sr-112580-5all-
Santa Monica, California, ~~tg~i@r 1, 1980
OCT 1 4 f988
,~~
DCT 2 8 198®
To: Mayor and City Council
:.: From: City Staff
Subject: Authorization for Restructuring of Water Utility Rates NDV 1 1 99$0
Introduction: ~Dy 2 ~ 198fl
This report requests the City Council approve detailed recommendations concerning
the structure and form of water rates and approve the attached resolution to
accomplish said recommendations.
Background:
The Santa Monica Water System is operated as a Division of the General Services
Department. It provides water to more than 90,000 consumers through 15,000
service connections, 4500 valves, 236 miles of distribution and transmission
mains. Fire protection is provided through a network of 1,700 fire hydrants
and 280 fire sprinkler connections. To distribute an average of more than
15,000,000 gallons per day, the division operates and maintains three major pumping
plants, seven (currently} water wells, a softening plant for locally produced water,
and four reservoirs containing 35 million gallons of stored water. More than eight
million gallons of State Project or Colorado River water are purchased from the
Metropolitan Water District and delivered daily for introduction into the system.
N0V 2 ~ 1980
This amount of imported water is necessarily increased or decreased as the amount
of pumped well water varies. Sixteen thousand feet of distribution mains are replacecd
yearly because of deterioration or inadequate size and eighteen acres bf well ~`~
i1CT 2 8 198Q
field and reservoir grounds are maintained. Total worth of the system is in
NOV 1 1 1980
~I"
~C~' 't ~
To: Mayor and City Council -2- October 1., 1980
excess of 10 million dollars; its total replacement could cost more than 35
million dollars at today's costs.
In recent years, major categories of vital Division operating expenses have risen
sharply due to inflationary and related factors. Projections for the future
indicate an even sharper increase in coming years due to increases in expenses
such as pumping power and purchased water costs. These costs are, to a large
degree, outside the control of the City, and constitute as much as 60% of the
annual operating expense. Capital costs have also risen due to inflation which
complicates the continuing need for new and replacement structures and equipment.
Ln the corresponding period, revenues failed to keep pace, due largely to reduced
water usage which resulted in the reduction of revenues and this reduction continues
today. In addition current water quality problems have resulted in greatly
increased expenses for testing, monitoring and investigative drilling. If water
operations and capital investment are to be kept on a sound financial basis,
revenues must 6e increased.
The current water rate structure is based on a fixed bi-monthly service charge
related to the cost of maintenance of the service and a uniform charge per
billing unit (100 cubic feet of water used). Since the 1977-78 Fiscal Year,
established by Council as Water Base Year for calculating costs in June, 1979,
the. uniform charge per billing unit has been increased 8%* while the service
charge has not been changed since 1972. The current charge is $.45 per 100
cubic feet of water.
* Not including $.035/100 cubic feet currently charged under "pass through" costs
for imported water.
To: Piayor and City Council -3-
October 1, 1980
During the 1980-81 budget preparation, it became apparent that proposed water
operations expenditures would exceed anticipated revenues not only in 1980-81 fiscal
year, but also in ensuing years. The major factors contributing to the situation
are these:
1. Operational and distribution system maintenance costs increases, mainly
due to increases in material as well as labor costs;
2. Increases in maintenance costs of meters and services;
3. Costs increases in purchased water and electrical power;
4. Capital expenditures for needed replacements and improvements; and
costs due to "oversizing" of water mains to satisfy increasing fire
suppression demands.
Understanding that many elements of these and other costs are largely outside the
control of utility management is necessary to understand rate structuring of
a commodity such as water. It is proposed the costs of the major cost factors
be separated and delineated in rate structuring studies and those costs be
identified on future consumer water bills.
A discussion of each of these factors follows:
1. Base Water Rate
While Consumer Price Index has risen by 37.8% since 1977-78, the uniform
water rate per billing unit has risen by 8%. Until this separation of
incremental costs, all the increased costs of factors #2 and #4 above
were included in the uniform rate. This increment of cost should instead
T,.o: Mayor and City Council -4-
October 1, lggp
encompass all operations costs except for those delineated in the other
factors. Costs included in the Base Water Rate should be salaries;
maintenance of water mains, treatment plant, pumps, water wells;
landscaping; mechanical and automotive equipment maintenance and all
factors not specifically identified in the other three factors.
2. Service Charge:
3
As mentioned above, service charges should equate costs of maintenance
of consumer service lines and meters. They have not been adjusted
since 1972. The fixed "Service Charge" should increase to more nearly
reflect the actual costs of this maintenance. It is emphasized
that the costs of maintenance of services and meters are present regardless
of the amount of water usage. Therefore, this factor should remain a
"fixed" charge and be separately identified on the consumer bill.
Power and Imported Water Adjustment:
The City of Santa Monica currently purchases and imports more .than one-half
of its water supply from the Metropolitan Water District of Southern
California. The cost increases of that purchased water since the 7977-78
base year are currently being "passed through" to the consumer by Council
resolution effected in 1979. It is proposed that these costs increases
be delineated as part of the rate structure. Also to be included in the
increased cost of pumping power. This factor would be identified as
"Power and Imported Mater Adjustment" and would appear on the water
bill.
4. Fire Demand and Capital Improvements:
To fund capital improvements and their increased costs due to fire demand,
it is proposed that fixed or "stand'-by" charges be established and to be
To: Mayor and City Council -5- - Octaber'1, 1980
applicable to both domestic and fire services to more equitably
distribute the costs of improvements. The charges are graduated so that
the bulk of the funds are .produced by those structures that place the
highest demands on the water distribution system. These charges would
also be identified on the consumer bill.
The derivations of the above incremental factors are as follows:
1. Base Water Rate is derived by:
Total operating costs less the costs of Power and Tmported Water Adjustment, New
Meters and serviced , and Capital Improvements.
