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Finance Committee - June 27, 2019
CITY OF NEWPORT BEACH FINANCE COMMITTEE AGENDA - Final 100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D Thursday, June 27, 2019 - 3:00 PM Finance Committee Members: Will O'Neill, Chair / Mayor Pro Tem Diane Dixon, Mayor Joy Brenner, Council Member William Collopy, Committee Member John Reed, Committee Member Joe Stapleton, Committee Member Larry Tucker, Committee Member Staff Members: Grace K. Leung, City Manager Dan Matusiewicz, Finance Director / Treasurer Steve Montano, Deputy Director, Finance Marlene Burns, Administrative Specialist to the Finance Director The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to comment on agenda items before the Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount of time, generally three (3) minutes per person. The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, we will attempt to accommodate you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3123 or dmatusiewicz@newportbeachca.gov. NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance Department 24 hours prior to the scheduled meeting. I.CALL MEETING TO ORDER II.ROLL CALL III.PUBLIC COMMENTS Public comments are invited on agenda and non-agenda items generally considered to be within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for the record. The Finance Committee has the discretion to extend or shorten the speakers’ time limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a courtesy, please turn cell phones off or set them in the silent mode. June 27, 2019 Page 2 Finance Committee Meeting IV.CONSENT CALENDAR MINUTES OF MAY 30, 2019A. Recommended Action: Approve and file. DRAFT MINUTES 053019 V.CURRENT BUSINESS 2019 WATER RATE STUDYA. Summary: The Utilities Department retained the consulting services of Raftelis Financial Consultants Inc. to prepare the 2019 Water Rate Study. The previous water rate study was completed in 2009 and the last rate increase for water users was in 2014. The purpose of this presentation is to review the preliminary results of the draft water rate study, receive input, and seek the Committee’s direction to move the item to City Council for discussion and approval. Recommended Action: a. Review the water enterprise fund financial analysis and 2019 Draft Water Rate Study information and provide input to staff; b. Forward the item to City Council for discussion and consideration. STAFF REPORT ATTACHMENT A ATTACHMENT B ATTACHMENT C WORK PLAN REVIEWB. Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Receive and file. ATTACHMENT A VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) VII.ADJOURNMENT Finance Committee Meeting Minutes May 30, 2019 Page 1 of 4 CITY OF NEWPORT BEACH FINANCE COMMITTEE MAY 30, 2019 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:01 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660. II. ROLL CALL PRESENT: Mayor Pro Tem/Chair Will O’Neill, Mayor Diane Dixon, Council Member Joy Brenner, Committee Member William Collopy, Committee Member John Reed, Committee Member Joe Stapleton, Committee Member Larry Tucker ABSENT: Committee Member Joy Brenner and Committee Member William Collopy (excused absence) STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Dan Matusiewicz, Finance Deputy Director Steve Montano, Budget Manager/Finance Susan Giangrande, Budget Analyst/Finance Amy Mayfield, Administrative Manager/Fire Angela Crespi, Budget and Payroll Supervisor, Shannon Espinoza, Administrative Manager/Public Works Jamie Copeland and Administrative to the Finance Director Marlene Burns OTHER ENTITIES: None. MEMBERS OF THE PUBLIC: Jim Mosher III. PUBLIC COMMENTS Chair O’Neill opened public comments. Noting there were no other members of the public who elected to speak, Chair O’Neill closed public comments. IV. CONSENT CALENDAR A. MINUTES OF MAY 16, 2019 Recommended Action: Approve and file. MOTION: Committee Member Tucker moved, and Committee Member Reed seconded, to approve the minutes with proposed changes. The motion carried 5 ayes – 0 noes, 2 absences (Brenner, Collopy). V. CURRENT BUSINESS A. RECOMMENDATION OF FY 2019-20 BUDGET Summary: Make final recommendation to the City Council on the proposed FY 2019-20 Operating Budget and or CIP. Recommended Action: Receive and file. Finance Committee Meeting Minutes May 30, 2019 Page 2 of 4 Chair O’Neill introduced the item and noted that the budget review and recommendation process is one of the primary functions of the Finance Committee. He reviewed the budget process and indicated that the City Charter requires the City Manager to propose a budget directly to the City Council. He indicated that the budget is reviewed by the Finance Committee. The Committee makes recommendations to the City Council, which has the final decision in adopting those recommendations. Lastly, he restated that the Finance Committee had convened a number of times to review the budget in detail. Finance Director/Treasurer Dan Matusiewicz advised that one change in the proposed budget is a water charge to City departments. Departments were paying 100% of the commodity rate; however, the former City Manager had recommended a phase-in of the capital charge to departments that, as a result, will have an impact to the General Fund of $204,000. He also noted that there will be a charge to the Water Division of $20,000 but revenues will increase by $224,000. Budget Manager Susan Giangrande advised that there was an increase to the Great Scott Tree Care contract of $90,000. In response to Committee Member Stapleton’s inquiry regarding an increase in Police Officers, Chair O’Neill recommended that the Finance Committee withhold making a recommendation as this is more of a policy issue that is best addressed by the City Council. Chair O’Neill opened public comments. Jim Mosher expressed concern regarding the proposed increase of base wages for City Council by 6%. He requested clarification regarding the figures and the methodology behind those figures including how it impacts the increase on July 1 of each year. He also noted the CPI index the City Charter refers to no longer exists. Mr. Mosher also expressed concern regarding the ratio established between the Mayor’s base wage and that of other City Council Members. He advised the ratio set by the City Charter is 1.419% and this year’s budget in regards to that ratio is off by about $500 or $600. Mr. Mosher expressed concern regarding the City Manager’s Economic Development Program which has no