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Home My WebLink AboutFY 2011-2012 Sewer Service Charge Performance Audit - Suspen Council/Agency Meeting Held: Deferred/Continued to: '*App vet ❑ Conditionally Approved ❑ Denied �. Cifji Ier s Sig Lure Council Meeting Date: August 20, 2012 Department ID Number: PW 12-051 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager PREPARED BY: Travis K. Hopkins, PE, Director of Public Works SUBJECT: Accept the Sewer Service Charge Performance Audit for Fiscal Year 2011-2012 and suspend the annual Consumer Price Index (CPI) adjustment of the Sewer Service Rates for Fiscal Year 2012-2013 Statement of Issue: Section 14.54.060 of the Huntington Beach Municipal Code (HBMC) requires the City Council to establish sewer service charges by ordinance. Chapter 14.55 of the HBMC requires specific amounts of the charges and the formula for modifying the charges. Staff is recommending that the adjustment of charges be suspended for Fiscal Year 2012/13. The Sewer Service Charge Annual Performance Audit is presented to the City Council as required by Section 14.54.070. Financial Impact: Sewer Service Fund (511) revenue for FY 2012/13 is estimated at $11,023,600 if the Consumer Price Index (CPI) adjustment is made to the sewer service fee and $10,850,000 if the adjustment is suspended for the fiscal year. Recommended Action: Motion to: A) Accept the Sewer Service Charge Performance Audit for Fiscal Year 2011-12 as presented; and, B) Suspend the Annual Consumer Price Index (CPI) Adjustment of the Sewer Service Rates for Fiscal Year 2012-13. Alternative Action(s): A) Do not accept the Sewer Service Charge Performance Audit and direct staff to make specific modifications. B) Direct staff to prepare an Ordinance to amend the Sewer Service Rate by the percentage change in the Consumer Price Index as noted in Chapter 14.55 of the Municipal Code for Council adoption at a later date. HB -79- Item 9. - I REQUEST FOR COUNCIL ACTION MEETING DATE: 8/20/2012 DEPARTMENT ID NUMBER: PW 12-051 Analysis: The Sewer Service Fund is designated solely for facilities and resources relating to the rehabilitation, replacement, repair and maintenance of City-owned sewers and lift stations. This is in accordance with the California Health and Safety Code Section 5470, and is included as Chapter 14.54 in the HBMC. Section 14.54.070 Annual Program Review of the HBMC requires an annual review and performance audit of the Sewer Service Fund by the Public Works Commission. The audit was presented to the Commission at the July 18, 2012, regular meeting. Per the Municipal Code, the City Council shall receive at a regularly scheduled meeting the recommendations of the Public Works Commission concerning fees, rates and charges proposed to be modified or added to the sewer service user charge. In accordance with Section 14.55.030 Annual CPIU Adjustments, each Sewer Service User Charge shall be adjusted to reflect the annual percentage adjustment in Consumer Price Index for all Urban Consumers (CPIU) in Los Angeles, Orange and Riverside Counties established by the U.S. Bureau of Labor Statistics, available as of July 1, 2011. The CPIU for the month of May 2011 reflects an annual increase of 1.6%. As noted in the Annual Audit, a Sewer Lateral Program was added effective January 3, 2008, and the sewer service charge was increased to cover the expense. The program transferred the responsibility to the City for sewer lateral repairs within the City-owned right-of-way. Initially, the cost of the program exceeded the additional revenue generated by the adjustment to the sewer service user charge. Fiscal Year 2011/12 is the fourth year of the program and the Utilities Division has realized a significant reduction in the costs to the program. Staff projects expenditures of $385,000 for the program in Fiscal Year 2011/12, down from $2,221,870 in the first full year of the program. As a result, the Public Works Commission recommends that the Consumer Price Index (CPI) adjustment required by the Municipal Code be suspended for Fiscal Year 2012/13 and that staff