2. Power and Imported Adjustment (PI)
Current Costs of Power and
Imported Water less Base
Year (1977-78) costs = Power and Imported
Total Water Production Water Adjustment (PI)
3. Service Charge (SV):
This fixed charge is based on costs of maintaining water services
and meters.
Bi-Monthly Service Charge Bi-Monthly Service Charge
Size of Meter Domestic Meter Fire Meter
5/8 or 3/4 $ 13.002 $ N/A
7 20.003 N/A
7 1/2 9.10 N/A.
2 25.48 .7.60
3 60.20 71.50
4 85.02 I5.25
6 176.28 22.15
8 260.90 3g,5p
10 N/A 38.00
12 N/A 45.50
1. Costs of new meters and services are reimbursed by the consumer at time of
Installation.
2, hncludes first 20 6i:lling units (100 cubic feet of water usage). Subsequent
usage at base rate plus Power and Import Adjustment.
3, Includes first 30 billing units (100 cubic feet of water usage). Subsequent
usage at base rate plus Power and Import Adjustment.
To: Mayor and City Council -6- Oeto6er:l, 1980
4. Capital Improvements and Fire Demand Changes (CF).
Bi-Monthly Charges:
Size Domestic Fire
3/4" - 0 - N/A
1" - 0 - N/A
1 1/2" - 0 - N/A
2" 21.48 67.00
3" 166.88 514.00
4" 429.60 763.42
6" 974.00 958.58
8" 1435.00 1148.00
10" N/A 1337.42
Application of this rate structuring as applied to consumer charges through the
range of meter sizes and amounts of domestic consumption is as follows:
Water Cost to consumers - various cities - for 2 months billing period.
3/4 inch average 1-1/2 inch large 2 inch commer-' 6-inch industry
single family residential small cial & large & major
City residential apartments apartmehts hospital
20 billing units 100 billing units 500 billing 10,000 billing
units units
Santa Monica (current) 11.30 $52.00 $234.80 $4,567.80
Santa Monica (proposed ) 13.001 67.10 336.96 6,590.202
Bev. Hills Water 15.92 58.78 283.78 5,597.08
Inglewood. Water 22.20 94.83 449.89 6,830.51
Pasadena Water/Power3 10.50 52.50 257.76 3,788.00
Glendale Power/Light3 17.82 70.20 312.30 5,760.80
LA Water and Power3 16.69 58.63 194.85 3,673.40
Unit = Billing unit or 100 cubic feet (approximately 750 gallons) of water used.
1. See examole of consumer bill, page 8 of this report.
2. Sea example of consumer hill, page 9 of this report.
3. Combining water and power operations generally recults in reriuced water rates.
To: Mayor and City Council
-7-
October l 1980
Summary
The recommendations presented by staff will result %n the average bill for a
single family house increasing by 15% or $.85/month and 6y 29% or $1.51/month
r
per unit for apartment and condominiums. r increases result far commercial
and industrial users - if uses remain the same. The staff anticipates about 3-5%
reduction in water use because of the increases and therefore actual increases in
bills may be slightly less than indicated.
%! ~~
'"
To: f4ayor and City Council -7- October 1 1980 ~~
Revised October 9, 1980 OCT 1 4 1980
Summary
The recommendations presented by staff will result %n the average bill for a
single family house increasing by 75% or $.85/month and by 29% or $1.51/month
Larger
per unit for apartment and condominiums. $X~XX~k increases result for commercial
and industrial users - if uses remain the same.l The staff anticipates about 3-5%
reduction in water use because of the increases and therefore actual increases in
bills may be slightly less than indicated.
1. See pages 6 and 9 of this report.
0/
OCT 1 4 1980
To: Mayor and City Council _ g _ October 1, 1980
An example of how each of the incremental cost factors could be shown on the
consumer bill for a typical 1-family residential unit.
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j2i3) 393-99]5 o
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:r~ACCQUN~!NO ~ ..~ ;, ' ~ ': '~` acR t ?At7CRE5S ~` .::- <;: 1 :~ AChFUt,~3FR.
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1060 ~ 1080
20
This period last year 23
l oo~ 'A,iaCtUFIf :':.
BR - Q
SV 13.00
PI - 0
CF -0-
O?AL'-CUE ~ ..'.
13.00
RETURN THIS
STUB WITH
YOUR PAYMENT
F
PA`f:'THi5 A4M1t?U{Ei
13_00 ~
_ ~E%PIANAiION ON REV ERSE SIDE ', ~•
'PLEASE
RETURN
THIS
PORTION
N/ITf-I
YOUR
PAYMENT
MAKE CHECKS PAYABLE TO
B;~i53T~ ~1€as"~3IC,~ §eVi~T~R ~~V~al, I
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h
BR-Basic Water Rate PB-Previous Balance
SV-Service Charge CR-Credit Balance
PI-Paver & Imported rrTater P.dj : DA-Application of Deposit
CF-Capital In~urove*Mwxit and SC-Sanitation Charge
Fire Demand Rate ST-Sewer Treatment Fee
---L_ __-
-- _ __
'r THE TOTAL CUE SNO`NS .4 CREDIT B4! ANCE, PLEASE DISREGARD THIS BILL. THE j
AMOUNT OF YOUR CREDIT BALANCE WILL BE APPLIEDTOWARDS YOUR NEXT BILL. f
I•
l
FOR SERVICE OR INFORMATION PLEASE CALL THESE NUMBERS E
DAYS 393-9975 EVENINGS, WEEKENDS, HOLIDAYS 473-id60
PLEASE KEEP THIS PORTION FOR YOUR RECORDS
To: Mayor and City Council
_g_ October 1, lggp
An example of how each of the incremental cost factors could be shown for
10,000 bill units, 6""domestic meter.
