DATE: December 15, 2015
TO: Board of Supervisors
SUBMITTED BY: Alan Weaver, Director
Department of Public Works and Planning
SUBJECT: Protest Hearing on Increasing the Annual Water Service Fee for County Service Area 23 - Exchequer Heights
RECOMMENDED ACTION(S):
TITLE
Conduct hearing and receive written protests from County Service Area 23, Exchequer Heights, property owners on a proposal to increase the annual water service fee, as required under California Constitution Article XIII D, Section 6, and upon completion of the public protest hearing, approve item A or B.
A. If there is not a majority protest, adopt a resolution establishing the increased annual water service fee for operation and maintenance costs of potable water for County Service Area 23, Exchequer Heights.
B. If there is a majority protest, make a finding that there is a majority protest and abandon proceedings to increase the annual water service fee and direct staff to hold a public meeting announcing immediate cost savings steps which could include suspension of water quality testing and reporting, issuance of a notice of potential non-potable water, a recommendation to boil all water prior to ingesting it, or a possible dissolution of County Service Area 23.
REPORT
The proposed increased annual water service fee is recommended to fund the operations and maintenance (O&M) and administration of the community water system and establish prudent reserves for anticipated capital replacements and repairs. There are 16 properties receiving water service from the County in County Service Area 23 (CSA 23). For there to be a majority protest, the County must receive properly submitted written protests representing at least 9 of those properties.
ALTERNATIVE ACTION(S):
Staff has not identified any viable alternative.
FISCAL IMPACT:
There is no net County cost associated with the recommended actions. All costs for the administration and O&M of the water services and anticipated capital projects will be paid from the increased annual water service fee to be charged to the owners of properties receiving water service through CSA 23.
DISCUSSION:
CSA 23 was formed in 1970 to provide water services for the subdivision of Exchequer Heights, Tract 1994. This subdivision is located approximately three miles southwest of the Dinkey Creek area near the intersection of Exchequer Drive and Dinkey Creek Road. There are 16 parcels within the service area, all of which are developed.
The increased annual water service fee has been proposed to pay for O&M of the water system and to build reserves for repair and replacement of capital components of the system. The annual water service fees were last increased in 2009 in order to increase reserves and generate revenue for infrastructure repairs. However, since 2009, annual O&M costs have increased by approximately 21%. The 2009 adopted water service fee structure did not include an annual inflation increase to allow revenues to keep up with increased costs of operations. The proposed increased annual water service fee is calculated to meet the Fresno County Board of Supervisors (Board) policy of maintaining a minimum reserve level of 50% of the average of the last three years operating expenses.
On July 30, 2015, Department of Public Works and Planning staff met with the CSA 23 Citizens Advisory Committee (CAC) and discussed the possibility of initiating a rate adjustment process (Prop 218) to propose an increased annual water service fee due to increased O&M costs and expected and necessary repairs needed for the water system. Staff explained that the increased annual water service fee would include funds for O&M, future capital replacement, and building of a cash reserve. At the meeting, the CAC approved Staff moving forward with the proposed rate increase that included a capital repair/replacement plan.
On October 30, 2015, as required by Proposition 218, in accordance with California Constitution Article XIII D requirements, notification for the Protest Hearing (Attachment A) was mailed to record owners of property subject to the proposed increased annual water service fee. The notification letter explained the procedure for submitting a protest to the proposed increased annual water service fee, and clarified how the proposed increased annual water service fee was calculated and how it will allow CSA 23 to meet the operational needs of the water system. The notice also explained that if less than a majority of property owners submitted a written protest to the proposed annual water service fee, the Board may set the fee effective July 1, 2015. On November 3, 2015, staff mailed a letter (Attachment B) to inform property owners that the deadline for written protests was December 15, 2015, and not November 17, 2015, as the October 30 notice erroneously stated.
On December 2, 2015, staff met with CSA 23 water users, including property owners and residents at the Shaver Lake Community Center to explain the proposed new annual water service fee and to answer any questions related to the proposed fee. Additionally, staff explained the Prop 218 process and the ramifications of a majority protest of the proposed new annual water service fee, which could include the suspension of water quality testing and reporting, and issuance of a notice of potential non-potable water, and a recommendation to boil all water prior to ingesting it.
The proposed water service fee was developed by analyzing the actual costs of O&M for the CSA 23 water system over the last three years and developing a projected O&M cost based on that data. The proposed water service fee also includes anticipated costs for known necessary capital replacement and repair projects.
Anticipated capital replacement and repair costs include the replacement or repair of 2 well pumps. Well pumps have a known life cycle and can be expected to need repair or replacement every 7 to 9 years during normal operations. The first projected well pump repair or replacement is scheduled under the proposed capital plan to occur in budget year 4 and the second in budget year 8. Another anticipated capital cost included in the proposed water service fee is a necessary repair to the roof of the booster pump building which is scheduled to take place in budget year 2. A one-time contingency amount of $3,500 for miscellaneous infrastructure repairs is also included in the costs used to calculate proposed water service fee.
The projected cost of all O&M components for the first year of the proposed water service fee is $15,919.36 which is $994.96 per customer. In addition, the capital replacement and repair reserve component of the proposed water service fee is $3,075 per year, which is $192.19 per customer. Including all three components, the total first year proposed water service fee is $1,187.15 per customer. This is a 52% increase from the current annual water service fee of $779.56. There is a 28% increase to the O&M expenses. The remainder of the increase (24%) is due to the creation of the capital replacement plan approved by the CAC.
The proposed new annual water service fee includes an annual inflation factor equal to the average annual change for the San Francisco-Oakland-San Jose Consumer Price Index - All Items (SFCPI-U) up to a maximum 3% annual inflation increase for a five-year period (effective July 1 of each year beginning on July 1, 2016, with the last increase to occur on July 1, 2019) to ensure that the base water fee maintains pace with the economy.
Exhibit “A” shows the proposed new water service fee over the next five years with maximum inflation increases.
If the County does not receive properly submitted written protests from owners or tenants representing a majority of the properties receiving water service in CSA 23, the Board may approve the proposed new annual water service fee. If a majority protest occurs, staff will communicate with CSA 23 property owners and residents on reducing water services or the potential dissolution of CSA 23. For there to be a majority protest, the County must receive properly submitted written protests representing at least 9 properties receiving water service from the County in County Service Area No. 23.
If approved, the proposed new annual water service fee will become effective July 1, 2015.
ATTACHMENTS INCLUDED AND/OR ON FILE:
Map
Exhibit A
Attachment A
Attachment B
On file with the Clerk - Fee Increase Resolution
CAO ANALYST:
John Hays