HomeMy WebLinkAboutSewer Service Fund Performance Audit Review of Fiscal Year 2 (8) Council/Agency Meeting Held:_
Deferred/Continued to:
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Council Meeting Date: August 15, 2011 Department ID Number: PW 11-051
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 and suspend the
annual Consumer Price Index (CPI) adjustment of the Sewer Service
Rates
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 specific amounts of the charges and the formula for modifying the
charges. Staff is recommending that the adjustment to the charges be suspended for Fiscal
Year 2011/12. The Sewer Service Charge Annual Performance Audit is presented to the City
Council as required by Section 14.54.070 Annual Program Review.
Financial Impact: Sewer Service Fund (511) revenue for FY 2011/12 is estimated at
$11.2 million if the Consumer Price Index (CPI) adjustment is made to the sewer service fee
and $10.9 million if the adjustment is suspended for the fiscal year.
Recommended Action: Motion to:
A) Accept the Sewer Service Charge Performance Audit as presented; and,
B) Suspend the annual Consumer Price Index (CPI) adjustment of the Sewer Service Rates.
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.
Item 14. - I xB -266-
REQUEST FOR COUNCIL ACTION
MEETING DATE: 8/15/2011 DEPARTMENT ID NUMBER: PW 11-051
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 20,
2011 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 of each year. The
CPIU available as of July 1, 2011, for the month of May 2011, reflects an annual increase of
3.1%.
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 2010/11 marks the third full year of
the program and the Utilities Division has realized a drastically decreased number of
requests for sewer lateral repairs. Staff projects that the total number of repairs for FY
2010/11 will be less than half of each of the last two fiscal years. Therefore, the Public
Works Commission recommends that the Consumer Price Index (CPI) adjustment required
by the Municipal Code be suspended for Fiscal Year 2011/12 and that staff monitor the
volume of repairs and costs/revenue requirements thereof.
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
20, 2011. By a vote of 6-1-0, the Commission recommended the report be forwarded to City Council
and recommended City Council suspend the rate adjustment for Fiscal Year 2011/12.
Environmental Status: Not Applicable.
Strategic Plan Goal: Maintain, improve and obtain funding for infrastructure and equipment
Attachment(s):
® - 'ip
1. Sewer Service Fund Annual Performance Audit
xB -267- Item 14. - 2
ATTAC H M E N T # 1
City of Huntington Beach
Public Works Department
Sewer Service Fund Performance Audit
Re view of Fiscal Year 2010-11
Introduction
On September 4, 2001, the Huntington Beach City Council adopted a Sewer Service
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.
➢ Capital improvements included 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 2010-
11 marks the third full year of the program and the Utilities Division has realized a
drastically decreased number of sewer lateral repairs. In fact, staff projects that
July 2011 - 1 -
xB -269- Item 14. - 4
the total number of repairs for FY 2010-11 will be less than half of each of the
last two fiscal years. Therefore, it is recommended that the Consumer Price
Index (CPI) adjustment required by the Municipal Code be suspended for Fiscal
Year 2011-12 and that staff monitor the volume of repairs and costs thereof.
Review of 2010-11 Budget
Personnel and operating expenditures account for approximately forty-five percent
(45%) of the 2010-11 Sewer Service Fund budget and are directed toward preventative
and routine maintenance. The budget includes salaries, 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 replacements and capital equipment replacements. 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 Oceanhill Sewer Project was completed this year.
The Adams/Ranger lift station construction contract will be awarded this year with
construction being completed in FY 2011-12. Design of the Algonquin/Boardwalk lift
station began this year.
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): Design began this fiscal year with scheduled
completion by the end of the fiscal year.
Maintenance Activities : Current and projected year-end totals for various maintenance
activities are presented below.
Sewer Line Maintenance
➢ Routine cleaning of 1,248,642 linear feet of sewer pipe, projected to be
1,550,000 linear feet by year-end.