* Additional CF and SV charges would be added if
this consumer also has a fire service -see
pages 5 and' 6 For a 6" fire service an
additional $981.33 bi-monthly charge would be
added.
BR-Basic Water Service PB-Previous Balance
SV-Service Charge CR-Credit Balance
PT-Power & Tmported Water Adj. DA-Application of Deposit
CF-Capital Improvement and SC-Sanitation Charge
Fire Demand.Charge ST-Sewer Treatment Fee
To; Mayor and City Council -10- October 1, lgg0
Recommandations:
Based on the study of rates and rate structures, it is recommended that; Council
establish and adopt by resolution the following:
1. A uniform "Base Water Rate" of $0.50 per hundred cubic feet of water
sold.
2. A "Power and Imported Water Adjustment" defined as the present cost of power
and imported waterless $938,298, the cost of power and imported water in the
1977-78 Base Year, divided by the expected water sales for the present year.
3. Bimonthly "Service Charges" for fire and domestic meters as follows:
Size of Meter Bi-monthly Bi-monthly
service charge service charge
domestic fire
3/4" $ 13.00 $ N/A Includes-first:20_billing units
1" 20.00 fJ/A Includes first 30 billing units
1 1/2" 9.10 N/A
2" 25.48 7.60
3" 60.20 11.50
4" 85.02 15.25
6" 176.28 22.75
8" 260.90 30.50
10" N/A 38.00
4. Capital Improvement and Fire Demand Stand-by charges for Domestic Services
and Fire Services as follows:
Size Domestic Service Fire Service
3/4" -0- N/A
1" -0- N/A
1 1/2" -0- N/A
2" 21.48 67.00
3" 166.88 514.00
4" 429.60 763.42
6" 974.00 958.58
8" 1435.00 1148.00
10" N/A 1337.42
5• T he s e c h a r g e s t o b e- effective upon its adoption, or upon administrative
implementation,whichever occurs last.
Prepared by: Stan Scholl
Ed Lash
John Johnson
Santa Monica, California, October 23, 1980
Y3'1
To: Mayor and City Council .~ 5 _~
From City Staff
Subject: Addendum to Proposed Water Rate Restructuring, OCT ~ E 99~~
Staff Report dated October 1, 1980
At its September 10th, 1980 meeting, Council directed Staff to re-study the
structure. of water rates as proposed and present instead a water rate structure
which places the burden of funding water system improvements on the users who
represent the larger flow requirements demanded of the system. The rate structure
proposed in the subject staff report will accomplish that purpose by the inclusion
of fixed fees applicable to both domestic water service meters and fire service
detector-check valves. These fees are not applied to the two smaller sizes of
domestic water meters (which sizes generally imply single family residences) but
are effected starting with. 2-inch Domestic services and 2-inch Fire Services, with
fees increasing according to the increase in service sizel and in proportion to
the demand on the system.
Examples of the effects of this method of rate structuring appear on pages 8 and 9
of the subject staff report. The net effect is a modest increase to the smallest
users or single family residences and a large increase to the larger domestic
and commercial customers. The example on page 9 shows a 44% increase to a
large firm for domestic water use only. Often, a consumer of this size would
occupy the type of structure which ~aould also be required by building and fire
codes to have an area or areas covered by the fire sprinklers. If this requirement
1. See page 6 of the subject Staff Report.
To: Mayor and City Council - 2 - October 23, 1980
necessitated a 6" fire service, then an additional $981,28 would be added
for a total bill for this two-month period of $7,571.55. For a year's
service the bill would be $45,429.36, of which $11,595.48 would be the
portion charged for system improvements and fire demand.
All Fire Sprinkler Systems are not mandated by codes.. Some are installed
voluntarily by building owners to reduce fire insurance rates, with
an expected pay-back on their investment of 3-5 years. This type of
voluntary installation of sprinkler systems would likely cease. It
would be expected that many existing fire service owners would simply
cancel their accounts if they are not mandeted by code to maintain them
in those instances where the proposed charges would exceed the
savings in fire insurance rates.
To encourage sprinkler installations, the elimination of the Fire Service
fee would be possible. Fees applicable to Domestic Services could be
increased to partially replace the funds not generated due to that
removal. An additional $.10 applied to the base water rate would produce
a further portion of those deleted funds:
To: Mayor and City Staff - 3 - October 23', 1980
Funds Deleted by removal of fees applicable to Fire Services $1,729,741
Funds Generated by increase in fees applicable to Domestic Service 477,781
Funds Generated by $.10 increase to Base Water Rate 525,000
Net loss of projected funds $ 726,9602
Included with this addendum are revised pages of the subject staff report and
a revised resolution which reflect the effects of these changes, if adopted,
Alternatively, other approaches to obtaining the required revenues from the larger
users could be further explored. A fee structure based on square footage of the
structure could be developed but does not take into account the degree of
fire hazard or available water required for fire suppression, e.g. a 1000 square
foot paint store might require much more water to be available than a 4,000 square
foot duplex or office. building. Similar deficiencies would apply to a fee
structure. based on street "front-footage."
A varying commodity (watery rate based on the "classes" of water usage could be
developed whereby larger users would be charged more for each billing unit of
water used.8 Water usage in the City would be surveyed and categories of usage
be esta67i.shed ranging from domestic and potable through commercial usages,
then light manufacturing, etc., with higher charges per billing unit for each
class in the upward progression. This approach would be difficult to study,
establish. and administer, and the end result would be similar to a more standard
"Ascending Block Rate", whereby the cost per billing unit escalates as a
2. Th~'s reduction in revenues and proposed remedial measures will be the subject
of a subsequent report.
3. A billing unit is 100 cubic feet or 748 gallons, currently 45 cents.
To: ~ Mdyor and City Council - 4 -
October 23, 1980
consumer`s water usage surpasses predeterminedlimitations or "blocks".
