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HomeMy WebLinkAboutMin - CC - 2021.09.07 - Study SessionCITY BURLINGAME uFaT[o J u[ 6 BURLINGAME CITY COUNCIL Approved Minutes City Council Study Session Meeting on September 7, 2021 1. CALL TO ORDER A duly noticed meeting of the Burlingame City Council was held on the above date via Zoom Webinar at 6:15 p.m. 2. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, O'Brien Keighran, Ortiz MEMBERS ABSENT: None 3. STUDY SESSION a. STUDY SESSION — WATER AND SEWER RATES DPW Murtuza stated that the City hasn't increased sewer rates for nine years. Therefore, staff hired Bartle Wells Associates to conduct a study on water and sewer rates. He explained that water and sewer rates are collected on a bi-monthly basis to fund the Water Enterprise Fund and Sewer Enterprise Fund. The Water Enterprise Fund provides funding to install, maintain, and operate water supply infrastructure within the city, and to purchase drinking water from the San Francisco Public Utilities Commission (SFPUC) on a wholesale basis. He continued that the Water Enterprise Fund provides funding to the water system's capital improvement program (CIP) and debt service used for water infrastructure improvements. He stated that the Water Enterprise Fund currently provides $3.5 million in annual funding for the CIP, with a substantial backlog of capital improvement needs to address. DPW Murtuza explained that the Sewer Enterprise Fund provides funding to install, maintain, and operate sewer conveyance infrastructure and the wastewater treatment facility. He noted that the Sewer Enterprise Fund provides funding for the sewer system's CIP and debt service used for sewer infrastructure improvements. He stated that in a typical year, the Sewer Enterprise Fund provides $4 million in CIP funding. The recent Sewer System Master Plan has identified capital projects estimated at approximately $137 million of backlog through 2040. DPW Murtuza introduced Alex Handlers from Bartle Wells Associates. Mr. Handlers gave an overview of Bartle Wells Associates: 0 Financial consulting firm specializing in utility rates and finance. • Professional services: 1) utility rate & fee studies, 2) financial plans, 3) financial advisor for debt financing. • Charter Member: National Association of Municipal Advisors • MSRB-Registered Municipal Advisory Firm • Consulted for over 500 public agencies throughout California, including numerous Bay Area cities and special districts • Assisted City with last water rate study, recent capacity charge updates, and a prior State Revolving Fund Loan • Extensive experience developing water & sewer rate studies Mr. Handlers gave a background of the water and sewer rates: • Water and sewer utilities are self-supporting enterprises funded primarily from water and sewer service charges. o Rates need to be set at adequate levels to support each utility's operating, maintenance, debt service, and capital funding needs • City last adopted 3 years of water rate increases effective January 1, 2017 through 2019; no water rate increases were implemented in 2020 or 2021 • No sewer rate increases in over 9 years (last increase effective July 2012) • Combined water and sewer rates for typical single family homes are in the lower range compared to other agencies in San Mateo County o Water rates in upper -middle range o Sewer rates in lower range • Customers billed via bi-monthly utility bill for water, sewer, and garbage Mr. Handlers went over what the water and sewer rates pay for: Water Rates Capital Improvements 3.5 million 18% Debt 2.1 million 10% Operating & Maintenance 5.7 million 29 % SFPUC Water Supply 8.5 million 43 % Sewer Rates Capital Improvements 4.7 million 28% Debt 2.6 million 15% Operating & Maintenance 5.1 million 30% Wastewater Treatment 4.4 million 27% Mr. Handlers explained that Burlingame's average combined monthly water and sewer bill is $140.55. He commented that this equates to $50.40 in sewer charges and $89.65 in water charges. He noted that some agencies receive property tax revenues that help reduce funding needs from rates. He continued that other agencies adopted or anticipate adopting rate increases in upcoming years. 2 Mayor O'Brien Keighran asked about projected sewer rates. Mr. Handlers responded that they have those projections for sewer rate increases. Mr. Handlers gave an overview of the rate study summary: • Rate study overview o Developed updated 10-year financial projections for water and sewer utilities o Evaluated rate increases needed to support each utility's operating, maintenance, debt service, and capital funding needs o Updated sewer rate structure to keep rates for each customer class aligned with the cost of providing service • General findings and recommendations o Water Rates: No increases recommended at this time o Sewer Rates: Rate increases needed to support operating and capital needs o Recommend phasing in sewer rate increases over 3 years • Even with sewer rate increases, combined utility bills for typical single family homes are projected to remain among the lowest in the county. Mr. Handlers gave an overview of the water rate: • City last adopted 3 years of rate increases effective January 1, 2017 through 2019 o Rates designed to support operating and capital programs and increasing costs of SFPUC water supply o SFPUC wholesale rates have increased slower than previously projected • No water rate increases implemented in 2020 or 2021 • No new water rate increases are needed or recommended at this time • Projections