City of Culver City, California
Agenda Item Report
Meeting Date: 06/27/2011 Item Number: PH-5
CITY COUNCIL AGENDA ITEM: PUBLIC HEARING - Adoption of a Resolution
Confirming the Assessment and Ordering the Levy for the Sewer User’s Service
Charge for Fiscal Year 2011/2012
Contact Person/Dept.: Mate Gaspar/PW Phone Number: 310-253-5602
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [X] Action Item: [] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Agenda and Meetings – City Council (06/22/2010); Culver
City News (06/16/2011);
Department Approval:
Charles D. Herbertson(06/16/11)
City Attorney Approval:
Carol Schwab (by H. Baker) (06/22/11)
Chief Financial Officer Approval:
Jeff Muir (by M. Noller) (06/22/11)
City Manager Approval:
John M. Nachbar (06/22/11)
RECOMMENDATION:
Staff recommends the City Council adopt a Resolution confirming the assessment
and ordering the levy for the Sewer User’s Service Charge for Fiscal Year
2011/2012.
PROCEDURE:
1. Mayor seeks motion from City Council to receive and file the affidavits of
publication and posting of notices, and correspondence received in response to
the public hearing notices; and,
2. Mayor calls for a staff report and the City Council Members may pose questions
to staff as desired; and,
3. Mayor seeks a motion to open the public hearing; and,
4. Mayor seeks a motion to close the public hearing after all public testimony has
been presented; and,
5. City Council discusses the item and arrives at its decision.
BACKGROUND:
Culver City currently obtains sewage treatment services at the City of Los Angeles'
Hyperion Treatment Plant through an Amalgamated Agreement with the City of Los
Angeles. This Agreement requires Culver City to pay a proportionate share of the
costs of conveyance, operation, maintenance, repair and capital improvements to
upgrade and improve the amalgamated sewerage system.
City of Culver City, California
Agenda Item Report
Culver City owns and operates a separate sewage collection system, which is
connected to the amalgamated system.
Federal law requires that all other agencies using the City of Los Angeles' Hyperion
Treatment Plant adopt a system of charges to assure that each property served by a
public sewer pay its fair share of costs for the operation, maintenance, repair and
improvement of Hyperion Treatment Plant. The “fair share” of each sewer-using
property is based on its contribution to the system in terms of flow quantity and
sewage quality (biochemical oxygen demand and suspended solids). This is in
addition to the cost experienced by Culver City in the collection, operation, and
improvement of our own sewage system.
All of these costs are annually determined and presented to the City Council in the
City Engineer's Report, in accordance with Section 5.02.035 of the Culver City
Municipal Code (CCMC). The proposed charges for Fiscal Year 2011/2012 will
address estimated costs for providing complete operation, maintenance, and local
capital improvements for the Culver City sewerage system and for the estimated
payments due to the City of Los Angeles for Culver City's share of the Los Angeles
Amalgamated System costs.
In addition to formulating and adopting a system of Sewer User’s Service Charges,
the City must also select a system of collecting these charges. In 1980, based on an
engineering study and the City Engineer’s recommendation, the City Council
initiated a once-a-year billing procedure for Sewer User’s Service Charges that
places each property owner’s charges on their property tax bill. This method of
collection has proven to be very efficient and provides the lowest cost billing and
collection service for Culver City.
