HomeMy WebLinkAboutMin - CC - 2021.09.07 - Study SessionCITY
BURLINGAME
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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.
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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)
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• 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
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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
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