Utilities Rate Advisory Commission Meeting - August 28, 2024

The Utilities Rate Advisory Commission (URAC) met on Wednesday, August 28, 2024 at 5:30 PM at Sacramento City Hall. Chair Zito called the meeting to order, leading a land acknowledgement and pledge of allegiance. All four commissioners were present (Eberle, Johnson, Tran, Zito). The meeting included presentations from the Department of Public Works Recycling and Solid Waste Division, Department of Utilities (DOU) overview, financial update, and deferred maintenance. No public comments were made on agenda items. The consent calendar was approved unanimously.

Consent Calendar

• Item 1: Approval of Utilities Rate Advisory Commission Meeting Minutes of May 22, 2024. Passed by a vote of 4-0 (motion by Commissioner Tran, second by Commissioner Johnson).

Discussion Items

• Item 2: Department of Public Works, Recycling and Solid Waste Division Updates and Accomplishments (File ID: 2024-01419)

  • Tyler Stratton, Administrative Officer, presented. Key points:
    • Residential collection of trash, recycling, and organic waste; street sweeping; bulky waste collection via “the claw.”
    • Last rate adjustment for FY22-24; fund is healthy with no near-term rate adjustments.
    • Senate Bill 1383 organic waste diversion: 14.5% increase in organic tonnage collected (comparing summer months 2023 to 2019 baseline), with 5,000 new accounts since 2019.
    • Provided 20,000 food waste pails in 2023 (35,000 total since June 2022).
    • Completed compressed natural gas (CNG) station for 65 trucks south of American River.
    • Ordered city’s first electric side loader (first right-hand drive electric collection vehicle in the nation, grant-funded).
    • 2023 accomplishments include: $50,000 grant for hazardous waste facility resurfacing, 12-acre acquisition from SMUD for bike trail, backyard composting seminars (9 in spring/fall, 150 geobin composters given), and a composting video.
    • Performance metrics: 89 daily routes, 133,000 accounts, 127,000 tons garbage/year, 32,000 tons recycle (19% contamination), 78,000 tons organics, 11,000 illegal dumping requests (2.9 days average response).
  • Commissioners congratulated staff on successful year and inquired about compost distribution (available via giveaways on website). No vote required; received and commented.

• Item 3: Department of Utilities Overview Presentation (File ID: 2024-01531)

  • Pravani Vandeyar, Director of Utilities, presented. Key points:
    • Core services: drinking water, wastewater, drainage. $227M revenue in FY23, $236M five-year CIP (2024-2028), 580 FTEs, 100 sq mi service area.
    • DOU is not funded by general fund (except rate assistance program via Prop 218). Revenue sources: user fees, impact fees, grants, low-interest loans, bonds.
    • Heavy regulation by federal, state, local agencies; regulatory environment increasingly complex (PFOS, lead/copper, etc.).
    • Divisions: Office of Director (15 FTEs, $5.8M operating budget), Drinking Water (2 treatment plants, 30 wells, 17 reservoirs, 1,600+ miles pipe), Wastewater/Drainage (225 FTEs, $42.6M budget, 840+ miles pipe, 159 pump stations), Engineering & Water Resources, Business Services.
    • Service levels: water quality standards met 100% of time; sewer overflow rate target <5/100 miles (5-year avg 2.5); drainage response within 30 min day/1 hour after hours.
    • Key challenges: $2.1 billion total deferred maintenance (water $740M, drainage $364M, wastewater $1.1B). Impact of homelessness cost $857,000 in FY23 (encampment removals and cleanup, not funded by rates or existing drainage fee).
    • Rate outlook: water and wastewater rate adjustments needed for FY28 implementation; storm drainage fee currently in appeal (funds CIP only, not O&M). DOU is working with city auditor’s office and a consultant to justify rate needs; public messaging will follow.
    • Commissioner Tran emphasized need for proactive public communication about future rate increases and explored non-rate revenue for low-income assistance (discretionary revenue from telecom leases on reservoirs). Commissioner Johnson inquired about the cost of homelessness, noting it complicates maintenance. Chair Zito noted that $857k is not covered by any fund, straining operations.
  • No vote required; received and commented.