monitor the volume of repairs and costs/revenue requirements thereof. The Consumer Price Index (CPI) adjustment was also suspended the previous fiscal year. Suspension of the CPI adjustment would result in an estimated $173,600 in revenues not being realized. Public Works Commission Action: The Public Works Commission reviewed the Sewer Service Charge Annual Performance Audit and the Sewer Service User Charge Annual Adjustment on July 18, 2012. By a vote of 5-0-2 (O'Connell, Spencer absent) the Commission recommended that the report be forwarded to City Council for approval and that Council suspend the rate adjustment for Fiscal Year 2012/13. Environmental Status: Not Applicable Strategic Plan Goal: Improve long-term financial sustainability Attachment(s): 1. Sewer Service Fund Annual Performance Audit Item 9. - 2 FIB -80- ATTACHMENT # 1 iin -xi- Item 9. - 3 City of Huntington Beach Public Works Department Sewer Service Fund Performance Audit Review of Fiscal Year 2011112 Introduction On September 4, 2001, the Huntington Beach City Council adopted a Sewer Service User Charge and created the Sewer Service Fund. The Sewer Service Fund revenue is designated solely for the rehabilitation, replacement, repair and maintenance of City- owned sewers and lift stations. This is in accordance with the California Health and Safety Code Section 5470, and is included in the ordinance that adds Chapter 14.54 to the Huntington Beach Municipal Code. The ordinance established the Huntington Beach Public Works Commission as both the oversight committee and the final appeals board. The Sewer Service Fund shall be subject to an annual review and performance audit by the Public Works Commission. The information presented in this report complies with Section 14.54.070 Annual Program Review. In addition, the City Council shall receive, at a regularly scheduled meeting, the recommendations of the Public Works Commission concerning fees, rates and charges proposed to be modified or added to the sewer service user charge. A public hearing on proposed charges will be held annually in conjunction with the City's annual budget process and hearing. Program Overview Scheduled maintenance projects and minor emergency repairs will be completed within the allotted budget. r Capital improvements including lift station design and construction work and the sewer lining program. �= The Municipal Code states that the Consumer Price Index for Urban Consumers (CPIU) that is available July 1 shall be used to calculate adjustments to sewer service rates. A Sewer Lateral Program was added effective January 3, 2008, and the sewer service charge was adjusted to cover the expense. The program transferred the responsibility to the City for sewer lateral repairs within the City-owned right-of- way. Initially, the cost of the program exceeded the additional revenue generated by the adjustment to the sewer service user charge. Fiscal year 2011/12 marks the fourth full year of the program and the Utilities Division has realized decreasing costs for the sewer lateral program. July 2012 - 1 - Item 9. - 4 xB -82- Closed Circuit Television Inspection and cleaning of sewer mains. ➢ Therefore, the overall budget is estimated to be neutral and it is recommended that the Consumer Price Index (CPI) adjustment required by the Municipal Code be suspended for Fiscal Year 2012/13 and that staff monitor the volume of repairs and costs thereof. Review of 2011/12 Budget Personnel and operating expenditures account for approximately forty-five percent (45%) of the 2011/12 Sewer Service Fund budget and are directed toward preventative and routine maintenance. The budget includes salaries and benefits, sewer line maintenance, lift station services, manhole upgrades, the sewer lateral program and cost allocation charges to the General Fund. The balance of the expense budget is earmarked for capital equipment replacement and capital projects, including slip lining, pipeline rehabilitation, lift station replacement and capital equipment replacement. In general, the Sewer Maintenance Section of the Utilities Division