sr-060981-9cTo:
From:
Subject:
Santa Monica, California, May 20, 1981
Mayor and City Council
City Staff
!MATER RATE STUDY APlD AUTHORIZATIOPJ
TO READJUST !dATER RATES
Introduction
JUN 9 1981
This report requests the City Council adopt a Resolution to approve adjustments.
to the water rates. to fund the proposed Budget requests.
Background
The proposed !~Jater Division budnet for Fiscal Year 1981-82 indicates the need to
either increase. the water revenues or decrease the projected expenditures to fund
the operations for the year. The unfunded portion in the proposed budget is-due to
addition of administrative indirect expenses, increases in purchased water costs
including imported waterprice increases and increased use of imported water,costs
incurred due to lack of completion of Fiscal Year 1980-81 projects that lacked funding,
and unfunded capital improvements.
The !dater Division budget expenditures consist of three main components; 1) maintenance
and operation expenses, 2) cost of capital improvements and 3) utilities adjustment.
Maintenance and operation includes salaries, materials and other expenses involved in the
daily operation of the water utility and includes a base amount for the cost to the
City for utilities. as of Fiscal Year 1977-78 (the Base Year as established by
previous Council action). Capital improvements includes the cost of purchasing
equipment, constructing wells and other structures Utilities Adjustment is the cost to_
the City for utilities in excess_of those costs in fiscal year 1977-78 (base .year).
JUN ~ -1981.
To: t4ayor and City Council - 2 - May 20, 1981
Currently, the rate structure for water service is divided into four identifiable
components. These components are:
1. !Dater Service Charge (Fixed charge for each size of service)
2. !•!ater Commodity Charge (Uniform rate per consumer billing unit - 748 gallons)
3. lJater Utilities Adjustment (Uniform rate per consumer billing unit)
4. !later Capital Improvements Charge (Uniform rate per square foot of commercial
building; fixed rates. for single and
multi-family dwellings.)
The hater Service Charge, lJater Commodity Charoe and lJater Utilities Adjustment are
presently listed on the billing document sent to consumers as t~!ater Charges and the
hater Capital Improvements charge is identified separately.
The lJater Service Charoe and the b!ater Commodity Charge are identified with the
Maintenance and Operation (M & 0) component of the Water Budget and includes both
fixed and variable costs. An example of a fixed cost is property taxes, .and an example
for a variable charge is imported water purchased. The Water Service charge is a
fixed charge to the consumer reoardless of the quantity of water used, and is related
to the fixed costs in the M & 0 section of the budget. The lJater Commodity
Charge is a variable charge based on water used by the consumer and is related to
the variable costs in the M & 0 part of the budget.
The Capital Improvements Rate is a fixed charge and is the same regardless of the amount
of water usage. As explained in the staff report of January 9, 1981, it is related
to the benefit received by both commercial and residential consumers through past
and anticipated capital expenditures. Such a fixed charge ensures that sufficient
income will be generated during the year to adequately fund the Capital Improvements
program.
To: Mayor and City Council - 3 -
May 20, 1981
The Utilities Adjustment Charge is calculated to fund the difference between the cost
of utilities in Fiscal Year 1977-78 (the Base Year per previous Council action) and the
current cost for the same level purchased today. This charge is a variable in that the
more water purchased, the more adjustment is required to be "passed through" to the
consumer for the. additional utilities expenses.
Table I (a), Column I indicates the expenditures anticipated in the Fiscal Year 1981-82
which are categorized as 1) Maintenance and Operation, 2) Capital Improvements and
3) Utili-ties Adjustment. Table I (a), Column II indicates the revenue expected from
the 1) Service Charges and Commodity Charges to fund maintanence and operations,
2) The Capital Improvements Charge, and 3) the Utilities Adjustment. Table I (a),
Column III shows the differences between the same categories of expense and revenues
propose d. to be funded by rate increases in the respective categories.
TABLE I (a)
Reconciliation of Expenses and Revenues
Unfunded
Expenses. Revenue Difference
1) Maintenance & Operatjon 3,813,028. 3,124,731 (a) 688,297
2) Capital Improvements 1,911,600 (d) 1,123,594 (b) 788,006
3) Utilities Adjustment 623,702 316,000 (c) 307,702
(a) From existing Service Charges -and Commodity Rate
(b) From existino Capital Improvements Rate
(c) From current Utility Adjustment Charge greater than $938,298 (utilities costs
in Base Year)
(d) Coritains $432,000 for funding of the Marine Street Water Main which was to be
borrowed from the General Fund in FY 1980-81 to be repaid FY 1981-82.
To: Mayor and City Council - 4 - May 20, 1481
ALTERNATIVES
Alternative I - -
One method of funding the unfunded difference is to increase the rates as shown in
Table I (b). This proposal would increase the maintenance and operation rate from
.45¢ to 62.5¢ per billing unit (74$ gallons of water used), the Capital Improvement
charges. from $3.50 to $6.00 bimonthly per single family dwelling, from $2.00 to
$3.50 bimonthly per multiple family dwelling, the square foot charge on commercial
buildings from .0039065 to $.00665 per. square foot bimonthly and the utilities
adjustment from .8¢ to.16¢ per billing unit.