indicate likely need for small inflationary rate increases in future years to keep rates aligned with costs of service • Covid-19 impacts: decrease in commercial use has been partially offset by increase in residential use • City monitoring drought conditions • City can re-evaluate water rates in future years Councilmember Brownrigg commented that it would be helpful to have a chart with the comparison of wholesale rates between CalWater and the SFPUC. Mr. Handlers gave an overview of the sewer rate: • No sewer rate increases over the past 9 years o Current rates have been in effect since July 1, 2012 • City's sewer rates for typical single family homes are among the lowest in San Mateo County • Financial projections indicate need for rate increases over next 3 years o Costs have increased over the past 9 years with no corresponding rate increases o Fund high -priority sewer system capital improvement needs o Keep rates aligned with costs of providing service • Covid-19 impacts: Commercial usage has declined, particularly from restaurants & hotels (revenues decreased by —$2 million in FY 2020/21) 3 • With proposed rate increases, City's sewer rates for typical single family homes will remain among the lowest in the county Mr. Handler explained that the single family residential monthly sewer rate is on the lower side compared to other agencies. He commented that Burlingame residents pay $24.50 in fixed or minimum charges and $25.90 in sewer usage charges each month. Mr. Handlers reviewed the capital improvement needs: • Sewer facilities include: o Collection System: 95 miles of pipelines and 6 pump stations o Wastewater Treatment Plant: Serves Burlingame, half of Hillsborough and Burlingame Hills SMD (operated by Veolia) o Effluent disposal via North Bayside System Unit (NBSU) o Significant backlog of aging infrastructure • Master plans and engineering analysis identified wastewater system capital improvements ($137 million) o Wastewater Treatment Plant Master Plan Update (2016) and Predesign Study (2021) o Wastewater Collection System Master Plan Update (2021) o Cost Estimate: $63 million over first 5 years (with 3% cost escalation) o Addresses highest -priority needs He noted that the capital improvement needs are the biggest driver of increasing rates. Mr. Handlers gave a sewer rate study overview: • Evaluated rate increases under 2 scenarios • Scenario A: Full CIP o $63 million over 5 years with 3% cost escalation o Assumes $23 million cash funding and $40 million of debt financing • Scenario B: Deferred CIP o $42 million over 5 years o $22 million cash funding and $20 million debt financing for high -priority WWTP Project (Replace Digester No. 2, Digester Equip Building & Sludge Handling Building) • Developed updated sewer rate structure o Sewer rate structure has not been adjusted since at least 2006 o Provides administrative record that rates reasonably recover the cost of service to each customer class in compliance with Prop 218 o Aimed to maintain continuity with current rate structure, but rates for some classes increase more than others due to realignment with cost of service • Phased in rate adjustments over 3 years Mr. Handlers explained the sewer rate scenarios. He noted that with the full CIP scenario, it would be 9% increases each year for a three-year period and for the deferred CIP scenario, it would be 7% increases each year for a three-year period. He continued that there will be 4 institutional increases to charges for schools and churches. He noted the institutional charges are not targeted specifically at these establishments, but their charges were so low to begin with that it was inevitable. He commented that the deferred CIP would also see rate increases but slightly less than the full CIP scenario. Mr. Handlers stated that under scenario A, the average single family residential monthly sewer rates would go up to $55.68, and under scenario B they would go up to $54.49. He explained that this would still make Burlingame's rates lower than most. Councilmember Brownrigg asked if the one of the reasons Burlingame has lower sewer rates than most is because the sewer system is run by Veolia. DPW Murtuza responded in the affirmative. He noted that cost increases have been to cover the cost of inflation for construction. Councilmember Brownrigg commented that he is in favor of the 9% increase. Mr. Handlers gave an overview of the next steps: • Obtain Council input and direction • Move forward with Proposition 218 process at Council's direction o Mail notices to property owners/ratepayers 45+ days prior to a Public Hearing o Hold public hearing on proposed sewer rates (Tentative Date: November 15 Council Meeting) o Rate increases subject to "majority protest" • Goal: New rates become effective starting January 1, 2022 Mayor O'Brien Keighran opened the study session for public comment. No one spoke. Mayor O'Brien Keighran commented that she does not want the City's infrastructure to fall too far behind and is in favor of the 9% increases. Councilmember Beach commented that the difference between the two scenarios is not that much and that she would be in favor of the 9% increases. Councilmember Colson commented she is in favor of the 9% increases. She noted she wants to avoid any further costs from any leaky or faulty infrastructure. Vice Mayor Ortiz concurred with his colleagues. Mayor O'Brien Keighran thanked staff for the presentation. 4. ADJOURNMENT The meeting was adjourned at 6:56pm. Respectfully submitted /s/ Meaghan Hassel -Shearer, City Clerk 5