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c�<,FORN'P City Council Staff Report
December 11, 2018
Agenda Item No. 6
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Mark Vukojevic, Utilities Director - 949-644-3011,
mvukojevic@newportbeachca.gov
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst,
jrosenbaum@newportbeachca.gov
PHONE: 949-644-3057
TITLE: Resolution to Amend the 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 (GAP).
The use of recycled water curtails potable water use and is less expensive for the seven
users in the City.
The commodity charge is one component of the recycled water rate the City charges its
customers and is a direct reflection of what the City pays OCWD for recycled water.
Newport Beach Municipal Code (NBMC) 14.13.010 states that the commodity charge will
be adjusted annually on January 1 to reflect the City's cost to purchase water from
OCWD.
OCWD increased the cost to purchase recycled water on July 1, 2018. In compliance with
the municipal code, staff recommends the City's recycled commodity charge be adjusted
to cover the actual cost the City pays OCWD.
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. 2018-82, A Resolution of the City Council of the City of Newport
Beach, California, Amending the Recycled Water Commodity Charge Effective
February 1, 2019.
6-1
Resolution to Amend the Recycled Water Commodity Charge
December 11, 2018
Page 2
FUNDING REQUIREMENTS:
The revenue and expenditures for the recycled water commodity costs will increase by
approximately $56,000 per year.
DISCUSSION:
The City of Newport Beach (City) provides non -potable (recycled) water for irrigation of
parks, schools, center medians, and golf courses. Currently there are seven users of
recycled water in the City. The City purchases recycled water from the Orange County
Water District (OCWD) through the Green Acres Project (GAP).
In 2013, the City conducted a recycled water rate study 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 Newport Beach Municipal Code (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 covering operations and maintenance of the
system, a pump station charge from each customer receiving water by means of a pump
station, and a commodity charge recovering the City's cost to purchase recycled water
from OCWD. 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 on January 1 to reflect the City's cost to purchase water from
OCWD.
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.
Currently, the City charges $1.69 per Hundred Cubic Foot (HCF) (1 HCF = 748 gallons),
which equals $736.21 dollars per Acre -Foot (AF). The OCWD rate prior to July 1, 2018
was $738.00 per AF. On March 20, 2018, 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 $738.00 per Acre -Foot (AF) to $838.00 per AF effective July 1, 2018. This
requires the commodity rate to increase to $1.92 per HCF. This number is established by
the following conversions and equation: 1 Acre -Foot (AF) = 43,560 Cubic Feet (FT3), 100
FT3 = 1 HCF, therefore: $838 / 43,560 FT3 x 100 = $1.92/HCF. Recycled water remains
significantly less expensive for users when compared to potable water, which is
$3.08/HCF.
6-2
Resolution to Amend the Recycled Water Commodity Charge
December 11, 2018
Page 3
The fixed charges as well as the pump station charge rates will adjust as originally
approved in 2014. The table below reflects the proposed changes for calendar year 2019.
Staff anticipates that a new recycled water rate study may be needed next year and would
bring the item back to Council through a new Proposition 218 process for a recommended
change if needed.
Table: 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 1
$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 $0.89 $1.69 $1.92
Pump Station Charge
Per HCF I none $0.36 $0.37 $0.38 $0.38
If City Council approves of the increase, staff will then provide thirty days' notice of the
increase to the seven recycled water rate payers in compliance with California
Government Code Section 53756. Rates will be effective February 1, 2019 rather than
January 1, 2019.
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). In accordance with Gov. Code
53756, after the fee schedule is adopted, the City will provide 30 -day written notice to all
users affected prior to the effective date. As a courtesy, all users have also been notified
of this City Council meeting.
ATTACHMENTS:
Attachment A - Resolution No. 2018-82
Attachment B - OCWD Letter to the City - Intent to Increase Recycled Water Charges
6-3
ATTACHMENT A
RESOLUTION NO. 2018- 82
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH, CALIFORNIA, AMENDING THE
RECYCLED WATER COMMODITY CHARGE EFFECTIVE
FEBRUARY 1, 2019
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 theservice;
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 NBMC Section 14.13.010(B), the monthly commodity
charge recovers the City's cost to purchase recycled waterfrom 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 waterfor
an amount equal to OCWD's cost of producing and distributing Green Acres Project
water;
0
Resolution No. 2018 -
Page 2 of 3
WHEREAS, after the City received a notification letter from OCWD on May 31,
2017, about the increase in recycled water rates from $478.40 per acre foot to $738.00
per acre foot of recycled water, the City Council adopted Resolution No. 2017-69 which
adjusted the City's recycled water commodity rate from $0.89 per hundred cubic feet
("HCF") to $1.69 per HCF, effective January 1, 2018;
WHEREAS, in a letter to the City from OCWD dated March 20, 2018, OCWD
informed that City that, for the period commencing July 1, 2018, OCWD's cost of
producing and distributing Green Acres Project water to the City is $838.00 per acre foot;
WHEREAS, the increase (from $738.00 per acre foot to $838.00 per acre foot as
of July 1, 2018) 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 NBMC Section 14.13.010(B), 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 NBMC section 14.13.010(B) 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 February 1, 2019, 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 does hereby adopt the proposed monthly -recycled
water charges fee schedule attached hereto as Exhibit A, and incorporated herein by this
reference and amends the monthly -recycled water commodity charge for 2019, which
shall become effective February 1, 2019. The recycled water commodity charge through
January 31, 2019, shall be the proposed recycled monthly -water commodity charge set
forth in Exhibit A for 2018 and the recycled water commodity charge effective February
1, 2019, shall be the proposed monthly -recycled water charge for 2019 set forth in Exhibit
A. The recycled water rates shall be updated as early as January of each year pursuant
to the schedule set forth in Exhibit A. The City Council directs staff to include the
proposed monthly -recycled water rates in Exhibit A within the City's Schedule of Rates,
6-5
Resolution No. 2018 -
Page 3 of 3
Fees, and Fines or other successor document and adjust the recycled water rates
consistent with Exhibit A.
