Title
Public Hearing to Consider Introduction of Ordinance Revising the City’s Sewer Service Charges. (Public Works 602)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda (City) owns and operates 128 miles of sewer collection system and 33 pump stations. Sewer service charges are viewed as property-related fees and are subject to specific requirements of the California Constitution Article XIII D § 6(a), commonly referred to as Proposition (Prop) 218. The fees must only cover expenses to provide service to the customer assessed, including salaries and benefits, contractual services, materials, equipment and infrastructure rehabilitation. Prop 218 allows a multi-year schedule of fee increases for up to five years and requires an increase in the fee(s) to be approved by the customers under a protest-ballot procedure, where all affected property owners are notified and given the opportunity to protest the increase in writing or at a public hearing, and a majority protest prohibits the increase.
In October 2019, staff contracted with Bartle Wells Associates (BWA) to conduct a sewer financial plan and rate study (Exhibit 1). Based on an evaluation of sewer funding needs and revenue sources, the report recommends an annual increase of 3% to the sewer service charges through Fiscal Year (FY) 2025, as shown in the table below. A comparison of monthly sewer service charges with regional agencies shows that City rates are on the low end and are projected to remain low over the next five years. On April 7, 2020, the City Council adopted a Resolution declaring the City’s Intention to revise the Sewer Service Charge Establishing Procedures for Accepting Protests Pursuant to Article XIID, Section 6 (a) of the California Constitution Regarding Property-Related Fees and Charges. On April 15, 2020, BWA mailed property owners a written notice, in accordance with Prop 218, announcing the proposed sewer service charge increase, the date of this Public Hearing, and the protest procedures.
BACKGROUND
The City collects sewage generated by Alameda residents and businesses and conveys it via a network of sewer pipes and lift stations to the East Bay Municipal Utility District (EBMUD) for treatment. Many of the City's sewers were installed in the early to mid-20th century and now show signs of deterioration such as loose joints, cracks, and breaks. The City, through intentional design, has separate sanitary sewer and storm water drainage systems. Infiltration and inflow (I/I) is storm water that should enter the storm drainage system but instead enters the sewer system through these cracks and other defects in the sewer pipes. I/I causes excessive sanitary flows during wet weather events that exceed both local conveyance and regional treatment capacity.
In the 1980s, EBMUD constructed three wet weather facilities (WWFs), with regulatory approval, to handle the increased sanitary flow during large storm events. However, in 2007, EBMUD's discharge permit for the WWFs was remanded by the State Water Resources Control Board (SWRCB) based on the Environmental Protection Agency (EPA) ruling that the discharges do not meet secondary treatment standards and therefore, are in violation of the Clean Water Act. In 2009, the EPA filed a complaint against EBMUD for the continued use of the WWFs. The EBMUD lawsuit was followed by a separate suit by the EPA against each of the municipal entities that operate sewer collection systems discharging to the EBMUD system. Alameda was named in the second lawsuit, along with the other dischargers including Albany, Berkeley, Emeryville, Oakland, Piedmont, and Stege Sanitary District (collectively, the Satellites). The EPA case against the Satellites was legally based on allegations of "unpermitted" discharges or sanitary sewer overflows (SSOs) from their systems. However, the primary objective was not related to SSO enforcement, but rather to ensure that an aggressive program to reduce the use of WWFs would be carried out by the Satellites.
Negotiations ensued, and the EPA, Department of Justice, SWRCB and the Regional Water Board entered into Final Consent Decree for Case Nos. C09-00186 and 09-05684 with the defendants, including the City, with a 23 year term commencing in 2014.
Based upon the stated capital and operational work requirements in the Consent Decree the City conducted a Sewer Rate Study and on May 19, 2015, held a public hearing to consider a 3% annual increases in the sewer service charge for FY 2016 through FY 2020, with the final passage of the ordinance on June 2, 2015.
Consent Decree compliance is assessed annually for each agency based on the performance of specified work. The City has met or surpassed all Consent Decree requirements to date, including the rehabilitation of nearly 20 miles of sewer main and associated manholes and lower laterals. This work focuses on that which is likely to fail first and with greatest consequence as determined by the pipe rating model in the City’s Sewer Master Plan. The prioritized rehabilitation plan balances annual Consent Decree work requirements (2.6 miles/per year), anticipated revenue/budget, and expected construction costs based on pipe diameter and other constructability factors. To date, the Sewer Master Plan has provided the right guidance.