• Item 4: Department of Utilities Financial Update on FY25 Budget and FY24 Year-End Projections (File ID: 2024-01517)

  • Ryan Pham, Business Services Manager, presented. Key points:
    • Water fund: FY24 year-end net change to fund balance projected at $11.1M (down from May projection due to vacancy savings). Utility delinquency charges reinstated Nov 2023, generating ~$1.2M annual revenue. Bond refunding saved $4M.
    • Wastewater fund: FY24 net change ~$100K increase from May projection. Late fees reinstated expected ~$820K annual revenue. $300K emergency sewer repair.
    • FY25 adopted budget: increased revenue for water ($697K), wastewater ($1.5M), drainage ($1.3M). Five new positions added (assistant director, admin analyst, plant operator, two admin clerical). Merchant fees to be passed to customers in 2025.
    • Five-year forecast assumptions: 0.02% growth; general fund tax 11% of rate revenue; water fund balance negative by FY28 without rate increase, plan to use $32M capital reserve in FY27; wastewater fund needs adjustment in FY28 to maintain 1.2 debt coverage; drainage fund needs increase in FY29-30 (separate from the appealed stormwater fee for CIP).
    • Days of working capital: new reserve policy (120 days operating reserve, capital reserve equal to prior year CAPEX with goal of 5 years). Water fund days of working capital have declined; rates needed to avoid credit rating impact.
    • Sacramento Utility Rate Assistance Program: currently 1,065 participants (after audit reducing enrollment), budget $5.6M from general fund. Program managed to maintain budget; future rate increases will include requests for additional discounts.
    • Commissioner Johnson asked about unidentified regulatory project costs (long-term control plan for combined sewer system) – staff clarified that forecast does not yet include those costs, will be updated in FY26. Commissioner Tran asked about drainage fund increase factoring in current fee appeal – staff explained the fee is for CIP/regulations only, separate from O&M rate.
  • No vote required; received and commented.

• Item 5: Staff Presentation on Deferred Maintenance (File ID: 2024-01530)

  • Jordan Bird, Administrative Analyst, presented. Key points:
    • Deferred maintenance (or “deferred asset investment”) total $2.1 billion (water $740M, drainage $364M, wastewater $1.1B).
    • FY24 progress: water systems spent $9.2M on deferred projects (e.g., Freeport Reservoir Pump Replacement $1.8M, equipment replacements $1.2M). Drainage system completed emergency Sump 90 berm repair ($478K); FY25 will include $5M grant for Sump 111 electrical/pumping. Wastewater system spent $6.8M (e.g., Pocket Road pipe repairs due to sinkhole affecting 60-110 residents).
    • FY25 budget: water $21.4M for deferred maintenance (including $2M Freeport project), drainage $600K canals, $4.5M pipes, $12M pump stations, $460K facilities; wastewater $3M allocated but $6M in emergency projects (Pioneer Outfall, Fifth Street sinkhole) requires reallocation from planned projects and fund balance. Additional grants total $11.5M for wastewater.
    • Major challenge: lack of funding; deferred maintenance backlog compounds annually. DOU conducts 30-year CIP and asset management to prioritize; rate adjustments and financing options are essential.
    • Commissioner Tran commended grant procurement efforts (~$8M noted). Meeting time approached 2-hour limit; commissioners voted to extend (motion by Tran, second by Eberle; passed 4-0) to allow follow-up on wastewater regulatory plan.
  • No vote required; received and commented.

• Commissioner Comments – Ideas and Questions (After motion to extend)

  • Commissioner Tran requested a one-page resource for renters detailing their rights on utility billing transparency (California Civil Code protections), to be placed on DOU website. Staff agreed to work with city attorney and explore existing resources, possibly present at a future meeting.
  • Vice Chair Eberle asked if the upcoming audit will include evaluation of rate increase mechanisms such as tying rates to indices or more automated regular schedule. Director Vandeyar responded that two options will be developed: traditional step increases followed by pauses, and long-term smaller incremental increases (likely preferred by council). These will be brought to URAC for input before council.

Key Outcomes

• Consent Calendar approved (minutes of May 22, 2024) by unanimous vote (4-0).
• Meeting extended past 2 hours by unanimous vote (4-0) to complete discussion.
• All discussion items (2-5) were received and commented; no votes were taken on these items.
• Staff will bring a renter education resource to a future meeting and will develop two rate increase structure options for commission input.
• The next financial update is scheduled for August 2025 meeting.
• Next meeting is in October 2024 (as per Chair’s adjournment comment).```json {