Honorable Mayor and Members of the Hermosa Beach City Council
Regular Meeting of April 26, 2022
Title
APPROVAL OF A RESOLUTION ACCEPTING
THE PRELIMINARY ENGINEER’S REPORT FOR THE
SEWER SERVICE CHARGES AND SETTING A MAJORITY
PROTEST HEARING FOR JULY 12, 2022 SETTING A NEW
INCREASED RATE AND FOR APPROVINGTHE
ANNUAL LEVY OF THE CHARGE
(Public Works Director Joe SanClemente)
Body
Recommended Action:
Recommendation
Staff recommends City Council:
1. Adopt a resolution accepting the Preliminary Engineer’s Report and setting the majority protest public hearing for July 12, 2022 (Attachment 4); and
2. Direct the City Clerk to mail all notices required under Proposition 218 and other applicable state laws.
Body
Executive Summary:
The sewer service charge has been collected since Fiscal Year 2015-16, with an annual Consumer Price Index (CPI) increase capped at two percent for a five-year term. In Fiscal Year 2021-22 the sewer service charge remained the same as the previous year at $126.60 due to the expiration of the five-year term for CPI increases.
To reestablish the CPI increase for the sewer fee for Fiscal Year 2022-23 and future years, a new majority protest public hearing must be held to provide property owners the opportunity to protest the sewer service charge. This report explains the process for the public hearing and the improvements completed with the funds collected from the sewer fees.
Background:
At its June 23, 2015 meeting, City Council approved a resolution adopting the first annual sewer service charge to fund maintenance, operations, servicing, and improvements to the City’s sewer collection system. The sewer service charge for each parcel is based on the direct cost of providing maintenance, operation, servicing, and improvements to the sewer collections system and by water consumption for non-residential users. The fees, collected from parcels, fund the sewer services provided by the City.
At its July 14, 2015 meeting, City Council waived full reading and adopt by title Ordinance No. 15-1355 (Attachment 1), adding a new chapter 13.12 to the Hermosa Beach Municipal Code regarding sewer service charges. As stated in Ordinance 15-1335, the City could increase the sewer service charge each year by the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers in the Los Angeles-Riverside-Orange County, CA area (CPI - W), not to exceed two percent per year for up to five years.
In Fiscal Year 2021-22, the City was outside of the initial 5-year window and therefore did not adjust the sewer service charge by the annual CPI increase. Ordinance 15-1335 states that to continue to increase the sewer service charge, the City may conduct another majority protest hearing to authorize inflation increases for an additional period not to exceed five years.
Following the public hearing process, staff would update section 13.12.010 of the Hermosa Beach Municipal Code regarding charges levied.
Past Council Actions
|
Meeting Date |
Description |
|
June 23, 2015 |
City Council approved a resolution adopting the first annual sewer service charge to fund maintenance, operations, servicing, and improvements to the City’s sewer collection system. |
|
July 14, 2015 |
City Council waived full reading and adopt by title Ordinance No. 15-1355 |
Analysis:
For Fiscal Year 2022-23, staff recommends adding a five percent CPI increase to the sewer fee as suggested by the Preliminary Engineer’s Report. The proposed CPI value is based on the percentage change in CPI since the sewer fee inception. By having capped the CPI at two percent, the City has lost the necessary revenue to keep the City’s sewer system well maintained and to make the necessary repairs as recommended in the Sewer Master Plan.
Table 1 below shows the annual increases in CPI and the actual increase added to the City sewer fee since its inception.
TABLE 1. Actual Sewer Fee Increase versus Consumer Price Index
|
CONSUMER PRICE INDEX Los Angeles Urban Wage Earners and Clerical Workers (CPI-W) |
|
Year Ending |
Percent Change |
Actual Increase |
|
March 2016 |
1.7 |
1.7 |
|
February 2017 |
2.5 |
2 |
|
January 2018 |
3.7 |
2 |
|
January 2019 |
2.9 |
2 |
|
January 2020 |
3.5 |
2 |
|
January 2021 |
1.1 |
0 |
|
January 2022 |
7.6 |
|
Single-family residential units are charged at 1.0 equivalent service units (ESU) per parcel. Multi-family residential units are charged at 0.6 ESU per parcel and condominiums at 1.0 ESU per parcel, as they are similar to single-family residents in use. Vacant parcels of any use are charged 0.5 ESU. For FY 2022-2023 the proposed charge, with a proposed five percent CPI increase, is $132.93 per 1.0 ESU.