The following table is a summary of historical rates collected via the Sewer User’s
Service Charge:
FISCAL YEAR RATE INCREASE
1990/91TO
2001/02
No rate increases - $20.5
million wastewater revenue
bond issued in 1991/1992
2002/03 10% rate increase
2003/04 10% rate increase*
2004/05 10% rate increase
2005/06 5% rate increase
2006/07 10% rate increase
2007/08 10% rate increase
2008/09 No rate increase
2009/10 No rate increase
2010/11 No rate increase
2011/12 No rate increase proposed
*Included revisions to sewer user charges formulas. City of Culver City, California
Agenda Item Report
On June 6, 2011, the City Council approved the Engineer's Report, declared its
intention to order the assessment levy and collection of assessments, and set the
date, time and place for this public hearing for the Sewer User’s Service Charge
DISCUSSION:
The Sewer User’s Service Charge budget is 100 percent self-supporting for all
expenditures related to the collection, operation & maintenance, capital
improvements, conveyance and treatment of the City’s sewer system. The sewer
user service charge is collected based on the prior calendar year’s total water
consumption for each parcel that is on the sewer system. For a single family
dwelling unit, 42% of the water consumption amount is deducted due to landscape
irrigation. For a multi-family dwelling, 15% of the water consumption is deducted
due to landscape irrigation.
The Amalgamated Sewer Agreement with the City of Los Angeles requires that
costs related to conveyance and treatment are paid by the City. These charges are
based on flow measurements and sewage samples that are taken throughout the
year. Each year the City of Los Angeles sends Culver City their 5-year projections
for the above mentioned sewer conveyance and treatment costs. In a January
2011 letter from the City of Los Angeles to Culver City they have projected a total
charge of $2,335,000 for Fiscal Year 2011/2012. The final amount will not be
known until August 2012 when all expenses for FY 2011/2012 have been
determined. Historically this final amount has been less than the projected amount.
The Sewer Enterprise Fund currently maintains an adequate reserve and staff
does not recommend any rate increase this year. In future years, due to a planned
aggressive capital improvement program, the sewer fund surplus is expected to
diminish and it will be likely that staff will recommend increases in the sewer user
charge rates at that time.
Pursuant to Section 5.02.035.C of the Culver City Municipal Code (CCMC), any
interested persons may file a written protest with the City Clerk. Pursuant to CCMC
5.02.035.D, at the conclusion of the hearing, the City Council shall allow or overrule
any objections and modify the report if it is deemed necessary. Adoption of the
proposed Resolution shall confirm the report and the charge against each parcel
shall be a special assessment and lien on that parcel.
FISCAL ANALYSIS:
The Engineer’s Report contains a spreadsheet of the 5 year estimated sewer user
service fund cash flow projections.
City of Culver City, California
Agenda Item Report
ATTACHMENTS:
1. Proposed Resolution
2. Sewer Enterprise Funds 5 year cash flow projection
MOTION:
That the City Council:
(Absent a majority protest) Adopt the Resolution confirming the assessment and
ordering the levy for the Sewer User’s Service Charge for Fiscal Year 2011/2012.
MEETING DATE: 06/27/11
AGENDA ITEM: A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF CULVER CITY, CALIFORNIA,
CONFIRMING THE ASSESSMENT AND
ORDERING THE LEVY FOR THE SEWER
USER'S SERVICE CHARGES FOR FISCAL
YEAR 2011-2012
ATTACHMENTS
Pages
1 Proposed Resolution 1-2
2 Engineer's Report 3-10 I
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RESOLUTION NO. 2011-R
A RESOLUTiON OF THE CITY COUNCIL OF THE CITY OF
CULVER CITY, CALIFORNIA, CONFIRMING THE
ASSESSMENT AND ORDERING THE LEVY FOR THE SEWER
USER'S SERVICE CHARGES FOR FISCAL YEAR 2011-2012.
WHEREAS, the City Council previously completed proceedings in accordance
with the provisions of Chapter 5.02 of the Culver City Municipal Code ("CCMC") for the levy and
collection of annual assessments for the system of sewer user's service charges providing that
each parcel of property shall pay its proportionate share of the costs for operation,
maintenance, repair and improvements of the City sewerage system (the "Sewer User's Service
Charges"); and,
WHEREAS, on June 6, 2011, the City Council approved the Assessment
Engineer's Report (the "Engineer's Report") and declared its intention to provide for the levy
and collection of annual assessments for Fiscal Year 2011-2012, to provide for the costs and
expenses necessary for the operation, maintenance, repair and improvements of the City
sewerage system; and,
WHEREAS, the City Council has heard all testimony and considered all
objections to the assessment at a duly noticed public hearing held on June 27, 2011 and has
detemnined to proceed with the levy of annual assessments for the District.
