2001 AGN NOV 06 I03 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT For the City Council and Colton Utility Authority Meeting of November 6, 2001 TO: Honorable Chairperson and Utility Authority Members FROM: Thomas K. Clarke, Utilities Director - Item #3 SUBJECT: Adoption and Approval of Ordinance Authorizing a General Rate Increase for Sewer Service DATE: October 16, 2001 BACKGROUND On July 18, 2000, the Colton City Council approved the formation of the Colton Utility Authority, which established a financial mechanism, vis-cl-vis, a leaseback arrangement that would mitigate a portion of the proposed sewer rate increase. The increase was the direct result of two construction financings to expand the Wastewater Treatment Plant and remove the cease and desist order that the City of Colton has been working under since 1995. DISCUSSION / ANALYSIS In 1995, the City of Colton received a cease and desist order from the Regional Water Quality Control Board (Board) that required the City to address a shortfall in reliable treatment capacity at the plant. Under the State's mandates, when a treatment facility reaches 75 percent of its reliable capacity, it must provide a plan to the Board of how it will come back into compliance. The cease and desist order was issued because of the City's ongoing failure to address the deficiency and other issues at the plant. Shortly after the receipt of the order, the City evaluated several treatment techniques that would add to the reliable capacity, and after a lengthy process, chose a conventional ditch -type treatment method. Design and construction followed using funds from the State Revolving Fund in the amount of approximately $7.1 million that would add 2 million gallons per day of additional treatment capacity. The State loan has provisions that require repayment of the loan to commence twelve months after the ditches became operational. To date, completion as defined under the State Revolving Fund loan has not occurred. Part of the construction contract called for an engineering evaluation and remediation of a portion of Unit 1 at the plant (built in 1949). Upon operation of the two new ditches, Unit 1 was taken out of service and inspected. The results of that inspection concluded that the unit was not a viable candidate for rehabilitation, and, in fact, was not physically fit to provide any "reliable" service. Under these circumstances, the City could not satisfy its reliable capacity requirements. To address the cease and desist order, Staff, the Utilities Commission, and the City Council all agreed that Phase 2 of the plant expansion was necessary. Under this plan, the construction of two more ditches was required. A change order was issued to the contractor on site and construction began. These two ditches were estimated to cost $4 million (a considerable savings over the first two). Funding for this phase was provided through a traditional revenue bond issued under the umbrella of the newly formed Colton Utility Authority. This issue was actually for approximately $5.8 million, the difference to be used for other wastewater construction and pipeline replacement. Action to form the Colton Utility Authority resulted directly from the estimated rate increases required to repay the debt obligations associated with the State Revolving Fund loan and the bond issuance, along with the relationship of the transfer of revenues from the Water and Wastewater Divisions to the General Fund. Staff originally estimated that the overall impacts would result in an increase in retail sewer rates in the neighborhood of 33 percent. The City Council asked staff to look at operational alternatives that would reduce the amount of Page 1 of 2 (w/Attachments)