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SR-11-10-2015-7D 502-001-01 City Council Report City Council Regular Meeting: November 10, 2015 Agenda Item: 7.D 1 of 9 To: Mayor and City Council From: Martin Pastucha, Director, Public Works, Water Resources Subject: Introduction for First Reading of an Ordinance Amending Santa Monica Municipal Code Section 7.12.150 Which Requires Individual Water Meters for Each Residential Unit in New Multi-family Residential projects; and Adopt a Resolution Establishing Reduced Water Rate Discounts for MFR Units in 100% Affordable Housing Projects. Recommended Action Staff recommends that the City Council: (1) Introduce for first reading the attached ordinance (attachment A) amending Santa Monica Municipal Code Section 7.12.150 which requires individual water meters for each residential unit in new multi-family residential projects. The proposed amendment would provide that individual meters be required for all residential projects with six residential units or fewer, and require a City master meter and private submeters for all multi-family residential (MFR) projects with more than six residential units. In addition, the proposed amendment would remove the existing exemption for affordable housing projects. (2) Adopt the attached resolution (attachment B) establishing a reduced water rate discount for MFR units in 100% affordable housing projects. (3) Authorize the budget changes as outlined in the Financial Impacts and Budget Actions section of this report. Executive Summary Existing code which has been in effect since 1990 requires individual water meters for each unit of new MFR construction. Practical limitations exist in attempting to place more than six meters at a new MFR project, given the space restrictions in alleys and street parkways. The existing code contains an exemption to this requirement for affordable housing projects. Given the water conservation benefits of individual metering, via submetering, for all residential units including low income units, this report recommends amending SMMC Section 7.12.150 to clarify that MFR projects with more than six units be required to install a City master meter with private submeters, and that the exemption for affordable housing projects be removed. To offset the cost impacts of eliminating the exemption from separate metering for affordable housing projects, 2 of 9 staff recommends reduced water rates for MFR units in 100% dedicated affordable housing projects. Background SMMC Section 7.12.150 requires individual water meters for each unit of new multi - family residential construction. It includes an exemption for affordable housing projects, allowing the developer to provide a single master meter for the project if an acceptable alternative method for determining water consumption for each unit is provided. Although the staff report introducing Ordinance No. 1513 (CCS) at the February 13, 1990 (attachment C) Council meeting addressed the issue from the perspective of construction costs, the prevailing consideration at the time was a prolonged drought affecting California from 1987–1992. It was assumed that individual metering would enable residents and the City to monitor water consumption and reinforce water conservation measures in place at the time. However, as a practical and legal matter, implementation of the requirement is a challenge for many multi-family residential developments. To allow for periodic reading and maintenance, SMMC Section 7.12.140 (e) requires that water meters be placed within the public right-of-way on the street side of the development or in an alley behind the project. The frontage area of many properties along the street often is not large enough to accommodate multiple meters, and alleys behind many properties similarly present space constraints due to their narrow width and conflicts with other utility services in the alley. As a practical matter, the two code sections conflict. Multi -family projects incorporating more than six units require significant space for meters which is often not available because of placement of parkway trees, refuse enclosures, or parking areas among other things. Consequently, projects other than affordable housing developments have installed master meters rather than individual meters, with the condition that submeters be installed as a means of monitoring individual water consumption and continuing the focus on water conservation. This requirement is enforced by Public Works staff in Water Resources as a condition of development or during plan check by staff in the Civil Engineering Division. 3 of 9 Submeters are individual meters behind the master meter. These meters are installed on each water line servicing the individual units, allowing the monitoring of water consumption for each unit. Whereas the master meter is City-owned and maintained, submeters are owned, operated, and maintained by the landlord, property management firm, condominium association, or homeowners association. A representative listing of multi-family residential projects, which have been required to install submeters in recent years, is included in attachment D. For illustrative purposes, attachment E is a photograph of a submeter installation for an 8-unit project at 1837 12th Street. Also, plumbing systems in new multi-family construction utilize central water heaters for the entire building, thereby providing energy savings for the building as opposed to having multiple water heaters. As a result, each unit is supplied with separate cold and hot water service lines. In some cases developers have installed dual submeters in individual units, but the technology for hot water meters is relatively new. Therefore, the more common practice has been to provide cold water meters only for individual units. As an alternate methodology to submeters, some landlords in multi-family developments in Santa Monica have utilized the Ratio Utility Billing System, or RUBS. In the RUBS approach, water consumption is allocated to each tenant through an allocation formula, which can include one or a combination of the following factors:  Number of occupants  Square footage  Number of bathrooms or bedrooms  Number of water fixtures Over the years, staff has received complaints from some tenants about use of RUBS. Some tenants have claimed RUBS methodology is unfair because it does not reflect their actual usage. Others have complained that it does not comply with the code requirement for individual meters. 