Ascending block rates have been tried recently as an encouragement to water
conservation, but most attempts have been short-lived as the same inequities
exist in ascending as in decending block rates. Also, neither the "class of
use" nor the "ascending block rate" addresses the areas of fire demand
implicit in Council's instructions.
A possibly more promising metfiod or approach to accomplishing the intent of
funding improvements by higher charges to the larger users wculd be a fee
structure based on "Required Fire Flow"4 as established by a formula developed
by the Municipal Survey Services of the Insurance Services Officer (ISO). it
was developed from the analysis of many large loss fires in a wide range of
occupancies and is generally accepted as valid for predicting the maximum amount
of water that would be applied to a fully-involved burning structure in order to
confine and extinguish the fire. This approach begins by establishing the basic
fire flow required as if the. City were composed in its entirety of single-family
dwellings, Once .the required fire flow for single-family dwellings is established
a fee schedule based on required fire flows for larger structures is established
to fund system improvements. ?his method might also include incentives to promote
fire sprinkler system usage based on the fact that fully sprinklered structures
may be ignored when calculating fire flows for a given area, and an owner who
so equips his structure could 6e given a reduction of the fee.
4, "Requi.red Fire Flow" is a term which describes the relationship of the physical
characteristics of a building (type of construction), its use, and its
llnmediate surroundings to the amount of water necessary to extinguish the
most serious fire possible in it.
To: Mayor and City Council -5-
October 23, 1980
Summary
An infinite variety of approaches to rate structuring is available to
produce revenues from various groupings. of commodity consumers. However,
some inconsistencies and inequities invariably turn up in any rate struc-
ture. The evolution of utility rates has led largely toward "uniform"
rates, where the cost per billing unit is the same to. every user regardless
of the quantity used. This method altered slightly by the inclusion of
"service charges", is in common use (currently in effect in Santa Monica)
and is generally accepted in the industry as being the most equitable way
of distributing costs of improvements to all consumers. All consumers
benefit in some degree by an improvement in the system. This method does
not address the question of who creates the need for the improvement. If
those who create that need are to fund the improvements, the rate structure
proposed in the subject staff report (or as revised by this addendum), or
any combination of the approaches discussed above could be implemented. .
It should be emphasized that any rate structure charge can become intricate
and cumbersome to research, implement and administer, and lead time before
implementation could become considerable. Since the major revenue producing
months (summer) have passed without implementation of an increase in water
rates, the City already faces a significant "short-fall" in meeting budgeted
Water Operations expenditures for the 1980-81 Fiscal year.5 Timely adoption
of the proposed rate structure, or adoption of the proposed structure as
revised by this addendum would minimize the projected "short-fall".
5. This shortage and proposed remedial measures will be the subject of a
subsequent report.
To: Mayor and City Council - 6 - October 23, 1980
Recommendation
It is recommended that the rate structure proposed in the staff report and
as revised by this addendum 6e adopted, and that staff 6e directed to
investigate specific alternative approaches to rate structuring for future
presentation at Council's discretion.
Prepared by: Stan Scholl
Ed Lash.
k~~u~~
To: Mayor and City Council -2- October l., 1980 ~~
Revised, October 23, 1980
OC~£ ~ ~ 9980
excess of 10 million dollars; its total replacement could cost more than 35
million dollars at today's costs.
In recent years, major categories of vital Division operating expenses have risen
sharply due to inflationary and related factors. Projections for the future
indicate an even sharper increase in coming years due to increases in expenses
such as pumping power and purchased water costs. These costs are, to a large
degree, outside the control of the City, and constitute as much as 60°6 of the
annual operating expense. Capital costs have also risen due to inflation which
complicates the continuing need for new and replacement structures and equipment.
In the corresponding period, revenues failed to keep pace, due largely to reduced
water usage which resulted in the reduction of revenues and this reduction continues
today. In addition current water quality problems have resulted in greatly
increased expenses for testing, monitoring and investigative drilling. If water
operations and capital investment are to be kept on a sound financial basis,
revenues must be increased.
The current water rate structure is based on a fixed bi-monthly service charge
related to the cost of maintenance of the service and a uniform charge per
billing unit (100 cubic feet of water used). Since the 1977-78 Fiscal Year,
established by Council as 6dater Base Year for calculating costs in June, 1979,
the uniform charge per billing unit has been increased 8~* while the service
charge has not been changed since 1972
cubic feet of water.
The current charge is $.45 per 100
* M~~ Including $.035/100 cubic feet currently charged under "pass through" costs
for imported water.
~E'R.S~tX
~~ ~ ~
__ OCT 2 8., ggD_
To: Mayor and City Council -5- -October '1, 1980
Revised, October 23, 1980
applicable to B~x6 domestic i4~Stl 1~~1F~ services to more equitably
distribute the costs of improvements. The charges are graduated so that
the bulk of the funds are produced by those structures that place the
highest demands on the water distribution system. These charges would
also be identified on the consumer bill.
The derivations of the above incremental factors are as follows:
1. Base Water Rate is derived by:
Total operating costs less the costs of Power and Tmported 4Jater Adjustment, Ne~•a
Meters and servicesl, and Capital Improvements.
2. Power and Imported Adjustment (PI}
Current Costs of Power and
Imported Water less Base
Year (1977-78) costs = Power and Imported
Total 6Jater Production Water Adjustment (PI)
3. Service Charge (SV):
This fixed charge is based on costs of maintaining water services
and meters.
Bi-Monthly Service Charge
Size of Meter Domestic Meter
5/8 or 3/4 $ 13.002
1 20.003
1 1/2 9.10
2 25.48
3 60.20
4 85.02
6 176.28
8 260.90
10 N/A
12 N/A
1
2
3.
