Utilities Rate Advisory Commission Meeting - November 14, 2011

The City of Sacramento Utilities Rate Advisory Commission met on November 14, 2011, at New City Hall Council Chambers. The meeting was called to order at 5:34 p.m. and adjourned at 8:12 p.m. All seven commissioners were present, with Carolyn Veal-Hunter arriving at 5:36 p.m. The commission approved minutes, received staff reports, and reviewed the proposed Water and Wastewater Program Finance Plan, including a 30-year infrastructure program, a five-year capital improvement plan, and proposed three-year rate increases.

Consent Calendar

• Approved the minutes from the October 26, 2011 meeting unanimously. Motion by Douglas Brown, second by Scott Brown.

Staff Report Back from October 26, 2011 Meeting

• Received and filed. Dave Brent, Interim Director of Utilities, reported on follow-up items. Staff presented preliminary data linking sanitary sewer overflows and water main leaks to pipe age, and C-value testing of cast iron water pipes in the downtown/midtown area. Some pipes in red-rated areas showed capacities of about 30 percent of design. Staff is still completing the requested pipe-age correlation and will report back. Lists of water and sewer projects completed since 2001 were provided. Grant information remains incomplete and will be provided later.

Water and Wastewater Program Finance Plan

• Received and filed. Staff and consultants from FCS presented the plan previously shown to City Council on November 8. The plan includes a 30-year program, a five-year capital improvement program (CIP), and a recommended three-year rate adjustment. The five-year water CIP totals approximately $350 million; the wastewater CIP totals approximately $64 million. Proposed monthly increases for the average single-family residential bill are $3.44 for water and $2.36 for wastewater, representing about a 6 percent overall utility bill increase over three years.
• Jamille Moens reviewed preliminary FY11 water fund results: revenues were budgeted at $82.8 million but actuals were $80.8 million; expenditures were budgeted at $83.8 million but came in at $74 million, producing net positive activity of about $7.5 million ($6.9 million after fleet adjustment). Wastewater fund results also came in under budget.
• The wastewater fund shifted $2 million of capital costs to the drainage fund to avoid a structural deficit. Cost escalators in the model include about 4 percent first-year labor increases from closed contracts, then zero in years two and three, plus assumptions for electricity, fuel, chemicals, CPI, ENR, and the voter-approved 11 percent general fund tax on utility revenues.
• Commissioners asked about rate smoothing, debt financing, reserve targets, bond ratings, long-term rate increases, and accountability. Staff discussed moving up to $30 million from existing capital appropriations into reserve to improve bond coverage and then refunding those projects with new debt.
• Commissioner Veal-Hunter asked about low-income assistance. Staff stated Proposition 218 prohibits using rate revenue to subsidize low-income customers; any program would need non-enterprise funding, and options are being explored with the City Council.

Public Comments & Testimony

• Greg Hatfield, identified as policy director/vice president of I in Sacramento, commented during the Finance Plan discussion. He described the plan as a 30-year commitment with unknowns, raised concerns about moving $30 million from capital projects into reserves, and called for stronger tracking and oversight to ensure ratepayer money is used for infrastructure. He stated support for maintaining infrastructure but emphasized the need for accountability.
• There were no public comments on matters not on the agenda.

Commission Ideas, Questions and Announcements

• Commissioner S. Brown requested the presentation in PDF format; staff said materials are available on the website.
• Commissioner Veal-Hunter shared that she attended a utility facility tour and found it helpful.
• Staff is considering rescheduling the next commission meeting from November 30 due to a conference and will notify commissioners.
• Staff clarified that the commission may meet during the Proposition 218 notification/protest period, but the public hearing must be held at the close of the 45-day period, and approved rates cannot exceed those in the notice.

Key Outcomes

• Minutes approved; staff reports received and filed.
• Staff will provide the following in future reports: completed grant information, the pipe-age correlation, alternative program and rate scenarios requested by City Council, long-term rate projections, a breakdown of rate increases between capital and operating uses, and a one-step rate scenario.
• Upcoming schedule: Proposition 218 notice around early December; continued community outreach; commission public hearing tentatively January 25, 2012; City Council hearing in February; rates effective July 1, 2012 if adopted.