HomeMy WebLinkAboutSewer Service Charge Performance Audit for Fiscal Year 2013- Dept. ID PW 14-051 Page 1 of 2
— Meeting Date:8/18/2014
—D
CITY OF HUNTINGTON BEACH
REQUEST FOR, CITY COUNCIL ACTION
MEETING DATE: 8/18/2014
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 2013-2014
and suspend the annual Consumer Price Index (CPI) adjustment of the Sewer
Service Rates for Fiscal Year 2014-15
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 2014-15. 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 2014-15 is estimated at $10,591,100 if the CPI
adjustment is made to the sewer service charge and $10,416,000 if the adjustment is suspended
for the fiscal year.
Recommended Action:
A) Accept the Sewer Service Charge Performance Audit for Fiscal Year 2013-14 as presented;
and,
B) Suspend the Annual Consumer Price Index (CPI) Adjustment of the Sewer Rates for Fiscal
Year 2014-15.
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 23, 2014, meeting. Per the Municipal Code, the
LIB -107- Item 5. - I
Dept. ID PW 14-051 Page 2 of 2
Meeting Date:8/18/2014
City Council shall receive 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 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, 2014. The CPIU for the month of May 2014
reflects an annual increase of 1.7%.
Staff is recommending that the annual adjustment be suspended for Fiscal Year 2014-15 so that
staff may continue to monitor the sewer lateral program and the revenue requirements and costs
thereof. Additionally, the City is finalizing 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 23, 2014. By a vote of 6-0, the
Commission recommended that the report be forwarded to City Council for approval and that the
Council suspend the rate adjustment for Fiscal Year 2014-15.
Environmental Status:
Not Applicable
Strategic Plan Goal:
Improve the City's infrastructure
Attachment(s):
1.) Annual Sewer Service Charge Performance Audit for Fiscal Year 2013-14
Item 5. - 2 xB -1108-
City of Huntington Beach
Public Works Department
Sewer Service Fund Performance Audit
Review of Fiscal Year 2013114
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. 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 2014/15
and that staff monitor the volume of repairs and costs thereof.
Program Overview
Scheduled maintenance projects and minor emergency repairs will be completed
within the allotted budget.
Closed Circuit Television Inspection and cleaning of sewer mains.
r Operations and maintenance of the City's 28 sewer lift stations.
Capital improvements including lift station design and construction work and the
sewer lining program.
v 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
July 2014 - 1 -
HB -109- Item 5. - 3
revenue generated by the adjustment to the sewer service user charge. Costs
for this program have decreased significantly since its inception.
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.
r A major void was discovered at the intersection of Brookhurst Street and
Indianapolis Avenue, most likely caused by a double siphon at the Orange
County Sanitation District sewer collection line. Repairs on this project lasted
from February to June and cost approximately $800,000.
Review of 2013/14 Budget
Personnel and operating expenditures account for approximately forty-five percent
(45%) of the 2013/14 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, and lift
station 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 was completed this year.
Design of the Trinidad Lift Station is expected to be finished by the end of this fiscal
year. City accepted transfer of the Brightwater Lift Station from the developer of the
surrounding housing project.
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) Construction of the Warner Avenue
Gravity Sewer (WAGS) project was substantially completed, with work expected to
finish early next fiscal year.
Sewer Replacement Project: Construction for the replacement of a portion of the sewer
line in Beach Boulevard between Ellis and Slater was completed this fiscal year.
July 2014 -2-
Item 5. - 4 HB -> >0-
CCTV Inspection: The sewer system is inspected through the use of Closed Circuit
Television inspection. A contractor was employed during this last fiscal year 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.
Maintenance Activities : Totals for various maintenance activities are presented below.
Sewer Line Maintenance
r Routine cleaning of 1,884,917 linear feet of sewer pipe.
Removal of 5,700 pounds of debris/grit during routine cleaning.
Cleaned 225 enhanced cleaning areas (areas of sewer line cleaned from two
times to twelve times per year) for a total of 489,375 linear feet through June.
Fats, Oils and Grease (FOG) program has cleaned 10,878 linear feet of sewer
line around food service establishments and other areas with high grease
concentrations.
y Applied root control to 24,114 linear feet of sewer line.
Sewer lateral repair program received 223 requests for repair to date.
r Inspected via Closed Circuit Television (CCTV) 181,305 linear feet of residential
sewer lines and arterial mains.
Manhole Maintenance
y Cleaned and inspected 8,707 manholes.
Repaired and recoated 58 manholes.
Sprayed insecticide for roaches in 256 manholes.
Sewer Lift Station Maintenance
Inspected 28 lift stations three times a week and cleaned each station every two
months.
Cleaned 260 check valves; projected to be 348 by year's end.
10, Replaced 2 check valves
Replaced 5 gate valves.
r Disassembled and rebuilt 8 sewer pumps.
y Replaced 2 transducers.
Cleaned 27 sewer wet wells; projected to be 32 by year's end.
Replaced 2 cannon emergency electrical plugs.
Painted 8 stations.
Installed Intercom system at lift station 32.
Emergency Response
2 Sanitary Sewer Overflows (SSO) to date
34 power outages requiring the use of generators to power the lift stations.
July 2014 -3 -
HB -11 1- Item 5. - 5
291 service requests from the public during business hours.
r 65 after hours lift station alarms and failures.
v 92 after hour call outs for miscellaneous sewer related problems.
3 emergency sewer line point repairs.
Sewer Lateral Program
Under the Sewer Lateral Program, the City assumed 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.
Staff had previously budgeted for the Sewer Lateral Program based on the expenditures
in the first two years of the program. However, following reductions in calls after the first
three fiscal years of the program, staff reduced the budget for fiscal year 2013/14.
