HomeMy WebLinkAboutAGENDA REPORT 2017 1115 CCSA REG ITEM 09B ITEM 9.B.
Girt OP MOORPARK,CALIFORNIA
City Council Meeting
51210/1
MOORPARK CITY COUNCIL
AGENDA REPORT y: /, s,G, -- — ._
TO: The Honorable City Council
FROM: Jeremy Laurentowski, Parks and Recreation Director'51--
DATE: November 8, 2017 (CC Meeting of 11/15/17)
SUBJECT: Consider Waterworks District No. 1 Proposed Water Rate Increases
for 2018
BACKGROUND
On October 13, 2016, a Special Meeting of the Ventura County Waterworks District No.
1 (District) Citizens' Advisory Committee (CAC) was held at the District's office in
Moorpark. The purpose of the meeting was a presentation by District staff regarding
proposed water rates for the District's various users. The rate structure was based on a
Water Rate Study prepared by Raftelis Financial Consultants, Inc. (Raftelis). City staff
felt that the new water rate structure presented by Raftelis and District staff was fair and
equitable. The proposed water rate structure proportionally allocated the costs of
providing services in accordance with Article XIII D of the California Constitution,
commonly known as Proposition 218 (Prop 218). The differences in the various rate
structures identified for each type of user was due to an analysis of peaking costs. The
peaking costs related to each type of water user allowed for a proportionate increase in
water costs. This is based on the maximum demand of water required by the type of
user and overall cost increases related to the District's infrastructure needs to supply
the demand during a given period of time. During the presentation, both District staff
and Raftelis stated that the analysis and rate structure was defensible and in
compliance with the requirements of Prop 218.
On November 7, 2016, the District held a Special CAC Meeting to discuss the rate
structure presented by the District during the October 13, 2016 CAC meeting. The CAC
felt that the rate structure for agricultural users should be reevaluated and referenced a
report prepared in 2012 by the former Director of the Water and Sanitation Department.
The report identified support for a lower rate for agricultural customers due to the fact
that groundwater was less costly to certain District customers.
As required under Prop 218, the District prepared a Notice of Public Hearing (Notice) on
the Proposed Rate Restructuring and Water Rate Increases. Prior to posting the
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November 15, 2017
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Notice, the District reevaluated the groundwater supply for agricultural customers and
determined that a portion of agricultural customers receive approximately 50% of the
District's total groundwater supply. This approach lowered all agricultural rates by
approximately 14%, while increasing all other users between 2% and 4% above the
original recommendation by District staff. To comply with Prop 218, the Notice included
the higher costs to all users so that the District would have time to present their findings
to the CAD.
On December 6, 2016, the District held a Special CAC Meeting to present their findings
regarding the analysis on agricultural water supply, particularly related to groundwater.
The District confirmed that approximately 50% of the groundwater supply is provided to
a portion of agricultural users within certain zones. This is the result of the piping and
supply infrastructure. The District believed that a certain percentage of groundwater
does not mix with the overall supply of water and can only be used by customers that
are located within certain zones identified by District staff. The primary users in these
zones are agricultural users. However, staff believes that this analysis failed to equally
distribute the costs of water to all customers as was not defensible under Prop,218. Not
all agricultural users are located within the zones that receive the groundwater benefit,
yet all agricultural customers would receive the reduced rate. In addition, a number of
M&I users are located in the areas where they would benefit from the groundwater
supply, however, they will not receive the benefit of lower costs.
The CAC determined that since the District confirmed that 50% of the groundwater is
dedicated to a number of agricultural customers, the lower agricultural rate is justified
for all agricultural users. Although there was no information provided by the District
regarding what percentage of agricultural customers would receive the benefit, or what
percentage of M&I users would not benefit from the analysis, the CAC made a
recommendation to the District that both options should be presented and that the
Board should make the final decision regarding the proposed water rates for the District.
On December 7, 2016, District staff presented both the original water rates that were
recommended by Raftelis, as well as the revised water rates due to the groundwater
analysis prepared by District staff to the City Council. The District presented several
scenarios that they felt justified a lower rate for agricultural customers. The first was
regarding treatment costs, stating that agricultural customers don't require treated
water. The second scenario was regarding certain revenue sources that the District felt
could subsidize agricultural rates over a certain period of time. The third was regarding
interruptibility of service. The District explained that during certain periods of peak
demand they may be able to receive reduced water rates from imported water
purveyors, particularly Calleguas, provided agricultural service is designated as
interruptible. However, it was not clear which water rates were going to be
recommended to the Ventura County Board of Supervisors (Board) during the Board
meeting on February 28, 2107.
