HomeMy WebLinkAbout19 - Sewer Rate Adjustment
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NEWPORT BEACH
City Council Staff Report
CITY OF
January 26, 2016
Agenda Item No. 19
ABSTRACT:
The Municipal Operations Department retained the consulting services of H F & H
Consultants, LLC (“HF&H”) to prepare a sewer rate study. The study analyzed the cost
of service and made recommendations regarding the rate and structure in compliance
with State law. The study concluded that a rate increase is recommended to ensure
adequate funds are available to continue to maintain a safe and healthy sewer
infrastructure.
RECOMMENDATION:
a) Conduct a public hearing to accept comments on the proposed sewer rate and at the
conclusion of the hearing close the 45-day notice period;
b) Direct the City Clerk to tabulate the results of the protests received from property
owners and customers and announce the findings;
c) In the absence of a majority of protests, adopt the proposed rates and structure; and
d) Introduce Ordinance No 2016-1, An Ordinance of the City Council of the City of
Newport Beach, California, Amending Section 14.24.065 of Title 14 of the Newport
Beach Municipal Code Pertaining to Sewer Use Charge, and pass to second reading
on February 9, 2016.
FUNDING REQUIREMENTS:
There are no funding requirements to implement the sewer rate structure; however, this
action will change the sewer water rate and structure currently being charged to users
of sewer water.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: George Murdoch, Municipal Operations Director – Utilities
949-644-3011, gmurdoch@newportbeachca.gov
PREPARED BY: Rachell Wilfert, Management Specialist
PHONE: 949-644-3011
TITLE: Adoption of Sewer Rate Adjustment
Adoption of Sewer Rate Adjustment
January 26, 2016
Page 2
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DISCUSSION:
Background:
In February of 2013, the City entered into an agreement with H F & H to conduct a
Sewer and Recycled Water Rate Study that resulted in the average reduction of
recycled rates of 50% (completed in 2014) and recommended an adjustment in sewer
rates to cover operations and capital improvement costs as well as provide funding to
meet reserve policies. The study addressed the revenue shortfalls and predicted that
the sewer fund balances would dip below the minimum in FY 2016-17 and become
negative by FY 2017-18. The rate study can be found at
www.newportbeachca.gov/sewerrates.
A draft of the rate study was presented at the City Council study session on June 9,
2015. City Council asked staff to further analyze outsourcing to offset any rate
increases. Starting in 2011, the division outsourced sewer line videoing, grease
interceptor inspections, and FOG control services. This resulted in the reduction of two
employees by fiscal year 2013/14. A report on additional outsourcing was presented to
the Finance Committee on August 13, 2015. The Committee found no further
outsourcing action was required but requested staff to continue to look for opportunities.
The Committee recommended the item be moved to City Council.
On October 13, 2015, the City Council reviewed the proposed rates and directed staff
to send out notices in compliance with State law. The City mailed 27,193 notices
(attachment A) to property owners and non-property owning customers on December
9, 2015. The 45-day notice period will conclude at the end of the public hearing on
January 26, 2016.
Proposed Rates:
The proposed rates are for a five year period and include a variable (Sewer Use) charge
and a Fixed (Sewer Service) charge. For those customers that do not receive water
service from the City, a monthly fixed charge is recommended. The study recommends
a change in the rate structure to eliminate the existing surcharge and per unit charge.
These charges have been moved to the fixed portion of the rates. The proposed rates
are included in the Proposition 218 notice (Attachment A).
Approximately ninety four percent of our customers have a 5/8”, 3/4” or 1” meters. The
average monthly water use for our single family homes is 15 HCF (billing units). One
HCF is 748 gallons. Using the average meter size and water use, the below table
depicts the average increase in sewer fees over five years.
Adoption of Sewer Rate Adjustment
January 26, 2016
Page 3
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Current 2016 2017 2018 2019 2020
Sewer Use Charge per HCF $0.35 $0.39 $0.43 $0.48 $0.53 $0.59
Sewer Use Charge at 15 HCF (avg. use) $5.25 $5.85 $6.45 $7.20 $7.95 $8.85
Sewer Service Charge 3/4" to 1" Meter $4.50 $6.04 $6.71 $7.44 $8.26 $9.17
Total $9.75 $11.89 $13.16 $14.64 $16.21 $18.02
Average Monthly Increase $2.14 $1.27 $1.48 $1.57 $1.81
Rate revenue will incrementally increase the Sewer Enterprise Fund over five years as
shown below.