salaries listed but does have expenses listed within Supplies and Materials. He noted that in a recent City Council meeting, there was a discussion of spending $80,000 from that line item for Business Improvements Districts, but would like clarity on the remaining $345,000. Chair O’Neill closed public comments. Chair O’Neill clarified City Council compensation for the last fiscal year should have reflected 4%, but inadvertently reflected 0% and this year’s increase was 2%. Budget Manager Giangrande noted that she spoke with the City Attorney and the CPI Index being used is for Los Angeles-Long Beach-Anaheim and the name has simply changed. Finance Director/Treasurer Matusiewicz clarified that Supplies and Materials is a category code and within it is an object code called Special Departmental Expense, which is being used for “catch-all” items. City Manager Leung noted that more object codes can be added and of the $425,000, the largest item of $255,000 is earmarked for the Special Events Grant. She also noted there are two $40,000 grants for the BIDs, and two $40,000 grants identified for the two Merchant Associations. In response to Mayor Diane Dixon’s inquiry regarding the fluctuation in amounts for City Council expenses, Budget Manager Susan Giangrande clarified that each district receives $6,000 per Finance Committee Meeting Minutes May 30, 2019 Page 3 of 4 year but at the time of the printing, some districts had not spent their discretionary funds. She also clarified that City Council payroll is blended into the Council Allowance. In response to Chair O’Neill’s inquiry regarding the ratio between the Mayor’s base wage and that of other City Council Members, Budget Manager/Finance Giangrande advised that Human Resources would need to provide additional information; but, did note that it may be attributed to monies owed to Mayor Dixon, as she was being underpaid. Chair O’Neill requested that this item be investigated further. Mayor Dixon thanked staff for having corrected the payroll situation. Chair O’Neill thanked Budget staff, Finance staff, and Citizen Members for their assistance in the budget review. MOTION: Chair O’Neill moved, and Committee Member Stapleton seconded, to recommend the proposed budget as is to City Council without any recommendation on the CIP. The motion carried 5 ayes – 0 noes, 2 absences (Brenner, Collopy). B. WORK PLAN REVIEW Summary: Staff will review with the committee the agenda topics scheduled for the remainder of the calendar year. Recommended action: Receive and file. In response to Chair O’Neill inquiry, Finance Director/Treasurer Matusiewicz advised that water rates will be presented at the June 27, 2019, Finance Committee meeting. Chair O’Neill requested that Pension Primer be removed from the agenda. Chair O’Neill advised that the City Council approved water rate consultant is working through preliminary numbers and stressed the importance for the Finance Committee to complete a thorough review of the options available to the City. He noted the primary focus will be to scrutinize the increase to the fixed and/or commodity water rates. Chair O’Neill noted the June 27, 2019, Finance Committee meeting will take place if Water Rates are presented and will be canceled if not. Chair O’Neill reminded Finance Committee members their terms end on June 30, 2019, and re-nominations will take place at the first meeting in July. He suggested Committee Members interested in re-nomination contact the City Council member who initially nominated them for the position and the process is noticed publicly with the Local Appointments List, consistent with the Maddy Act (Cal. Gov. Code § 54972) . Chair O’Neill advised that Finance Committee meetings will not take place in July and August. Committee Member Tucker will work with Committee Member John Reed to review the Pension Primer. Chair O’Neill advised he would work through potential conflicts in scheduling Finance Committee meetings in September, October and November. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON- DISCUSSION ITEM) None. Finance Committee Meeting Minutes May 30, 2019 Page 4 of 4 VII. AJOURNMENT The Finance Committee adjourned at 3:26 p.m. to the next regular meeting of the Finance Committee. Filed with these minutes are copies of all materials distributed at the meeting. The agenda for the Regular Meeting was posted on May 24, 2019, at 1:50 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: ___________________________________ _____________________ Will O’Neill, Chair Date Finance Committee CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5A June 27, 2019 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Mark Vukojevic, Utilities Director (949) 644-3011, mvukojevic@newportbeachca.gov SUBJECT: 2019 WATER RATE STUDY SUMMARY: The Utilities Department retained the consulting services of Raftelis Financial Consultants Inc. to prepare the 2019 Water Rate Study. The previous water rate study was completed in 2009 and the last rate increase for water users was in 2014. The purpose of this presentation is to review the preliminary results of the financial analysis and the draft water rate study, receive input, and seek the Committee’s direction to move the item to City Council for discussion and approval. RECOMMENDED ACTION: 1. Review the water enterprise fund financial analysis and 2019 Draft Water Rate Study information and provide input to staff; 2. Forward the item to City Council for discussion and consideration. DISCUSSION: At the last Finance Committee meeting on May 16, 2019, staff discussed the current status of the Water Enterprise Fund and outlined the typical steps and decision points for evaluating water rates. The Water Enterprise Fund is managed by the Utilities Department and the Finance Department. Attached to this staff report is a PowerPoint presentation that reviews financial analysis, policies and the financial plan, the reserve policy, future drought concerns and rate options concerning fixed and variable revenues. Staff is requesting that the Committee review the information presented, provide input to staff, select a preferred rate option and move the item forward to City Council for consideration of the report and proposed water rates adjustments. 