4 of 9 Discussion A conflict exists between the existing requirement to place water meters in the public right-of-way and the requirement for individual water meters for most multi-family residential unit. The placement of meters in the public right -of-way is necessary to avoid potential exposure in the event of leaks at the meter or other failure in the service line on private property. Additionally, meter maintenance and meter reading is facilitated in having access to the facilities without having to enter private property and the associated liability. As a result, practically speaking, changing SMMC Section 7.12.140 (e) (the requirement to place meters in the public right-of-way) is not recommended. Proposed amendment to 7.12.150 related to water meter requirements for new multi- family residential construction Given the practical impediments and physical limitations, which make it infeasible to require the installation of a separate City-owned water meter for each unit of a new multi-family development, staff recommends a revision to SMMC Section 7.12.150 to require individual meters for all new multi-family developments with six or fewer units, and require a master meter and individual unit submeters for new multi-family developments with greater than six units, and repealing th e affordable housing exemption. The benefits of the revision include:  Clarification of the requirements for individual meters for each residential unit by establishing a clear threshold of the number of units in a project above which a master meter (owned and maintained by the City) is required in the public right of way in combination with submeters on property (owned/maintained/monitored by the property owner);  Fewer public meters in the public right of way, resulting in less conflicts with parking areas, street trees, refuse enclosures, and other utilities,  Reduced cost to the city for installation, maintenance, and billing resulting from fewer public meters;  Enhanced conservation opportunities in providing a means to measure individual water consumption in all residential units, including those in affordable housing projects. 5 of 9 Water conservation continues to be a key element in the City’s water management strategy. California has experienced drought in 1987-1992, 2000-2002, and 2007-2009. Given the current drought conditions (2011 to present year) and the City’s stated goal of achieving water self-sufficiency by the year 2020, meeting water conservation goals is an integral component of demand management strategies, which when coupled with supply augmentation opportunities, will assist the City in achieving its water conservation goals. Prior to and following the adoption of Ordinance No. 1513 (CCS) in 1990, the City adopted and amended numerous water conservation ordinances and initiatives, including SMMC Chapter 7.16, Water Conservation, which addresses:  Establishment of Water Conservation Plans and Water Shortage Response Plans;  No-Water Waste requirements addressing time of day landscape irrigation restrictions, and prohibiting irrigation overspray and runoff;  Establishment of a water demand mitigation fee to mitigate the estimated daily water consumption rate projected for the development. Additionally, SMMC Chapter 7.18, Water Conservation Plumbing Standards, was adopted in 1993 to require all plumbing fixtures in a structure to be retrofitted with water conserving fixtures upon sale or transfer of the structure. The City’s Office of Sustainability and the Environment (OSE) manages the City-wide Sustainability Program, including several community-focused water conservation programs:  Administration of the City’s Water Shortage Response Plan;  Community based water education programs with outreach to local schools;  Landscape and gardening water efficiency assistance;  Water waste ordinance enforcement;  Administering community rebate and grant programs for water efficient appliances and irrigation systems, and purchase and installation of rain barrels and cisterns. 6 of 9 Currently, drought conditions in the period 2011–present have resulted in Council‘s adoption of Stage 2 water shortage conditions on August 12, 2014 (attachment F) and development of a water allocation plan through amendments to the City’s Water Shortage Response Plan at the January 13, 2015 (attachment G) Council meeting. Continuation of the conservation strategies and public outreach will be necessary to achieve conservation goals. Recent development of more water efficient indoor fixtures and appliances has created opportunities for enhanced indoor water efficiencies. Additional water savings can be achieved through enhancements in outdoor water efficiency. Nevertheless, the requirement for water use accountability in all individual residential units (single and multi-family) remains a highly effective way to maintain residential water efficiency. Proposed water rates discount for multi-family residential units in 100% affordable housing projects SMMC Section 7.12.150 includes an exemption for affordable housing developments, presumably to encourage such projects by reducing construction costs. The exemption was conditioned upon providing an acceptable alternative method for determining water consumption for each