The URL can be used to link to this page

Home My WebLink AboutAccept the Sewer Service Fund Performance Audit for Fiscal Y �A_I j / Pi°Rd VEb 7-0 k City of Huntington Beach - r File #: 18-036 MEETING DATE: 6/4/2018 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 Fund Performance Audit for Fiscal Year 2017-18 Statement of Issue: The Sewer Service Fund Annual Performance Audit is presented to the City Council as required by HBMC Section 14.54.070. Financial Impact: Not Applicable Recommended Action: Accept the Sewer Service Fund Annual Performance Audit for Fiscal Year 2017-18 Alternative Action(s): Do not accept the Sewer Service Fund Annual Performance Audit for Fiscal Year 2017-18 and direct staff to make specific modifications. 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 May 16, 2018, meeting. The Commission voted to recommend that that the City Council receive and file the Sewer Service Fund Performance Audit in accordance with HBMC Section 14.54.070 for Fiscal Year 2017/18. The report has been amended to reflect the final audited figures as reflected in the FY 2016-17 Comprehensive Annual Financial Report. Per the aforementioned section of the HBMC, "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." The public hearing addressing the proposed changes to both the water and sewer service charges was held on March 19, 2018. The City Council adopted the Sewer Service User Charges at the April 2, 2018 regular City of Huntington Beach Page 1 of 2 Printed on 5/31/2018 powe ea cy Legis4a `l File #: 18-036 MEETING DATE: 6/4/2018 meeting. Environmental Status: Not applicable Strategic Plan Goal: Enhance and maintain infrastructure Attachment(s): 1. Fiscal Year 2017-18 Sewer Service Fund Performance Audit City of Huntington Beach Page 2 of 2 Printed on 5/31/2018 p;3we+0 bit�E;:ji9i83""rn City of Huntington Beach Public Works Department Sewer Service Fund Performance Audit Review of Fiscal Year 2017118 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 was held in April as part of a Proposition 218 protest hearing to reaffirm the current rate adjustment structure. Program Overview ➢ Scheduled maintenance projects and minor emergency repairs will be completed within the allotted budget. y Closed Circuit Television (CCTV) Inspection and cleaning of sewer mains. r Operations and maintenance of the City's 27 sewer lift stations. ➢ Capital improvements including lift station design and construction work and the sewer lining program. ➢ 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. May 2018 - 1 - -37- ➢ The City Council adopted a reserve policy for enterprise funds in FY 14/15. The reserve policy for the Sewer Service Funds states that the City will maintain a reserve equal to the sum of the following: o Operations and Maintenance: Thirty-three percent (33%) of the adopted annual budget to ensure adequate working capital for operating expenses. This amount is $2.6 million. o Capital Improvement Program (CIP): One-hundred percent (100%) of the average annual planned Capital Improvement Program for the following five years. This amount is $2.65 million. o Emergency: an amount equal to the estimated cost, as determined by the City Engineer, to replace one sewer lift station. This amount is $3.3 million. o The total reserve would amount to $8.55 million. ➢ The Municipal Code states that the Consumer Price Index for Urban Consumers (CPIU) in Los Angeles, Orange, Riverside Counties established by the Bureau of Labor Statistics for the year over year for the month of November shall be used to calculate adjustments to sewer service rates. This was amended by City Council in April 2017 due to the change in the City's fiscal year. Review of Fiscal Year 2017/18 Fiscal Year 2017/18 is only nine months due to the change from an October 1- September 30 fiscal year to a July 1-June 30 fiscal year. Personnel and operating expenditures account for approximately seventy percent (70%) of the Fiscal Year 2017/18 Sewer Service Fund budget and are directed toward preventative and routine maintenance. The budget includes salaries and benefits, sewer line maintenance, CCTV pipeline and lateral inspection, lift station services, manhole upgrades, the sewer lateral program and cost allocation charges to the City's General Fund. The balance of the expense budget is earmarked for capital equipment replacement and capital projects, including slip lining, pipeline rehabilitation, 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. Sewer Lift Station: A construction contract for the Edgewater Sewer Lift Station was awarded with construction to begin before the end of FY 2017/18. Maintenance Activities: Totals for various maintenance activities are presented below. 