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Staff believes that the scenarios presented by the District were not substantiated for
several reasons. First, all water is treated and the supply cannot be separated to
different customers. Second, the allocation of unrestricted revenue sources to
subsidize agricultural users is a violation of Proposition 218 proportionality requirement.
If non-rate payer revenue sources are applied to discount the rates charged to one
class of users but not others, then the District is necessarily charging non-agricultural
users a disproportionate share of the District's total revenue needs. And lastly,
interruptibility is a paper policy that does not currently translate into actual cost savings.
On February 28, 2017 staff submitted a Letter of Protest (LOP) to the Board for their
consideration, as the District recommended to the Board the District's preferred
scenario which included the lower water rate for agricultural users. The LOP submitted
by the City stated that the City supported the original rate structure originally
recommended in the study prepared by Raftelis, and expressed the City's concerns
regarding the Distict's alternative scenario that favored agricultural users, particularly
the fact that M&I customers would need to subsidize agricultural rates and that the
scenario presented by the District was not defensible under Prop 218 for the various
reasons discussed above. The Board seemed receptive to the City's concerns and
deferred a decision on the water rates to a future Board meeting.
The Board meeting was deferred to the March 14, 2017. During the meeting staff
resubmitted the LOP to the Board and discussed the City's concerns regarding the
proposed water rates by the District. The Board was not receptive to the City's
concerns and approved the District's water rate proposal, which provided a reduced rate
to agricultural users. The agricultural rate approved by the Board was $2.58/HCF,
which was a 33% reduction in the agricultural rates recommended by Raftelis. The rate
recommended by Raftelis was $3.86/HCF.
Staff met with the County Supervisor Foy and District staff to discuss the City's
concerns and to determine a plan moving forward. It appeared to staff that there was a
genuine understanding that a solution needed to be determined regarding agricultural
rates and a future plan needed to be developed to increase the rates over a period of
time, and make whole the 33% difference in the rate discrepancy. Based on several
conversations during these meetings, staff was under the impression that the District
would prepare a long range plan and meet with City staff prior to the 2017 deadline to
post the Prop 218 Notice and associated Board meeting.
In order to memorialize the City's commitment to determine a solution to this matter, on
May 9, 2017 the District entered into a Tolling Agreement (Agreement) with the City of
Moorpark. The Tolling Agreement will expire on or before March 24, 2018.
DISCUSSION
On October 11, 2017 staff met with Michaela Brown, Director of Ventura County Water
District regarding the District's 2018 Water Rate Proposal. The District provided City
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staff with a copy of the proposal one day prior to the CAC meeting that was scheduled
on October 12, 2017. The District's proposal included a 7% increase for M&I customers
and a 15% rate increase for agricultural customers. As mentioned previously, the
District recommended, and the Board approved, a 33% reduction in agricultural rates for
2017, as compared to the water rates recommended by Raftelis. The additional
increase for agricultural customers recommended in the 2018 proposal was an attempt
to make agricultural rates whole and to catch up with the overall reduction approved by
the Board. However, at this rate, it would take ten years for agricultural rates to catch
up with the Raftelis recommendation.
Staff prepared a letter (attached), and met with the CAC on October 12, 2017. Staff
requested that the CAC and District staff propose a higher rate for agricultural
customers in the Prop 218 Notice. City staff requested that the District and the CAC
Notice an agricultural adjustment that would make agricultural customers whole with the
rate structure recommended by Raftelis over a seven year period. Staff felt this was a
reasonable compromise, as the ten year payback proposed by the District would require
a subsidy to agricultural customers, from M&I customers, for an excessive period of
time. Staff also made this recommendation so that staff and the City Council would
have time to evaluate all water rate options prior to the Board meeting in
December. The final water rate proposal adopted by the Board can be lower than the
rates in the Prop 218 notice, but not higher. The CAC agreed with staffs
recommendation and made a motion as such.