➢ Removal of 5,050 pounds of debris/grit, projected to be 11,000 pounds of debris
removed by year-end.
➢ Approximately 46 pounds of debris removed per mile of sewer line.
➢ Cleaned 196 chronic trouble spots/areas of sewer line from twice to twelve times
per year.
➢ Fats, Oils and Grease program has cleaned 302,122 linear feet of sewer line
around food service establishments and other areas with high grease
concentrations; projected to be 320,000 linear feet by year-end.
➢ Fats, Oils and Grease program removed 5,500 pounds of grease from sewer
lines around food service establishments and other areas with high grease
concentrations; projected to be 6,100 pounds removed by year-end.
July 2011 -2 -
Item 14. - 5 HB -270-
➢ Cleaned 59,955 linear feet of arterial sewer lines; projected to be 81,200 linear
feet by year end.
➢ Applied root control to 3,094 linear feet of sewer line.
➢ Lateral sewer line repair program received 158 concerns for repair, resolved 378
concerns, projected to be 172 by year end.
Manhole Maintenance
➢ Clean and inspect 6,976 manholes
➢ Sprayed insecticide for roaches in 106 manholes.
Sewer Lift Station Maintenance
➢ 28 Lift Stations inspected three times a week and cleaned every two months
➢ 302 Check valves cleaned projected to be 336 by year-end.
➢ 4 sewer pumps taken apart and rebuilt with new parts as needed
➢ Replaced 4 lift station sump pumps.
➢ Replaced 2 transducers and 1 station controller.
➢ Replaced two 32 HP motors.
➢ 23 Sewer wet wells cleaned.
➢ Paint the interior walls and plumbing/piping of 6 sewer lift stations.
➢ Replaced 2 check valves and 2 gate valves
Emergency Response
➢ 11 sewer spills to date (6 private, 5 City).
➢ 11 power outages requiring the use of generators to power the lift stations.
➢ 126 service requests from the public during business hours.
➢ 61 after hours lift station alarms and failures.
➢ 20 after hour police call outs for miscellaneous sewer related problems.
➢ Made 4 emergency sewer line point repairs.
July 2011 -3 -
xB -27 1- Item 14. -,6
Sewer Service Fund Budget
FY 2010/11 Projected Expenditures
Personnel Original Budget Revised Budget Projected
Salaries, Permanent $1,801,601 $1,801,601 $1,200,000
Salaries, Temporary $60,000 $60,000 $48,000
Salaries, Overtime $78,000 $78,000 $140,000
Benefits $782,362 $782,362 $640,000
Total Personnel $2,721,964 $2,721,964 $2,028,000
Operating
Utilities $168,800 $166,154 $130,000
Equipment and Supplies $84,005 $84,005 $65,000
Repairs and Maintenance $1,883,600 $1,993,901 $1,010,000
Conferences and Training $3,900 $4,150 $3,000
Professional Services $100,000 $353,769 $250,000
Rental Expense $3,000 $3,000 $2,500
Interdepartmental Charges $1,139,200 $1,139,200 $1,139,200
Expense Allowance $6,300 $6,300 $4,000
Other Expenses $75,000 $97,688 $90,000
Total Operating $3,463,805 $3,848,167 $2,693,700
Capital
Equipment $428,000 $584,825 $530,000
Total Capital $428,000 $584,825 $530,000
CIP
Improvements $3,050,000 $6,759,863 $5,590,000
Total CIP $3,050,000 $6,759,863 $5,590,000
Total $9,663,769 $13,914,819 $10,841,700
;_Be`ginnng Balance 10%1/2009 .___ r _ r$1�1�,865,;000
Actual Revenues FY 09-10 $10,820,000
Actual Expenditures FY 09-10 ($6,215,000)
Unreserved Funds Available 10/1/2010 $16,470,000
Beginning Balance 10/1/2010 $16,470,000
Projected Revenues FY 10-11 $10,850,000
Projected Expenditures FY 10-11 ($10,841,700)
Unreserved Funds Available $16,478,300
tProjecfed B e ginning Balance,p1t0/1/20.11 " m $16,478,300
July 2011 -4-
Item 14. - 7 xB -272-
Revenue Detail
Source FY09-10 FY 10-11
Actual Projected
Customer Charges $10,400,000 $10,550,000
Interest $240,000 $200,000
Other $180,000 $100,000
Total $10,820,000 $10,850,000
Proposed FY 2011-12 Budget
Sewer Service 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, 2011 for the month of
May reflects an annual increase of 3.1%. Normally, this percentage would be
calculated and included as the recommended adjustment to the Sewer Service User
Charge effective October 1, 2011. However, as noted in the Program Overview, staff is
recommending that the annual adjustment, in this case an increase, be suspended for
Fiscal Year 2011-12 so that staff may monitor the sewer lateral program and the
revenue requirements and costs thereof. The following table shows the 3.1% increase.
