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FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
November 14, 2017
Agenda Item No. 3
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
George Murdoch, Municipal Operations Director - 949-644-3011,
gmurdoch@newportbeachca.gov
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst
jrosenbaum(a)-newportbeachca.gov
PHONE: 949-644-3057
TITLE: Resolution to Amend Recycled Water Commodity Charge
ABSTRACT:
The City of Newport Beach (City) provides non -potable (recycled) water for irrigation of
parks, schools, center medians, and golf courses. The City purchases recycled water
from the Orange County Water District (OCWD) through the Green Acres Project.
The Commodity charge is one component of the recycled water rate the City charges its
customers. The Commodity charge (price per HCF or billing unit) is a direct reflection of
what the City pays OCWD for recycled water.
Municipal Code NBMC 14.13.010 states that if the City's cost of recycled water increases
by more than the projected rate to purchase water from OCWD, the commodity charge
will be adjusted annually to reflect the City's cost to purchase water form OCWD.
OCWD has increased the rate higher than the established rates projected. In compliance
with our municipal code, staff recommends the City's recycled commodity charge be
adjusted to cover the actual cost the City pays OCWD. The proposed rates are described
in the discussion section below.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Adopt Resolution No. 2017-69, A Resolution of the City Council of the City of Newport
Beach, California, Amending the Recycled Water Commodity Charge Effective
January 1, 2018.
3-1
Resolution to Amend Recycled Water Commodity Charge
November 14, 2017
Page 2
FUNDING REQUIREMENTS:
There are no funding requirements to implement the adjusted recycled water rate;
however, this action will change the recycled water commodity charge currently assessed
to users of recycled water.
DISCUSSION:
The City of Newport Beach (City) provides non -potable (recycled) water for irrigation of
parks, schools, center medians, and golf courses. The City purchases recycled water
from the Orange County Water District (OCWD) through the Green Acres Project.
The City retained the services of HF&H Consultants (HF&H) to conduct a recycled water
rate study in 2013 and presented the findings to the Finance Committee and City Council
in 2014. Following a Proposition 218 notice period and public hearing on August 12, 2014,
the City Council introduced Ordinance No. 2014-13 amending the NBMC adding Section
14.13 Recycled Water Rates Established.
On September 9, 2014, the City Council conducted a second reading of the ordinance
and adopted Resolution No. 2014-78 setting new recycled water rates over a five-year
period. The rates are a combination of fixed charges to cover operations and maintenance
costs of the system, a pump station charge for operations and maintenance of the City
owned pump stations and a commodity (price per HCF or billing unit) charge that is the
actual cost the City pays OCWD for recycled water.
The rates were first adjusted in 2015 and scheduled to increase every year for a five-year
period ending with in 2019. Table 1 below is the current rates established by Resolution
2014-78.
Table 1 Current Monthly Recycled Water Charges
Fixed Charge
Meter Size 2014
2015
2016
2017
2018
2019
5/8" or 3/4" $13.82
$18.91
$19.29
$19.68
$20.07
$20.47
1" $23.03
$31.53
$32.16
$32.80
$33.46
$34.13
1 '/2" $46.06
$63.05
$64.32
$65.60
$66.91
$68.25
2" $73.70
$100.88
$102.90
$104.95
$107.05
$109.19
3" $138.18
$189.15
$192.94
$196.80
$200.73
$204.75
4" $230.30
$315.25
$321.56
$327.99
$334.55
$341.24
6" $460.61
$630.50
$643.11
$655.98
$669.10
$682.48
8" $736.98
$1,008.81
$1,028.99
$1,049.57
$1,070.56
$1,091.97
Commodity Charge
Per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93
Pump Station Charge
Per HCF none $0.36 $0.37 $0.38 $0.38 $0.39
3-2
Resolution to Amend Recycled Water Commodity Charge
November 14, 2017
Page 3
On June 27, 2017, the City and OCWD entered into a new Agreement related to the City's
purchase and distribution of recycled water from OCWD. This Agreement establishes the
distribution, purchase price, water quality, operating obligations, and rules related to the
purchase and distribution of recycled water from OCWD. Furthermore, the Agreement
allows OCWD to establish fees in accordance to their true cost to provide
reclaimed/recycled water.
Municipal Code NBMC 14.13.010 states that if the City's cost of recycled water increases
by more than the projected rate to purchase water from OCWD, the commodity charge
will be adjusted annually to reflect the City's cost to purchase water from OCWD.