On October 26, 2017 the District mailed the Notice of proposed water rates for 2018 to
District customers. The Notice did not include the higher rate (7 years, not 10 years) for
agricultural customers as requested by staff, and as recommended by the CAC. The
2018 rates presented by the District are as follows:
Residential Current Rates Proposed Rates 2018
Tier 1 (0-10 HCF) $3.20 $3.43
Tier 2 (>10-25 HCF) $3.83 $4.10
Tier 3 (>25 HCF) $4.40 $4.71
Residential Non-Tiered $3.92 $4.20
Residential Multi-Family $3.39 $3.63
Commercial $3.67 $3.93
Agricultural $2.58 $2.97
Industrial $3.44 $3.69
Institutional $4.12 $4.41
Temporary Constructions $5.22 $5.59
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FISCAL IMPACT
As discussed previously, this represents an average 7% increase for M&I users and
15% increase for agricultural customers. At this rate, agricultural rates would reach the
rate developed by Raftelis, which is justifiable under Prop 218, in approximately ten
years, and M&I customers would continue to pay more than the Prop 218 justified rate
for the next ten years. This means that M&I customers would pay more than their fair
share of water costs, which is not supported under Prop 218, during the next ten year
period.
STAFF RECOMMENDATION
Direct staff as deemed appropriate.
Attachment: Letter to Ventura County Water and Sanitation Department
•
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F°P / =9 CITY OF MOORPARK
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v�w ��, PARKS,RECREATION&COMMUNITY SERVICES DEPT. 1 799 Moorpark Avenue,Moorpark,CA 93021
Main City Phone Number(805)517-6200 I Fax(805)532-2550 1 moorpark@moorparkca.gov
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October
3vy ^ moorpark@moorparkca.gov
12, 2017
Ms. Michaela Brown, Director
Ventura County Water and Sanitation Department
Ventura County Waterworks District No. 1
6767 Spring Road
Moorpark, California 93021
Subject: 2018 Water Rate Proposal
Dear Ms. Brown:
Thank you very much for meeting with City staff yesterday to discuss the water rate increases
proposed by Ventura County Waterworks District No.1 (District) for the 2018 calendar year.
We understand that due to increases in operating costs, the District is proposing a Commodity
Adjustment resulting in a 7% increase for all M&I customers, and an Agricultural Adjustment
resulting in a 15% increase for all agricultural customers. The reason behind the additional
increase in agricultural rates is to make up a percentage of the 33% rate reduction offered to
agricultural customers in 2017. As demonstrated in the five-year projection that was presented
to City staff, the proposed annual rate increase for agricultural customers would take
approximately ten years to catch up with the rate structure proposed by Raftelis Financial
Consultants (Raftelis) in their final report dated December 7, 2016.
As we discussed, the City feels that there should be an additional analysis prepared by the
District to demonstrate the impacts to agricultural customers where the water rate deficiency is
made whole over a five-year period, and another analysis to show this over a seven-year
' period. However, we understand that due to timing, and the provisions of Proposition 218, the
District intends to mail the proposal to District customers by October 26, 2017 in order to
present the proposal to the County Board of Supervisors (Board) on December 12, 2017. Due
to the timing of this process, City staff will not have time tc update the City Council on the rate
increases before the Prop 218 notice has been posted. Therefore, the City is requesting that
the District recommend to the Citizen's Advisory Committee during their October 12, 2017
meeting an Agricultural Adjustment that would make agricultural customers whole with the rate
structure recommended by Raftelis over a seven-year period. This would allow the District the
ability to present a final Water Rate Proposal to the Board that is equal to, or lower than the
rate structure filed under Prop 218, and will also allow time for the Moorpark City Council to
heat the District's proposal and comment as appropriate.
JANICE S.PARVIN ROSEANN MIKOS,Ph.D. KEITH F.MILLHOUSE DAVID POLLOCK MARK VAN DAM
Mayor Councilmember Councilmember Councilmember Councilmember 3 0
Michaela Brown
October 12, 2017
Page 2
Thank you for your consideration.
Sincerely,
1
1
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J.-re y Laurentowski
Parks and Recreation Director
City of Moorpark
CC: Peter Foy, Supervisor, County of Ventura
Citizen's Advisory Committee
City Council, City of Moorpark
Steven Kueny, City Manager, City of Moorpark
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