2019 Water Rate Study June 27, 2019 Page 2 Prepared and Submitted by: /s/ Mark Vukojevic_____________________ Mark Vukojevic Utilities Director Attachments: A. Water Rate Study PowerPoint Presentation Prepared by Raftelis Financial Consultants, Inc., dated June 27, 2019 B. 2019 Water Master Plan – PowerPoint Presentation to City Council on May 14, 2019 C. Water Supply and System Update – PowerPoint Presentation to City Council on February 26, 2019 ATTACHMENT A WATER RATE STUDY POWERPOINT PRESENTATION PREPARED BY RAFTELIS FINANCIAL CONSULTANTS, INC., DATED JUNE 27, 2019 t tt t Wa t e r R a t e S t u d y Ju n e 2 7 , 2 0 1 9 Ci t y o f N e w p o r t B e a c h 1 Ra t e S t u d y Ra t e S t u d y Ra t e S t u d y Ra t e S t u d y a t a G l a n c e Ra t e S e t t i n g Ra t e S e t t i n g Ra t e S e t t i n g Ra t e S e t t i n g Fr a m e w o r k Fr a m e w o r k Fr a m e w o r k Fr a m e w o r k • F i n a n c i a l g o a l s a n d po l i c i e s • P r i c i n g o b j e c t i v e s Fi n a n c i a l P l a n Fi n a n c i a l P l a n Fi n a n c i a l P l a n Fi n a n c i a l P l a n • E v a l u a t i o n o f C I P a n d fi n a n c i n g o p t i o n s • C a s h f l o w a n a l y s i s fo r f i n a n c i a l su f f i c i e n c y Co s t o f S e r v i c e Co s t o f S e r v i c e Co s t o f S e r v i c e Co s t o f S e r v i c e & R a t e D e s i g n & R a t e D e s i g n & R a t e D e s i g n & R a t e D e s i g n • C o s t a l l o c a t i o n s • R a t e d e s i g n ̶ Ra t e c a l c u l a t i o n s ̶ Cu s t o m e r i m p a c t an a l y s e s Fi n a l R a t e Fi n a l R a t e Fi n a l R a t e Fi n a l R a t e Adoption Adoption Adoption Adoption • R e p o r t • P u b l i c H e a r i n g 2 Ho w d o W e D e a l w i t h F u t u r e W a t e r Ho w d o W e D e a l w i t h F u t u r e W a t e r Ho w d o W e D e a l w i t h F u t u r e W a t e r Ho w d o W e D e a l w i t h F u t u r e W a t e r Re s t r i c t i o n ? Re s t r i c t i o n ? Re s t r i c t i o n ? Re s t r i c t i o n ? 3 P o t e n t i a l A p p r o a c h e s 3 P o t e n t i a l A p p r o a c h e s 3 P o t e n t i a l A p p r o a c h e s 3 P o t e n t i a l A p p r o a c h e s 1. In c r e a s e t h e f i x e d c h a r g e t o r e f l e c t t h e f i x e d c o s t › Af f o r d a b i l i t y / e n v i r o n m e n t a l c o n c e r n › We c a n i n c r e a s e t h e f i x e d c h a r g e b y a s l i g h t a m o u n t and st i l l a d d r e s s o t h e r c o n s i d e r a t i o n s 2. De v e l o p a r a t e s t a b i l i z a t i o n f u n d › De t e r m i n e h o w m u c h f i x e d c o s t i s c o v e r e d i n t h e co m m o d i t y r a t e a n d d e v e l o p a p r o p e r r e s e r v e t a r g e t › “I n s u r a n c e p r e m i u m ” m o d e l 3. De v e l o p d r o u g h t r a t e s t h a t c a n b e i m p l e m e n t e d du r i n g r e q u i r e d c u t b a c k › Pl e a s e c u t b a c k a n d y e s y o u r r a t e s a r e i n c r e a s i n g – Me s s a g i n g c h a l l e n g e 3 Re c o m m e n d a t i o n s Re c o m m e n d a t i o n s Re c o m m e n d a t i o n s Re c o m m e n d a t i o n s • In c r e a s e t h e f i x e d c h a r g e b y a s m a l l a m o u n t › Ba l a n c i n g o u t r e v e n u e s t a b i l i t y w i t h a f f o r d a b i l i t y / en v i r o n m e n t a l c o n c e r n s • De v e l o p a r a t e s t a b i l i z a t i o n f u n d f o r 3 0 % c u t b a c k i n wa t e r u s e › Ra t e s t a b i l i z a t i o n f u n d w i l l b e s u f f i c i e n t f o r t e m p orary cut ba c k › Lo n g t e r m c u t b a c k w i l l r e q u i r e a d d i t i o n a l r a t e i n c rease • Us e d r o u g h t p e n a l t i e s dr o u g h t p e n a l t i e s dr o u g h t p e n a l t i e s dr o u g h t p e n a l t i e s a s e n f o r c e m e n t t o o l t o r e d u c e wa t e r u s e . T h i s w a s e f f e c t i v e d u r i n g l a s t d r o u g h t › Po l i c y c o n s i d e r a t i o n : S h o u l d w e b e n c h m a r k w a t e r u s e ba s e d o n h i s t o r i c a l o r w a t e r b u d g e t a l l o c a t i o n ? 4 Ov e r v i e w o f F i n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Go a l s o f F i n a n c i a l / R e s e r v e P o l i c i e s : Go a l s o f F i n a n c i a l / R e s e r v e P o l i c i e s : Go a l s o f F i n a n c i a l / R e s e r v e P o l i c i e s : Go a l s o f F i n a n c i a l / R e s e r v e P o l i c i e s : • To m i t i g a t e f i n a n c i a l r i s k – Ra t e / r e v e n u e i n s t a b i l i t y – Em e r g e n c y w i t h a s s e t f a i l u r e – Vo l a t i l i t y i n w o r k i n g c a p i t a l • To a c h i e v e / m a i n t a i n a c e r t a i n c r e d i t r a t i n g • To d e t e r m i n e m o s t o p p o r t u n e t i m e t o is s u e d e b t Ov e r v i e w o f F i n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Fi n a n c i a l P o l i c i e s Im p o r t a n c e o f F i n a n c i a l P o l i c i e s : Im p o r t a n c e o f F i n a n c i a l P o l i c i e s : Im p o r t a n c e o f F i n a n c i a l P o l i c i e s : Im p o r t a n c e o f F i n a n c i a l P o l i c i e s : • To m a i n t a i n f i n a n c i a l s o l v e n c y – Pr o v i d e a b a s i s f o r c o p i n g w i t h f i s c a l e m e r g e n c i e s (revenue sh o r t - f a l l s , a s s e t f a i l u r e , e m e r g e n c y , e t c … ) • To p r o v i d e g u i d e l i n e s f o r s o u n d f i n a n c i a l m a n a g e m e n t wi t h a n o v e r a l l l o n g - r a n g e p e r s p e c t i v e • To e n h a n c e f i n a n c i a l m a n a g e m e n t t r a n s p a r e n c y – Im p r o v e p u b l i c ’ s c o n f i d e n c e a n d e l e c t e d o f f i c i a l s ’ credibility Fi n a n c i a l H e a l t h Fi n a n c i a l H e a l t h Fi n a n c i a l H e a l t h Fi n a n c i a l H e a l t h I n d i c a t o r s He a l t h y R e s e r v e s He a l t h y R e s e r v e s He a l t h y R e s e r v e s He a l t h y R e s e r v e s • Op e r a t i n g R e s e r v e – r e s u l t s f r o m p o s i t i v e c a s h f l o w • CI P R e s e r v e s – c a n a w a r d c o n t r a c t s q u i c k l y a n d s p e e d u p pr o j e c t s i f n e c e s s a r y • Ra t e S t a b i l i z a t i o n – f u n d s u s e d d u r i n g p e r i o d s o f r e v e n u e sh o r t a g e s › Su c h a s a d r o u g h t › Ca n u s e p r o b a b i l i t y a n a l y s i s t o d e t e r m i n e r e s e r v e l evels • Em e r g e n c y – f u n d s a v a i l a b l e i n c a s e o f a s s e t f a i l u r e › Cr i t i c a l a s s e t r e p l a c e m e n t a n a l y s i s u s e d t o s e t r e s erve level Pr o p o s e d R e s e r v e P o l i c y Pr o p o s e d R e s e r v e P o l i c y Pr o p o s e d R e s e r v e P o l i c y Pr o p o s e d R e s e r v e P o l i c y • O& M R e s e r v e O& M R e s e r v e O& M R e s e r v e O& M R e s e r v e – f o r O p e r a t i