unit. Since the majority of new affordable housing projects will likely be larger than six units and the conservation incentive and accountability goals are the same for affordable units as for market rate units, the exemption for affordable housing projects in the original ordinance is inconsistent with City conservation goals. If the exemption for low income multi-family residential projects is removed, thereby requiring these projects to include plumbing for submeters, construction costs would see an increase of up to $1,000 per residential unit. This estimate was provided by Community Corporation representatives. As a potential offset to this cost increase, staff recommends reduced water rates for multi-family residential units in 100% affordable housing projects. Similar to the low-income program currently provided for single-family customers, the discount would be $1 per HCF of water in the first tier for each unit in an affordable housing project. 7 of 9 In the current rate structure, multi-family customers receive 4 HCF of water in the first tier for each residential unit. Accordingly, the maximum discount provided would be $4 per residential unit per billing period. For example, a 20 unit low income project would receive up to an $80 discount in a single billing period. The proposed low income discount, if approved by Council, would apply to all units in 100% affordable housing projects only. It is also important to note that whereas the submeter requirement would apply only to new MFR projects, the proposed low income discount would be applied to all residential units in 100% affordable housing projects including those projects already built. There currently are approximately 3,500 low income MFR units throughout the city. The availability of the discount to existing low income units presented a more acceptable cost offset to Community Corporation over the increase in project construction costs and the discount being applied only to new projects. Regional comparison cities were surveyed to inquire about a similar program to provide financial relief for multifamily residential customers. Low income multi-family water discounts are not provided in Burbank, Glendale, Los Angeles, Long Beach, or Pasadena (Los Angeles and Pasadena provide single -family low income customer discounts similar to the Santa Monica single-family low income program). Similarly, staff surveyed the cities of San Francisco, Sacramento, and San Jose and found no existing program in those cities which provided low income water pricing for multi -family residential customers. The same comparison cities were also surveyed to inquire about their local requirement for submeters in multifamily residential projects. Although not widely implemented among the cities, Pasadena and Beverly Hills have existing regulations similar to the individual meter ordinance proposed for Santa Monica. 8 of 9 Agency Multi-Family Low Income Water Discount Submeters required by Code or Ordinance Burbank None None Glendale None None Los Angeles None Optional, not required Long Beach None None Pasadena None Master meter/submeters for new MFR projects Beverly Hills None Master meter/submeters for new projects greater than 3 units Sacramento None None San Francisco None None San Jose None None At the state level, Senator Lois Wolk, 3rd District, has introduced SB-7 for the 2015-2016 legislative session, Water Submeters in Multi-Residence Structures. The proposed bill authorizes the Department of Housing & Community Development to develop and propose standards requiring the installation of water submeters in new multi-unit residential rental buildings. Staff will monitor the progress of this legislation. Cost of service requirements in Proposition 218 require that the discount provided to qualified low income customers be covered by the City’s General Fund in order to avoid it becoming subsidized by other rate payers. The projected General Fund transfer to the Water Fund is estimated at approximately $84,000 per year (3,500 units x $4/unit/billing period x 6 billing periods/year). Additional low income units added in any given year would increase the general fund transf er amount by $24 per MFR unit per year ($4/unit/ billing period x 6 billing periods/year). Financial Impacts & Budget Actions 9 of 9 The projected discount to qualifying low income MFR projects is approximately $84,000 in the first year. The following budget action would be required to reimburse the Water Fund: 1. Appropriation of budgets in the amount of $84,000 for transfers from the General Fund (01695.570081) to the Water Fund (25695.570081). Prepared By: Gil Borboa, Water Resources Manager Approved Forwarded to Council Attachments: A. Ordinance B. Resolution C. February 13, 1990 Staff Report (weblink) D. Recent Submetered Multi-Family Residential Projects E. Submeter Installation for an 8-unit Project F. August 12, 2014 Staff Report (weblink) G. January 13, 2015 Staff Report (weblink) Attachment A – Recent Submetered Multi-Family Residential Projects:  2602 Broadway, 4 story, 33 units, 2012  626 Broadway, 4 story, 48 units, 2009  1610 Broadway, 3 story, 7 units, 2009  1906 Broadway, 4 story, 32 units, 2008  606 Broadway, 6 story, 100 units, 2008  819 Broadway, 4 story, 97 units, 2011  1502 Broadway, 4 story, 33 units, 2012  1753 18th Street, 18 units, 2014  1754 19th Street, 7 units, 2014  214 Santa Monica Blvd., 3 story, 38 units, 2013  3107 Santa Monica Blvd.,2 story, 9 units, 2009  519 Santa Monica Blvd., 5 story, 2012  212 Marine Street, 4 story, 2006  395 Santa Monica Pl., all retail stores submetered, 2010  519 Santa Monica Blvd., 5 story mixed use, 2012  1317 17th Street, 5 story MFR mixed use, 2015  702 Arizona Ave., 4 story mixed use, 2009  507 Wilshire Blvd., 5 story, 50 units, 2009 Attachment B – Submeter Installation at 1837 12th Street     Reference:    Resolution No. 10923   (CCS)