Utilities Rate Advisory Commission Meeting - July 24, 2019

The Utilities Rate Advisory Commission (URAC) met on July 24, 2019, at 5:30 p.m. in the Council Chambers at 915 I Street, Sacramento. The meeting included approval of the June 26, 2019 minutes, quarterly updates from the Department of Utilities (DOU) on accountability and finances, and a zero-waste overview and landfill closure presentation from the Department of Public Works (DPW). Commissioners discussed fund balance surpluses, rate adjustment planning, and the city's zero-waste goals.

Consent Calendar

• Approval of Minutes for June 26, 2019: The motion passed with one abstention (Commissioner Travis abstained). Chair Jarvis also abstained from voting.

Discussion Items

• Department of Utilities: Accountability Plan Quarterly Update (Estimated Time 20 minutes): Pravani Vandia, Water Division Manager, presented the accountability plan update covering the community engagement program, FY17-20 CIP financing, and the director's report. Key details: the water capital finance plan includes a $173.1 million drinking water state revolving fund loan (as of March 31, 2019, $52.4 million spent, $54.8 million encumbered) and $62.6 million in Series 2017 water revenue bonds ($60.5 million expended, $2 million encumbered). Wastewater bonds ($32 million) were issued in April 2019 with a $6 million premium. All three funds (water, wastewater, storm drainage) project at least 120 days of working capital at June 30, 2019. The director's report noted 7,750 participants in the rate assistance program (with 5 not-for-profit organizations), with an anticipated increase to 8,500 by August. FY19 expenditures for the program were $1.7 million (budget $3.78 million); unspent funds will roll back to the general fund. Water conservation efforts include two-day-a-week watering, leak-free programs, and smart controller rebates. Current water usage is approximately 160–165 gallons per capita per day (down from 280+ historically).
• Department of Utilities: Financial Update (Estimated Time 20 minutes): Jackie Price, Supervising Financial Analyst, presented FY19 year-end projections and FY20 budget. Key points: Water fund expenditures projected $7 million under budget, resulting in a net revenue of $31 million to fund balance. Wastewater fund revenues projected $1.9 million over budget due to increased sewer permits. Storm drainage fund expenditures projected $1.3 million under budget. Fund balances are growing; water fund has 456 days of working capital (significantly above the 120-day policy). Commissioners expressed concern about the large surplus (approximately $75 million above reserve) and questioned whether it undermines the need for future rate increases. Bill Busath, DOU Director, responded that the high balance is due to front-loading capital costs for the SRF loan, delayed debt service, and a cautious approach to spending, especially for the storm drainage fund which has not had a rate adjustment. He acknowledged the concern and agreed to bring forward projections showing the fund balance declining over time. Chair Jarvis also requested that presentations be provided in advance for better preparation.
• Department of Public Works: Zero-waste Overview (Estimated Time 20 minutes): Jennifer Venema, Sustainability Manager, and John Febbo, Integrated Waste Planning Superintendent, presented on the city's zero-waste goals. The general plan (2015) sets a goal of achieving zero waste by 2040, with interim thresholds. Waste comprises about 6% of the city's greenhouse gas emissions (baseline 2005). The city has achieved a 24% reduction in municipal operations emissions (exceeding the 22% goal) and expects to meet the 2020 community reduction target of 15%. However, post-2020 targets (40% by 2030) will require significant progress in transportation and energy. The current waste diversion rate is 57.9% (state disposal-based accounting). Challenges include market disruptions (National Sword) and the high cost of increasing diversion due to diminishing returns. Senate Bill 1383 (2017) requires food waste collection beginning in 2022; the city plans to roll out a program in 2021. Commissioners asked about progress toward the 75% diversion goal and requested data showing current tonnage relative to 2005 levels. Discussion also covered upstream policies (e.g., product stewardship) and the role of recycling centers. Staff indicated that the Mayoral Climate Commission and upcoming Climate Action Plan update will address higher-level zero-waste strategies.
• Department of Public Works: Landfill Maintenance and Closure Overview (Estimated Time 15 minutes): John Febbo presented on legacy landfill costs. The 28th Street Landfill (closed 1995) is in a 30-year post-closure maintenance period. Future closures include Cannon Scullen (1952-1957, estimated $3.75 million), Deller (1957-1963, already closed $4 million), and Bell Marine (1963-1968, estimated $3-5 million). These costs are borne by the solid waste rate base. The presentation noted that landfill costs are expected to decrease over time as closures are completed. The Cannon Scullen closure will use dirt from the McKinley Vault project.

Key Outcomes

• Minutes approved (one abstention).
• All presentations were received and filed (no vote required).
• Commissioners requested that DOU provide projections showing how fund balances will decline over time, and that presentations be sent in advance.
• Staff committed to reporting back on the diversion rate relative to the 2005 baseline at a future meeting.
• Meeting adjourned after the landfill presentation (time not recorded, but meeting was noted as long).