Demand for the Sewer Lateral Program has increased in the current fiscal year, but is
still within the amount budgeted by staff. Staff is recommending the fiscal year 2014/15
line-item request for the sewer lateral program remain unchanged from the current fiscal
year.
Sewer Lateral Expenditures
3
$2,500,000
1
$2,000,000
$1,500,000 ^
$1,000,000
€ a
$500,000
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
July 2014 -4-
Item 5. - 6 HB -112-
Sewer Service Fund Budget
FY 2013114 Projected Expenditures
Personnel Original Budget Revised Budget* Projected
Salaries, Permanent $1,704,538 $1,704,538 $1,661,045
Salaries, Temporary $65,000 $65,000 $54,861
Salaries, Overtime $80,000 $80,000 $105,000
Benefits $987,090 $987,090 $938,711
Total Personnel $2,836,627 `$2,836,627 $2759,617
Operating
Utilities $140,000 $140,000 $100,000
Equipment and Supplies $165,350 $165,350 $100,711
Repairs and Maintenance $1,483,000 $1,483,000 $1,552,378
Conferences and Training $4,000 $4,000 $2,000
Professional Services $125,000 $195,692 $195,000
Rental Expense $3,500 $3,500 $3,500
Interdepartmental Charges $1,244,834 $1,244,834 $1,244,834
Expense Allowance $5,800 $5,800 $5,800
Other Expenses $75,000 $75,000 $20,000
$3,246,484 3 $3,317,176.}
Total Operating , $3;224,222
Capital
Equipment $304,880 $304,880 $211,144
Vehicles $265,000 $265,000 $265,000
Total.Capital�. $569,880 $569,880 $476,144
CIP
Improvements $2,150,000 $17,654,424 $14,261,003
Total CIP 4 ,$2,150,000 $17,654,424,�,$14;261,003
Total $10,782,991 $24,378,107 $20,720,986
*Revised Budget includes funds carried over from prior fiscal year
Be jnnin Batap"6 10/ J2Q12 . .... W
.. .a
Actual Revenues FY 12/13 $12,197,918
Actual Expenditures FY 12/13 -$7,185,908
Unreserved Funds Available 10/1/2013 $34,834,188
Begi'nning Balance 1016/2013 fr $34,834,188-
Projected Revenues FY 13/14 $12,602,796
Projected Expenditures FY 13/14 $20 720,986
July 2014 -5 -
HB -1 13- Item 5. - 7
Revenue Detail
Source FY 12/13 FY 13114
Actual Projected
Customer Charges $10,616,704 $10,953,195
Interest $68,639 $180,000
Settlements 1,500,000 1,376,839
Other $12,574 $92,762
Total $12,197,918 $12,602,796
Proposed FY 2014/15 Budget
Sewer Service User Charge Adjustments
In accordance with Section 14.55.030 Annual CPIU Adiustments, 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, 2014 for the month of
May reflects an annual increase of 1.7%. Normally, this percentage would be
calculated and included as the recommended adjustment to the Sewer Service User
Charge effective October 1, 2014.
However, staff is recommending that the annual adjustment, in this case an increase,
be suspended for Fiscal Year 2014/15 while the City completes its reserve policy study.
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 1.7% increase. For purposes of comparison, the rates
represent a monthly charge.
Julv 2014 -6-
Item 5. - 8 HB -114-
Effect of CPI Adjustment on Current Sewer Service Charge
Current With CPI
Increase
Custc�rnerrctguryF Charge Type Unit ,Charge ,
Residential: Single-family & Flat rate for all customers in per unit $10.6923 $10.8741
townhouses with individual category per
meters month
Apartment: All apartments, Flat rate for all customers in per unit $8.8693 $9.0201
mobile homes and townhouses category per
served by common meters month
Regular Flat rate amount per Equivalent per EDU $12.4089 $12.6199
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 % 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 $2.3614
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 $2.2365
per ADA
per year
July2014 -7-
11B -I 15- Item 5. - 9
Sewer Service Fund Budget
FY 2014115 Proposed
Personnel
Salaries, Permanent $1,883,250
Salaries, Temporary $65,000
Regular Overtime $80,000
Benefits $1,049,812
Total Personener, $3,078,062:
Operating
Utilities $110,000
Supplies $355,350
Repairs and Maintenance $1,543,000
Conferences and Training $3,000
Professional Services $500,000
Rental Expense $3,500
Cost Allocation $1,282,879
Auto Allowance $5,800
Contingency $75,000
x
-.Totai O eratin $3,878,529'
Capital
Equipment $372,600
Vehicles $588,600
.Total Ca' ital�a $961,20%
CIP (new)
Lift Station (Trinidad) $2,100,000
Sewer Lining $350,000
;
Total CIP ` y $2;450,000''
TOTAL 10,367,791
Revenue Detail FY 14115
Customer Charges $10,300,000
Other $116,000
Total $10,416,000
July 2014 -8-
Item 5. - 10 xB -11 G-
Sewer Service Fund Projected Balance Sheet
Beginning Balance 10/1/2014 $26,715,998
Projected Revenues FY 14/15 $10,416,000
Proposed Expenditures FY 14/15 ($10,367,791)
Projected Beginning Balance 10/1/2015 $26,764,207
Capital Projects FY 2014/15
Lift Stations: Construction is planned in 2014/15 for the Trinidad Lift Station. Design is
scheduled for the Edgewater Lift Station.
Sewer Lining: Sewer lining in the amount of$350,000 is programmed in FY 2014/15. A
lining project is bid once a sufficient number of sewer defects are identified as part of
the CCTV inspection program.
July 2014 -9-
xB -1 17- Item 5. - I I