Currently, the City collects from our customers $0.89 per HCF (1 HCF = 748 gallons)
which equals $387.71 dollars per Acre -Foot (AF) of revenue. Prior to July 1, 2017, OCWD
set its rate to $478.40 per AF. This is higher than the anticipated $387.71 per AF used in
our rate study.
On May 31, 2017, the City, as well as all GAP recycled water retailers, received a letter
from OCWD notifying us that the wholesale rate would be increasing from $478.40 per
Acre -Foot (AF) to $738.00 per AF effective July 1, 2017. In order to pay for this significant
increase, the City will need to increase the commodity rate to $1.69 per HCF. This number
is established by the following conversions and equation: 1 Acre -Foot (AF) = 43,560
Cubic Feet (FT3), 100 FT3 = 1 Hundred Cubic Feet (HCF) therefore: $738 / 43,560 FT3 x
100 = $1.69/HCF.
The fixed charges as well as the pump station charge are proposed to remain the same.
Table 2 reflects the proposed changes which recovers 100 percent of the actual cost the
City pays OCWD for recycled water for the calendar year 2018. It is anticipated that
OCWD may increase their rates again in 2019 at which time staff will bring the item back
to Council for a recommended change if needed.
Table 2 Proposed Monthly Recycled Water Charges
Fixed Charge
Meter Size 2014
2015
2016
2017
2018
2019
5/8" or 3/4" $13.82
$18.91
$19.29
$19.68
$20.07
$20.47
1" $23.03
$31.53
$32.16
$32.80
$33.46
$34.13
1 '/2" $46.06
$63.05
$64.32
$65.60
$66.91
$68.25
2" $73.70
$100.88
$102.90
$104.95
$107.05
$109.19
3" $138.18
$189.15
$192.94
$196.80
$200.73
$204.75
4" $230.30
$315.25
$321.56
$327.99
$334.55
$341.24
6" $460.61
$630.50
$643.11
$655.98
$669.10
$682.48
8" $736.98
$1,008.81
$1,028.99
$1,049.57
$1,070.56
$1,091.97
Commodity Charge
Per HCF $2.46 $0.86 $0.87 $1.69 $1.69 $1.69
Pump Station Charge
Per HCF I none $0.36 $0.37 $0.38 $0.38 $0.39
3-3
Resolution to Amend Recycled Water Commodity Charge
November 14, 2017
Page 4
If City Council approves of the increase, then staff will provide thirty days' notice of the
increase to the recycled water rate payers in compliance with California Government
Code Section 53756. Rates will be effective January 1, 2018.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — Resolution No. 2017-69
Attachment B — OCWD Letter to the City — Intent to Increase Recycled Water Charges
3-4
ATTACHMENT A
RESOLUTION NO. 2017-69
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, AMENDING THE
RECYCLED WATER COMMODITY CHARGE EFFECTIVE
JANUARY 1, 2018
WHEREAS, Newport Beach Municipal Code ("NBMC") Section 3.36.030(A)
provides that the cost recovery percentage for most user fee services shall be one
hundred percent (100%), with the exception of the user services listed therein and those
services for which the fee is limited by statute. NBMC Section 3.36.030(C) provides that
the City Council may amend the amount of any fee or charge for, and the actual cost of
providing, any user service upon a determination that there has been an increase or
decrease in one or more of the cost factors relevant to the calculation of the actual cost
of providing the service;
WHEREAS, on September 9, 2014, City Council adopted Ordinance No. 2014-13
adding Chapter 14.13 to the NBMC and establishing recycled water rates. NBMC Section
14.13.010 provides that the City of Newport Beach ("City") will charge and collect a
monthly fixed recycled water service charge, a monthly per-unit commodity charge for
each meter, and a monthly pump station charge from each customer who receives
recycled water by means of a pump station and allows for any or all of such charges to
be effective January 1St of each year and be charged according to the fee schedule
adopted by resolution of the City Council;
WHEREAS, pursuant to Subsection (B) of NBMC Section 14.13.010, the monthly
commodity charge recovers the City's cost to purchase recycled water from the Orange
County Water District ("OCWD") and, if the City's cost of recycled water increases by
more than the projected rate to purchase recycled water from OCWD, the commodity
charge will be adjusted annually to reflect the City's cost to purchase recycled water from
OCWD;
WHEREAS, pursuant to Resolution No. 2014-78, the City Council adopted a fee
schedule for the City's recycled water rates, incorporated the recycled water rate
schedule into the City's master fee schedule, now referred to as the Schedule of Rates,
Fines, and Fees, and resolved that the recycled water rates shall be updated in January
of each year pursuant to the annual fee schedule attached to Resolution No. 2014-78;
WHEREAS, on June 27, 2017, the City Council approved an agreement between
the City and OCWD which established the distribution, purchase price, water quality,
operating obligations, and rules related to the purchase and distribution of reclaimed