n g C a s h F l o w › 33 % o f o p e r a t i n g e x p e n s e s ( o r 4 m o n t h s o f e x p e n s e s ) • Ca p i t a l R e s e r v e Ca p i t a l R e s e r v e Ca p i t a l R e s e r v e Ca p i t a l R e s e r v e – f o r C a p i t a l W o r k i n g C a p i t a l › 75 % o f 5 - y e a r a v e r a g e C I P • Ra t e S t a b i l i z a t i o n Ra t e S t a b i l i z a t i o n Ra t e S t a b i l i z a t i o n Ra t e S t a b i l i z a t i o n – f o r u n e x p e c t e d w a t e r d e m a n d re d u c t i o n o r u n e x p e c t e d w a t e r s u p p l y c o s t i n c r e a s e s , em e r g e n c i e s , a n d n o n - b u d g e t e d C I P c a p i t a l p r o j e c t s › Re c o m m e n d e d R a t e S t a b i l i z a t i o n R e s e r v e T a r g e t Re c o m m e n d e d R a t e S t a b i l i z a t i o n R e s e r v e T a r g e t Re c o m m e n d e d R a t e S t a b i l i z a t i o n R e s e r v e T a r g e t Re c o m m e n d e d R a t e S t a b i l i z a t i o n R e s e r v e T a r g e t Ba l a n c e : $ 2 . 7 M Ba l a n c e : $ 2 . 7 M Ba l a n c e : $ 2 . 7 M Ba l a n c e : $ 2 . 7 M – Fu t u r e r e s e r v e t a r g e t w i l l b e i n c r e a s e d b y p r o j e c t e d water su p p l y i n c r e a s e s ~ 3 . 2 % p e r y e a r – Se e c a l c u l a t i o n s o n n e x t s l i d e 8 Ra t e S t a b i l i z a t i o n F u n d o f $ 2 . 7 M Ra t e S t a b i l i z a t i o n F u n d o f $ 2 . 7 M Ra t e S t a b i l i z a t i o n F u n d o f $ 2 . 7 M Ra t e S t a b i l i z a t i o n F u n d o f $ 2 . 7 M • $2 . 7 M r e p r e s e n t s t h e n e t r e v e n u e s h o r t f a l l f r o m a 30 % c u t ba c k › 30 % r e d u c t i o n i s a p p r o x i m a t e c u t b a c k t h a t o c c u r r e d during the la s t d r o u g h t › Th e C i t y i s e x p e c t e d t o s e l l 5 . 9 M u n i t s o f w a t e r u n de r n o r m a l co n d i t i o n s › Th e C i t y p u r c h a s e s w a t e r f r o m t w o w h o l e s a l e w a t e r e ntities. › Th e C i t y s e l l s w a t e r t h r o u g h a c o m m o d i t y r a t e o f $ 3 .0 8 p e r u n i t – $1 . 5 4 o f t h e c o m m o d i t y r a t e r e p r e s e n t s t h e p r i c e t h e City pa y s p e r u n i t t o p u r c h a s e t h e w a t e r w h o l e s a l e – Th e C i t y s a v e s t h i s c o s t w h e n i t p u r c h a s e s l e s s w a t e r – Th e r e m a i n i n g b a l a n c e o f t h e p e r u n i t c o m m o d i t y r a t e ($3.08 - $ 1 . 5 4 = $ 1 . 5 4 ) r e p r e s e n t s t h e C i t y ' s f i x e d c o s t s t ha t it r e c o v e r s t h r o u g h t h e c o m m o d i t y r a t e – Wh e n t h e C i t y s e l l s l e s s w a t e r , i t d o e s n o t g e n e r a t e e n o u g h re v e n u e t o c o v e r t h e s e f i x e d c o s t s • $2 . 7 M = $ 1 . 5 4 F i x e d C o s t s x 3 0 % C u t b a c k x 5 . 9 M u n i t s 9 Re s e r v e P o l i c y D i s c u s s i o n Re s e r v e P o l i c y D i s c u s s i o n Re s e r v e P o l i c y D i s c u s s i o n Re s e r v e P o l i c y D i s c u s s i o n Re s e r v e s Re s e r v e s Re s e r v e s Re s e r v e s Cu r r e n t T a r g e t L e v e l Cu r r e n t T a r g e t L e v e l Cu r r e n t T a r g e t L e v e l Cu r r e n t T a r g e t L e v e l P r o p o s e d T a r g e t L e v e l Pr o p o s e d T a r g e t L e v e l Pr o p o s e d T a r g e t L e v e l Pr o p o s e d T a r g e t L e v e l Cu r r e n t P o l i c y Cu r r e n t P o l i c y Cu r r e n t P o l i c y Cu r r e n t P o l i c y FY 2 0 2 0 C u r r e n t FY 2 0 2 0 C u r r e n t FY 2 0 2 0 C u r r e n t FY 2 0 2 0 C u r r e n t Ta r g e t Ta r g e t Ta r g e t Ta r g e t Pr o p o s e d P o l i c y Pr o p o s e d P o l i c y Pr o p o s e d P o l i c y Pr o p o s e d P o l i c y FY 2020 FY 2020 FY 2020 FY 2020 Proposed Target Proposed Target Proposed Target Proposed Target O& M R e s e r v e / Ra t e S t a b i l i z a t i o n Re s e r v e 50 % o f O & M $ 1 2 . 5 M 33 % o f O & M $ 8 . 9 M Ne t r e v e n u e l o s s fo r 3 0 % w a t e r us a g e r e d u c t i o n $2.7M Ca p i t a l R e s e r v e U n d e f i n e d Am o u n t N/ A 7 5 % o f 5 - y r av e r a g e C I P $5.4M To t a l T a r g e t To t a l T a r g e t To t a l T a r g e t To t a l T a r g e t Re s e r v e Re s e r v e Re s e r v e Re s e r v e $1 2 . 5 M + $1 2 . 5 M + $1 2 . 5 M + $1 2 . 5 M + $ 1 7 . 0 M $17.0M $17.0M $17.0M Cu r r e n t E n d i n g Cu r r e n t E n d i n g Cu r r e n t E n d i n g Cu r r e n t E n d i n g Ba l a n c e Ba l a n c e Ba l a n c e Ba l a n c e Ju l y 1 , 2 0 1 8 Ju l y 1 , 2 0 1 8 Ju l y 1 , 2 0 1 8 Ju l y 1 , 2 0 1 8 $3 3 , 9 2 4 , 5 6 4 $3 3 , 9 2 4 , 5 6 4 $3 3 , 9 2 4 , 5 6 4 $3 3 , 9 2 4 , 5 6 4 Ju l y 1 , 2 0 1 9 Ju l y 1 , 2 0 1 9 Ju l y 1 , 2 0 1 9 Ju l y 1 , 2 0 1 9 $3 1 , 1 2 1 , 4 2 9 $3 1 , 1 2 1 , 4 2 9 $3 1 , 1 2 1 , 4 2 9 $3 1 , 1 2 1 , 4 2 9 10 Re s e r v e T a r g e t s Re s e r v e T a r g e t s Re s e r v e T a r g e t s Re s e r v e T a r g e t s Ta r g e t R e s e r v e s Ta r g e t R e s e r v e s Ta r g e t R e s e r v e s Ta r g e t R e s e r v e s F Y 2 0 1 9 FY 2 0 1 9 FY 2 0 1 9 FY 2 0 1 9 F Y 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 F Y 2 0 2 1 FY 2 0 2 1 FY 2 0 2 1 FY 2 0 2 1 F Y 2 0 2 2 FY 2 0 2 2 FY 2 0 2 2 FY 2 0 2 2 F Y 2 0 2 3 FY 2023 FY 2023 FY 2023 O& M 3 3 % of o p e r a t i n g ex p e n s e s $8 , 3 2 6 , 5 7 2 $ 8 , 9 0 3 , 5 0 7 $ 9 , 0 4 3 , 9 1 4 $ 9 , 3 7 4 , 8 0 1 $ 9 , 7 5 6 , 2 3 2 Ra t e S t a b . $ 2 , 7 0 0 , 0 0 0 $ 2 , 7 0 0 , 0 0 0 $ 2 , 7 0 0 , 0 0 0 $ 2 , 7 8 6 , 9 1 4 $ 2, 8 7 6 , 8 0 9 $ 2 , 9 6 9 , 7 9 5 Ca p i t a l 7 5 % of 5 - y e a r av e r a g e C I P $5 , 7 0 8 , 4 0 0 $ 5 , 4 0 0 , 0 0 0 $ 5 , 4 0 0 , 0 0 0 $ 5 , 4 0 0 , 0 0 0 $ 5 , 4 0 0 , 0 0 0 To t a l T a r g e t R e s e r v e s To t a l T a r g e t R e s e r v e s To t a l T a r g e t R e s e r v e s To t a l T a r g e t R e s e r v e s $1 6 , 7 3 4 , 9 7 2 $ 1 7 , 0 0 3 , 5 0 7 $ 1 7 , 2 3 0 , 8 2 8 $ 1 7 , 6 5 1 , 6 1 0 $ 1 8 ,126,027 11 St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n No R e v A d j u s t m e n t s 12 St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n No R e v A d j u s t m e n t s 13 St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n No R e v A d j u s t m e n t s 14 St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n St a t u s Q u o F i n a n c i a l P l a n No R e v A d j u s t m e n t s , L e v e l e d E s t i m a t e d $ 7 . 2 M C I P 15 Pr o p o s e d F i n a n c i a l P l a n Pr o p o s e d F i n a n c i a l P l a n Pr o p o s e d F i n a n c i a l P l a n Pr o p o s e d F i n a n c i a l P l a n ~7 . 