NOW, THEREFORE, the City Council of the City of Culver City, DOES HEREBY
RESOLVE as follows:
1. The City Council hereby confirms the assessment and the allocation of
the levy amounts so that each parcel of property shall pay its proportionate share of the costs
for operation, maintenance, repair and improvements of the City sewerage system, as is
described in full detail in the Engineer's Report on file with the Clerk.
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MICHEAL O'LEARY, Mayor
City of Culver City, California
APPROVED
_4 4
CAR 6,_ A. SCHWAB, City Attorney
2. The adoption of this resolution shall constitute the levy of an assessment
for the fiscal year commencing July 1, 2011 and ending June 30, 2012.
3. The assessment for the Sewer User's Service Charges as set forth in the
Engineer's Report shall be performed pursuant to law. The County Auditor shall enter on the
County Assessment Roll the amount of the assessment and the assessment shall be collected
at the same time and in the same manner as the County property taxes are collected. After
collection by the County, the net amount of the assessment shall be paid to the City of Culver
City.
4. Upon receipt of monies representing assessments collected by the
County, the City shall deposit the monies into a special fund known as the "Fund for Sewer
Users Service Charges" which was previously established upon the creation of the District.
5. Immediately upon the adoption of this Resolution, the City Clerk shall file
a certified copy of this Resolution, which includes the Engineer's Report containing the
allocation of levy amounts and assessment, with the County Auditor.
6. A certified copy of the Engineer's Report shall also be filed in the Office
of the City Engineer, with a duplicate copy on file in the Office of the City Clerk, and shall be
open for public inspection.
APPROVED and ADOPTED this day of 2011.
ATTEST:
MARTIN R. COLE, City Clerk
A 1 1-00315
-2- PUBLIC WORKS DEPARTMENT
9770 CULVER BOULEVARD, 2ND FLOOR
CULVER CITY, CALIFORNIA 90232-0507
CHARLES D. HERBERTSON
Public Works Director/City Engineer
Phone (310) 253-5600
FAX (310) 253-5626
ENGINEER'S REPORT
ON THE ANNUAL LEVY
2011-2012
SEWER USER'S SERVICE CHARGE
IN THE CITY OF CULVER CITY UNDER THE
PROVISIONS
OF CHAPTER 5.02 OF THE CODE OF THE CITY OF
CULVER CITY, CALIFORNIA
FILED with the City Clerk
on June 01,2011
PRESENTED to the City Council
and APPROVED by Resolution
No. 2011-R , adopted by said
City Council on June 27, 2011
and thereafter filed in the
Office of the City Clerk
Martin Cole
City Clerk
City of Culver City TO: The Honorable Mayor and Members of the City Council
FROM: Charles D. Herbertson, Public Works Director and City Engineer
CITY ENGINEER'S REPORT FOR SEWER USER'S SERVICE CHARGES FOR
FISCAL YEAR 2011-12
1.0 Introduction
A major challenge confronting those responsible for wastewater infrastructure,
transportation, treatment and disposal is acquiring adequate funds to finance and
operate facilities and capital equipment, along with implementing appropriate pricing
structures to ensure the self-sufficiency of the utility. The financing vehicle that is used
by the utility and the timing of the financing are crucial in ensuring that wastewater
customers are appropriately paying for facilities that they need, and not inappropriately
financing facilities for future customers. It is a major goal of an effective financial plan to
'match' the economic impact on customers with the benefits received from the service.