Section 2: Resolution No. 2017-69 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
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 11th day of December 2018.
Marshall "Duffy" Duffield
Mayor
ATTEST:
Leilani I. Brown
City Clerk
APPROVED AS TO FORM:
CI ATTORNEY'S OFFICE
C,
Aaron C. Harp
City Attorney
Attachment: Exhibit A — Recycled Water Commodity Charge Rate Tables
0=0
Current (2018) 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"
1 $460.61
1 $630.50
1 $643.11
1 $655.98
1 $669.10 1
$682.48
8"
1 $736.98
1 $1,008.81
1 $1,028.99
1 $1,049.57
1 $1,070.56 1
$1,091.97
Commodity Charge
Per HCF $2.46 $0.86 $0.87 $0.89 $1.69
Pump Station Charge
Per HCF none $0.36 $0.37 $0.38 $0.38 $0.39
Proposed Monthly Recycled Water Charges
(2018 charges effective through January 31, 2019 - 2019 charges effective February 1, 2019)
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 '/3"
$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
1 $315.25
$321.56
1 $327.99
1 $334.55 1
$341.24
6"
$460.61
1 $630.50
$643.11
1 $655.98
1 $669.10 1
$682.48
8"
$736.98
1 $1,008.81
$1,028.99
1 $1,049.57
1 $1,070.56 1
$1,091.97
Commodity Charge
Per HCF 1 $2.46 $0.86 $0.87 $0.89 $1.69 $1.92
Pump Station Charge
Per HCF I none $0.36 $0.37 $0.38 $0.38
6-7
Directors
PHILIP L. ANTHONY
DENIS R. BILODEAU, P.E. 1
SHAWN DEWANE
CATHY GREEN
DINA NGUYEN
VICENTE SARMIENTO
STEPHEN R.SHELDON
JAMES VANDERBILT
BRUCE WHITAKER ORANGE COUNTY WATER DISTRICT
ROGER C. YOH. P.E. Orange County's Groundwater Authority
March 20, 2018
Mr. Steffen Catron
Director of Municipal Operation — Utilities
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92658
RE; Green Acres Project (GAP) Fiscal Year 2098-19 Sales Rate
Dear Steffen,
ATTACHMENT B
Officers
President
DENIS R. BILODEAU, P.E.
First Vice President
PHILIP L. ANTHONY
Second Vice President
SHAWN DEWANE
General Manager
MICHAEL R. MARKUS, P.E., D.WRE
In accordance with sections 3.2 and 3.3 of the "Agreement between Orange County Water
District and City of Newport Beach Regarding Distribution and Sale of Green Acres Project
Water" entered into as of July 1, 2017, please find enclosed a copy of the revised "Exhibit D-.
OCWD Unit Price Calculation for Project Water Sold to RETAILER" applicable to the upcoming
2018-19 fiscal year. The Operating Group, defined in section 3.3, met on March 12, 2018 to
discuss pertinent GAP subjects. The GAP sales rate of $838 per acre foot will become effective
on July 1, 2018.
Also enclosed you will find a summary of the GAP product water quality measurements taken
during the 2016 and 2017 calendar years.
Sincerely,
Ben Smith, P.E.
Engineer
714-378-3211
bsmith �ocwd.com
Enclosures-.
• FY 2018-19 "Exhibit D- OCWD Unit Price Calculation for Project Water Sold to RETAILER"
• Calendar Years 2016 and 2017 "Treated Water Quality for Station GA-HPEPBLEND"
.:
Exhibit D: OCWD Unit Price Calculation for Project Water Sold to RETAILER
Revisions to Exhibit D by OCWD do not require an amendment to this Agreement.
Fiscal Year 2016-2017 calculation listed below. This unit price shall be effective for Fiscal Year (FY) 2018-2019.
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)
$1,259,860.21
Previous fiscal year Repair
and Rehabilitation Fund
contribution for Project
Facilities. This figure may be
periodically reviewed and
adjusted by OCWD Board as
necessary
$1,002,245.00
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
$981,844.98*
Previous fiscal year Project Water in acre-feet
3,870.65
Estimated future fiscal year rates provided for planning purposes only. Rates are subject to substantive change prior to
implementation.
FY 2019-20: $863* per acre foot
FY 2020-21: $828 per acre foot
FY 2021-22: $859 per acre foot
FY 2022-23: $892 per acre foot
FY 2023-24: $927 per acre foot
$838*
per acre
foot
* In order to smooth rate increases, $50,000 of the State Loan debt repayment has been removed from the calculation of the effective
unit price for FY 2018-19 and will be applied to the calculation of the effective unit price for FY 2019-20.