5 % p e r y e a r f o r t h e n e x t 5 y e a r s 16 Pr o p o s e d W a t e r R a t e D e s i g n Pr o p o s e d W a t e r R a t e D e s i g n Pr o p o s e d W a t e r R a t e D e s i g n Pr o p o s e d W a t e r R a t e D e s i g n 17 • B i l l i n g & C u s t o m e r S e r v i c e s – u n i f o r m w i t h m e t e r s i ze s • M e t e r R e l a t e d C o s t s – i n c r e a s i n g w i t h m e t e r c a p a c i t y r a t i o s • C a p a c i t y C o s t s – i n c r e a s i n g w i t h m e t e r c a p a c i t y r a t io s Fi x e d C h a r g e s C o m p o n e n t s Fi x e d C h a r g e s C o m p o n e n t s Fi x e d C h a r g e s C o m p o n e n t s Fi x e d C h a r g e s C o m p o n e n t s • S u p p l y R a t e • U n r e c o v e r e d f i x e d c o s t s • P a s s - t h r o u g h R a t e Wa t e r U s a g e R a t e s Wa t e r U s a g e R a t e s Wa t e r U s a g e R a t e s Wa t e r U s a g e R a t e s • R W S u p p l y R a t e RW U s a g e R a t e s RW U s a g e R a t e s RW U s a g e R a t e s RW U s a g e R a t e s Me t e r S i z e s a n d C u s t o m e r C l a s s Me t e r S i z e s a n d C u s t o m e r C l a s s Me t e r S i z e s a n d C u s t o m e r C l a s s Me t e r S i z e s a n d C u s t o m e r C l a s s Me t e r S i z e Me t e r S i z e Me t e r S i z e Me t e r S i z e S i n g l e F a m i l y Si n g l e F a m i l y Si n g l e F a m i l y Si n g l e F a m i l y M u l t i F a m i l y Mu l t i F a m i l y Mu l t i F a m i l y Mu l t i F a m i l y C o m m e r c i a l Co m m e r c i a l Co m m e r c i a l Co m m e r c i a l I r r i g a t i o n Ir r i g a t i o n Ir r i g a t i o n Ir r i g a t i o n C i t y Ci t y Ci t y Ci t y O t h e r s Ot h e r s Ot h e r s Ot h e r s T o t a l Total Total Total 5/ 8 12 , 7 8 5 3 , 1 9 2 3 9 4 9 7 5 3 2 4 1 6 , 5 4 5 16,545 16,545 16,545 3/ 4 3 0 0 0 1 0 4 44 4 1 6, 5 9 0 5 5 4 2 2 9 9 7 8 6 2 9 7 , 5 8 5 7,585 7,585 7,585 1 1 / 2 17 6 9 1 1 6 1 9 5 2 2 6 5 5 1 551 551 551 2 28 1 1 1 0 4 0 4 4 2 7 1 7 3 3 5 1 , 4 3 0 1,430 1,430 1,430 3 0 6 1 7 1 8 0 3 2 3232 32 4 0 1 1 2 9 4 5 2 5 1 5151 51 6 0 5 7 0 3 0 1 5 1515 15 8 0 0 4 2 2 0 8 88 8 10 0 0 0 0 0 0 0 00 0 12 0 0 0 0 1 0 1 11 1 To t a l To t a l To t a l To t a l 1 9 , 8 3 5 19 , 8 3 5 19 , 8 3 5 19 , 8 3 5 3 , 9 6 9 3, 9 6 9 3, 9 6 9 3, 9 6 9 1 , 2 4 5 1, 2 4 5 1, 2 4 5 1, 2 4 5 7 2 3 72 3 72 3 72 3 3 5 4 35 4 35 4 35 4 9 6 9696 96 2 6 , 2 2 2 26,222 26,222 26,222 18 Ra t e O p t i o n s Ra t e O p t i o n s Ra t e O p t i o n s Ra t e O p t i o n s • Op t i o n 1 : M a i n t a i n c u r r e n t 3 1 % f i x e d r e v e n u e s • Op t i o n 2 : I n c r e a s e t o 3 4 % f i x e d r e v e n u e s • Ot h e r R e c o m m e n d a t i o n s : › Re m o v e t h e $ 1 p e r e x t r a u n i t c h a r g e f o r M u l t i F a m i l y 19 Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s C u r r e n t Cu r r e n t Cu r r e n t Cu r r e n t Pr o p o s e d Pr o p o s e d Pr o p o s e d Pr o p o s e d FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 Impact $Impact $Impact $Impact $ 5/ 8 - i n c h $1 7 . 2 7 $ 1 9 . 0 4 $1 9 . 0 4 $1 9 . 0 4 $1 9 . 0 4 $ 1 . 7 7 3/ 4 - i n c h $1 7 . 2 7 $ 1 9 . 0 4 $1 9 . 0 4 $1 9 . 0 4 $1 9 . 0 4 $ 1 . 7 7 1- i n c h $2 8 . 7 9 $ 2 9 . 2 8 $2 9 . 2 8 $2 9 . 2 8 $2 9 . 2 8 $ 0 . 4 9 1 ½ - i n c h $5 7 . 5 8 $ 5 4 . 8 6 $5 4 . 8 6 $5 4 . 8 6 $5 4 . 8 6 - $ 2 . 7 2 2- i n c h $9 2 . 1 2 $ 8 5 . 5 6 $8 5 . 5 6 $8 5 . 5 6 $8 5 . 5 6 - $ 6 . 5 6 3- i n c h $1 7 2 . 7 3 $ 2 2 6 . 2 8 $2 2 6 . 2 8 $2 2 6 . 2 8 $2 2 6 . 2 8 $ 5 3 . 5 5 4- i n c h $2 8 7 . 8 8 $ 3 8 7 . 4 7 $3 8 7 . 4 7 $3 8 7 . 4 7 $3 8 7 . 4 7 $ 9 9 . 5 9 6- i n c h $5 7 5 . 7 6 $ 8 2 2 . 4 1 $8 2 2 . 4 1 $8 2 2 . 4 1 $8 2 2 . 4 1 $ 2 4 6 . 6 5 8- i n c h $9 2 1 . 2 2 $ 1 , 4 3 6 . 4 5 $1 , 4 3 6 . 4 5 $1 , 4 3 6 . 4 5 $1 , 4 3 6 . 4 5 $ 5 1 5 . 2 3 10 - i n c h $1 , 6 5 5 . 9 0 $ 2 , 1 5 2 . 8 3 $2 , 1 5 2 . 8 3 $2 , 1 5 2 . 8 3 $2 , 1 5 2 . 8 3 $ 4 9 6 . 9 3 12 - i n c h $2 , 6 6 3 . 4 8 $ 2 , 7 1 5 . 7 0 $2 , 7 1 5 . 7 0 $2 , 7 1 5 . 7 0 $2 , 7 1 5 . 7 0 $ 5 2 . 2 2 Pe r D w e l l i n g U n i t C h a r g e $1 . 0 0 N / A 20 Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v Op t i o n 1 R a t e s : 3 1 % F i x e d R e v 21 Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s C u r r e n t Cu r r e n t Cu r r e n t Cu r r e n t Pr o p o s e d Pr o p o s e d Pr o p o s e d Pr o p o s e d FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 Impact $Impact $Impact $Impact $ Po t a b l e W a t e r $ 3 . 0 8 $ 3 . 2 3 $3 . 2 3 $3 . 2 3 $3 . 2 3 $ 0 . 1 5 Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Ra t e O p t i o n 1 Ra t e O p t i o n 1 Ra t e O p t i o n 1 Ra t e O p t i o n 1 22 Th e a v e r a g e S i n g l e F a m i l y u s e i s 1 1 h c f , w h i c h w i l l s e e a n a n n u a l i n c r e a s e of $ 4 1 . 0 4 Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s Wa t e r F i x e d C h a r g e s C u r r e n t Cu r r e n t Cu r r e n t Cu r r e n t Pr o p o s e d Pr o p o s e d Pr o p o s e d Pr o p o s e d FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 FY 2 0 2 0 Impact $Impact $Impact $Impact $ 5/ 8 - i n c h $1 7 . 2 7 $ 2 0 . 5 7 $2 0 . 5 7 $2 0 . 5 7 $2 0 . 5 7 $ 3 . 3 0 3/ 4 - i n c h $1 7 . 2 7 $ 2 0 . 5 7 $2 0 . 5 7 $2 0 . 5 7 $2 0 . 5 7 $ 3 . 3 0 1- i n c h $2 8 . 7 9 $ 3 1 . 8 2 $3 1 . 8 2 $3 1 . 8 2 $3 1 . 8 2 $ 3 . 0 3 1 ½ - i n c h $5 7 . 5 8 $ 5 9 . 9 6 $5 9 . 9 6 $5 9 . 9 6 $5 9 . 9 6 $ 2 . 3 8 2- i n c h $9 2 . 1 2 $ 9 3 . 7 1 $9 3 . 7 1 $9 3 . 7 1 $9 3 . 7 1 $ 1 . 5 9 3- i n c h $1 7 2 . 7 3 $ 2 4 8 . 4 2 $2 4 8 . 4 2 $2 4 8 . 4 2 $2 4 8 . 4 2 $ 7 5 . 6 9 4- i n c h $2 8 7 . 8 8 $ 4 2 5 . 6 3 $4 2 5 . 6 3 $4 2 5 . 6 3 $4 2 5 . 6 3 $ 1 3 7 . 7 5 6- i n c h $5 7 5 . 7 6 $ 9 0 3 . 8 3 $9 0 3 . 8 3 $9 0 3 . 8 3 $9 0 3 . 8 3 $ 3 2 8 . 0 7 8- i n c h $9 2 1 . 2 2 $ 1 , 5 7 8 . 9 3 $1 , 5 7 8 . 9 3 $1 , 5 7 8 . 9 3 $1 , 5 7 8 . 9 3 $ 6 5 7 . 7 1 10 - i n c h $1 , 6 5 5 . 9 0 $ 2 , 3 6 6 . 5 4 $2 , 3 6 6 . 5 4 $2 , 3 6 6 . 5 4 $2 , 3 6 6 . 5 4 $ 7 1 0 . 6 4 12 - i n c h $2 , 6 6 3 . 4 8 $ 2 , 9 8 5 . 3 9 $2 , 9 8 5 . 3 9 $2 , 9 8 5 . 3 9 $2 , 9 8 5 . 3 9 $ 3 2 1 . 9 1 Pe r D w e l l i n g U n i t C h a r g e $1 . 0 0 N/ A N/ A N/ A N/ A - $ 1 . 0 0 23 Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Op t i o n 2 R a t e s : 3 4 % F i x e d R e v Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s Wa t e r U s a g e C h a r g e s C u r r e n t Cu r r e n t Cu r r e n t Cu r r e n t Pr o p o s e d F Y Pr o p o s e d F Y Pr o p o s e d F Y Pr o p o s e d F Y 20 2 0 20 2 0 20 2 0 20 2 0 Im p a c t $ Im p a c t $ Im p a c t $ Im p a c t $ Po t a b l e W a t e r $ 3 . 