2016 2017 2018 2019 2020
Revenue from Current Rates $3,091,253 $3,091,253 $3,091,253 $3,091,253 $3,091,253
Revenue from Increases $113,346 $528,759 $926,960 $1,368,964 $1,859,587
Total Rate Revenue $3,204,599 $3,620,012 $4,018,213 $4,460,216 $4,950,840
Sewer Master Plan
The Sewer Master Plan was completed in 2009 and identified approximately $29
million dollars in projects to maintain a healthy system. The consultant recommended
an increase in staffing levels by two and an increase in rates to complete a 15 or 20
year master plan program. Staffing levels were not increased and rates could not be
adjusted without a complete rate study as required by State law. Staff looked at
outsourcing as an option to offset a revenue increase and started the process of
preparing an RFP for a rate analysis.
Proposition 218 Procedures
Under the Proposition 218 requirements, the rates cannot be increased if a majority of
the property owning customers submits a valid written protest to the City Clerk by the
close of the 45-day notice period. At the conclusion of the public hearing the City Clerk
shall complete the tabulation of all written protests received, including those received
during the public hearing and shall report the results to the City Council. The Clerk
may advise the City Council of the absence of a majority protest without determining
the validity of all protests. Notices were sent to non-property owning customers and
City Council may consider their protests; however, they will not be counted as part of
the requirement. At this point, City Council could vote to adopt the new rates and
structure.
Adoption of Sewer Rate Adjustment
January 26, 2016
Page 4
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Introduction of the Ordinance Changes
The existing rates are identified in the NBMC (Chapter 14.24.065). Should the rates be
approved, staff recommends Council introduce an ordinance amending the code to
remove the existing rates and include them in the Fee Schedule and pass to second
reading on February 9, 2016. A redlined version of the amendment showing the existing
code (Attachment B) and a final version of the code for approval (Attachment C) are
presented for Council review.
The new sewer water rates and structure will be effective 30 days after the second
reading of the ordinance (approximately March 10). The next rate adjustment will be
affective on January 1, 2017, and on the first day of each year thereafter until January
1, 2020.
Other Agencies Actions:
The City is one of many local agencies that are in the midst of sewer rate increases.
Irvine Ranch Water District, City of Huntington Beach, Moulton Niguel Water District,
Laguna Beach, and Costa Mesa Sanitary District have either recently implemented an
increase, or are in the process of increasing rates. The rate structures vary from
agency to agency so it’s difficult to compare. The following table displays information
from rate increase notices from neighboring agencies. Measurements are typically
assigned by “units” meaning billing units or HCF, Multi-Family (MF), Single Family
Residential (SFR), or Dwelling Unit (DU) and have a variety of fixed and/or variable
rate structure.
Adoption of Sewer Rate Adjustment
January 26, 2016
Page 5
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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 – Proposition 218 Notice
Attachment B – Ordinance 2016-1 Amendment to Sewer Use Charge Redline
Attachment C – Ordinance 2016-1 Amendment to Sewer Use Charge Final
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92658-8915
TO: Doe, John & Jane
12345 Main Street
Newport Beach, CA 94590
City of Newport Beach Information and Notice of Public Hearing
Protest Procedure of Proposed Sewer Rate Charges
EXTRA SPACE
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ATTACHMENT A
Proposed Sewer Rate Increase
Notice of Public Hearing and Protest
Procedure
NOTICE IS HEREBY GIVEN that on Tuesday, January 26, 2016 at 7:00 p.m., a public hearing will
be conducted in the City Council Chambers at 100 Civic Center Drive, Newport Beach, CA
92660.
This will be a public hearing before the Newport Beach City Council to allow public testimony and
discussion of the proposed sewer rate adjustments described within this notice. The City Council will
take written and oral comments that evening. They will also consider all written protests against the
proposed charges, determine if a majority protest exists, and consider resolutions to adopt the sewer
rate charges.
How to File a Written Protest
Written protests must be filed with the City of Newport Beach City Clerk. Written protests may
be hand delivered or mailed to the City Clerk at 100 Civic Center Drive, Newport Beach, California
92660. To be valid, written protests must state opposition to the proposed water rate increase, identify
the parcel (by assessor’s parcel number or street address), and include the original signature of the
sewer service customer or property owner. Written protests may be submitted up to the conclusion of
the public testimony at the public hearing on January 26, 2016.
About Proposition 218
In November 1996, California voters approved Proposition 218. As a result, California agencies m ust
comply with its requirements when setting utility rates. One provision requires that a noticed public
hearing on utility rates be held and that rates not be increased if a majority of affected property owners
protest the increased rates in writing.