Bi-Monthly Service Charge
Fire Meter
$ N/A
N/A
N/A
_7.60
11.50
15.25
22.75
30.50
38.00
45.50
Costs of new meters and services are reimbursed by the consumer at time of
installation.
Includes first 20 billing units (100 cubic feet of water usage). Subsequent
usage at base rate plus Po~•ier and Import Adjustment.
Includes first 30 billing units (100 cubic feet of water usage). Subsequent
usage at base rate plus Pos•~er and Import Adjustment.
7oi Mayor and City Council. -6- pctober 1, 1980
Revised, October 23, 1980
(.includes Fire Demand Charge's)
4. Capital Improvements ~~~ ~~x~ ~ ~~'~ (CF).
Bi-Monthly Charges:
Size Domestic S~IF~
Servi ces 8~M~582~~5
3/4" - 0 - ~xX
1° - 0 - ~x8
1 1/2" ~x&xx 8.00 14x8
2.. 8~x#8 42.9.6 8>~X~~
3" 88dx88 337.76 88Axt~8
4" #88x80 859.20 'x6$x#a'
6" AR#x~~ 1948.00 ~d8x88
8" k#88xd~ 2807.00 ~848X~®
3cQ" Ct~ 1;88Rx48
Application of this rate structuring as applied to consumer charges through the
range of meter sizes and amounts of domestic consumption is as follovrs:
Water Cost to consumers - various cities - for 2 months billing period.
City 3/4 inch average
single family
residential 1-1/2 inch 7aroe
residential small
apartments 2 inch commer-
cial & large
apartments 6-inch industry
& major
hospital
20 billing units 100 billing units 500 billing 10,000 billing
units units
Santa Monica (current) 11.30 $52.00 $234.80 $4,567.80
San±a Monica (proposed
) 13.001 85.10
8XXX0 408.44
888x88 8,924.28
QxQQ~xRW2
Bev. Hills Water 15.92 58.78 283.78 5,597.08
Inglewood 4fater 22.20 94.83 449.89 6,830.51
Pasadena 4Jater/Povrer3 10.50 52.50 25TJ6 3,783.00
Glendale Power/Light3 17.82 70.20 312.30 5,760.80
LA Water and Power3 16.69 58.63 194.85 3,673.40
Unit = Billing unit or 100 cubic feet (approximat.ely 750 gallons) of water used.
1. See example of consumer bill, nage 8 of this report.
2- SeP example of consumer hi 11, page 9 of this report.
3. Combining water and power operations generally results in reuuced water rates.
To~: i•iayor and City Council
-7- October 1 ,'1820
Revised October 9, 1980
Revised October 23. 1980
The recommendations presented by staff will result in the average bill for a
64q $1.65
single family house increasing by 15% or $. 85/month and by 2~dai or $i;x9~/month
Larger
per unit for apartment and condominiums. $Xt4X2r~k increases result for commercial
and industrial users - if uses remain the same.l The staff anticipates about 3-5i;
reduction in water use because of the increases and therefore actual increases in
bills may be slightly less than indicated.
1. See pages 6 and 9 of this report.
To: hiayor and City Council -9_ October 1, lggp
Revised October 23, 1980
An example of how each of the incremental cost factors could be shown for
10,000 bill units, 6":'domestic meter.
C{3Y OF SRT+37;a AilOi3I1C~ ~a~To-lT v;d l~1tiJ;51t7~^•1 ILITY
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iCBS :141N SIR E Ei, SANiA MUNICA, CALIF, 90dC1 I1IJI 39J~99 )$ p
BILL i
p
y
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~ 'y ~i=+` ~~~i3ty~
ccR ICc
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;Jul ,1980 Sep 4,198q
DUE ^ATE
This period last
year 10,200.
AMOUNT ,:
cc e ;
BR ~~®~x~~ 600
SV 176.28
PI ~ aoD.oo
CF gS~iX~~ 194
;`T.OTAi DUES.
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* EXFLANAiION ON Rc /ERSE SICE
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coDE ExPLANAnoN
BR-Basic 4later Service PB-Previous Balance
SV-Service Charge CR-Credit Balance
PI-Po~•rer & Tmported Water Adj. DA-Application of Deposit
CF-Capital Improvement and SC-Sanitation Charge
Fire Demand Charge ST-Seueer Treatment Fee
IF iNE TOTAL DUE SHO`NS A CREDIT BALANCE, F'i EAS`c DISREGARD THIS fl ILL. THE
AMChNf OE YOUR CREDiI- BALAP+CE WILL EE APPLIED TOE"LARDS YOUR NEXT 61LL.
FOR SERVICE OR INFCRMAnCN PLEASE CALL THESE NU141BERS
DA'!S .593-99TH EV EI`lINGS, `P/EEKENDS, HOLIDAYS 4i3-1 d60
PLC-ASE KEEP THIS PCRTIOi~I FOR YOUR RECORDS
To: Mayor and City Council -10- October 1, 1980
Revised October 23, 1980
Recommandations:
Based on the study of rates and rate structures, it is recommended that; Council
establish and adopt by resolution the following:
1. A uniform "Base Water Rate" of $0.50 oer hundred cubic feet of water
sold.
2. A "Power and Imported Mater Adjustment" defined as the present cost of power
and imported waterless $938,298, the cost of power and imported water in the
1977-78 Base Year, divided by the expected water sales for the present year.