0 8 $ 3 . 1 0 $3 . 1 0 $3 . 1 0 $3 . 1 0 $ 0 . 0 2 24 Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Mo n t h l y C u s t o m e r I m p a c t f o r Ra t e O p t i o n 2 Ra t e O p t i o n 2 Ra t e O p t i o n 2 Ra t e O p t i o n 2 25 Th e a v e r a g e S i n g l e F a m i l y u s e i s 1 1 h c f , w h i c h w i l l s e e a n a n n u a l i n c r e a s e of $ 4 2 . 0 0 Ne x t S t e p s Ne x t S t e p s Ne x t S t e p s Ne x t S t e p s • Ci t y C o u n c i l S t u d y S e s s i o n o n A u g u s t 1 3 • Pu b l i c O u t r e a c h • Ci t y C o u n c i l m e e t i n g o n S e p t 1 0 , W a t e r R a t e S t u d y a n d Pr o p o s i t i o n 2 1 8 n o t i c e • No t i c e M a i l i n g t o a l l C u s t o m e r s • Pu b l i c H e a r i n g o n N o v e m b e r 5 26 ATTACHMENT B 2019 WATER MASTER PLAN – POWERPOINT PRESENTATION TO CITY COUNCIL ON MAY 14, 2019 © Arcadis 2019 2019 Water Master Plan Newport Beach City Council Meeting May 14, 2019 Background and Purpose 2 •Previous Water Master Plan (WMP) was completed in 1999 and updated in 2008 •2019 WMP reflects recent water demands (2007- 2016) •Incorporates projected water demands and land use from General Plan •Evaluated all water facilities -horizontal (pipelines) and vertical facilities •Conducted risk and condition analysis of our facilities •Prioritize and recommend Capital Improvement Program projects for the next 30 years Water Supply Approximately 66,000 CNB Residents 70% -75% Groundwater (12,000 AFY) 22% -27% Imported (4,000 AFY) 3% Recycled Water (Separate System) Existing System Infrastructure 4 •Serves approximately 66,000 customers over 11 square miles •Approximately 300 miles of pipelines, three storage reservoirs, four groundwater wells, and five pump stations •Five major pressure zones with 43 pressure regulating stations •Six imported water connections with Metropolitan Water District and 12 emergency connections with IRWD and Mesa Water District Water System Modeling •Developed new GIS based hydraulic model •Calibrated model with field measurements •Used model to analyze system performance •Ability to predict impacts to water system due to change in demand 6 Hydraulic Analysis Results Storage Capacity Pumping Capacity Fire Flow Protection Water Pressure Ability to Meet Demand Aging Water Infrastructure •Existing water mains that are 100 years old •Water wells and BCR cover will require rehabilitation and/or replacement •Continue with Cast Iron pipe replacement program •Start Asbestos Cement (AC) pipe replacement program •Transitioning from manual water meters to “smart” meters with our Advance Metering Infrastructure projects Water Main Breaks Via Lido by Newport Blvd Jamboree Road by PCH 2019 Proposed 30-year Water CIP Budget Pipeline Replacement and Relining $103,540,000 Facilities Projects $45,951,000 Advanced Metering Infrastructure $14,500,000 Pressure Reducing Stations $1,207,000 Total (without inflation)$165,198,000 Total (with 2.5% inflation per year)$216,715,000 Estimated Average Annual Budget $7,223,833 Current Water CIP Budget •Current average CIP budget is approximately $5 million per year •Proposed budget is $7.2 million per year •Additional $2.2 million per year needed to address: Increase in construction cost Minimize expensive emergency repairs Replace aging infrastructure •Proactive approach in the maintenance of our water system prior to failure Recommendation and Next Steps •Approve and adopt the 2019 Water Master Plan •Include necessary funds in the 2019 Water Rate Study •Review progress of Water Master Plan CIP every 10 years (Council Policy F-2) •Complete water CIP projects as identified in the Master Plan Public Works Department A Well-Engineered Machine Protecting and Providing Quality Public Improvements and Services ATTACHMENT C WATER SUPPLY AND SYSTEM UPDATE – POWERPOINT PRESENTATION TO CITY COUNCIL ON FEBRUARY 26, 2019 Ci t y C o u n c i l S t u d y S e s s i o n Fe b r u a r y 2 6 , 2 0 1 9 Ne w p o r t Be a c h Wa t e r Su p p l y & Sy s t e m Up d a t e Ut i l i t i e s De p a r t m e n t Wa t e r Sy s t e m Ex t e n s i v e & Co m p l e x Sy s t e m Co v e r i n g Mo s t of th e Ci t y ’ s Boundaries Wa t e r De l i v e r i e s Do u b l e in th e Su m m e r t i m e Sy s t e m Ov e r v i e w • 30 2 Mi l e s of Po t a b l e Wa t e r Pi p e l i n e • 20 2 Mi l l i o n Ga l l o n St o r a g e Ca p a c i t y • 26 , 5 5 0 Se r v i c e Co n n e c t i o n s • 17 Bo o s t e r Pu m p s • 42 Pr e s s u r e Re d u c i n g St a t i o n s • 2, 7 2 3 Fi r e Hy d r a n t s • 8, 1 7 2 Di s t r i b u t i o n Va l v e s • 12 In t e r c o n n e c t s wi t h Lo c a l Ag e n c i e s 20 1 8 Wa t e r De l i v e r y Fa c t s • 4. 8 Bi l l i o n Ga l l o n s De l i v e r e d (~15,000 acre feet) • 74 % fr o m 4 Lo c a l Gr o u n d w a t e r Wells • 23 % fr o m 6 Im p o r t Co n n e c t i o n s • 3% fr o m lo c a l Re c y c l e d Supplier Ut i l i t i e s De p a r t m e n t Gr o u n d w a t e r Su p p l y Ut i l i t i e s De p a r t m e n t OC W D P r e s e n t a t i o n Cu r r e n t Sy s t e m • C u r r e n t wa t e r su p p l y si t u a t i o n is go o d ; •C o s t to pu r c h a s e / p u m p wa t e r co n t i n u e s to ri s e • C u r r e n t CI P pr o g r a m is ap p r o x . $5 m i l an n u a l l y • P r o g r a m e d / s c h e d u l e d / P r o a c t i v e ma i n t e n a n c e & re p l a c e m e n t s sy s t e m ma n a g e m e n t st r a t e g i e s •N o n ‐ma s t e r pl a n ne e d s •C u s t o m e r Se r v i c e Fu t u r e Ne e d s an d In v e s t m e n t s • M a i n t e n a n c e in v e s t m e n t s • C a p i t a l Im p r o v e m e n t In v e s t m e n t s •A d v a n c e d Me t e r In f r a s t r u c t u r e • W a t e r Co n s e r v a t i o n Wa t e r Sy s t e m Up d a t e Ut i l i t i e s D e p a r t m e n t Ut i l i t i e s De p a r t m e n t Wa t e r Ma s t e r Pl a n Up d a t e •D r a f t Wa t e r Ma s t e r Pl a n to be pu b l i s h e d ne x t we e k • P r e v i o u s Wa t e r Ma s t e r Pl a n wa s 20 0 8 / 2 0 0 9 • R e c o m m e n d e d in c r e a s e in ca p i t a l re p l a c e m e n t s Wa t e r Ra t e St u d y • N e x t Ci t y Co u n c i l me e t i n g , re q u e s t to hi r e a co n s u l t a n t and study th e ra t e s • C r e a t e an up d a t e d fi n a n c i a l pl a n • P r e v i o u s Wa t e r Ra t e St u d y wa s in 20 0 9 •L a s t ra t e ad j u s t m e n t wa s in 20 1 4 Co m i n g up : Ut i l i t i e s D e p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Em e r g e n c y Ut i l i t i e s De p a r t m e n t Ja m b o r e e Wa t e r l i n e Br e a k Ut i l i t i e s De p a r t m e n t Wa t e r Su p p l y & Sy s t e m Up d a t e • En d of Pr e s e n t a t i o n Ut i l i t i e s De p a r t m e n t t Water Rate Study June 27, 2019 City of Newport Beach 1 Rate Study at a Glance Rate Setting Framework •Financial goals and policies •Pricing objectives Financial Plan •Evaluation of CIP and financing options •Cash flow analysis for financial sufficiency Cost of Service & Rate Design •Cost allocations •Rate design ̶Rate calculations ̶Customer impact analyses Final Rate Adoption •Report •Public Hearing 2 How do We Deal with Future Water Restriction? 