Regulations governing Federal and State grant funds require the City of Los Angeles to
maintain a Cost Recovery Program (Sewer User Charges System) which includes all
operations and maintenance costs directly or indirectly related to the treatment and
collection of liquid waste discharge by residents and businesses. As a result of Culver
City's contractual relationship with the City of Los Angeles for wastewater treatment at
the Hyperion Treatment Facility, Culver City (City) is also required to recover from each
wastewater user their proportionate share of the costs incurred for wastewater collection
capital improvements within Culver City, wastewater system operation and
maintenance, City of Los Angeles capital improvements for conveyance to Hyperion
and operation and maintenance at Hyperion. Accordingly, Culver City adopted a plan to
collect wastewater user charges and implemented it for the first time in fiscal year 1980-
81.
The City recovers wastewater user charges on an annual basis. Since the plan's
inception, the County Auditor-Controller's offices, and the annual property tax bill, have
been utilized as the vehicle for both billing and collection. This method has proven to be
both functionally satisfactory and exceptionally economical over the last twenty eight
years.
In order to achieve a fair and equitable system of wastewater user charges, users are
charged in a manner consistent with their actual use of the system. This comprises not
only the flow quantity, but also the wastewater strength (quality) as characterized by
BOD (biochemical oxygen demand) and SS (suspended solids).
Pursuant to the Culver City Municipal Code, in FY 2003-04 the City reviewed and
approved the Sewer User's Service Charges (SUSC) structures and billing formulas to
ensure that the City utilizes an effective pricing structure within the constraints of
Proposition 218. Additionally, the City wanted to ensure that its sewer pricing structure
continues to achieve the goals and objectives of the community, while maintaining a fair
and equitable distribution of costs to all of its customers. 2 (1 ,1 t1 /14 ,1
I ULM I I 1.0 I 1"ClJI. IJUUyeL $ 11,673,301
Sewer User Service Charge
Interest Income
$7,231,008
$ 350,000
$7,581,008
2.0 Discussion
Staff recommends that the existing rates be affirmed for the 2011-12 tax rolls. Staff
believes, based on the current Sewer Fund balances and the anticipated revenues and
expenses, that the existing rates will be adequate to maintain the solvency of the Fund.
Credits for residential landscaping can be given in two ways. 1) Either the resident can
install a separate water meter for landscaping which will not be assessed on the tax bill
or 2) prove by submitting calculations and evidence that the percentage reduction in the
tabled formula is not adequate.
Last year, the City of Los Angeles charged $1,568,000 for operations, maintenance and
capital improvements for the treatment and conveyance of Culver City wastewater. For
fiscal year 2011-12, the City of Los Angeles projects that the charge will be $2,335,000,
3.0 Calculation of Annual Expenditures and Revenue
For fiscal year 2011-12 the estimated annual expenditures are as follows:
Operating Costs — City $3,414,001
Operating and Capital Projected charges from $2,335,000
City of Los Angeles*
Debt Service on Sewer Bond $1,604,300
Capital Projects — City $ 4,320,000
Table 1 shows the Five-Year Cash Flow Projection for the Sewer Enterprise Fund.
*Operating and capital projects charges from the City of Los Angeles for fiscal year
2011-12 is a projection that was made in January 2011. Based on past experience, the
charges amount will likely change and be at a lower amount.
In addition to annual operating and capital expenditures, sewer fund rates are set
so as to maintain a minimum reserve within the sewer fund. The minimum
reserve amount is calculated as follows:
Minimum Reserve Fund = 70% of annual operations budget + 2 yrs of debt service
+ annual capital improvements budget
For fiscal year 2011-2012 the minimum required reserve fund is estimated to be
$9,918,400.and the available cash balance is projected to be $24,213,328.
For fiscal year 2011-12 the estimated annual revenue is as follows: Base
Charge
n 1.1.1
SUSC
Staff recommends that the current SUSC billing formulas and charges remain the same
for fiscal year 2011-12 due to the healthy cash reserve balance.
4.0 Summary of Current SUSC Rate Structure
The current SUSC Rate Structure is composed of a base charge and a commodity
charge for all customer classifications.
