City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council adopt a resolution approving the Engineer’s
Report and affirming the existing annual assessment levy for the Sewer Users’
Service Charge for Fiscal Year July 1, 2008 to June 30, 2009.
PROCEDURE:
Mayor:
Announce that this is the time and place for the public hearing to discuss the annual
levy of assessments for the Sewer User’s Service Charge for Fiscal Year
2008/2009.
City Clerk:
Announce that notice of this hearing has been given pursuant to the provisions of
Chapter 15.01 of the Code of the City of Culver City, California, and that the
following affidavits are on file in his office:
1. Affidavit of Publication; and
2. Affidavit of Posting.
Mayor and Council: Seeks a Motion to receive and file all affidavits.
Meeting Date: 06/23/08 Item Number: PH-2
AGENDA ITEM: PUBLIC HEARING Adoption of a Resolution Approving the
Engineer’s Report and Affirming the Existing Annual Assessment Levy for the
Sewer User’s Service Charge for Fiscal Year 2008/2009
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]
Public Notification:
Legal:
The Notice of Public Hearing was posted on the City’s official bulletin board on
June 12, 2008 and published in the June 12, 2008 issue of Culver City News.
Master E-Mail Notification List on (06/18/08)
Department Approval:
Charles Herbertson (06/16/08)
City Attorney Approval:
Carol Schwab (by H. Baker) (06/18/08)
City Financial Officer Approval:
Jeff Muir (by M. Noller) (06/18/08)
City Manager Approval:
Jerry B. Fulwood (06/18/08) City of Culver City, California
City Council Agenda Item Report
City Engineer: Present the Engineer's Report and explains method of
assessment for the annual levy.
City Clerk: Announce the number of written protests received, if any,
and announce that copies of all such protests have been
delivered to the City Council OR, summarize the contents
thereof.
Mayor: First, ask to hear from those who have filed a written protest.
Next, ask to hear from those in the audience wishing to
speak against the proposed assessments.
Then, ask to hear from anyone who wishes to speak in favor
of the proposed assessments.
Mayor and Council: Seeks a motion to Declare the Public Hearing closed.
Mayor and Council: Discussion.
Mayor and Council: By Motion, overrule and deny any protests, assuming
protests represent less than 50% of property interest.
Mayor and Council: By Motion, adopt the Resolution confirming the annual
assessment levy
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.
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 City of Culver City, California
City Council Agenda Item Report
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 collection and conveyance 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 2008/2009 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.
During the Fiscal Year 2002/03 Sewer User Service Charge rate discussion the City
Council approved a program that identified the need for annual 10% rate increases
through Fiscal Year 2007/2008. The Sewer User Service Charge rate has been
increased 10% every year since Fiscal Year 2002/03 except in Fiscal Year 2005/06
where the rate was increased by 5%. The total percentage rate increase from fiscal
year 2002/03 to fiscal year 2007/08 was 55%. From fiscal year 1990/91 to fiscal
year 2001/02 there was no rate increase. The total rate increase in eighteen (18)
years averaged 3% a year.
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. A certain portion of the
water consumption amount is deducted due to landscape irrigation.
With the Amalgamated Agreement with the City of Los Angeles, certain costs
related to conveyance and treatment are included in this charge by Los Angeles
which the City pays based on flow measurements throughout the year. The City of
Los Angeles sends Amalgamated Cities their 5-year projections for costs related to City of Culver City, California
City Council Agenda Item Report
the Agreement. In a In a February 12, 2008 letter from the City of Los Angeles to
Culver City they have projected an increase of cost from $2,089,000 to $2,963,000.
This is an $874,000 cost increase.
However, the actual cost will be made known in July 2008. Historically, the City of
Los Angeles tends to project a much larger cost than the actual cost that is
received at a later date.
The Sewer Enterprise Fund maintains a large surplus reserve and staff does not
recommend any rate increase this year. As described earlier in the report, each
property owner’s sewer charge is based on its water consumption and then
entered in a formula as described in the Engineer’s report. Preliminary water
consumption data for 2007 from Golden State Water Company and City of Los
Angeles’ Department of Water and Power show an increase of 2% over last year’s
amount. As such, the total revenue will increase by about 2% over last year.
