HomeMy WebLinkAboutAccept the Sewer Service Fund Performance Audit for Fiscal Y (3) lVP&WED (0-0-l
City of Huntington Beach (&2GkJ7DE7V-A&MT)
File #: 19-628 MEETING DATE: 6/17/2019
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: David Kiff, Interim City Manager
PREPARED BY: Travis Hopkins, Interim Assistant City Manager
Subject:
Accept the Sewer Service Fund Performance Audit for Fiscal Year 2018-19
Statement of Issue:
The Sewer Service Fund Annual Performance Audit is presented to the City Council in conjunction
with the budget as required by Huntington Beach Municipal Code (HBMC) Section 14.54.070.
Financial Impact:
There are no fiscal impacts associated with accepting this report.
Recommended Action:
Accept the Sewer Service Fund Performance Audit for Fiscal Year 2018-19.
Alternative Action(s):
Do not accept the Sewer Service Fund Performance Audit 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 sanitary sewers and sewer 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 and approved by the Commission at their May 15, 2019 meeting.
Per the aforementioned section of 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 charges was held on May 20, 2019. The City
Council adopted the water and sewer service charges at that time, with a recommended 8.8%
reduction to the sewer fee. The reasons for this reduction were:
City of Huntington Beach Page 1 of 2 Printed on 6/12/2019
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File #: 19-628 MEETING DATE: 6/17/2019
o For the past several years, the Sewer Service Fund (Fund 511) has operated at a surplus.
The reasons for this are:
■ Requests pertaining to the Sewer Lateral Program have shown reduced activity for the
last several years.
• An increase in Sewer Development Impact Fund (Fund 210) revenues, due to recent
major development projects, has resulted in additional revenue that is being utilized to
partially fund sewer lift station replacement projects.
Environmental Status:
Not Applicable
Strategic Plan Goal:
Enhance and maintain infrastructure
Attachment(s):
1. Fiscal Year 2018-19 Sewer Service Fund Performance Audit
City of Huntington Beach Page 2 of 2 Printed on 6/12/2019
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City of Huntington Beach
Public Works Department
Sewer Service Fund Performance Audit
Review of Fiscal Year 2018119
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 on May 20, 2019.
Program Overview
Scheduled maintenance projects and minor emergency repairs will be completed
within the allotted budget.
Closed Circuit Television (CCTV) Inspection and cleaning of sewer mains.
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.
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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 $3.2 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 $3.5
million.
o The total reserve would amount to $9.3 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.
Review of Fiscal Year 2018/19
Personnel and operating expenditures account for approximately seventy percent (70%)
of the Fiscal Year 2018/19 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 Stations: Edgewater Sewer Lift Station ($1.7 million in Sewer Development;
$2.3 million in Sewer Service Fund) is under construction. The bid for construction
contract for the Slater Sewer Lift Station ($2,500,000 in Sewer Development; $1 million
in Sewer Service Fund) was postponed until November 2019.
Design of the Saybrook Sewer Lift Station was started in FY 2018/19.
Sewer Lining: A construction contract ($503,000)for the FY 2018/19 Sewer Lining project
was awarded with construction to begin shortly after the end of FY 2018/19
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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 to video inspect areas prior to
sewer sliplining. City crews video inspect the sewer mains located in residential
areas and low traffic volume streets.
Sewer Line Maintenance
Routine cleaning of 888,229 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 201 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 34 manholes.
Sprayed insecticide for roaches in 250 manholes.
Projected installation of 21 Smart covers at additional "hot spots."
Sewer Lift Station Maintenance
Inspected 27 lift stations three times a week and cleaned each station every two
months.
Cleaned and inspected 336 check valves.
a Cleaned 36 wet wells.
➢ Replaced 3 check valves.
r Replaced 1 gate valve.
Disassembled and rebuilt 10 sewer pumps.
Replaced 2 motors.
Replaced 1 impeller.
Replaced 9 sewer pumps.
Replaced 5 submersible-type sewer pumps.
Rebuilt 4 blower motors.
➢ Upgraded 6 control panels.
Relocated 1 control panel above ground
Installed 5 Smart covers
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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 I.