3. Bimonthly "Service Charges" for fire and domestic meters as follows:
Size of Meter Bi-monthly Bi-monthly
service charge service charge
domestic fire
3/4" $ 13.00 ~ N/A Includes first 20_billing units
1" 20.00 N/A Includes first 30 billing units
1 1/2" 9.10 N/A
2" 25.48 7.60
3" 60.20 11.50
4" 85.02 15.25
6" 176.28 22.75
8" 260.90 30.50
10" NJA 38.00
4. Capital Improvement and Fire Demand Stand-by charges for Domestic Services
arxd<~xar~cx0eoxuca~csc a s f o 11 ows
Size Domestic Service ~x~~ SS~~~:X~€c
3/4~~ -0_ ~~~
1" -0- W~A
1 1/2" x~9<- 8.00 SG~~
2" x~kx4~ 42.96 ~x'x~
3" :lS~xl~~x 337.76 ~~~
4'~ ~a2k~x~klx 859.20 x7~xix~l~2
6" ~:dx~xkl~)x 1948.00 ~~°x~~
8" A~3~~xk~k1 2870.00 ~~~t~
~~~ ~~ NX3~7x~
5• T h e s e c h a r g e s t o b e effective upon i is adoption , or upon administrative
implementation whichever occurs last.
Prepared by: Stan Scholl
Ed Lash
John Johnson
NOeI 2 ~ rN~~
November 20,.1980
To: City Council
From: Perry Scott
Subject: Interim Water Rate Proposal
The Interim Water Rates proposed herein are based oh information provided
by the staff which is summarized in a number of attached exhibits. It is
probable that the estimated annual total of 5,250,000 billing units of
water use is somewhat low. However, the estimate is the best and most
reasonable assumption the staff can make based on the recorded information
available.
Exhibits Attached
A - - Sprinkler System Requirements
B - - Office Structure Construction
C - - Service Line Capacity
D - - Comparative Cost and Capacity
E - - Special Accounts Basic Data
F - - Special Accounts -- Comparative Data
G - - Proposed Interim Rates
H - - Estimated Annual Revenues
I - - Comparative Rate Proposals
The capacity of water supply,. water storage .and water distribution facilities
is primarily determined by the demand generated for fire supply minimums
rather than domestic use. Consequently, the costs which must be funded. by
system users are irrevocably tied to total (as well as relative) fire supply
requirements. The enormous demands placed on the system in recent years by
~~
~dOV '1 5 q~'
To: City Council -2- November 20, 1980
new construction is a fact of life to which system users and beneficiaries
must respond.
One measure of the fire supply capacity burden is illustrated in
Exhibit C. 348 fire services have a system demand capacity
equal to 43% of the total capacity represented by 15,090 domestic
water services (and more than the 11,084 domestic services for 3/4"
and 1" customers).
Another is the square feet of new commercial and industrial office
facilities which are under construction (or have been completed)
since 1975. The floor area to be provided by this construction
activity is about 3,425,866 square feet or an amount equal to
1,712 single family residential structures of 2,000 square feet each.
Imposition of charges tied to either the existence of afire service or the
size of the domestic meter does not reflect the extent. of the problem gener-
ated by a particular development, nor does it reasonably distribute the
increase in cost to the City. Exhibit A summarizes Sprinkler System
Requirements (which- require fire services) and demonstrates the nature and
class of extensive developments which can (and have) occurred without the
installation of sprinklers.
A comparison of the impact upon a few accounts of the 10-23-80 rate proposal
by the staff is included in Exhibit F. The structural exposure is reasonably
measured by the square feet of floor area in a given structure. The 10-23
rate for capital improvements and fire demand would produce the following
costs to the owners or occupants of the structures:
To: City Council -3- November 20,.1980
Account
Santa Monica. Shores
Ocean Towers
GTE and Champagne Towers
Evening Outlook
Vivitar Building
USA Petroleum
Cost Per 1,000 Sq. Ft.
$ 5.54
,1.39
4.35
0.86
0.72
0.95
It is submitted that the fixed fee based on the size of the domestic water
meter is not a reasonable method of distributing cost. A system which
produces a cost variable among users which ranges from $0:72 per 1,000
square feet of floor area to $5.54 (a ratio of 7.7 to 1) simply cannot
be defended or supported.
Domestic water use is even less reliable as a measure of relative
fire demand. Although a table was not included, domestic water
use per 1,000 square feet of floor area ranges from a high of
78.76 (Evening Outlook) to a low of 3.61 (Vivitar), or a ratio
of 21.8 to 1.
Clearly rates must be adjusted to provide the funds. required for system
maintenance and e>:pansion. While there is some urgency which supports Timely
action, urgency will not support the imposition of a rate structure which is
grossly unfair and unreasonable..
It is suggested that we adopt an interim rate increase of roughly.
19% as set forth in Exhibit G which will produce a minimum annual
revenue of $3,302,820 exclusive. of .charges for meter and service
installations. (See Exhibits H and I).
To: City Council -4- November 20, 1980
The staff should be instructed to redefine capital and fire demand costs to
be all costs of expansion or replacement of all water distribution and
storage facilities. We should then distribute these costs to all classes
of users (including single family) on the basis of a fixed charge per 1,000
square feet of floor area prorated to the nearest 200 square feet
We have the computer tapes of the Assessor's Records which can supply
virtually all the information required for such a cost distribution
system. Moreover, once in place, changes can be readily and
inexpensively made based on issuance of building permits for
remodeling or new construction.
Absolute equity is impossible of achievement and may well depend on individual
perception colored by whether one is paying or receiving. It is argued that
the system proposed represents substantial equity among and between both
present and future users.
While an argument can be made with respect to calculating specific fire
demands for each structure, it should be noted that such calculations are
destroyed by a change in occupancy or use. Moreover, it is more than probable
that floor area is as accurate a measure of structural or life hazard exposure
as any other.
The argument that installation of sprinklers reduces the hazard
is quite valid. It does not, however, reduce the fire supply
demand or the installation of street hydrants.
To: City Council -5- November"20, 1980.
Santa Monica Place, for example, has a sprinkler system and
two 8" fire services. It also has on the perimeter of the two
square blacks 14 street hydrants. Atwo-square-block residential
area would be served by a maximum of six street hydrants and no
fire services.