Frequently Asked Questions
Q. What does my sewer bill pay for?
A. Your Newport Beach sewer bill covers the following categories costs and services:
• The annual operation and maintenance of the sewer system, including pump station
operations and sewer division employee salaries.
• The repair and replacement of pipes, pump stations, facilities and equipment to improve the
sewer system safety, efficiency and reliability. No debt for this purpose is proposed and all
improvements are “paid as we go” with rate revenue.
Q. Why do the rates need to be raised?
A. The City completed a Sewer Capital Improvement Master Plan in 2010 and projects completed are
updated in the plan each year. The plan identifies infrastructure that requires replacement with
associated costs and is prioritized by severity of damage and risk. Sewer operations, maintenance
and capital improvement programs are supported through the Sewer Enterprise Fund. The current
sewer revenues provide adequate funding for operations, but fall short in providing enough funding
for capital improvements. At the current rate, sewer rate reserves will be depleted by 2017.
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Q. How is my sewer bill currently calculated?
A. Currently a customer’s sewer bill is a component of the municipal services statement sent to City
sewer customers.
Each bill has at least two components:
1. Sewer Service (Fixed): This monthly charge is based on the customer’s water meter size.
Most single-family residential properties have a 3/4, 5/8 or 1 inch meter. Additionally, this
charge includes a capital component. The capital component is to be used for repairs and
improvements to the sewer system identified in the Sewer Master Plan.
2. Sewer Use (Variable): This charge is based on the amount of water used and is calculated
by multiplying the number of water billing units (HCF) by the Sewer Use fee. One HCF
(Hundred Cubic Feet) is equal to 748 gallons.
There are two charges being removed from the proposed rate structure: a surcharge for customer s
with meters 2 inches or larger and per dwelling unit charge. Under the revised sewer rate structure,
these charges will be incorporated into the monthly sewer service charge.
For sewer customers who do not purchase potable water from the City, there is a fixed flat rate
charge identified on the statement as: (Sewer Service – No Water).
Q. How can I find out how the rate change affects my bill?
A. Start by looking at your Municipal Services Statement (a sample has been provided below). You’ll
see a notation like “WATER SERVICE .625”. This means that the water meter at your home or
business is a ⅝” meter. Next, look at the “Current and Proposed Sewer Rates” chart that follows
on this notice. Under “Sewer Service (Fixed)”, if you have a ⅝” meter, the rate will go from $4.50
per month, or $9.00 for each two-month period, to $6.04 per month, or $12.08 for each two-month
period.
Using the sample provided, your charge for sewer use (“SEWER USE HCF”), will be calculated by
multiplying the proposed per unit charge of $0.39 (currently $0.35) by the number of water billing
units (6 HCF) for a total of $2.34. The total sewer charges combine the Sewer Service ($12.08) and
the Sewer Use ($2.34) for a total cost of $14.42 per two month billing period, or $7.21 per month.
If you still have questions about how your bill might be impacted, call or e-mail the City using the
number or address at the end of this notice.
SAMPLE
MUNICIPAL SERVICES STATEMENT
This is how much water
you used.
*See Sewer Use (Variable)
below for the new rate.
This is where to find
your meter size.
*Look under Sewer
Service (Fixed) for the
corresponding meter size
to find your new sewer
rate.*
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Current and Proposed Sewer Rates
For more detailed information regarding the proposed rates, please visit our web site
at:www.newportbeachca.gov/SewerRates
Need More Information? If you have questions, please call George Murdoch, Municipal
Operations Director, Utilities at (949) 644-3011 or e-mail at utilitieshelp@newportbeachca.gov .