Although these increases appear large, they are a result of previous rate changes.
A substantial portion of City consumption is included as a fixed charge for the small
meters, thus leavinn a smaller portion of the total consumption to generate the
variable part of the unfunded balance.
Alternative II
A second alternative would reduce the proposed expenditures and provide a-lesser rate
increase to fund the proposed budget. This method increases the Maintenance and Operation
Rate to .50¢ per billing unit, the Capital Improvement Rate to $7.00 bimonthly for a
single family dwelling, $4.00 bimonthly for multifamily dwellings and a similar
increase for commercial buildings and an increase in the utilities adjustment to .13¢
per billing unit. Three hundred thousand dollars proposed for the purchase of water
meters would be eliminated from the maintenance and operation components of the budget.
This method would permit sufficient funding of the budget to accomplish most of the
proposed programs for the Water Division budget, but not to the extent as in Alternative I.S
__-~_~_~......~...~_ r__.,
To: Mayor and City Council - 5 - May 20, 1981
TABLE I (b)
Present Proposed Rate
Rate Alternative I
Maintenance & operation ,45/B%l ling .625JBilling
Unit
Capital Improvements Single Family .3.50 6.00
Multiple Family 2.00 3.50
Commercial/industrial .0039065/ft2 .00665/ft2
Utilities Adjustment
Note: Service Charge unchahged in all cases.
08/Unit .16
13/Unit
Alternative III
A third alternative would leave the rates as they are at present. If this alternative
is accepted, all capital improvements except water main replacements would be elimi-
nated from the proposed budget.
The comparative costs to the City's average consumers is indicated in Table II.
Table III shows examples of current and proposed billings for certain existing
consumers. Alternative II is more consistent with. rates of comparable cities.
Recommendation
It is recommended that Council adopt Alternative II by resolution effective
July 1, 1981 or as soon thereafter as administratively feasible. It is also
recommended that Council delete $300,000 from the Departmental Operating supplies
account, add $432,000 to Project 1 for the Marine Street Water Main and delete
the repayment of the loan from the General Fund currently shown as "Other Expenses",
line item 700-749, page. 254. This recommendation wial increase tFie average Single
family home by $1.75 per month (if no more than 20 units are used during the bill-
Proposed Increases (Bi-monthly)
rnative
50/Bi.llingf
Unit
7.00
4.00 2 ''
.007813/ft
ing period).
CITY
Santa Monica
Ii (Current & Alternative III)
Santa Monica
'. (Alternative I)
Santa Monica
(Alternative II)
Beverly Hills
Inglewood
Pasadena
,' Glendale
Los Angeles
EFFECT ON SAMPLE OF CERTAIN CONSUMERS
BIP10NTHLY CHARGES Typical
Average Large Large Apartment (1) Industry (2)
Residential Residential Commercial or Major H
s
it
l
o
p
a
s
$16.50 (3) $65.30 $379.00 $5,815.35
$19,.00 (3) $95.30 $581.90 $8,844.70
$20.00 (3) $77.30 $516.90 $6,936.00
$19.30 $72.70 $378.50 $7,502.20
$20.56 $87.81 $416.57 $6,324.62
$ 9.41 $43.49 $193.05 $4,299.03
$28.48. $125.30 $576.80 $5,419.95
$16.54 $63.90 $199.20 $3,760.40
(1) 50 Apartments
2 100 000 S uare Feet
3 Includes first 20 billing units
IdATER COST TO CONSUMERS
-Various Cities-
' 6 ' May 20, 1981
To: Mayor and City Council - 7 - May 20> 1981
EXAMPLES OF BILLS OF CERTAIN BUILDINGS
Proposed Proposed
Existing Rates Rates
Billing Rates Alternative I Alternative
Santa Monica Shores 266 Units
2700 - 2800 Neilson
4" Domestic 2231 Units 1
" $5,376.81 37,960.40- $6
765
51
6
Domestic 3340 Units ,
.
6" Domestic 2996 Units
Evening Outlook 50,000 ft 2
2" Domestic 3938 Units $2,296.86 $3,423.83' $2,8g5_9g
USA Petroleum 45,000 ft 2
2" Domestic 421 Units $ 413.32 $ 644.13 $ 631.21
Champagne Towers 119 Units
1221 Ocean Avenue
2"Domestic 3,339 Units $2,022.07 $3,052.01 $2,593.97
Sea Castle 178 Units
1725 Promenade.
4" Domestic 1528 Units $1,220.74 $1,877.38 $1,729.54
Ocean Towers 305 Units
201 Ocean Avenue
4" Domestic 3749 Units $2,651.87 $4,065.36 $3,636.77
1 One Unit equals approximately 748 gallons