Title
Report regarding a resolution establishing sewer service rates for the fiscal year 2020-2021; amending the Master Fee Schedule to include the fiscal year 2020-2021 Sewer Service Rates; adopting the Report of Annual Sewer Rentals Charges for the fiscal year 2020-2021. (Mike Futrell, City Manager & Brian Schumacker, Plant Superintendent).
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RECOMMENDATION
Recommendation
Staff recommends that the City Council conduct a public hearing and adopt a Resolution establishing sewer service rates for the fiscal year 2020-2021, amending the Master Fee Schedule to include the fiscal year 2020-2021 Sewer Service Rates; adopting the Report of Annual Sewer Rentals Charges for the fiscal year 2020-2021.
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BACKGROUND/DISCUSSION
The South San Francisco-San Bruno Water Quality Control Plant went into service in 1952 to meet the community’s growing need to protect public health and safeguard San Francisco Bay. The sewage collection and treatment system operates 24 hours per day, seven days per week, and can process up to 62 million gallons per day (MGD) of wastewater. The collection system conveys wastewater through a network of over 165 miles of underground sewer lines and thirteen sanitary sewage pump stations in South San Francisco to the Water Quality Control Plant (WQCP). This infrastructure serves 16,461 residential and 1,584 commercial connections.
Complex systems thoroughly treat wastewater at the WQCP. Local, state, and federal regulators heavily regulate the treatment processes. These regulations help to protect the health and safety of humans, animals, plants, and the environment. The discharge requirements for the WQCP are governed by the San Francisco Bay Regional Water Quality Control Board and defined in Order No. R2-2019-0021, National Pollution Discharge Elimination System (NPDES) No. CA 0038130 adopted on July 10, 2019.
Sewer fees collected from the users fund critical services such as the operation, maintenance, compliance monitoring, and upgrade of the sewer collection system and treatment plant required by the NPDES permit. The plant staff has engaged in further planning at the treatment plant and has started or completed several reliability improvement projects and engineering studies.
• Completed:
o Standby generator No. 1 replacement project
o Effluent storage pond relining project (initially constructed in 2005)
o WQCP rehabilitation building seismic retrofitting
• Under design and construction:
o Design and rebuilding/rehabilitation of anaerobic digesters
o Bulk chemical storage tank rehabilitation (initially constructed in 1997)
o Secondary clarifier restoration (initially constructed in 1964)
o Sewer collection system inspection and repair
o Sanitary Pump Station No. 4 redundant force main
Plant management consistently looks for opportunities to operate more efficiently and to implement cost-savings measures, including the following:
• Replacement of two low-efficiency centrifugal blowers with two high-efficiency turbo blowers. These new turbo blowers use up to 25% less electricity
• Digestion process redesign that will replace two conventional anaerobic digesters with one high solids digester. This redesign saved 50% in tank construction costs.
• Planning a 520 kW battery energy storage system to reduce peak energy charges of up to 35% per year
• Feasibility planning for biosolids drying that can reduce biosolids disposal cost by 75% per year
• 205 kW solar photovoltaic (PV) covered parking. This project can reduce plant electrical cost by up to 20% per year
Regulators continue to make discharge requirements more stringent since the passage of the Clean Water Act in 1972. The Clean Water Act requires adequate plant upgrades to meet new state and federal mandates. The most recent mandate requires additional plant upgrades and necessitated the adjustment of user sewer rates to fund the required changes. On June 28, 2017, the City Council conducted a Proposition 218 process to set sewer rates. Subsequently, this process approved a five-year rate plan that increased sewer fees to fund the mandated sewer collection system and treatment plant improvements, as follows:
• In the fiscal year 2017-18, a 13% increase across all rate types
• In the fiscal year 2018-19, a 10% increase across all rate types (financing required only a 9% increase in FY 2018-19)
• In fiscal years 2019-20 through 2021-2022, a 2% increase each year across all rate types
Revenues and expenses are in alignment with the staff’s projections from the approved five-year rate plan.
However, the staff does not recommend the 2% increase this year for two reasons.
1. Staff successfully secured low-interest Clean Water State Revolving Funding (CWSRF) resulting in a lower interest rate on debt service; and
2. The CWSRF Green Project Reserve approved 4 million dollars in principal forgiveness.
The CWSRF targets critical green infrastructure, energy efficiency improvements, and other environmentally innovative projects. Several of the WQCP’s projects qualified, for instance, the new high solids digester technology, solar, and high-efficiency sludge mixing systems. Finance Staff anticipates that the CWSRF loan will save the City roughly 23.7 million dollars in fees, principal forgiveness, and interest charges over the 20-year life of the loan in comparison to open market sources, such as bond issuance.
If the City Council elects to do so, the residential rates will remain at $ 61.58 per month. The rate will not increase from the previous fiscal year. Commercial and industrial rates will also remain even. Commercial rates vary depending upon actual water use of the prior year. The sewer service charge for each type of commercial business also depends on the customer type, customer class (there are different classes for commercial and institutional customers), and the amount of wastewater discharged.
The chart below displays how the City of South San Francisco residential sewer rates compare to other cities within San Mateo County.
Under the City’s Municipal Code requirements, the Finance Director has filed with the City Clerk a report containing a summary of the annual rentals or charges by type of real property, receiving sewer service, computed in conformity with the schedule of fees. Additionally, the City Clerk published the notice of the public hearing per the applicable state law and Municipal Code requirements. Following the adoption of the Resolution approving the report of sewer service charges for the Fiscal Year 2020-21, the City Clerk will file a copy of the report with the county auditor. The county will then collect the sewer service charges will on the official tax assessment roll.
RELATIONSHIP TO THE STRATEGIC PLAN
The Water Quality Control Plant (WQCP) Division promotes public health and environmental stewardship. Continuing to fund infrastructure capital improvements positively affects the quality of life for South San Francisco residents by protecting public health and safety.
FISCAL IMPACT
Staff developed the FY 2020-21 Sewer Fund budget based on revenue from the proposed rate. Projected revenues for FY 2020-21 are $24,329,908 if approved by the City Council.
CONCLUSION
The staff has updated the financial forecast for the City based on predicted operational costs, state NPDES permit requirements, and estimates of Sewer Fund revenues and expenses. Staff recommends the existing rate structure remain as set forth for FY 2020-21 within the five-year rate plan initially adopted by City Council in 2017.
The City determined Sewer service rates following state guidelines, and staff believes the proposed rates represent a fair and equitable allocation of costs to the various classes of users and are in proportion to the amount of sewage discharged into the sewer system.
Attachment:
1. Proposed FY 2020-21 Sewer Rate Plan PowerPoint Presentation