$2,000,000
i
$1,500,000
$1,000,000
$500,000
$0
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18* 2018/19
"FY 2017/18 was a nine-month fiscal year
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Projected FY 2018119 Expenditures
Personnel Original Budget Revised Budget* Projected
Salaries, Permanent $2,012,367 $2,012,367 $1,915,936
Salaries, Temporary $55,400 $55,400 $30,384
Salaries, Overtime $82,500 $82,500 $193,194
Benefits $1,335,488 $1,335,488 $1,335,488
Total Personnel $3,485,755 $3,485,755 $3,475,002
Operating
Utilities $110,000 $110,000 $130,000
Equipment and Supplies $348,350 $348,350 $128,838
Repairs and Maintenance $1,753,000 $1,950,973 $1,235,296
Conferences and Training $24,000 $37,000 $33,534
Professional Services $250,000 $361,733 $128,310
Rental Expense $3,500 $3,500 $100
Interdepartmental Charges $1,772,723 $1,772,723 $1,772,723
Expense Allowance $5,800 $5,800 $5,800
Total Operating $4,267,373 $4,590,079 $3,434,601
Capital
Vehicles $350,000 $350,000 $344,222
$350,000 $350,000 $344,222
CIP
Improvements $1,580,000 $5,916,881 $1,001,906
Total CIP $1,580,000 $5,916,881 $1,001,906
Total $9,683,128 $14,342,715 $8,255,731
*Revised budget is carry-over encumbrances from prior fiscal year.
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FY 2018119 Projected Revenues
Source FY 17/18* FY 18/19
Actual Projected
Customer Charges $8,329,120 $11,781,389
Interest $2,593 $588,035
Other $32,466 $8,703
Total $8,364,179 $12,378,127
*Shortened fiscal year
Projected FY 2018119 Fund Balance
Beginning Balance 07/1/2018 $22,198,503
Projected Revenues FY 18/19 $12,378,127
Projected Expenditures FY 18/19 ($8,255,731)
Projected End Balance 6/30/2019 $26,320,899
Proposed FY 2019/20 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.
Over the past five fiscal years, the City has received a significant increase in sewer
development revenues. These revenues are designated for the Sewer Development
Fund (Fund 210), and can only be spent on increasing sewer collection capacity.
Therefore, these funds have been used as part of the funding for the Edgewater and
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Slater sewer lift stations and are proposed to be used as part of the funding for the
upcoming Saybrook and New Britain projects. This has increased the Sewer
Maintenance Fund (Fund 511) reserves. As a result, staff has included a reduction in
sewer rates of $1.00 for single family residential customers — prorated for other account
types — in the Fiscal Year 2019/20 budget. Because this is a reduction in fees, no
Proposition 218 protest hearing is required.
The following table shows the impacts of the proposed rate adjustment
Effect of Rate Adjustment on Current Sewer Service Charge
Current Rate
Customer Category Charge Type Unit Charge Adjustment
Residential: Single-family Flat rate for all per unit $11.3541 $10.3538
& townhouses with customers in category per
individual meters month
Multi Family Residential: Flat rate for all per unit $9.4183 $8.5885
All apartments, mobile customers in category per
homes and townhouses month
served by common meters
Regular Flat rate amount per per $13.1770 $12,0161
Commercial/Industrial Equivalent Dwelling EDU
Unit (EDU). EDU per
refers to either (1) the month
capacity of 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
Public Schools: All public Flat rate per student High $3.6264 $3.3069
K-8 and high school districts per year with a School
with schools in the City different rate per per
student for K-8 and for ADA
high schools peryear
ADA - Average Daily K-8 $2.3352 $2.1295
Attendance per
ADA
per year
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66
FY 2019120 Proposed Budget
Personnel
Salaries, Permanent $2,012,668
Salaries, Temporary $56,550
Regular Overtime $82,500
Benefits $1,451,276
Total Personnel $3,602,994
Operating
Utilities $110,000
Supplies $350,350
Repairs and Maintenance $1,629,000
Conferences and Training $24,000
Professional Services $298,000
Rental Expense $3,500
Cost Allocation $1,832,548
Auto Allowance $5,800
Other Expenses $75,000
Total Operating $4,328,198
CIP (new)
Lift Station (Saybrook-construction) $1 ,500,000
Sewer Lining $1,000,000
Bridge Rehabilitation (sewer portion) $100,000
Residential Zone Maintenance $100,000
Vehicles $515,000
Total CIP $3,215,000
TOTAL $11,053,192
FY 2019120 Proposed Revenue
Customer Charges $10,389,698
Interest $180,000
Other $10,000
Total $10,579,698
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FY 2019120 Projected Fund Balance
Projected Beginning Balance 7/1/2019 $26,320,899
Projected Revenues FY 19/20 $10,579,698
Proposed Expenditures FY 19/20 ($11,053,192)
Anticipated Carry-Over Expenses ($5,148,398)
Projected End Balance 6/30/2020 $20,699,007
FY 2019120 Capital Projects
Lift Stations: A construction contract for the Saybrook Sewer Lift Station will be awarded,
with $3,800,000 budgeted for this project; $1,500,000 from Sewer Maintenance Fund and
$2,300,000 from Sewer Development Fund. Funds in the amount of $200,000 for the
design of the New Britain Sewer Lift Station are included in the budget request in the
Sewer Development Fund (210).
Sewer Lining: Sewer lining in the amount of$1,000,000 is programmed in FY2019/20. A
lining project is bid once a sufficient number of sewer defects are identified as part of the
CCTV inspection program.
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