Consolidation and diversion of sewer flow
In December 2007, the City Council approved a contract with Psomas for the
sewer pump station consolidation study. The study will determine the economic
feasibility of consolidating several of the pump stations. Based on the results of
this study, staff may recommend to the City Council several sewer projects to
consolidate the sewer pump stations. The costs for this endeavor are projected to
be several million dollars and would be obtained from the Sewer Enterprise Fund
surplus reserve balance. After this study is completed, a second phase will study
the feasibility of diverting the consolidated sewer flow to the Los Angeles County
system. Should sending flow to the County system prove feasible, it is likely that
this will also cost several million dollars to implement the system changes needed
to bring this about and to buy into the County Sanitation District’s system. The
purpose of this entire effort is that the sewer system will cost less to maintain and
operate over the long term. A side benefit would be that the City would obtain
better representation of its interest through membership on the Sanitation District
Board.
Audit of City of Los Angeles’ costs
The Cities of Glendale and Burbank, along with Culver City, hired PBS&J
Engineering consultants to audit City of Los Angeles’ sewer costs related to the
Amalgamated Agreement. The audit was initiated in response to last year’s large
projected operating and capital cost increases to all Cities in the Amalgamated
system. The audit has been completed. A joint letter was mailed to the City of Los City of Culver City, California
City Council Agenda Item Report
Angeles with the audit and its recommendations. City of Los Angeles has
responded to the letter and it is currently being reviewed by staff.
FISCAL ANALYSIS:
The report contains a spreadsheet of the 5 year estimated sewer user service fund
cash flow projections.
ATTACHMENTS:
Engineer’s Report
Resolution
Sewer Enterprise Funds 5 year cash flow projection
MOTION:
That the City Council:
Adopt a Resolution approving the Engineer’s Report and affirming the existing
annual assessment levy for the Sewer User’s Service Charge for Fiscal Year July
1, 2008 to June 30, 2009.
MEETING DATE: 06/23/08
AGENDA ITEM: PUBLIC HEARING Adoption of a Resolution Approving
the Engineer's Report and Affirming the Existing Annual
Assessment Levy for the Sewer User's Service Charge
for Fiscal Year 2008/2009
ATTACHMENTS
Pages|109| Engineer's Report 1-7|109| Resolution 8-10|109| Sewer Enterprise Funds 5 year cash flow projection 11PUBLIC WORKS DEPARTMENT
9770 CULVER BOULEVARD. CULVER CITY, CALIFORNIA 90232-0507
(310) 253-5600 • FAX (310) 253-5626
CHARLES 0. HERBERTSON, PE LS
Public Works Director and
City Engineer
ENGINEER'S REPORT
ON THE ANNUAL LEVY
2008-2009
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 23, 2008
PRESENTED to the City Council
and APPROVED by Resolution
No. 2008- R , adopted by said
City Council on June 23, 2008
and thereafter filed in the
Office of the City Clerk
IICulver City — SUSC
2008/2009 City Engineer's Report
6/17/2008
2 of 7
CITY ENGINEER'S REPORT FOR SEWER USER'S SERVICE CHARGES FOR FISCAL
YEAR 2008-09
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).Culver City — SUSC
2008/2009 City Engineer's Report
6/17/2008
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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 continue to achieve the goals and
objectives of the community, while maintaining a fair and equitable distribution of costs to all of
its customers.
2.0 Discussion
Staff recommends that that the existing rates be affirmed for 2008-09 tax rolls. Staff believes,
based on the current Sewer Fund balances and the anticipated revenues and costs, that the
existing rates will protect 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 82.089.000 for operations, maintenance and capital
improvements for the treatment and conveyance of Culver City wastewater. For fiscal year
2008-2009, the charge is projected to be about $2,900,000.
3.0 Calculation of Annual Expenditures and Revenue
For fiscal year 2008-09 the estimated annual expenditures is as follows:
Operating Costs - City $2,465,311
Operating and Capital Project Charges from City of $2,900,000 *
Los Angeles
Debt Service on Sewer Bond $1,708,884
Sewer User Service Charge credits - estimated $ 50,000
City of L.A. Sewer Facility Charge - estimated $ 325,000
Capital Projects — City $3,455,000
Total FY 2008-2009 budget $10,904,195
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 2008-09 is
a projection made in February 2008. Based on past experience, the charges amount will likely
change and be at a lower amount.
3Culver City — SUSC
2008/2009 City Engineer's Report
6/17/2008
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Minimum Reserve Fund = 70% of annual operations budget 4- 2 yrs of debt service
annual capital improvements budget
For fiscal year 2008-2009 the minimum required reserve fund is estimated to be $8,598,485
and the available cash balance is projected to be $18,498,000.