For purposes of comparison, the rates represent a monthly charge.
July 2011 -5 -
xB -273- Item 14. - 8
Effect of CPI Adjustment on Current Sewer Service Charge
Current CPI
Customer Category ' Charge Type Unit Charge Increase
Residential: Single-family & $10.6923 $11.0238
townhouses with individual Flat rate for all customers in per unit
meters category per
month
Apartment: All apartments, per unit $8.8693 $9.1442
mobile homes and townhouses Flat rate for all customers in
served by common meters category per
month
Regular Flat rate amount per Equivalent per EDU $12.4089 $12.7936
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 1/4 inch
meter, or (2) the number of
tenant units that receive water
service through the water meter,
whichever is greater
High-Consumption $2.3219 $2.3929
Commercial/Industrial: Flat rate per hundred cubic feet
Businesses with high water (CCF) of estimated sewer per CCF
consumption relative to their discharge per year
meter size
Public Schools: All public K-8 High $3.4150 $3.5209
and high school districts with Flat rate per student per year School
schools in the City with a different rate per student per ADA
for K-8 and for high schools
per year
ADA-Average Daily Attendance
K-8 $2.1991 $2.2673
per ADA
per year
July 2011 -6-
Item 14. - 9 xB -274-
Sewer Service Fund Budget
FY 2011112 Proposed
Personnel
Salaries, Permanent $1,380,000
Salaries, Temporary $65,000
Regular Overtime $80,000
Benefits $550,000
Total Personnel $2,075,000
Operating
Utilities $140,000
Supplies $109,350
Repairs and Maintenance $1,842,000
Conferences and Training $4,000
Professional Services $115,000
Rental Expense $3,500
Cost Allocation $1,175,000
Auto Allowance $6,300
Contingency $75,000
Total Operating $3,470,150
Capital
Equip, General/Vehicles $110,000
Total Capital $110,000
CIP
Lift Station $1,700,000
Slip Lining $100,000
WAGS Design/Construction $6,000,000
Total CIP $7,800,000
TOTAL $13,455,150
Revenue Detail FY 11-12
Customer Charges $10,850,000
Interest $250,000
Reimbursements $110,000
Total $11,210,000
July 2011 -7-
xB -275- Item 14. - 10
Sewer Service Fund Projected Balance Sheet
Beginning Balance 10/1/2011 $16,478,300
Projected Revenues FY 11-12 $11,210,000
Proposed Expenditures FY 11-12 ($13,455,150)
Beginning Balance 10/1/2012 $14,233,150
Capital Projects FY 2011-12
Lift Stations: Construction is planned in 2011-12 for the Algonquin/Boardwalk lift
station. Design work is planned for the Trinidad lift station.
Sewer Lining: Sewer lining in the amount of $100,000 is programmed in FY 2011-12. 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): Design is expected to be completed, with
construction started in FY 2011-12, pending necessary entitlements.
July 2011 -8-
Item 14. - I 1 xB -276-