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Home My WebLink AboutFY 2012-2013 Sewer Service Charge Performance Audit Accepted Dept.ID PW 13-053 Page 1 of 2 ^ n Meeting Date:8119/2013 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 8/19/2013 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 2012-2013 and suspend the annual Consumer Price Index (CPI) adjustment of the Sewer Service Rates for Fiscal Year 2013-14 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 establishes the formula for modifying the charges and codifies an annual increase based on the Consumer Price Index (CPI) increase available in July. Staff is recommending that the adjustment of charges be suspended for Fiscal Year 2013-14. The Sewer Service Charge Annual Performance Audit is presented to the City Council as required by HBMC Section 14.54.070. Financial Impact: Sewer Service Fund (511) revenue for Fiscal Year 2013-14 is estimated at $10,699,000 if the CPI adjustment is made to the sewer service charge and $10,580,000 if the adjustment is suspended for the fiscal year. Recommended Action: A) Accept the Sewer Service Charge Performance Audit for Fiscal Year 2012-13 as presented; and, B) Suspend the Annual Consumer Price Index (CPI) Adjustment of the Sewer Rates for Fiscal Year 2013-14. Alternative Action(s): 1) Do not accept the Sewer Service Charge Performance Audit and direct staff to make specific modifications. 2) Direct staff to prepare an Ordinance to amend the Sewer Service Rate by the percentage change in the CPI as noted in HBMC Chapter 14.55 for adoption at a later date. 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 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 17, 2013, 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. Item 6. - I HB -76- Dept. ID PW 13-053 Page 2 of 2 Meeting Date:8/19/2013 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 the 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, 2013. The CPIU for the Month of May 2013 reflects an annual increase of 1.0%. Staff is recommending that the annual adjustment be suspended for Fiscal Year 2013-14 so that staff may continue to monitor the sewer lateral program and the revenue requirements and costs thereof. In addition, 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 and address pipeline and manhole defects before they become a major problem. The CCTV program and associated repairs should be accomplished within the current funding levels of the Sewer Fund. Additionally, the City is currently reviewing its reserve policy for major funds, including the Sewer Service Fund. It is recommended that no action be taken on changing the rate structure until the City Council has had the opportunity to review the reserve policy. 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 17, 2013. By a vote of 6-0-1 (Hart absent), the Commission recommended that the report be forwarded to City Council for approval and that the Council suspend the rate adjustment for Fiscal Year 2013-14. Environmental Status: Not Applicable Strategic Plan Goal: Improve the City's infrastructure Attachment(s): 1. Fiscal Year 2012-13 Sewer Service Charge Annual Performance Audit HB -77- Item 6. - 2 ATTACHMENT # 1 City of Huntington Beach Public Works Department Sewer Service Fund Performance Audit Review of Fiscal Year 2012113 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. y= 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 projected expenses. 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. Costs for this program have decreased significantly since its inception. July 2013 - 1 - HB -79- Item 6. - 4 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 2013/14 and that staff monitor the volume of repairs and costs thereof. Review of 2012/13 Budget Personnel and operating expenditures account for approximately forty-five percent (45%) of the 2012/13 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, Closed Circuit Television (CCTV) monitoring of lines, 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 Algonquin Lift Station and Force Main Project at Boardwalk was completed this year. Design of the Trinidad Lift Station at Edinger will be substantially completed this Fiscal Year with a construction contract anticipated for award in FY 2013-2014. Sewer Lining: A construction contract for this