For fiscal year 2008-09 the estimated annual revenue is as follows:
Sewer User Service Charge $8,477,983
Sewer Facility Fees $ 650,000
Interest Income $ 350,000
Total FY 2008-2009 budget $9,477,983
There will be an operating deficit in an amount of $1,426,192 based on the estimated total
expenditures and revenue for fiscal year 2008-09. This is a very conservative estimate and
will likely be a smaller deficit amount if the City of Los Angeles charges us less than they
projected in a letter to Culver City in February 2008. Also the City's capital project
expenditures may be less than projected if construction bids come in lower than budgeted.
Even without a rate increase for fiscal year 2008-09, the sewer user service charge
revenue will increase by 2% from last year's amount based on higher water consumption
data as obtained from Golden State Water Company and Los Angeles Department of
Water and Power for calendar year 2007. Therefore, with the healthy cash balance and
conservative estimates of expenditures, Staff recommends that the current SUSC billing
formulas and charges remain the same for fiscal year 2008-09.
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 comprised of two components:
Customer Costs — Customer costs such as billing and customer service are fixed costs that
tend to vary in proportion to the total number of customers served by the utility. Customer
costs are therefore allocated to each customer based on the number of customer accounts.
Fixed Capacity Costs — Capacity costs are fixed costs associated with maintaining the sewer
collection system. These costs include rents and leases. Capacity costs tend to vary inBase
Charge
I Annual Water x
Usage
Return to
Sewer
Percentage
Rate for the
X Customer
Class
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6/17/2008
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relation to the total capacity of the collection system. Capacity costs are therefore allocated to
each customer based on number of accounts.
B. Commodity Charge
The Commodity Charge is also comprised of two components:
Collection System Costs — Collection system costs are debit 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
collection system, these costs are allocated on a flow basis only.
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. The City of Los Angeles provides Culver City in July of
every year the Amalgamated System Sewerage System charge rates for the upcoming fiscal
year.
SUSC
5.0 Current SUSC Rates for 2007-08
Table 1
SUSC Current Billin Formulas for FY07/08
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)
roup III Users: $ 42.32 ( W x $7_63)
Group IV Users: $ 42.32 ( W x $3.75)
Group V Users: $ 42.32 (W x $3.26)Group VI Users:Individual Special Users
601 $ 42.32
602 $ 42.32
603 $ 42.32
604 $ 42.32
605 $ 42.32
606 $ 42.32
607 $ 42.32
609 $ 42.32
• ( W x $4.10)
• ( W x $5.35)
• ( W x $5.35)
• ( W x $3.75)
• ( W x $3.21)
• ( W x $5.35)
• ( W x $3.85)
• ( W x $3.85)
W=Annual Water Consum tion In HCF
SUSC
Usage
Base + Annual Water x
Charge
Return to Rate for the
Sewer X Customer
Percentage Class
Table 2
SUSC Proposed Billing Formulas for FY08109
Base Charge
Commodity Charge
(Per HCF Annual Flow)
Single Family
Group II Users:
Group III Users:
Group IV Users:
Group V Users:
$ 42.32 per unit+
$ 42.32
$ 42.32
$ 42.32
$ 42.32
$ 42.32
(0.85W x $3.85)
(0.58W x $3.85)
( W x $3.85)
( W x $7.63)
( W x $3.75)
( W x $3.26)
Group VI Users:Individual Special Users
601 $ 42.32
602 $ 42.32
603 $ 42.32
604 $ 42.32
( W x $4.10)
( W x $5.35)
( W x $5.35)
( W x $3.75)
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2008/2009 City Engineer's Report
6/17/2008
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Annual Water Consumption was based on calendar year 2006.
6.0 Proposed SUSC Rates for 2008-09605 $ 42.32
606 $ 42.32
607 $ 42.32
608 $ 42.32
609 $ 42.32
610 $ 42.32
W=Annual Water Consumption
W x $3.21)
W x $5.35)
W x $3.85)
W x $4.93)
W x $3.85)
W x $0.77)
In HCF
Culver City — SUSC
2008/2009 City Engineer's Report
6/17/2008
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Annual water consumption is based on calendar year 2007.
7.0 Recommendations:
In summary, Staff makes the following recommendations:
• Continue to use Los Angeles Auditor-Controller property tax roll for SUSC billing
purposes as it eliminates costly billing systems, additional staff, and minimizes bad
debt.
• Adopt a resolution that affirms the existing SUSC billing formulas for fiscal year 2008-
09.
Charles D. Herbertson RCE 46658
Public Works Director and City Engineerc6.