3 Potential Approaches 1.Increase the fixed charge to reflect the fixed cost ›Affordability / environmental concern ›We can increase the fixed charge by a slight amount and still address other considerations 2.Develop a rate stabilization fund ›Determine how much fixed cost is covered in the commodity rate and develop a proper reserve target ›“Insurance premium” model 3.Develop drought rates that can be implemented during required cut back ›Please cut back and yes your rates are increasing –Messaging challenge 3 Recommendations •Increase the fixed charge by a small amount ›Balancing out revenue stability with affordability / environmental concerns •Develop a rate stabilization fund for 30% cut back in water use ›Rate stabilization fund will be sufficient for temporary cut back ›Long term cut back will require additional rate increase •Use drought penalties as enforcement tool to reduce water use. This was effective during last drought ›Policy consideration: Should we benchmark water use based on historical or water budget allocation? 4 Overview of Financial Policies Goals of Financial/Reserve Policies: •To mitigate financial risk –Rate / revenue instability –Emergency with asset failure –Volatility in working capital •To achieve/maintain a certain credit rating •To determine most opportune time to issue debt Overview of Financial Policies Importance of Financial Policies: •To maintain financial solvency –Provide a basis for coping with fiscal emergencies (revenue short-falls, asset failure, emergency, etc …) •To provide guidelines for sound financial management with an overall long-range perspective •To enhance financial management transparency –Improve public’s confidence and elected officials’ credibility Financial Health Indicators Healthy Reserves •Operating Reserve –results from positive cash flow •CIP Reserves –can award contracts quickly and speed up projects if necessary •Rate Stabilization –funds used during periods of revenue shortages ›Such as a drought ›Can use probability analysis to determine reserve levels •Emergency –funds available in case of asset failure ›Critical asset replacement analysis used to set reserve level Proposed Reserve Policy •O&M Reserve –for Operating Cash Flow ›33% of operating expenses ( or 4 months of expenses) •Capital Reserve –for Capital Working Capital ›75% of 5-year average CIP •Rate Stabilization –for unexpected water demand reduction or unexpected water supply cost increases, emergencies, and non-budgeted CIP capital projects ›Recommended Rate Stabilization Reserve Target Balance: $2.7M –Future reserve target will be increased by projected water supply increases ~ 3.2% per year –See calculations on next slide 8 Rate Stabilization Fund of $2.7M •$2.7M represents the net revenue short fall from a 30% cut back ›30% reduction is approximate cutback that occurred during the last drought ›The City is expected to sell 5.9M units of water under normal conditions ›The City purchases water from two wholesale water entities. ›The City sells water through a commodity rate of $3.08 per unit –$1.54 of the commodity rate represents the price the City pays per unit to purchase the water wholesale –The City saves this cost when itpurchases less water –The remaining balance of the per unit commodity rate ($3.08 -$1.54 = $1.54) represents the City's fixed costs that it recovers through the commodity rate –When the City sells less water, it does not generate enough revenue to cover these fixed costs •$2.7M = $1.54 Fixed Costs x 30% Cutback x 5.9M units 9 Reserve Policy Discussion Reserves Current Target Level Proposed Target Level Current Policy FY 2020 Current Target Proposed Policy FY 2020 Proposed Target O&M Reserve / Rate Stabilization Reserve 50% of O&M $12.5M 33% of O&M $8.9M Net revenue loss for 30% water usage reduction $2.7M Capital Reserve Undefined Amount N/A 75% of 5-yr average CIP $5.4M Total Target Reserve $12.5M +$17.0M Current Ending Balance July 1, 2018 $33,924,564 July 1, 2019 $31,121,429 10 Reserve Targets Target Reserves FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 O&M 33%of operating expenses $8,326,572 $8,903,507 $9,043,914 $9,374,801 $9,756,232 Rate Stab.$2,700,000 $2,700,000 $2,700,000 $2,786,914 $2,876,809 $2,969,795 Capital 75%of 5-year average CIP $5,708,400 $5,400,000 $5,400,000 $5,400,000 $5,400,000 Total Target Reserves $16,734,972 $17,003,507 $17,230,828 $17,651,610 $18,126,027 11 Status Quo Financial Plan No Rev Adjustments 12 Status Quo Financial Plan No Rev Adjustments 13 Status Quo Financial Plan No Rev Adjustments 14 Status Quo Financial Plan No Rev Adjustments, Leveled Estimated $7.2M CIP 15 Proposed Financial Plan ~7.5% per year for the next 5 years 16 Proposed Water Rate Design 17 •Billing & Customer Services –uniform with meter sizes•Meter Related Costs –increasing with meter capacity ratios•Capacity Costs –increasing with meter capacity ratios Fixed Charges Components •Supply Rate •Unrecovered fixed costs•Pass-through Rate Water Usage Rates •RW Supply Rate RW Usage Rates Meter Sizes and Customer Class Meter Size Single Family Multi Family Commercial Irrigation City Others Total 5/8 12,785 3,192 394 97 53 24 16,545 3/4 3 0 0 0 1 0 4 1 6,590 554 229 97 86 29 7,585 1 1/2 176 91 161 95 22 6 551 2 281 110 404 427 173 35 1,430 3 0 6 17 1 8 0 32 4 0 11 29 4 5 2 51 6 0 5 7 0 3 0 15 8 0 0 4 2 2 0 8 10 0 0 0 0 0 0 0 12 0 0 0 0 1 0 1 Total 19,835 3,969 1,245 723 354 96 26,222 18 Rate Options •Option 1: Maintain current 31% fixed revenues •Option 2: Increase to 34% fixed revenues •Other Recommendations: ›Remove the $1 per extra unit charge for Multi Family 19 Option 1 Rates: 31% Fixed Rev Water Fixed Charges Current Proposed FY 2020 Impact $ 5/8-inch $17.27 $19.04 $1.77 3/4-inch $17.27 $19.04 $1.77 1-inch $28.79 $29.28 $0.49 1 ½-inch $57.58 $54.86 -$2.72 2-inch $92.12 $85.56 -$6.56 3-inch $172.73 $226.28 $53.55 4-inch $287.88 $387.47 $99.59 6-inch $575.76 $822.41 $246.65 8-inch $921.22 $1,436.45 $515.23 10-inch $1,655.90 $2,152.83 $496.93 12-inch $2,663.48 $2,715.70 $52.22 Per Dwelling Unit Charge $1.00 N/A 20 Option 1 Rates: 31% Fixed Rev 21 Water Usage Charges Current Proposed FY 2020 Impact $ Potable Water $3.08 $3.23 $0.15 Monthly Customer Impact for Rate Option 1 22 The average Single Family use is 11 hcf, which will see an annual increase of $41.04 Option 2 Rates: 34% Fixed Rev Water Fixed Charges Current Proposed FY 2020 Impact $ 5/8-inch $17.27 $20.57 $3.30 3/4-inch $17.27 $20.57 $3.30 1-inch $28.79 $31.82 $3.03 1 ½-inch $57.58 $59.96 $2.38 2-inch $92.12 $93.71 $1.59 3-inch $172.73 $248.42 $75.69 4-inch $287.88 $425.63 $137.75 6-inch $575.76 $903.83 $328.07 8-inch $921.22 $1,578.93 $657.71 10-inch $1,655.90 $2,366.54 $710.64 12-inch $2,663.48 $2,985.39 $321.91 Per Dwelling Unit Charge $1.00 N/A -$1.0023 Option 2 Rates: 34% Fixed Rev Water Usage Charges Current Proposed FY 2020 Impact $ Potable Water $3.08 $3.10 $0.02 24 Monthly Customer Impact for Rate Option 2 25 The average Single Family use is 11 hcf, which will see an annual increase of $42.00 Next Steps •City Council Study Session on August 13 •Public Outreach •City Council meeting on Sept 10, Water Rate Study and Proposition 218 notice •Notice Mailing to all Customers •Public Hearing on November 5 26 Key Decision •Confirmation on Reserve Policy •Direction on Rate Option 27 6/20/19 Scheduled Date Agenda Title Agenda Description Council Policy F-7, Income Property, Review A subcommittee of the Finance Committee was appointed to review and recommend changes if deemed necessary to select financial policies. In continuation from the December 13, 2018, meeting, the subcommittee working with staff has made additional edits to Council Policy F-7, Income Property, in order to align policy with current practice. Pension Accrued Liability Basics The City’s CalPERS actuary, Kerry Worgan, will present the major components, assumptions and plan experience considered during the development of the pension accrued liability. Section 115 Discussion An investment advisor and major provider of Section 115 pension prefunding trusts, PFM, will discuss the pros and cons; risks and benefits; and other considerations when considering the establishment of a Section 115 pension benefit trust. Budget Amendements (Quarter Ended December 31, 2018)Receive and file a staff report on the budget amendments for the prior quarter. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Discuss Items for Future Agendas Tuesday, January 22, 2019 CITY COUNCIL STUDY SESSION Beacon Economics will present its bi-annual economic and top revenue forecast for the City of Newport Beach. Saturday, February 02, 2019 CITY COUNCIL OFF-SITE PLANNING SESSION Staff will present status and funding of major programs planned for the calendar year. Harbor and Beaches Master Plan Update Review Harbor and Beaches Master Plan for financial solvency based on known Council priorities. Facilities Financial Plan Update Review Facilities Financial Plan for financial solvency based on known Council priorities. Long-Range Financial Forecast (LRFF)Staff will provide an update to the latest version of the LRFF. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Review of Operating Budget (Harbor Department)The goal of this presentation will be to familiarize members of the Finance Committee with the elements of the FY 2018-19 Harbor Department budget, provide opportunity for questions, and to gain clarity in the funding allocations for departmental programs. Finance Subcommittee to Review Beacon Bay Market Studies At the February 12, 2019, City Council Study Session, the City Council requested the Finance Committee create a subcommittee of citizen members to review/reconcile the Beacon Bay market studies prepared by the City’s consultant, Keyser Marston Associates and the resident proponent study. The subcommittee will report back to the full City Council with its recommendations. Review of Revenue Assumptions Staff will provide of an overview for revenue assumptions for the FY 2019-20 Proposed Budget. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Thursday, April 25, 2019 Proposed FY 2019-20 Budget Overview Staff will provide an overview of the Proposed FY 2019-20 Operating Budget. Budget Amendments for Quarter Ending March 31, 2019 Staff will report on the budget amendments for the prior quarter. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Tuesday, May 14, 2019 JOINT CITY COUNCIL/FINANCE COMMITTEE MEETING Thursday, May 16, 2019 FY 2017-18 Audit Review (with Auditor)The City’s external audit firm, White Nelson Diehl Evans LLP will meet with the Finance Committee to discuss the audit findings for the fiscal year ending 6/30/2018. The committee will have an opportunity to discuss any potential areas of concern and the auditors can discuss any changes in accounting standards or disclosures that were relevant for the audit year. Water Review Discussion Staff and or consultant will provide a broad overview of the water rate study process and solicit Finance Committee input as necessary. Proposed FY 2019-20 Follow-Up Meeting Staff will be available to answer follow-up questions on the Fiscal Year 2019-20 budget. Finance Committee may discuss their impending recommendation(s) to Council. Finance Subcommittee on Beacon Bay Market Studies Clarification of scope and other questions. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Thursday, May 30, 2019 Recommendation FY 2019-20 Budget Make final recommendation to the City Council on the proposed FY 2019-20 Operating Budget and or CIP. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Thursday, June 27, 2019 2019 Water Rate Study The Utilities Department retained the consulting services of Raftelis Financial Consultants Inc.to prepare the 2019 Water Rate Study.The previous water rate study was completed in 2009 and the last rate increase for water users was in 2014.The purpose of this presentation is to review the preliminary results of the draft water rate study,receive input,and seek the Committee’s direction to move the item to City Council for discussion and approval. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. City of Newport Beach Finance Committee Work Plan 2018-19 January February March April Thursday, March 14, 2019 Thursday, February 14, 2019 Thursday, January 17, 2019 June May I:\Users\FIN\Shared\Admin\Finance Committee\WORKPLAN\2019\2019 FC Workplan 1