Current
Structure FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20
Effective Increase Date 3/01/2016 01/01/2017 01/01/2018 01/01/2019 01/01/2020
Sewer Service (Fixed)
5/8" or 3/4" $4.50 $6.04 $6.71 $7.44 $8.26 $9.17
1" $4.50 $6.04 $6.71 $7.44 $8.26 $9.17
1 1/2" $4.50 $6.65 $7.38 $8.19 $9.09 $10.09
2" $14.50 $9.06 $10.06 $11.17 $12.40 $13.76
2 1/2" $14.50 $9.67 $10.73 $11.91 $13.22 $14.68
3" $14.50 $10.27 $11.40 $12.66 $14.05 $15.59
4" $14.50 $12.08 $13.41 $14.89 $16.53 $18.34
6" $14.50 $13.59 $15.09 $16.75 $18.59 $20.64
8" $14.50 $15.11 $16.77 $18.61 $20.66 $22.93
10" $14.50 $19.33 $21.46 $23.82 $26.44 $29.35
Sewer Service – No Water (Sewer Only Customers)
Rate per Account $6.25 $10.51 $11.66 $12.94 $14.37 $15.95
Sewer Use (Variable)
Rate per HCF $0.35 $0.39 $0.43 $0.48 $0.53 $0.59
Sewer Surcharges
Multi Unit surcharge
(per DU) $2.00 Note 1 Note 1 Note 1 Note 1 Note 1
Note 1: The surcharge has been incorporated into the Sewer Service (Fixed) under the revised structure
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ORDINANCE NO. 2016-__
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH AMENDING SECTION 14.24.065
OF TITLE 14 OF THE NEWPORT BEACH MUNICIPAL
CODE PERTAINTING TO SEWER USE CHARGE
WHEREAS, The City of Newport Beach charges users of the City’s sewer
service to cover the annual operation and maintenance of the sewer system, as wells as
the repair and replacement of pipes, pump station, facilities and equipment to improve
the sewer system safety, efficiency and reliability; and
WHEREAS, on February 26, 2013, the City’s Municipal Operations Department
retained the consulting services of HF&H Consultants, LLC (HF&H) to prepare a sewer
rate study in order to analyze the current cost to the City to provide sewer services and
to provide recommendations regarding an appropriate rate structure; and
WHEREAS, The HF&H study recommended a revised rate structure that
includes a fixed fee component for sewer customers, a fixed fee component for non-
water customers, and a commodity charge; and
WHEREAS, The City Council has reviewed the conclusions of the HF&H study
and agrees that the recommended rate structure should be implemented, which will
allow the City to charge the users of the sewer services a rate that reflects the City’s
current cost of maintaining the sewer system.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows:
Section 1: Section 14.24.065 is hereby amended to the Newport Beach
Municipal Code to read as follows:
A. A monthly basic fixed sewer use service charge of four dollars and fifty cents
($4.50) per month, shall be assessed against each individually metered dwelling
unit or business structure connected to the public sewer system and for each
sewer connection to the public sewer system for customers who purchase water
from the City of Newport Beach except as provided in subsection (C) of this
section. The sewer service charge is based on the water customer’s water meter
size. Fixed sewer service charges shall be effective January 1st of each year and
charged according to the Fee Schedule adopted by resolution of the City Council.
B. A monthly basic fixed sewer use service charge for customers who do not
purchase water from the City of Newport Beachof six dollars and twenty-five
cents ($6.25) per month, shall be assessed for each use service connection to
the public sewer system for customers who do not purchase water from the City
of Newport Beach. Fixed sewer service charges shall be effective January 1st of
each year and charged according to the Fee Schedule adopted by resolution of
the City Council.
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ATTACHMENT B
Page | 2
C. A monthly supplemental sewer use charge of two dollars ($2.00) per month,
shall be assessed for each additional living unit served by the same sewer
connection. For the purposes of this subsection, the term “living unit” shall mean
each additional dwelling unit and structures designed for permanent residential
use and each room with sanitary and sleeping facilities in any hospital, care
facility, hotel or motel.
DC. In addition to the sewer service charges specified above, a sewer
consumption use charge of thirty cents ($0.30) shall be assessed for each
hundred (100) cubic feet of water delivered to each water customer connected to
the public sewer system. Effective September 1, 2006, the sewer consumption
charge shall become thirty-five cents ($0.35). The sewer use charges shall be
effective January 1st of each year and charged according to the Fee Schedule
adopted by resolution of the City Council.
E. A monthly wastewater surcharge of ten dollars ($10.00) per month shall be
assessed to each water customer on all nonirrigation water meters which have a
diameter that equals or exceeds two inches. Water meter connections for the
exclusive purpose of providing water for fire sprinkler of fire protection systems
shall be exempted from this surcharge.
Section 2: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 3: If any section, subsection, sentence, clause or phrase of this
ordinance 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 ordinance. The
City Council hereby declares that it would have passed this ordinance and each section,
subsection, clause or phrase hereof, irrespective of the fact that any one or more
sections, subsections, sentences, clauses and phrases be declared invalid or
unconstitutional.
Section 4: The City Council finds the approval of this ordinance is not subject
to the California Environmental Quality Act (“CEQA”) pursuant to Section 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 to have a significant effect on the environment.