A. Base Charge
The base charge of the SUSC is a fixed cost and is comprised of two components:
Customer Costs — Calculating the sewer user service charge for the annual property tax
bill and responding to property owner inquiries regarding the charges
Capacity Costs — Capacity costs are fixed costs associated with the cost of providing
the required capacity within the sewer collection system . These costs include rents
and leases.
B. Commodity Charge
The Commodity Charge is also comprised of two components:
Collection System Costs — Collection system costs are debt service and variable costs
associated with the maintenance of the underground pipelines from each customer and
the integrated pipeline system prior to the discharge points to the City of Los Angeles
transmission system. As there are no treatment costs involved in the maintenance of
the Culver City's collection system, these costs are allocated based on the amount of
sewage flow only and do not take into account the strength of the sewage from a
particular source.
Treatment Costs — The process and costs of providing transmission, treatment, and
disposal of Culver City's customers' sewage are provided and determined by the City of
Los Angeles. These costs are considered variable costs, as they vary with the flow and
sewage strength as metered and determined by the City of Los Angeles. Treatment
costs are recovered through commodity rates charged on the basis of each customer's
adjusted actual water usage and their assumed sewage strengths. In July of every year
the City of Los Angeles provides Culver City with the Amalgamated System Sewerage
System charge rates for the upcoming fiscal year.
Below is the formula for calculating the Sewer Users Service Charge:
Commodity Charge
Annual Water Return to Rate for the
Usage X Sewer X Customer 5.0 Current SUSC Rates for 2010-11
Base Charge Commodity Charge
(Per HCF Annual total flow)
Multi-Family $ 42.32 per unit + (0.85W x $3.85)
Single Family $ 42.32 + (0.58W x $3.85)
Group ll Users: $ 42.32 + ( W x $3.85)
(Commercial no food preparation)
Group Ill Users: $ 42.32 + (W x $7.63)
(Commercial with food preparation)
Group IV Users: $ 42.32 + (VV x $3.75)
(Institutional)
Group V Users: $ 42.32 + (W x $3.26)
(Schools)
Group VI Users: Individual Special Users
601 $ 42.32 + (W x $4_10)
61.02 $ 42...32 + ell x $5. 35)
603 $ 42.32 + (VV x $5.35)
604 $ 42.32 + (1A/ x $3.75)
605 $ 42.32 + (IN x $3.21)
606 $ 42.32 + (W x $5.35)
607 $ 42.32 + (W x $3.85)
609 $ 42.32 + (W x $3.85)
610 $ 42.32 ± (VV x $0.77)
W=Annual Water Consumption In HCF
Unit is a resident dwelling unit.
Annual Water Consumption was based on calendar year 2008. 6.0 Proposed SUSC Rates for 2011-12
Table 2
Base Charge Commodity Charge
(Per HCF Annual total flow)
Multi-Family $ 42.32 per unit + (0.85W x $3.85)
Single Family $ 42.32 + (0.58W x $3.85)
Group II Users: $ 42.32 + ( W x $3.85)
(Commercial no food preparation)
Group Ill Users: $ 42.32 + (W x $7.63)
(Commercial with food preparation)
Group IV Users: $ 42.32 + (W x $3.75)
(Institutional)
Group V Users: $ 42.32 + (VV x $3.26)
(Schools)
Group VI Users: Individual Special Users
601 $ 42.32 + (VV x $4.10)
602 $ 42.32 + (VV x $5.35)
603 $ 42.32 + (VV x $5.35)
604 $ 42.32 + (W x $3.75)
605 $ 42.32 + (W x $3.21)
606 $ 42.32 + (VI/ x $5.35)
607 $ 42.32 + (VV x $3.85)
609 $ 42.32 + (W x $3.85)
610 $ 42.32 + (W x $0.77)
W=Annual Water Consumption In HCF
Unit is a residential dwelling unit
On June 13, 2010, the City Council conducted a public hearing for the adoption of the
2010/11 sewer user service charges. The City Council was informed that Golden State
Water Company (GSWC) stated they would no longer provide the water consumption
data for each parcel. GSWC stated that they considered the water consumption data to
be private and that the California State Public Utilities Commission (CPUC) had not
directed them to release it. Per staff recommendation, the City Council approved that
the fiscal year 2009-2010 sewer user service charges be used for the fiscal year 2010-
2011 sewer user service charges. I t.JvFo
64,./20/7.0 1
Charles D. HerbeWson RCE 46658
Public Works DireVtor and City Engineer
On August 23, 2010, the City Council authorized the use of the 2009 water consumption
data during the preparation of next year's annual Engineer's Report for the Sewer User
Service Charge (which will result in a one-time adjustment (deduction or addition) to the
Sewer User Service Charge in Fiscal Year 2011/2012). Meanwhile GSWC determined
that they could provide the water consumption data to Culver City if a confidentiality
agreement was put in place. This agreement has been executed and the GSWC has
provided the 2009 and 2010 water consumption data.