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 collection lines located in the City's May2018 -2- -38- arterial and high traffic volume streets. City crews video inspect the sewer mains located in residential areas and low traffic volume streets. Sewer Line Maintenance Routine cleaning of 377,743 linear feet of sewer pipe. Removal of 3,125 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 322,870 linear feet through June. The Fats, Oils and Grease (FOG) program has cleaned 7,400 linear feet of sewer line around food service establishments and other areas with high grease concentrations. ➢ Sewer lateral repair program received and resolved 141 requests for repair to date. ➢ Inspected via Closed Circuit Television (CCTV) 86,071 linear feet of residential sewer lines and arterial mains. Manhole Maintenance ➢ Cleaned and inspected 1,925 manholes. Repaired and recoated 7 manholes. ➢ Sprayed insecticide for roaches in 250 manholes. ➢ Projected installation of 20 Smart covers at various locations. Sewer Lift Station Maintenance ➢ Inspected 27 lift stations three times a week and cleaned each station every two months. ➢ Cleaned and inspected the check valves at 24 sewer lift stations for a total of 54 separate check valves. Cleaned 28 wet wells. Replaced 1 check valve. ➢ Replaced 3 gate valves. Disassembled and rebuilt 1 sewer pump. ➢ Cleaned 51 sewer lift station wet wells. Replaced 2 transducers. ➢ Replaced 4 motors. ➢ Replaced 1 impeller. May 2018 -3- -39- 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. As a response based program, demand is unpredictable. Sewer Lateral Expenditures $2,500,000 $2,000,000 3 i $1,500,000 __.___ _ _________.____.._______ ......_. I 3 $1,000,000 $500,000 — — -- 3 $0 ...,..... ... _....._ ........ 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18* *FY 17/18 Expenditures are projected for the nine month fiscal year May 2018 -4- -40- Projected FY 2017118 Expenditures Original Personnel Budget Revised Budget* Projected Salaries, Permanent $2,117,425 $1,588,069 $1,313,173 Salaries, Temporary $45,000 $33,750 $11,533 Salaries, Overtime $100,000 $100,000 $85,330 Benefits $1,335,488 $1,001,513 $872,847 Total Personnel $3,597,913 $2723,332 $2,282,883 Operating Utilities $130,800 $98,300 $78,304 Equipment and Supplies $324,200 $317,173 $128,871 Repairs and Maintenance $1,690,000 $1,315,730 $705,038 Conferences and Training $21,500 $22,254 $29,757 Professional Services $250,000 $501,948 $171,172 Rental Expense $5,000 $7,000 $0 Interdepartmental Charges $1,721,100 $1,240,686 $1,240,686 Expense Allowance $5,800 $4,350 $4,350 Total Operating $4,148,400 $3,507,441 $2,358,178 Capital Vehicles $0 $130,226 $129,924 Total Capital $0 $130,226 $129,924 CIP Improvements $1,580,000 $4,749,150 $480,194 Total CIP $1,580,000 $4,749,150 $480,194 Total $9,326,313 $11,110,149 $5,251,179 "Revised budget prorated due to shortened fiscal year; carry-over encumbrances from prior fiscal year also included in revised budget May2018 -5- -41- FY 2017118 Projected Revenues Source FY 16/17 FY 17/18 Actual Projected Customer Charges $10,836,845 $8,450,000 Interest $85,067 $304,772 Other $17,504 $32,467 Total $10,939,416 $8,787,239 Projected FY 2017118 Fund Balance Beginning Balance 10/1/2017 $18,275,807 Projected Revenues FY 17/18 $8,787,239 Projected Expenditures FY 17/18 ($5,251,179) Projected End Balance 6/30/2018 $21,811,867 Proposed FY 2018/19 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 for the year over year change in the month of November. 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 for November 2017 was 3.6%. This percentage adjustment was adopted by the City Council at a public hearing in April May2018 -6- -42- 2018. The City Council also discontinued the high consumption commercial/industrial category, moving those customers into regular commercial industrial, due to the difficulty of administering those accounts and the small number of those customers. The following table shows the 3.6% increase. For purposes of comparison, the rates represent a monthly charge. Effect of CPI Adjustment on Current Sewer Service Charge Current With CPI Customer Category Charge Type Unit Charge Increase Residential: Single-family & Flat rate for all customers in per unit $10.9596 $11.3541 townhouses with individual category per meters month Apartment: All apartments, Flat rate for all customers in per unit $9.0910 $9.4183 mobile homes and townhouses category per served by common meters month Regular Flat rate amount per Equivalent per EDU $12.7191 $13.1770 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 $2.3799 discontinued 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 $3.5004 $3.6264 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 $2.2541 $2.3352 per ADA per year May2018 -7- -43- FY 2018119 Proposed Budget Personnel Salaries, Permanent $2,012,367 Salaries, Temporary $55,450 Regular Overtime $82,500 Benefits $1,311,194 Total Personnel $3,461,511 Operating Utilities $110,000 Supplies $348,350 Repairs and Maintenance $1,753,000 Conferences and Training $24,000 Professional Services $250,000 Rental Expense $3,500 Cost Allocation $1,772,723 Auto Allowance $5,800 Total Operating $4,267,373 CIP (new) Lift Station (Saybrook) $1,000,000 Sewer Lining $500,000 Residential Zone Maintenance $30,000 Total CIP $1,530,000 TOTAL $9,258,884 FY 2018119 Proposed Revenue Customer Charges $11,417,250 Interest $180,000 Other $20,000 Total $11,617,250 May2018 -8- -44- FY 2018119 Projected Fund Balance Projected Beginning Balance 7/1/2018 $21,811,867 Projected Revenues FY 18/19 $11,617,250 Proposed Expenditures FY 18/19 ($9,258,884) Anticipated Carry-Over Expenses ($2,820,625) Projected End Balance 6/30/2019 $21,319,608 FY 2018119 Capital Projects Lift Stations: A construction contract for the Slater Lift Station will be awarded. Funds for the design of the Saybrook Lift Station are included in the budget request. Sewer Lining: Sewer lining in the amount of$500,000 is programmed in FY 2018/19. A lining project is bid once a sufficient number of sewer defects are identified as part of the CCTV inspection program. May2018 -9- -45- i