Utilities Rate Advisory Commission Meeting Summary

Meeting held March 9, 2011, from 5:37 p.m. to 7:58 p.m. at New City Hall, 915 I Street, Council Chambers. Present: Chair Steven Archibald, Commissioners Douglas Brown, Scott Brown, Steve Harriman, and Carolyn Veal-Hunter (arrived 5:54 p.m.); Karen McBride was absent.

Consent Calendar

• Approved the August 25, 2010 minutes on a motion by Douglas Brown, seconded by Steven Archibald, with all present in favor. The minutes were corrected to clarify that Dr. Lehr abstained rather than voted against the August motion.

Public Comments & Testimony

• Jeff Dunlevy, a College Glen resident and recycling industry employee, said residential solid waste, recycling, and green waste rates are about 30 to 50 percent higher than surrounding jurisdictions. He asked the efficiency audit to consider a rate rollback for the suspended neighborhood cleanup program, and he opposed flow-controlling commercial waste to the BLT facility, citing legal questions and warning that residents could end up paying the region's highest trash rates if the city cannot direct commercial tonnage.
• John Deglow, Vice President of the College Glen Neighborhood Association, questioned the $26 per month differential between street pickup and containerized service and said his association had requested the supporting numbers. He raised odor concerns from enclosed green waste containers, noted existing subsidy precedents (transit, enterprise zones, sports facilities, bike lanes), and urged that the seasonal leaf pickup "claw" service be valued for reducing storm drain clogging.

Discussion Items

• Commissioner and staff introductions were received and filed. New commissioners Steve Harriman and Scott Brown introduced themselves; staff also introduced key Department of Utilities personnel.
• Joe Robinson, Senior Deputy City Attorney, reviewed the commission charter: review and comment on utility rate proposals, no authority over utility service levels (set by Council), conduct Proposition 218 rate hearings, and act as a community liaison. This item was received and filed.
• Efficiency Audit Update, heard out of order: City Auditor Jorge Oseguera reported that the City Council authorized a professional services agreement on February 22, 2011, with Public Financial Management Inc. (PFM), joined by EMA and GBB, to perform an operational efficiency and cost-savings study. The audit will first target three to five opportunities for immediate savings; consultants are already interviewing Utilities staff. An electronic resident survey is being handled in-house rather than through the $116,000 audit contract. A formal report is expected between April 24 and early May, and an additional special audit committee meeting will be scheduled.
• Budget Status and Review: Jamille Moens, Business Services Manager, presented the FY10, FY11, and FY12 budget outlook. The Council reduced the commission's recommended 12 percent average weighted rate increase to about 9 percent for each of two years, increasing a typical single-family utility bill by $7.73 in the first year and $8.62 in the second. FY10 performance was better than budgeted due to lower water production, lower bad debt (after a $5 million spike), and savings from layoffs and furloughs. Service impacts included reduced preventive maintenance, suspended neighborhood cleanup, reduced/eliminated illegal dumping response, and street sweeping cut from weekly to bi-monthly. FY11 revenues are trending down, but contingency reserves of about $1.4 million are not expected to be used; solid waste reserves are increasing, while reserves remain below the 45-day prudent target (consultants advise 180 days). Utility staffing has dropped from 696 FTE in FY03 to 684 in FY11, or 672 when adjusted for the transfer of 12 utility billing staff. Roughly 42 percent of residential connections are metered; about 22,000 meters were installed last year using ARRA and other grant funds. FY12 assumes no across-the-board rate adjustments, continued furloughs except for solid waste drivers, no additional meter program funding, and incorporation of efficiency audit findings. The department's work plan includes loose-in-the-street rates/Measure A, BLT tiered pricing, water and fluoride Council workshops, a drainage rate/revenue requirement study, a four-year rate plan that includes a $150 million water treatment rehabilitation project, and development review fees.
• Utilities Rate Structure Review: Staff reviewed water, sewer, drainage, and solid waste rates for residential and commercial customers. Water rates include flat and metered components; the metered rate is 75 cents per 100 cubic feet, with a structure about 60 percent volumetric and 40 percent fixed. Staff noted that better conservation can require higher rates because most costs are fixed. Sewer rates are mostly flat, but commercial customers already have a metered sewer component; the commission discussed possible future volumetric sewer pricing. Solid waste rates are separately set for garbage, green waste, street sweeping, and recycling, with loose-in-the-street service priced at $13.71 per month versus containerized service. Discussion covered the cross-subsidy from loose-in-the-street service and the legal options for tiered water rates under Proposition 218 and the 2008 state conservation water pricing law. Staff also reviewed Measure B, the November 2010 ballot measure that would have rolled rates back and capped future increases at inflation; it was defeated by roughly 68 to 70 percent of voters.

Key Outcomes

• The consent calendar was approved, and the minutes of August 25, 2010 were accepted.
• Items on the charter/responsibilities, efficiency audit, budget status, and rate structure were all received and filed; no rate changes were adopted.
• Staff will return to the City Council on April 5, 2011, for direction on loose-in-the-street service levels, after which a rate recommendation may come back to this commission.
• The City Auditor is expected to deliver the efficiency audit report between late April and early May 2011; the commission may receive an update at a future meeting.
• Commission meetings are required at least quarterly and no more than 12 times per year. Additional meetings on the loose-in-the-street rate may be scheduled for April or May 2011.