(recycled) water from OCWD as part of OCWD's Green Acres Project ("GAP
Agreement");
WHEREAS, the GAP Agreement allows OCWD to sell the City recycled water for
an amount equal to OCWD's cost of producing and distributing Green Acres Project
water;
3-5
Resolution No. 2017 -
Page 2 of 4
WHEREAS, in a letter to the City from OCWD dated May 31, 2017, OCWD
informed that City that, for the period commencing July 1, 2017, OCWD's cost of
producing and distributing Green Acres Project water to the City is $738 per acre-foot;
WHEREAS, the significant increase (from $478.40 per acre-foot to $738 per acre-
foot as of July 1, 2017) in City's cost to purchase recycled water from OCWD requires a
comparable increase in City's recycled water commodity charge to offset OCWD's
increased cost of providing recycled water to the City;
WHEREAS, pursuant to Subsection (B) of NBMC Section 14.13.010, the City is
authorized to pass-through the effects of this increase charged by OCWD through an
adjustment to the commodity charge rate to be charged to its recycled water customers;
WHEREAS, in 2014, the City conducted the majority protest hearing on its
recycled water fees as required by California Constitution, article XIII D, section 6
(Proposition 218), no majority protest was lodged, the rates the City Council then adopted
included the requirement of Subsection (B) of NBMC section 14.13.010 to pass-through
to customers increases in the City's cost of water from OCWD as authorized by
Government Code section 53756 and, accordingly, no further protest proceeding is
required at this time; and
WHEREAS, by adopting this resolution, the City Council intends to amend the
recycled water commodity charge effective January 1, 2018 by adopting the fee schedule
attached hereto as Exhibit A and incorporated herein by this reference. The City's other
recycled water rates (fixed charge and pump station charge) are restated in Exhibit A, but
remain unchanged.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: The City Council hereby adopts the fee schedule attached hereto as
Exhibit A and incorporated herein by this reference and amends the recycled water
commodity charge effective January 1, 2018. The recycled water rates shall be updated
in January of each year pursuant to the schedule set forth in Exhibit A. The City Council
directs staff to include the recycled water rates in Exhibit A within the City's Schedule of
Rates, Fees, and Fines or other successor document and adjust the recycled water rates
each January consistent with Exhibit A.
Section 2: Resolution No. 2017-14 is hereby rescinded.
Section 3: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
Section 4: If any section, subsection, sentence, clause or phrase of this resolution
is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the
validity or constitutionality of the remaining portions of this resolution. The City Council
Resolution No. 201.7 -
Page 3 of 4
hereby declares that it would have passed this resolution, and each section, subsection,
sentence, clause or phrase hereof, irrespective of the fact that any one or more sections,
subsections, sentences, clauses or phrases be declared invalid or unconstitutional.
Section 5: The City Council finds the adoption of this resolution is not subject to
the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the
activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it
has no potential for resulting in physical change to the environment, directly or indirectly.
Section 6: This resolution shall take effect immediately upon its adoption by the
City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 14th day of November 2017.
Kevin Muldoon
Mayor
ATTEST:
Leilani I. Brown
City Clerk
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Aaron C. Harp d""�`3••t�
City Attorney
Attachment: Exhibit A — Recycled Water Commodity Charge Rate Tables
3-7
Resolution No. 2017 -
Page 4 of 4
Exhibit A
Current Monthly Recycled Water Charges
Fixed Charae
Meter
Size
2014
2015
2016
2017
2018
2019
314'18" or
$13.82
$18.91
$19.29
$19.68
$20.07
$20.47
1"
$23.03
$31.53
$32.16
$32.80
$33.46
$34.13
1 '/2"
$46.06
$63.05
$64.32
$65.60
$66.91
$68.25
2"
$73.70
$100.88
$102.90
$104.95
$107.05
$109.19
3"
$138.18
$189.15
$192.94
$196.80
$200.73
$204.75
4"
$230.30
$315.25
$321.56
$327.99
$334.55
$341.24
6"
$460.61
$630.50
$643.11
$655.98
$669.10
$682.48
8"
$736.98
$1,008.81
$1,028.99
$1,049.57
$1,070.56
$1,091.97
Commodity Charge
Per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93
Pump Station Charge
Per HCF none $0.36 $0.37 $0.38 $0.38 $0.39
Proposed Monthly Recycled Water Charges
Fixed Charge
Meter
Size
2014
2015
2016
2017
2018
2019
518" or
314"
$13.82
$18.91
$19.29
$19.68
$20.07
$20.47
1"
$23.03
$31.53
$32.16
$32.80
$33.46
$34.13
1 '/z"
$46.06
$63.05
$64.32
$65.60
$66.91
$68.25
2"
$73.70 .