It is also suggested that the staff be instructed to accumulate total water
used in billing units rather than gallons. The billing units are already
in the machine for billing purposes and can be readily accumulated. The
current record in gallons is quite inaccurate and serves no useful purpose.
Additionally, if staff determines it is feasible, total water use should be
recorded and accumulated by meter size.
~~
Prepared bq:-~er ~~ t
Attachments: Exhibits A through I
Informational Note: A capital improvement and fire demand rate of $0.20
per 1,000 square feet of floor area, for example,
would generate annual revenues of approximately
$18,700 from the 7,804 single family homes in the City.
EXHIBIT A
Sprinkler System Requirements
In general, sprinkler systems are required for hazardous occupancies
such as storage of flammable liquids, explosive materials, paint
spray operations, and for all hospitals, convalescent homes, and most
school occupancies: Although there are special conditions which
require the installation of sprinklers in otherwise exempt structures,
normal business, industrial and residential requirements are as follows:
All Classes
Sprinklers are required if the structure height exceeds
75 feet, notwithstanding occupancy.
Business Occupancies
Required only when the total area per floor exceeds 12,000 square
feet or a total floor area of 24,000 square. feet, notwithstanding
the number of floors.
Industrial Occupancies
Type I Construction; incombustible: Required only if the height
exceeds 75 feet.
Type 3 Construction; masonry exterior - wood interior:
Required only if area exceeds 12,000 square feet and, in
some cases, 18,000 square feet for non-hazardous occupancies.
Type 5 Construction; wood frame: Required only if structure
exceeds one story or 8,000 square feet.
EXHI3IT B
Office Structure Construction
COMPLETED OFFICE BUILDINGS 1975-1980
Searise, 3rd and Wilshire
Jack Joseph, 4th and Broadway
Century Federal, 5th and Santa Monica
1317 Fifth Street
1415 Fifth Street
519 Broadway
600 Broadway
601 Wilshire
1247 Sixth Street
1302 Sixth Street
1416 Sixth Street
1434 Sixth Street
1234 Seventh Street
1253 Seventh Street.
1333 Seventh Street
1321 Seventh Street
Total Square Feet Completed
UNDER CONSTRUCTION - 1980
Square Feet
125,000
28,000
75,000
7,000
6,000
17,500
9,000
4,800
7,000
13,000
4,200
7,500
5,800
4,000
2,020
7,000
317,820
Santa Monica Place 570,000
First Federal, 4th and Wilshire 215,000
Wilshire Palisades, Ocean and Arizona 181,000
Tamen, Fifth and Santa Monica 81,000
Barry Associates, 6th and Broadway 114,000
Total Square Feet Under Construction 1,161,000
Total Completed or Under Construction*
1,478,820
* This total of 1,478,820 square feet does not include about
500,000 square feet in the planning or .permit stage, nor
does it include the 22 industrial office buildings in the
Barclay-Curci Airport Park which have a floor area of
1,447,046 square feet. Effectively, floor area to be served
equals 3,425,866 square feet.
EXHIBIT C
Service Line Capacity
by Line and Total by Size
Domestic Services
Meter Number Service Line
Size Meters Diameter - Sq. In.
3/4" 7,464 0.533
1" 3,620 0.864
1-1/2" 3,051 2.036
2" 760 3.333
3" 127 7.354
4" 46 12.730
6" 20 28.890
8" 2 , 50.027
Total 15,090
Capacity
Total - Sa. In.
3,978.312
3,127.680
6,211.836
2,533.080
933.958
585.580
577.800
100.054
18,048.300
Percentage
of Total
22.04
17.33
34.42
14.04
5.18
3.24
3.20
0.55
100
Fire Services
Size Number Diameter - Sq. In.
2" - 23 - 3.333
3" 12 7.354
4" 145 12.730
6" 125 28.890
8" 41 50.027
10" 2 78.854
Total 348
Capacity - Sa.In.
76.659
88.248
1,845.850
3,611.250
2,051.107
ire 7no
7,830.822
°~ of Total
0.98
1.13
23.58
46.12
26.19
2.00
100
It should be noted the capacity of 348 fire services is equal to 43.39% of the
capacity of the 15,090 domestic services. Moreover, fire service capacity exceeds
that of the 11,084 domestic services for 3/4" and 1" customers.
EXHIBIT D
Comparative Cost and Capacity
Domestic Water Meters and Services
Meter Current Cost Ratio Capacity Ratio(7)
Size Cost to 3/4" Meter io 3/4" Service
3/4" $ 47.50 1.00 1.00
1" 109.00. 2.30 1.62
1-1/2" 254.00 5.35 3.82
2" 360.00 7.58 6.25
3" 1,060.00. 22.32 13.80
4" 1,647.00 34.67 23.88
6" 3,216.00 67.71 54.20
8" 5,600.00 117.90 93.86
(1) See Exhibit C for comparative capacity in square inches of
diam eter of domes tic service lines and the total capacity
e conn ected. to the system.
It should be noted each user pays the cost of meter and service
line installation at the time of installation.
Proposed service charges for domestic services are calculated on the
basis of the capacity ratio of each service to a base rate of $2.30
for a 3/4" service (computed to the nearest $0.10).