RESOLUTION NO. 2008-R
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CULVER CITY, CALIFORNIA, APPROVING THE
ENGINEER'S REPORT AND AFFIRMING THE EXISTING
ASSESSMENT LEVY FOR THE SEWER. USER'S
SERVICE CHARGE FOR FISCAL YEAR 2008/2009
WHEREAS, the City Council of the City of Culver City desires to assess a
levy for fiscal year 2008/2009 of the Sewer User's Service Charge pursuant to the
provisions of Chapter 5.02 of the Culver City Municipal Code ("CCMC") for a service
charge to be known and designated as SEWER USER'S SERVICE CHARGE
(hereinafter referred to as the "Service Charge"); and
WHEREAS, the City Engineer prepare and filed the Engineer's Report
(attached hereto as Exhibit "A" and incorporated herein by reference) for the City
Council's consideration; and
WHEREAS, the City Council has heard all testimony and evidence at a duly
noticed public hearing held on June 23, 2008 and has determined to proceed with the
levy of annual assessment for the Service Charge.
NOW, THEREFORE, the City Council of the City of Culver City, DOES
HEREBY RESOLVE as follows:
1. Upon the conclusion of the public hearing and consideration of all
public testimony, the Engineer's Report is hereby approved, the existing annual levy as
set forth and described in the Engineer's Report is hereby ordered, and no increase is
ordered at this time.
2. The adoption of this Resolution constitutes the levy of the existing
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3. The estimates of costs and all other matters as set forth in the
Engineer's Report as submitted pursuant to CCMC § 5.02.035 are hereby approved and
adopted.
4. The existing assessment 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 then 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
Treasurer of the C[ty of Culver City.
5. Upon receipt of monies representing assessments collected by the
County, the City Treasurer for the City of Culver City shall deposit the monies into a
special fund known as the "Fund for Sewer User's Service Charge," which was previously
established.
6. Immediately upon the adoption of this Resolution, the City Clerk shall
file a certified copy of the Engineer's Report containing the assessment, with the County
Auditor.
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9ATTEST:
APPRO
MARTIN COLE, City Clerk CAF1OL A. SCHWAB, ity Attorney
7. 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 23rd day of June 2008.
D. SCOTT MALSIN, MAYOR
City of Culver City, California
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102007/2008 actual
2008/2009
estimated 2009/2010 2010/2011 2011/2012 2012/2013
Beginning cash balance 18,498,000 17,071,808 17,481,362 16,634,542 13,587,812
Sewer User Service Charge 8,311,749 8,477,983 8,732,323 8,994,292 9,264,121 9,542,045
Industrial Waste Inspection Fee 60,000 70,000 70,000 70,000 70,000 70,000
CC & LA Sewer Facility Charges 600,000 650,000 500,000 300,000 300,000 300,000
Interest Income 350,000 350,000 350,000 300,000 250,000 250,000
Total Revenue 9,321,749 9,547,983 9,652,323 9,664,292 9,884,121 10,162,045
Less: Operating Costs
Operating costs- City 2,206,215 2,465,331 2,539,291 2,615,470 2,693,934 2,774,752
Operating costs- Hyperion 1,044,908 1,450,000 1,087,122 1,108,864 1,131,042 1,153,663
Debt service 1,701,569 1,708,844 1,709,234 1,707,914 1,704,834 1,709,334
Industrial Waste Inspection Fee 60,000 70,000 70,000 70,000 70,000 70,000
LA Sewer Facility Charges 300,000 325,000 250,000 150,000 150,000 150,000
SUSC Refund Credits 50,000 50,000 50,000 50,000 50,000 50,000
Total Operating Expenditures 5,362,692 6,069,175 5,705,647 5,702,248 5,799,810 5,907,749
Capital Projects
Capital expenditures- City 2,768,659 3,455,000 2,450,000 3,700,000 6,000,000 5,000,000
Capital expenditures- Hyperion 1,044,900 1,450,000 1,087,122 1,108,864 1,131,042 1,153,663
Total Capital Projects 3,813,559 4,905,000 3,537,122 4,808,864 7,131,042 6,153,663
Total Expenditures 9,176,251 10,974,175 9,242,769 10,511,112 12,930,852 12,061,412
Operating Surplus/Deficit 145,498 -1,426,192 409,554 -846,820 -3,046,731 -1,899,367
Cash Balance- End of June 18,498,000 17,071,808 _ 17,481,362 16,634,542 13,587,812 11,688,445
projection
3% increase *
2% increase
2% increase
Table 1
Sewer Enterprise Fund Five Year Estimated Cash Flow Projection
(FY 2007-2012)
*2% increase for FY 2008/09
FY 2008/09 Hyperion charges are projected by City of Los Angeles