expends the operating and equipment replacement budgets, and the Engineering Division is responsible for the implementation of capital projects. Lift Stations: Construction of the Ranger Lift Station at Adams was completed this year. The Algonquin Lift Station and Force Main Project construction contract will be awarded this year with construction being completed in FY 2012/2013. Sewer Lining: A construction contract for this year's Sewer Lining Project in the amount of$100,000 will be awarded by the end of this fiscal year. Warner Avenue Gravity Sewer (WAGS): This project has been delayed due to the unforeseen involvement of the Coastal Commission. The resulting necessity of certain permits/easements has hampered the initial time frame of this project but it appears to be back on schedule-albeit delayed. CCTV Inspection: Sewer lines are inspected through the use of Closed Circuit Television inspection with specific focus during this time period on the Pavement Management Program area in Zone 4. Warner Avenue at Rotterdam: In April 2012, a large void was discovered underneath the roadway at Warner Avenue just east of Beach Boulevard. An excavation depth greater than 20 feet was required to successfully replace a damaged manhole structure as well as to complete the repair of a City sewer line at the OCSD trunk line system point of connection. This was a large scale, unanticipated project with extensive material and labor charges involved. July 2012 -2- HB -83- Item 9. - 5 Maintenance Activities : Current and projected year-end totals for various maintenance activities are presented below. Sewer Line Maintenance Routine cleaning of 882,867 linear feet of sewer pipe, projected to be 1,300,000 linear feet by year-end. r Removal of 25,850 pounds of debris/grit, projected to be 30,000 pounds of debris removed by year-end. Clean 225 enhanced cleaning areas (areas of sewer line maintained from two times to twelve times per year). Fats, Oils and Grease (FOG) program has cleaned 284,816 linear feet of sewer line around food service establishments and other areas with high grease concentrations. r Fats, Oils and Grease program removed 3,650 pounds of grease from sewer lines around food service establishments and other areas with high grease concentrations; projected to be 4,250 pounds removed by year-end. Fats, Oils, Grease program will inspect 46 food service establishments' sewer lateral sewer lines by year-end. r Cleaned 66,350 linear feet of arterial sewer lines; projected to be 80,000 linear feet by year-end. y Applied root control to 16,518 linear feet of sewer line. Lateral sewer line repair program received 384 concerns for repair, resolved 189 concerns, and completed 113 lateral point repairs. r Inspected via Closed Circuit Television (CCTV) 191,084 lineal feet of residential mains; projected to complete 300,000 lineal feet by year-end Y Projected to complete 50,000 lineal feet of CCTV inspection of arterial main lines by year-end. Manhole Maintenance r Cleaned and inspected 8,302 manholes. r Approximately 20 manholes projected to be repaired and recoated by year-end. v Sprayed insecticide for roaches in 130 manholes. Removed and replaced 20 manhole rings. Sewer Lift Station Maintenance r' 27 lift stations inspected three times a week and cleaned every two months. y 236 check valves cleaned; projected to be 336 by year-end. 12 sewer pumps taken apart and rebuilt with new parts as needed. 3 of these are submersible which involves higher maintenance costs. Replaced 1 lift station sump pump. r Primary and secondary telemetry system components utilized to measure wet well sewage elevations were replaced at all 27 stations. SCADA controllers were also replaced at each station. 23 sewer wet wells cleaned. July 2012 -3 - Item 9. - 6 HB -84- Replaced 1 check valve and 3 gate valves Emergency Response r 19 Sanitary Sewer Overflows to date (9 private, 10 City). y 13 power outages requiring the use of generators to power the lift stations. 137 service requests from the public during business hours. 92 after hours lift station alarms and failures. 