EXHIBIT E
Special Accounts Basic Data
Santa Monica Shores
1 - 4" Domestic Meter
2 - 6" Domestic Meters
1 - 8" Fire Service
858,000 Sq.Ft. floor area(1)
532 Dwelling Units
Water Use(2) 8,567
Current Cost(a) $4,046.85
10-23 Proposal(4) $11,048.84
GTE and Chamoacane Towers
1 - 4" Domestic Meter
1 - 6" Domestic Meter
1 - 8" Fire Service
646,000 Sq.Ft. floor areal)
.120 Dwelling Units
Water Use - Res.(2) 3,339
Water Use..- Off 1,734
Current Cost(a) $2,406.75
10-23 Proposal(4) $6,548.64
Ocean Towers
1 - 4" Domestic Meter
1 - 8" Fire Service
619,000 Sq.Ft. floor area(1)
317 Dwelling Units
Water Use(2) 3,750
Current Cost(a) $143.60
10-23 Proposal(4) $3,524.72
Evening Outlook
1 - 2" Domestic Meter
1 - 8" Fire Service
50,000 Sq.Ft. floor area(1)
Water Use(2) 3,938
Current Cost(a) $1,805.30
10-23 Proposal(4) $2,776.78
v; ~~; +ar
1 - 2" Domestic Meter
1 - 8" Fire Service
60,000 Sq.Ft. floor area(1)
Water Use(2) 277
Current Cost(a) $130.85
10-23 Proposal(4) $246.50
USA Petroleum
1 - 2" Domestic Meter
45,000 Sq.Ft. floor area
Water Use(2) 421
Current Cost(a) $199.25
10-23 Proposal(4) $354.72
(1) F1`oor area includes garage area, if any.
(2) Water use in 100 ft.a average per billing period.
(3) Average cost per billing period last 12 months.
(4) 10-23-80 Staff Water Rate Increase Proposal
EXHIBIT F
Special Accounts - Comparative Data
Water Use
Account Dwelling Units Water Use Per DU
Santa Monica Shores 532 8,567 16.10
Ocean Towers 317 3,750 11.83
Champagne Towers 120 3,339 27.83
Impact of 10-23 Rate Proposal (Staff)
Account Current Proposed Ratio(1)
Santa Monica Shores $4,046.85 $11,048.84 2.73
Ocean Towers 1,743.60 3,524.72 2.02
GTE and Champagne Towers 2,406.75 6,548.64 2.72
Evening Outlook .1,805.30. 2,776.78 1.54
Vivitar 130.85 246.50 1.88
USA Petroleum 199.25 354.72 1.78
Cost Per 1,000 Sq. Ft. Floor Area(2)
Capital Improvements and Fire Demand
Account CI & FD Floor Area Per 1,000
Santa Monica Shores $4,755.20 858,000 $ 5.54
Ocean Towers 859.20 619,000 1.39
GTE & Champagne Towers 2,807.20 646,000 4.35
Evening Outlook 42.96 50;000 0.86
Vivitar 42.96 60,000 0.72
USA Petroleum 42.96 45,000 0.95
Ft.
(1) Ratio of proposed cost to current average cost.
(2) 10-23 Rate Proposal by Staff.
EXHIBIT G
Proposed Rates
Interim Rate Proposal
Basic Rate - Water Use
$0..45 plus 0.08 Power and Imported Water Adjustment(1)
Service Charge
Meter/Fire Service Size
3/4"
l ~~
1-1/2"
2"
3'•
4"
6"
8"
10"
Domestic Service(2)
$ 13.00(4)
20.00(5)
8.80
14.40
31.70
54.90
124.70
215.90
re Service (3)
7.60
11.50
15.25
22.75
30.50
38.00
(1) Per each billing unit of 100 cubic feet water use.
(2) Based on relative capacity of service -- see Exhibits C and D.
(3) Based on staff proposal 10-23-80.
(4) Includes 20 billing units in service .charge.
(5) Includes 30 billing units in service charge.
EXHIBIT H
Estimated Annual Revenues
Interim-Rate Adjustment Proposal
Meter No. Services Service Annual
Size Domestic Charge Revenue
3/4" 7,464 $ 13.00* $ 582,192
1" 3,620 20.00** 434,400
1-1/2" 3,051 8.80 161,093
2" 760 14.40 65,664
3" 127 31.70 24,155
4" 46 54.90 15,152
6" 20 124.:70 14,964
8" 2 215.90 2,591
Domestic Service Charge Subtotal $1,300,211
Size Fire No. Fire Service Annual
Service Services Charge Revenue
2" 23 $ 7.60 $ 1,049
3" 12 °' 11 .50 828
4" 745 15.25 13,268
6" 125 22.75 17,063
8" 41 30.50 7,503
10" 2 38.00 456
Fire Service Charge Subtotal $ 40,167
Domestic Service Charges $1,300,211
Fire Service Charges 40,167
Water Use @ .53 x 5,250,000~I~ 2,782,500
Subtotal $4,122,878
Less: Water use included for 3/4" & 1" - 820,058
Estimated Annual Revenue $3,302,820
(1) $.45 Base Rate plus .08 Power and Imported Water Adjustment.
* Includes 20 billing units of 100 ft.3 each.
** Includes 30 billing units of 100 ft.3 each.
EXHIBIT I
Comparative Rate Proposals
Pending Before City Council
Meter Size 3/4 Inch 1-1/2 Inch(1) 2 Inch(2) 6 Inch(3)
Use 1 Family Small Apts.. Commercial Industrial
Billing Units 20 100 500 70
000
,
Current Rates $11.30 $52.00 $234.80 $4,567.80
Cost Per Unit* 0.565 0.52 0.47 0.457
9-2 Proposal (Staff) 17.00 75.00 365.00 7
088
00
,
.
Increase 50% 44% 55% 55%
Cast Per Unit* 0.85 0.75 0.73 0.78
10-23 Proposal (Staff) 13.00- 85.10 408.44 8
924.28
,
Increase 15% 64% 74% 95%
Cost Per Unit* 0.65 0.851 0.817 0.892
Interim Proposal 13.00 61.80 279.40 5,424.70
Increase 15% 19% 19% 19%
Cost Per Unit* 0.65 0.62 0.56 0.54
* Cost Per Unit includes domestic service charge
(1) Includes large single family and apartments.
(2) Includes commercial and large apartments.
{3) Includes industrial and major hospital,