$100.88
$102.90
$104.95
$107.05
$109.19
3"
$138.18
$189.15
$192.94
$196.80
$200.73
$204.75
4"
$230.30
$315.25
$321.56
$327.99
$334.55
$341.24
6"
$460.61
$630.50
$643.11
$655.98
$669.10
$682.48
8"
$736.98
$1,008.81
$1,028.99
$1,049.57
$1,070.56
$1,091.97
Commodity Charge
Per HCF 1 $2.46 $0.86 $0.87 $1.69 $1.69 $1.69
Pump Station Charge
Per HCF I none $0.36 $0.37 $0.38 $0.38 $0.39
3-8
ATTACHMENT B
PHILIP L. ANTHONY
DENIS R. 811,93DEAU, P.E.
SHAWXDEH'ANE i� V
CATHY GREEN
DIVA NGUYE14
VICENM SARtNIENTO
STEPHEN R_SHELDON SINCE 1973
JAMES yAHpERBILT
GRUCEWHITANER ORANGE COUNTY WATER DISTRICT
ROGER C. YOH, R
O Fi4fY0E COUfVTY'8 OgOUNOWATSR AUTNOpfTY
May 31,2017
CITY OF NEWPORT BEACH
MUNICIPAL OPERATIONS DEPT.
ATTN: Mr. George Murdoch
Utilities General Manager
100 Civic Center Drive
Newport Beach, CA 92660
Subject: 2017-2018 GREEN ACRES PROJECT WHOLESALE WATER RATE
Dear Mr. Murdoch:
COMM
President
DENIS R. BiLDDEAU, P.E.
FrstYice President
PHILIP L. ANTHONY
Seeond Vice President
SHAWN DEWANE
General Manager
MICHAEL R. MARKUS. P.E., O.P
This letter is to inform you of the Green Acres Project Wholesale Water rate for 2017-2018
(period July 1, 2017 through June 30, 2018).
For project water served to water customers of the City of Newport Beach (City), City shall
purchase the Project Water from OCWD, at the point of its metered connection, for an amount
equal to OCWD's cost of producing and distributing Project Water based on the methodology
set forth in Exhibit D (attached), as determined by OCWD after consultation with the Operating
Group defined in Paragraph 3.3
Paragraph 3.33.3 of the Green Acres Project water agreement between City and OCWD, staff
representatives of OCWD, City, and other retail agencies participating in the Green Acres
Project shall form an "Operating Group" to meet at least once prior to the annual publishing of
the revised Exhibit D by OCWD.
The wholesale project water pricing, effective July 1, 2017 is: ,S738.00/af
Should you have any questions, please contact Joanne Goco at (714) 378-3306.
Very truly yours,
Randy Fick
CF'OlTreasurcr
Attachment
cc: Chris Auger, Water System Services Supervisor
File
M O `5
M
Exhibit D: OCWD Unit Price Calculation Project Water Sold to RETAILER
Revisions to Exhibit D by OCWD do not require an amendment to this Agreement.
Fiscal Year 2015-2016 calculation listed below. This unit price shall be effective for Fiscal Year 2017-2018.
Previous fiscal year operational
and maintenance cost to operate,
treat, and distribute Product
Water (Electricity, Chemicals,
Labor, Maintenance, Testing, +
Utility Location Services,
Replenishment Assessment Value
of Deep Well Blending Water)
$1,173,230.46
Previous fiscal year Repair
and Rehabilitation Fund
contribution for Project
Facilities. This figure may be
periodically reviewed and
adjusted by OCWD Board as
necessary
$936,678.00
Debt service payments.
This figure may vary as
terms for loans, certificates
of participation, and other
+ Project Facilities financing
change. Smoothing may
occur to avoid sudden
increases to this figure
$980,296.67
Previous fiscal year Project Water in acre-feet
4,186.09
Estimated future fiscal year rates provided for planning purposes only
implementation.
FY 2018-19: $778 per acre foot
FY 2019-20: $769 per acre foot
FY 2020-21: $741 per acre foot
FY 2021-22: $761 per acre foot
FY 2022-23: $782 per acre foot
_ $738
per acre
foot
Rates are subject to substantive change prior to
3-10