The City has also renovated nearly 80% of its pumping facilities to modern standards with redundancy, remote monitoring, backup power and other protective measures; cleaned over 100 miles of sewer main, promptly responded to incoming service calls and implemented source control to minimize the discharge of fats, oils and grease to the sewer system, which can cause backups or overflows.
In addition, to the annual assessment of work requirements, the Consent Decree has a check-in for each Wet Weather Facility (years 2022 and 2030) to determine whether the work being performed is actually reducing wet weather flows to those facilities such that they will no longer discharge by the end of the Consent Decree term. If a WWF fails the specified benchmark at the check-in, a Performance Evaluation Plan and Work Plan Revision Process is required for the contributing tributary agencies to that WWF. The City’s wastewater flow is tied to two of the three WWFs: San Antonio and Oakport facilities, as are the cities of Oakland and Piedmont.
DISCUSSION
BWA developed a ten-year cash flow projection to determine annual revenue requirements and project sewer rates. The operating and capital improvement costs included in this projection are based upon current work requirements in the Consent Decree and the current levels of operation and maintenance. If, at the 2022 WWF check-in for San Antonio Creek and/or Oakport, revised work requirements are incorporated into the Consent Decree, additional expenses will be incorporated into the next rate analysis scheduled for FY 2025.
Proposition 218 and Protest Procedures: Prop 218, also known as the "Right to Vote on Taxes Act”, was approved by California voters in 1996. The Act, which added Article XIlIC and XIIID to the California Constitution, provides a methodology for voters to repeal or reduce taxes, assessments, fees, and charges though the initiative process; reiterates the requirements for voter approval for local "special" and "general" taxes; and imposes restrictions and requirements on real property assessments and certain types of fees.
On April 7, 2020, the City Council adopted a Resolution declaring the City’s Intention to revise the Sewer Service Charge Establishing Procedures for Accepting Protests Pursuant to Article XIID, Section 6 (a) of the California Constitution Regarding Property-Related Fees and Charges. On April 15, 2020, BWA mailed property owners a written notice, in accordance with Prop 218, announcing the proposed sewer service charge increase, the date of this Public Hearing, and the protest procedures. A copy of the notice is contained in Exhibit 3. The written notice provided more advanced notice of the Public Hearing than the 45 days required by Prop 218. The mailed notice was printed in English, Chinese and Spanish and a copy was posted on the City’s website so that the content was available in 10 additional languages through use of the Google translator.
Prop 218 states that for sewer service charge increases, the City Council has the authority to approve the sewer service charge unless the City receives written protests opposing the proposed sewer service charge by a majority of the affected property owners. If the City receives a sufficient number of written protests, the City Council cannot approve the sewer service charge. A sufficient number of written protests was not received. Therefore, a three/fifths vote by the City Council is required for this sewer service charge increase to pass.
ALTERNATIVES
1. Approve the sewer service charges.
2. Provide staff with other direction.
FINANCIAL IMPACT
An annual increase of 3.0% to the sewer service charge for the next five years will fund ongoing operations and maintenance costs, provide adequate cash reserves, and comply with the Consent Decree mandates. Failure to increase the sewer service charge could lead to the City’s use of General Fund reserves to cover costs necessary to avoid strict EPA penalties for non-compliance.
If approved, the rate change would phase in annually beginning July 1, 2020, and be billed annually on the property tax roll. To be considered for the 2020 tax rolls, the City must provide any notifications on rates to the County by August 10, 2020. There is no impact to the General Fund.
ENVIRONMENTAL REVIEW
In accordance with the California Environmental Quality Act (CEQA), this project is Categorically Exempt pursuant to CEQA Guidelines section 15301, Maintenance of Existing Facilities.
CLIMATE IMPACT
This will not have an effect on the climate. However, sewer system maintenance is essential to overall environmental health and resilience in the community and the region.
RECOMMENDATION
Introduce an ordinance revising the City’s sewer service charges.
CITY MANAGER RECOMMENDATION
The City Manager recommends introduction of an ordinance revising the City’s sewer service charges. The increase over the 5 years represents an annual 3% increase. Even with the increase the Alameda Sewer rate would still be on the lower side regionally.
Respectfully submitted,
Liam Garland, Public Works Director
By,
Erin Smith, Deputy Public Works Director
Financial Impact section reviewed,
Nancy Bronstein, Acting Finance Director
Exhibits:
1. Sewer Rate Study
2. Submission and Tabulation Guidelines
cc: Eric Levitt, City Manager