year's Sewer Lining Project in the amount of$250,000 will be awarded by the end of this fiscal year. Warner Avenue Gravity Sewer (WAGS) (CC-1370) The 100% construction plans for this project were recently completed and currently, the project is out to bid with award of a construction contract anticipated prior to the end of this Fiscal Year. Sewer Replacement Project: Design for the replacement of a portion of the sewer line in Beach Boulevard between Ellis and Slater is currently underway. Funding for construction is proposed in the FY 2013-14 budget. CCTV Inspection: The sewer system is inspected through the use of Closed Circuit Television inspection. A contractor was employed during this time period to video inspect portions of the sewer system's main transmission/collection lines located in the City's arterial and high traffic volume streets. City crews video inspect the residential and low traffic volume streets. July 2013 -2_ Item 6. - 5 HB -80- Maintenance Activities : Current and projected year-end totals for various maintenance activities are presented below. Sewer Line Maintenance Routine cleaning of 1,058,256 linear feet of sewer pipe, projected to be 1,400,000 linear feet by year-end. ➢ Routine cleaning of 8,150 pounds of debris/grit. 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 10,209 linear feet of sewer line around food service establishments and other areas with high grease concentrations. ➢ Applied root control to 13,153 linear feet of sewer line. Lateral sewer line repair program received 189 requests for repair, resolved 189 concerns. Inspected via Closed Circuit Television (CCTV) and cleaned 102,334 lineal feet of residential mains ➢ Inspected via Closed Circuit Television 52,000 lineal feet of arterial main lines. Manhole Maintenance ➢ Cleaned and inspected 9,956 manholes. Repaired and recoated approximately 25 manholes. ➢ Sprayed insecticide for roaches in 130 manholes. Sewer Lift Station Maintenance ➢ Inspected 27 lift stations three times a week and cleaned every two months. Cleaned 236 check valves; projected to be 336 by year-end. Disassembled and rebuilt 6 sewer pumps; projected to be nine by year-end. Replaced 1 lift station sump pump. ➢ Replaced 4 transducers. ➢ Replaced 1 mulittrode controller. Cleaned 27 sewer wet wells; projected to be 32 by year end. Replaced 2 gate valves. Replaced two blower motors. ➢ Replaced 37 cannon emergency electrical plugs. Emergency Response 13 Sanitary Sewer Overflows (SSO) to date 13 power outages requiring the use of generators to power the lift stations. 137 service requests from the public during business hours. ➢ 45 after hours lift station alarms and failures. ➢ 125 after hour call outs for miscellaneous sewer related problems. 14 emergency sewer line point repairs. July 2013 -3- HB -81- Item 6. - 6 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 and businesses. Expenditures on the Sewer Lateral Program have decreased significantly since the program was initiated in Fiscal Year 2008/09. Expenditures $2,221,870.58 $1,334,680.34 $573,732.26 $603,814.52 $363.045.75 *Fiscal Year 2012/13 Expenditures are projected Staff had previously budgeted for the Sewer Lateral Program based on the expenditures in the first two years of the program. However, expenditures over the past three years have indicated that staff can reduce the budget for this program. Nonetheless, staff is still proposing maintaining the same budget level as the previous fiscal year as we continue to monitor this program. July 2013 -4- Item 6. - 7 HB -82- Sewer Service Fund Budget FY 2012113 Projected Expenditures Personnel Original Budget Revised Budget Projected Salaries, Permanent $1,799,217 $1,799,217 $1,547,011 Salaries, Temporary $65,000 $65,000 $ 67,679 Salaries, Overtime $80,000 $80,000 $ 93,808 Benefits $898,102 $901,503 $ 880,278 Total Personnel , $2,842,319r $2,845;720, $2`588,776 Operating Utilities $140,000 $140,000 $118,994 Equipment and Supplies $105,530 $105,350 $67,663 Repairs and Maintenance $1,842,000 $1,976,613 $770,461 Conferences and Training $4,000 $4,250 $1,520 Professional Services $165,000 $482,131 $459,656 Rental Expense $3,500 $3,500 $3,500 Interdepartmental Charges $1,208,577 $1,208,577 $1,208,577 Expense Allowance $6,300 $6,300 $6,300 Other Expenses $75,000 $75,300 $20,000 Total Operating $3,549 