Table 2 below compares the resulting sewer service charge rates for residential parcels between FY 2021-22 and FY 2022-23, and the net increase.
Table 2. Residential Parcel Sewer Charges
|
Land Use |
2021-22 Annual Charge (per unit) |
2022-23 Annual Charge (per unit) |
Amount of Annual Increase |
|
Single Family |
$126.60 |
$132.93 |
$6.33 |
|
Condominiums |
$126.60 |
$132.93 |
$6.33 |
|
Multi Family (Charge is per unit) |
$75.96 |
$79.76 |
$3.80 |
|
Vacant Parcels |
$63.30 |
$66.47 |
$3.17 |
A summary of ESUs for residential land-use classes can be found on page 10 of the Engineer’s Report (Attachment 2). For non-residential parcels, the ESU is a function of whether they used more or less water than last year. The ESU for various non-residential land uses is calculated per the following equation:
ESU = commercial water consumption gallons per day (GPD)/260 GPD per single family residential unit (SFRU)
The Engineer’s Report contains detailed information about the annual charge and the charge to be applied to the parcels. Also included in the report is information about the use of revenue, annual increases, and Proposition 218 considerations. Every parcel in the City is subject to the sewer service charge.
A notice of the future public hearing would be published in the Easy Reader prior to the actual meeting and the City Clerk would issue a written notice to property owners a minimum of 45 days in advance. The draft notice is provided as Attachment 3.
The July 12, 2022 public hearing provides an opportunity for the City Council to hear and consider all protests to the annual levy and increase of the sewer service charge. In the absence of a majority protest by property owners within the City of Hermosa Beach, the City Council may authorize the rate increase and order implementation of City sewer service charge as proposed on the attached Engineer’s Report. Similarly, at the July 12, 2022 public hearing if Council finds that protest is made by the property owners of a majority of separate parcels of property described in the Engineer’s Report, then the increase in CPI shall not take place.
If there is an annual increase this fiscal year, the City would be required in future years to notify each property owner in writing of the CPI-W increase at least 30 days before the effective date of the adjustment per State law.
As set forth above, staff recommends City Council adopt a resolution accepting the Engineer’s Report (Attachment 4) and setting the majority protest public hearing for July 12, 2022; and directing the City Clerk to mail all notices required under Proposition 218 and state law for collecting the annual levy on the tax roll.
Update on Sewer Repair Projects
The collected sewer funds are used for the City’s routine sewer cleaning, planned repairs and rehabilitation, and emergency repairs. The City collects an average of approximately $1,100,000 annually from the sewer service charge. Since 2015, the City has spent approximately $415,000 on average for operations/maintenance-including emergency repairs, contracted services for cleaning and video inspections, and personnel. The remainder of the funds are then primarily used to advance design and construction of the recommendations outlined in the Sewer Master Plan.
In FY 2021-22, the City is completing Phase 1 of Capital Improvement Program (CIP) Project 421 (sewer lining & point repairs) at an estimated cost of $478,535. In FY 2022-23, the City will complete Phase 2, which will include 0.8 miles of sewer repair and other point repairs at an estimated cost of approximately $2.5 million and will bring completion up to approximately 39 percent of the recommended improvements per the 2017 Sewer Master Plan.
General Plan Consistency:
This report and associated recommendation have been evaluated for their consistency with the City’s General Plan. Relevant Policies are listed below:
Infrastructure Element
Goal 4. The sewer system infrastructure is modernized and resilient.
Policies:
• 4.1 Sewer system master plan. Ensure that the Sanitary Sewer Master Plan contains an effective and proactive maintenance program that reduces future operation costs.
• 4.3 Service fees. Ensure that allocation of the Sewer Service Charge is efficient and transparent to the public.
Fiscal Impact:
The anticipated total revenue is approximately $1,102, 000, which is included in the 2022-23 Preliminary Budget. The CPI increase of 5 percent for 2022-23 would generate approximately $55,100 in additional revenue.
Attachments:
1. Ordinance 15-1335
2. Preliminary Engineer’s Report
3. Draft notice of Public Hearing and Sewer Charge Increase
4. Resolution Accepting the Preliminary Engineer’s Report and setting the public hearing
5. Link to June 23, 2015 Staff Report
6. Link to July 14, 2015 Staff Report
Respectfully Submitted by: Lucho Rodriguez, Deputy City Engineer
Concur: Joe SanClemente, Public Works Director
Noted for Fiscal Impact: Viki Copeland, Finance Director
Legal Review: Mike Jenkins, City Attorney
Approved: Suja Lowenthal, City Manager