follows: a. First 1,100 cubic feet per month: $3.50 per month b. All metered use in excess of 1,101 cubic feet per month at $3.22 per 1,000 cu. ft. 6 Sex~rr[llnu~Ienante Chaise Report - Fu,ul) em 3002-03 B. Residential: 1. Residential - individually metered at 53.50 per month 2. Residential - master metered at $2.45 per month per unit CONCLUSION It is recommended the Board of Directors: 1) Adopt a Resolution to adjust the existing Sewer Maintenance Charge as set forth in this report; and, 2) Adopt a Resolution setting the Locke Ranch Sewer Maintenance Charge and authorizing the County-Auditor Controller to collect the charge on the property tax bill of sewer customers outside the District's political boundary pursuant to the California Health and Safety Code. I~I~i Server :1lnuneirmmu- Chmoe Repo /1 F ,,a/l e:ir ?00-' 03 APPENDIX 1 ASSUMPTIONS USED TO DEVELOP THE FISCAL YEAR 2003-04 SEWER OPERATING FUND BUDGET The following key assumptions were used to develop the Sewer Operating Fund Budget: ASSF.MPTIONS AFFECTING REVENUES: 1. The current sewer rates will remain in effect for the next two fiscal years. 2. The District will retain its current pro-rata share of the one percent property tax revenue. 3. Yield on investments will average 2.0% during each of the next two fiscal }ears. 4. Interest earned on the "sewer fund" investments is allocated to the sewer operating fund. 5. The rate charged to the Cities of Placentia and Yorba Linda for sewer maintenance will pay the cost of services provided. 6. The forecast of prior year sewer operating fund actual revenues and expenses arc based on staff projections and are, therefore, subject to change following the annual audit. 7. The California legislature will not adopt proposals to either confiscate debt service property, taxes or an additional share of one percent property tax revenues. ASSUMPTIONS AFFECTING EXPENDITURES: 1. The District will serve an average of 15,900 accounts. 2. l he District w ill employ a full-time staff as identified in the Budget. 3. Expenses and revenues for maintenance contract work may or may not occur. 4. Nine percent of fixed supplies and services expenditures are allocated to the sewer operating fund. 5. The cost for workers compensation insurance is included in the fringe benefit percentage. 6. A budget of $3,000 is maintained to settle small damage claims filed against the District. Claims will continue to be processed in accordance with Board policy. 7. The District will incur costs to comply w ith water quality', air quality, used oil and "toxic" waste regulations, and safety regulations. 8. Several capital improvement projects are contingent on construction initiated by the City of Yorba Linda. If the city does not proceed then related District projects will not he built. 9. The District will purchase vehicles and equipment, and natural gas engines identified in separate plans previously approved by the Board. 10. Paving costs are in accordance with the current paving contract. 11. The postal rate will increase during the period of this Budget. 12. The per unit rates charged by the telephone company will increase. 13. Salaries and benefits costs are based on labor contracts approved by the Board.