The 2011/12 sewer user service charges will be calculated using the 2010 water
consumption data provided by GSWC and Los Angeles Department of Water and
Power. Also the one-time adjustment (deduction or addition) from the aforementioned
2009 water consumption data will then be applied to the 2011/12 sewer user charges.
7.0 Recommendations:
In Summary, Staff makes the following recommendations:
• Continue to use Los Angeles Auditor-Controller property tax roll for SUSC billing
purposes for FY 2011-2012 as it eliminates costly billing systems, additional staff,
and minimizes bad debt.
• Adopt a resolution that reaffirms the existing SUSC billing formulas for fiscal year
2011-12.
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Table
Sewer Enterprise Fund Five Year Estimated Cash Flow Projection
(FY 2010-2015)
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016
2010/2011 estimate estimate estimate estimate estimate
Beginning cash balance 24,213,328 22,422,742 19,693,343 16,167,342 12,550,011 10,227,963
Sewer User Service Charge 8,104,500 7,231,008 7,375, 628 7,523,141 7,673,604 7,827,076
,
Interest Income 350,000 350,000 350,000 150,000 150,000 150,000
,Total Revenue 8,454,500 7,581,008 7,725,628 7,673,141 7,823,604 7,977,076
1 .
Less: Operating Costs
Salaries and Benefits 1,140,185 1,362,894 1,390,152 1,417,955 1,446,314 1,475,240
Admin., insurance, rent 1,947,756 2,051,107 2,092,129 2,133,972 2,176,651 2,220,184
L.A. Hyperion 1,072, 500 1,167,500 1,277,600 1,276,100 1,182,350 1,263,200
Bond Debt Service 1,552,330 1,604,300 1,604,300 1,604,300 1,604,300 1,604,300
Total Operating Expenditures 4,572,586 4,822,907 4,974,029 5,014,372 4,963,301 5,087,684
Less: Capital Projects
Culver City 4,600,000 4,320,000 5,000,000 5,000,000 4,000,000 4,000,000
L. A. Hyperion 1,072,500 1,167,500 1,277,600 1,276400 1,182,350 1,263,200
Total Capital Projects 5,672,500 5,487,500 6,277,600 6,276,100 5,182,350 5,263,200
Total Expenditures 10,245,086 10,310,407 11,251,629 11,290,472 10,145,651 10,350,884
Operating Surplus/Deficit -1,790,586 -2,729,399 -3,526,001 -3,617,331 -2,322,048 -2,373,809
Cash Balance- End of June 22,422,742 19,693,343 16,167,342 12,550,011 10,227,963 7,854,155 ,
1. 2% increase beginning 2012/13 and assuming no change to water consumption
2. Assuming 2% COLA increase
3. Assuming 2% increase excluding depreciation
4. Projected charges by City of Los Angeles per Jan. 2011 letter
5. In 2012/13 and 2013/14 construction of new Fox Hills pump station and diversion of Mesmer and Overland sewer pump stations