2003 AGN JUN 03 I03 - Laserfiche WebLink

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New Wastewater Revenue Program PUBLIC HEARING June 3, 2003 Page 2 of 5 DISCUSSION/ANALYSIS On November 20, 2001 the Colton Utility Authority passed, approved and adopted Ordinance No. CUA 2001-1 amending Section 13.16.025 of the Colton Municipal Code to increase wastewater sewer service charges by 17.3 percent. The ordinance increased residential sewer rates from $18.50 to $21.70. The rates for Grand Terrace changed from $14.62 to $17.07 per month. At the time of his recommendation there were the following limitations: 1) The debt service was based on the final amount used for construction of the first two ditches and the rehabilitation work at Unit 1; 2) A condition within the State Revolving Fund requires that the City implement sewer rates based upon the strength of discharge (associated with the costs of treatment) of effluent for major customers and customer classes. A preliminary study was performed in 1999. The results of that study did not include the new hospital, the expansion of City's two major businesses, and realignment of customer class contributions. 3) The relationship between the City of Cotton and the City of Grand Terrance was contractually in question at that time if Unit 1 was taken out of service completely. It was subsequently determined that the useful life of Plant 1 (which was constructed in 1949) was essentially depleted and had limited reliability. As such, the scope of the work at the treatment plant was expanded to include the construction of two additional oxidation ditches. Since Plant 1 is fully depreciated and the City of Grand Terrace did not participate in the capital costs for the expansion and rehabilitation of the treatment plant, these costs are incorporated into the new rate structure. Thus, all customers will pay the same rates whether or not they are in the City of Colton. The wastewater fund has incurred deficits ranging from $256,867 to $1,363,947 during four out of the five last fiscal years on a cash basis. This appears to be due to the lack of an adequate revenue program or the implementation of a revenue program that lagged behind increasing operational costs. A new revenue program that satisfies the City's obligations under the SRF loan and bond requirement; should be implemented as soon as possible. This program should include a fixed escalation of at least one - percent annually or be indexed on the Consumer Price Index for the next three years in order to minimize the adverse impact of large rate jumps to our consumers. This escalation clause would minimize impacts to the budget due to factors such as increased personnel costs associated with existing contracts, the substantial increase in PERS costs, and increased operations costs (energy, spare parts, chemicals). It is important to understand that the majority of the existing expenditures are comprised of debt service and administrative transfers. This is illustrated in the following breakdown: Debt Service Major Component of Rate Structure Bonds $ 411,648 SRFL $ 530,338 RIX Demo $ 93,098 RIX Full -Scale $ 310,460 1,710,545/Year