125 after hour call outs for miscellaneous sewer related problems. y 9 emergency sewer line point repairs. Sewer Lateral Program Under the Sewer Lateral Program, the City assumes responsibility for the repair of all sewer laterals from the City-owned sewer main through the public right-of-way to the private property line. The property owner remains responsible for all costs of repair and maintenance of that portion of the sewer lateral on private property. This program is response driven as all work orders are generated in response to calls from residents. Expenditures on the Sewer Lateral Program have decreased significantly since the program was initiated in Fiscal Year 2008/09. [Y ..' 21 1 Expenditures $2,221,870.58 $1,334,680.34 1 $451,494.46 1 $385,000* *Fiscal Year 2011/12 Expenditures are projected Staff has budgeted for the Sewer Lateral Program based on the expenditures in the first two years of the program. However, expenditures in Fiscal Year 2010/11 and Fiscal Year 2011/12 indicate that a more conservative budget could be adopted for this program. July 2012 -4- HB -85- Item 9. - 7 Sewer Service Fund Budget FY 2011112 Projected Expenditures Personnel Original Budget Revised Budget Projected Salaries, Permanent $1,900,590 $1,900,590 $1,600,000 Salaries, Temporary $65,000 $65,000 $60,000 Salaries, Overtime $80,000 $80,000 $185,000 Benefits $944,749 $944,749 $868,000 Total Personnel $2,9901,339 $2,990,339, $2,713,000' Operating Utilities $140,000 $140,000 $140,000 Equipment and Supplies $109,350 $109,350 $100,000 Repairs and Maintenance $1,842,000 $1,976,613 $1,700,000 Conferences and Training $4,000 $4,250 $4,000 Professional Services $115,000 $482,131 $482,131 Rental Expense $3,500 $3,500 $3,500 Interdepartmental Charges $1,173,376 $1,173,376 $1,173,376 Expense Allowance $6,300 $6,300 $6,300 Other Expenses $75,000 $75,300 $75,000 Total Operating $3,468,526 $3,970,820 $4,'q 37" Capital Equipment $110,000 $161,243 $62,891 Total Capital ;. , $110,000 $161,243, ; $62,891- CIP Improvements $7,800,000 $13,715,663 $1,400,000 Total CIP ': = $7,910,000 $13,886,906 $1462,891 Total $14,368,865 $20,868,066 $7,860,198 Be nin Baance 10%'110,1 . , . . e. , Actual Revenues FY10/11 $10,747,014 Actual Expenditures FY 10/11 ($6,338,323) Unreserved Funds Available 10/1/2011 $20,878,691 -Beginning Balance 10/1/2011 $20,678,691 Projected Revenues FY 11/12 $10,850,000 Projected Expenditures FY 11/12 ($7,860,198) Unreserved Funds Available $23,868,493 ProlectedBeginrung'Balance 1OI,112012 $23;8Ii84 July 2012 -s - Item 9. - 8 xB -86- Revenue Detail Source FY10/11 FY 11/12 Actual Projected Customer Charges $10,390,137 $10,700,000 Interest $256,856 $250,000 Other $175,196 $100,000 Total $10,820,190 $10,850,000 Proposed FY 2012113 Budget Sewer Service User Charge Adjustments In accordance with Section 14.55.030 Annual CPIU Adjustments, each Sewer Service User Charge shall be adjusted to reflect the annual percentage adjustment in Consumer Price Index for all Urban Consumers (CPIU) in Los Angeles, Orange and Riverside Counties established by the U.S. Bureau of Labor Statistics and available as of July 1 of each year. The purpose for annual adjustment of the rates is to ensure that the revenues continue to fully fund the needs of the program. To accommodate the billing system, all service charge rates are calculated to four decimal places, and charged on a daily factor. The daily factor converts the monthly charge based on a 365-day year. This is a modification from the initially adopted rate schedule. The customer's bill reflects a charge based on the number of days between meter readings. A resolution was adopted by the City Council to authorize the daily rate methodology. The percentage adjustment in the CPIU available as of July 1, 2012 for the month of May reflects an annual increase of 1.6%. Normally, this percentage would be calculated and included as the recommended adjustment to the Sewer Service User Charge effective October 1, 2012. However, as noted in the Program Overview, staff is recommending that the annual adjustment, in this case an increase, be suspended for