Section 5: Except as expressly modified in this ordinance, all other Sections,
Subsections, terms, clauses and phrases set forth in the Newport Beach Municipal
Code shall remain unchanged and shall be in full force and effect.
Section 6: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
19-11
Page | 3
published once in the official newspaper of the City, and it shall be effective thirty (30)
days after its adoption.
This Ordinance was introduced at a regular meeting of the City Council of the
City of Newport Beach held on the 26th day of January, 2015, and adopted on the 9th
day of February, 2015, by the following vote, to-wit:
AYES, COUNCILMEMBERS ______________________________
_____________________________________________________
NOES, COUNCILMEMBERS______________________________
_____________________________________________________
ABSENT COUNCILMEMBERS ____________________________
_____________________________________________________
MAYOR_______________________________________________
DIANE B. DIXON
ATTEST:
_____________________________________
LEILANI I. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY ATTORNEY’S OFFICE
_____________________________________
AARON C. HARP, CITY ATTORNEY
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ORDINANCE NO. 2016-_
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH AMENDING SECTION 14.24.065
OF TITLE 14 OF THE NEWPORT BEACH MUNICIPAL
CODE PERTAINTING TO SEWER USE CHARGE
WHEREAS, The City of Newport Beach charges users of the City's sewer
service to cover the annual operation and maintenance of the sewer system, as wells as
the repair and replacement of pipes, pump station, facilities and equipment to improve
the sewer system safety, efficiency and reliability: and
WHEREAS, on February 26, 2013, the City's Municipal Operations Department
retained the consulting services of HF&H Consultants, LLC (HF&H) to prepare a sewer
rate study in order to analyze the current cost to the City to provide sewer services and
to provide recommendations regarding an appropriate rate structure; and
WHEREAS, The HF&H study recommended a revised rate structure that
includes a fixed fee component for sewer customers, a fixed fee component for non-
water customers, and a commodity charge; and
WHEREAS, The City Council has reviewed the conclusions of the HF&H study
and agrees that the recommended rate structure should be implemented, which will
allow the City to charge the users of the sewer services a rate that reflects the City's
current cost of maintaining the sewer system.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows:
Section 1: Section 14.24.065 is hereby amended to the Newport Beach
Municipal Code to read as follows:
A. A monthly fixed sewer service charge, shall be assessed against each
individually metered dwelling unit or business structure connected to the public
sewer system and for each sewer connection to the public sewer system for
customers who purchase water from the City of Newport Beach. The sewer
service charge is based on the water customer's water meter size. Fixed sewer
service charges shall be effective January 1®' of each year and charged
according to the Fee Schedule adopted by resolution of the City Council.
B. A monthly fixed sewer service charge for customers who do not purchase
water from the City of Newport Beach shall be assessed for each service
connection to the public sewer system. Fixed sewer service charges shall be
effective January 1®* of each year and charged according to the Fee Schedule
adopted by resolution of the City Council.
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ATTACHMENT C
C. In addition to the sewer service charge specified above, a sewer use charge
shall be assessed for each hundred (100) cubic feet of water delivered to each
water customer connected to the public sewer system. The sewer use charges
shall be effective January 1®' of each year and charged according to the Fee
Schedule adopted by resolution of the City Council.
Section 2: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 3: If any section, subsection, sentence, clause or phrase of this
ordinance 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 ordinance. The
City Council hereby declares that it would have passed this ordinance and each section,
subsection, clause or phrase hereof, irrespective of the fact that any one or more
sections, subsections, sentences, clauses and phrases be declared invalid or
unconstitutional.
Section 4: The City Council finds the approval of this ordinance is not subject
to the California Environmental Quality Act ("CEQA") pursuant to Section 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 to have a significant effect on the environment.
Section 5: Except as expressly modified in this ordinance, all other Sections,
Subsections, terms, clauses and phrases set forth in the Newport Beach Municipal
Code shall remain unchanged and shall be in full force and effect.
Section 6: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
published once in the official newspaper of the City, and it shall be effective thirty (30)
days after its adoption.
This Ordinance was introduced at a regular meeting of the City Council of the
City of Newport Beach held on the 26th day of January, 2015, and adopted on the 9"^
day of February, 2015, by the following vote, to-wit:
AYES, CQUNCILMEMBERS
NOES, CQUNCILMEMBERS.
ABSENT CQUNCILMEMBERS
Page | 2
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MAYOR
DIANE B. DIXON
ATTEST:
LEILANI I. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
AARON C. HARP, CITY ATTORNEY
Page | 3
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