9g74 $4,002,021,,, $2;656,671 Capital Equipment $250,000 $263,056 $211,144 Total XCapetal �. $250,000 „° $263056 „ ` $211,1�44 CIP Improvements $2,150,000 $14,239,272 $2,569,175 Total CIP e n '$2;F150;000 $-14,239,272 E $2;y 69,175T` Total $8,792,226 $21,350,069 $8,025,766 Actual Revenues FY11/12 $11,748,517 Actual Expenditures FY 11/12 ($7,623,092) Unreserved Funds Available 10/1/2012 $25,121,987 Be `nnin . Balance 10/1/2012 „°. $25;1,2--,, g 9 Projected Revenues FY 12/13 $12,725,957 Projected Expenditures FY 12/13 ($8,025,766) Unreserved Funds Available 10/1/2012 $29,822,178 Pro ected'.Be irrnn rBa ar1� 10�11201 29;8 78 .. ._=g 9 u.... A July 2013 -5 - HB -83- Item 6. - 8 Revenue Detail Source FY 11/12 FY 12/13 Actual Projected Customer Charges $10,606,657 $10,953,195 Interest $199,400 $180,000 Settlements 850,000.00 1,500,000.00 Other $92,459.61 $92,762 Total $11,748,517 $12,725,957 Proposed FY 2013/14 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, 2013 for the month of May reflects an annual increase of 1.0%. Normally, this percentage would be calculated and included as the recommended adjustment to the Sewer Service User Charge effective October 1, 2013. However, as noted in the Program Overview, staff is recommending that the annual adjustment, in this case an increase, be suspended for Fiscal Year 2013/14 so that staff may continue to monitor the sewer lateral program and the revenue requirements and costs thereof. Staff is continuing 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 1.0% increase. For purposes of comparison, the rates represent a monthly charge. July 2013 -6- Item 6. - 9 HB -84- Effect of CPe Adjustment on Current Sewer Service Charge �_ Current WWI,41 , R �ss01 oe�n 'rt' o Charge Type Unit' C ha rge Increase 9 Residential: Single-family & Flat rate for all customers in per unit $10.6923 $10.7992 townhouses with individual category per meters month Apartment: All apartments, Flat rate for all customers in per unit $8.8693 $8.9580 mobile homes and townhouses category per served by common meters month Regular Flat rate amount per Equivalent per EDU $12.4089 $12.5330 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 $2.3451 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 $3.4492 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 $2.2211 per ADA per year July 2013 -7- HB -85- Item 6. - 10 Sewer Service Fund Budget FY 2013114 Proposed Personnel Salaries, Permanent $1,701,136 Salaries, Temporary $65,000 Regular Overtime $80,000 Benefits $987,089 Total Personnel emu. $2,833,225_. Operating Utilities $140,000 Supplies $165,350 Repairs and Maintenance $1,483,000 Conferences and Training $4,000 Professional Services $125,000 Rental Expense $3,500 Cost Allocation $1,244,834 Auto Allowance $5,800 Contingency $75,000 -Total 'O eratin I. :y$3,24fi,484 Capital Equip, General/Vehicles $569,880 Total.Ca ital; $569;880 = CIP (new) Lift Station (Trinidad) $1,700,000 Lift Station Design (Edgewater) $400,000 Sewer Lining (CCTV) $250,000 Sewer Replacement Project (new) $400,000 Sewer Replacement Project cont. $1,855,000 Total CIPo. $4605,000` TOTAL $11,254,589 Revenue Detail FY 13114 Customer Charges $10,300,000 Interest $180,000 Reimbursements $110,000 Total $10,580,000 July 2013 -8- Item 6. - 11 HB -86- Sewer Service Fund Projected Balance Sheet Beginning Balance 101112013 $29,822,178 Projected Revenues FY 13114 $10,580,000 Proposed Expenditures FY 13114 ($11,254,589) Projected Beginning Balance 10/1/2014 $29,147,589 Capital Projects FY 2013/14 Lift Stations: Construction is planned in 2013114 for the Trinidad Lift Station. Design work is budgeted for the Edgewater Lift Station, with construction tentatively scheduled to begin in Fiscal Year 2014/15. Sewer Lining: Sewer lining in the amount of $250,000 is programmed in FY 2013114. A lining project is bid once a sufficient number of sewer defects are identified as part of the CCTV inspection program. Sewer Replacement Project: Construction funding for replacement of a portion of the sewer line in Beach Boulevard between Ellis and Slater is proposed for the FY 2013/14 budget. Sewer Main Replacements: Funding is being budgeted for potential sewer main replacements in the amount of $400,000 in preparation of increased development along the Beach/Edinger Corridor. July 2013 -9- xB -87- Item 6. - 12