Fiscal Year 2012/13 so that staff may continue to monitor the sewer lateral program and the revenue requirements and costs thereof. Staff is implementing an aggressive Closed Circuit Television (CCTV) inspection program of the sewer mains located on the City's arterial and high traffic streets to identify defects before they become a major problem. The CCTV programs should be accomplished within the current funding levels of the Sewer Fund. The following table shows the 1.6% increase. For purposes of comparison, the rates represent a monthly charge. July 2012 -6- HB -87- Item 9. - 9 Effect of CPI Adjustment on Current Sewer Service Charge . Current With CPh Customer Category Charge Type Unite Charge Increase m Residential: Single-family & Flat rate for all customers in per unit $10.6923 $10.8634 townhouses with individual category per meters month Apartment: All apartments, Flat rate for all customers in per unit $8.8693 $9.0112 mobile homes and townhouses category per served by common meters month Regular Flat rate amount per Equivalent per EDU $12.4089 $12.6074 Commercial/Industrial: Most Dwelling Unit (EDU). EDU per businesses, including private refers to either (1)the capacity of month schools a customer's water meter in comparison to a standard 3/4 inch meter, or (2)the number of tenant units that receive water service through the water meter, whichever is greater High-Consumption Flat rate per hundred cubic feet per CCF $2.3219 $2.3591 Commercial/Industrial: (CCF) of estimated sewer per year Businesses with high water discharge consumption relative to their meter size Public Schools: All public K-8 Flat rate per student per year High $3.4150 $3.4696 and high school districts with with a different rate per student School schools in the City for K-8 and for high schools per ADA per year ADA-Average Daily Attendance K-8 $2.1991 $2.2343 per ADA per year July 2012 -7- Item 9. - 10 xB -88- Sewer Service Fund Budget FY 2012113 Proposed Personnel Salaries, Permanent $1,799,217 Salaries, Temporary $65,000 Regular Overtime $80,000 Benefits $898,654 Total Personnel $2,842,871 Operating Utilities $140,000 Supplies $105,350 Repairs and Maintenance $1,842,000 Conferences and Training $4,000 Professional Services $165,000 Rental Expense $3,500 Cost Allocation $1,208,577 Auto Allowance $6,300 Contingency $75,000 Total Operating $3,549,727 Capital Equip, GeneralNehicles $250,000 Total Capital , '. $250,000 CIP Lift Station $1,700,000 Slip Lining $250,000 Sewer Replacement Project $200,000 Total CIP $2,400,000 TOTAL $8,792,598 Revenue Detail FY 12113 Customer Charges $10,350,000 Interest $180,000 Reimbursements $116,000 Total $10,596,000 July 2012 -8- HB -89- Item 9. - I I Sewer Service Fund Projected Balance Sheet Beginning Balance 10/1/2012 $23,868,493 Projected Revenues FY 12/13 $10,596,000 Proposed Expenditures FY 12/13 ($8,792,598) Beginning Balance 10/1/2013 $25,671,895 Capital Projects FY 2012/13 Lift Stations: Construction is planned in 2012/13 for the Algonquin/Boardwalk Lift Station. Design work is in progress for the Trinidad lift station, with construction tentatively scheduled to begin by the fall of 2013. Design work is also anticipated to begin on the Edgewater Lift Station later in the fiscal year. Sewer Lining: Sewer lining in the amount of $250,000 is programmed in FY 2012/13. A lining project is bid once a sufficient number of sewer defects are identified as part of the CCTV inspection program. Warner Avenue Gravity Sewer (WAGS): The WAGS project will eliminate Lift Station "B" and replace Lift Station "C" in addition to constructing a new gravity sewer main at Pacific Coast Highway and Warner Avenue. This project has been delayed due to the unforeseen involvement of the Coastal Commission. The resulting necessity of certain permits/easements has hampered the initial time frame of this project but it appears to be back on schedule-albeit delayed. Sewer Replacement Project: Design work will begin in Fiscal Year 2012-13 for replacing approximately 5,000 lineal feet of existing sewer main in Beach Boulevard. July 2012 -9_ Item 9. - 12 HB -90-