05-07-2019 - Item 11 - West Covina Citywide Sewer Service Charge: Directing That Charges Be Collected on The Tax Roll And Setting date For a Public HearingAGENDA ITEM NO. 11
AGENDA STAFF REPORT
City of West Covina | Office of the City Manager
DATE:May 7, 2019
TO:Mayor and City Council
FROM:David Carmany
Interim City Manager
SUBJECT:WEST COVINA CITYWIDE SEWER SERVICE CHARGE: DIRECTING THAT
CHARGES BE COLLECTED ON THE TAX ROLL AND SETTING A DATE
FOR A PUBLIC HEARING
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO. 2019-27 – A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF WEST COVINA, CALIFORNIA DECLARING ITS INTENTION TO
COLLECT SEWER SERVICE CHARGES ON THE COUNTY TAX ROLL FOR
FISCAL YEAR 2019-20 AND SETTING A PUBLIC HEARING FOR JUNE 18, 2019
REGARDING A REPORT ON THE CHARGES TO BE SO COLLECTED
BACKGROUND:
The Sewer Service Charge funds the maintenance and operation of the City’s sewer system. It is
charged annually to property owners on the property tax bill. A fixed fee is charged for each
residential dwelling unit and each 667-square feet of floor area for non-residential uses. The charge
is only collected from properties that are connected to the City’s sewer mains.
DISCUSSION:
Although sewer charges are exempt from voter approval under Proposition 218, if a new or
increased sewer charge is to be imposed at a rate that exceeds the previously adopted rates, the City
Council must conduct a protest hearing 45 days after mailed notice to property owners. If more than
50% of the property owners protest against the proposed rates, the new rates may not be imposed.
In Fiscal Year (FY) 2017-18, the City Council conducted a protest hearing regarding a five-year
schedule of sewer rates. Under this schedule, rates were proposed to increase from the proposed FY
2107-18 rate by 5% each year. Following the hearing, the City Council adopted the rate increases
for the subsequent five years. The remaining rates approved in those proceedings are as follows:
Fiscal Year 2019-20
$74.40 per Service Unit
Fiscal Year 2020-21
$78.12 per Service Unit
Fiscal Year 2021-22
$82.02 per Service Unit
These rates have already been approved by the Council by Resolution No. 2017-55 and
automatically take effect each year. However, in any year, the City Council may choose to levy the
sewer rates at a rate lower than the previously approved rate.
In order to place the sewer charges on the property tax roll for each fiscal year, the City Council
must hold a noticed public hearing regarding a report that lists the parcels to be charged and the
amount of the charge against each parcel. Willdan Financial Services has prepared such a report for
Fiscal Year 2019-20. The attached resolution confirms the rate of the charges for Fiscal Year 2019-
20, elects to collect the charges on the tax roll, and calls a hearing on the report.
LEGAL REVIEW:
The City Attorney has reviewed and approved the staff report, resolution and Preliminary Financial
Report.
OPTIONS:
The City Council has the following options:
1.Approve staff's recommendation; or
2.Reduce the rates for the sewer service charges; reserves would be depleted sooner and result in
the need to reduce services or subsidize the Citywide sewer program with General Fund
dollars.
Prepared by: Miguel Hernandez, Public Works Project Supervisor
Fiscal Impact
FISCAL IMPACT:
For FY 2019-20, the Citywide Sewer Service Charge rates are $74.40 per unit per year (as compared
with the $70.86 rate for the prior fiscal year) and generate an additional $167,456.92 in sewer
service charge. The total proposed sewer rate is projected to generate a total of $3,519,434. In
addition, $210,000 is projected to be received from the pre-existing ad valorem (according to value)
and $15,000 from cash balance interest. The total projected revenue is $3,744,434. Including the
$3,637,426 balance from the previous year, the total funding available is $7,381,859.
The preliminary operating budget for FY 2019-20 is $2,232,723. This includes an administration
and overhead charge of $139,901. The administration and overhead costs are derived from support
services provided by various departments including: City Manager’s Office, City Attorney’s Office,
City Clerk’s Office, Finance Department, and Human Resources Department. Support services
include, but not limited to payroll, personnel recruitment, insurance claims, audits, budgets, and
purchasing. In addition, staff is proposing to add four new capital improvement projects namely: 1)
a sewer mainline replacement on Glenview Road and Michelle Street at a cost of $1,450,000; 2) a
sewer mainline replacement on Azusa Avenue for a cost of $295,000; 3) sewer main replacement on
Citrus Street for a cost of $230,000; and 4) a catch basin trash capture at a cost of $50,000. The
total cost of the proposed capital improvement projects is $2,025,000 for FY 2019-20.
The Preliminary Financial Report for FY 2019-20 contains the following components:
1.Budget Summary and Reserve
2.Estimated Revenue Summary
3.Proposed Charge
4.Revised Projected Reserve (FY 2018-19)
There are no specific legal requirements or formal guidelines for the amount of reserves; however,
at least 50% is required to cover cash flow. A reserve between 100% and 200% is recommended by
staff to cover cash flow, future capital improvement projects, emergencies, and as a benefit it also
provides interest income.
Attachments
Attachment No. 1 - Citywide Sewer Rate History
Attachment No. 2 - Citywide Sewer Preliminary Financial Report
Attachment No. 3 - Forecasted Utility Operating Results
Attachment No. 4 - 10-Year Projection
Attachment No. 5 - Resolution 2019-27