6-15-2021 AGENDA ITEM NO.15 - PUBLIC HEARING REGARDING CITYWIDE SEWER SERVICE CHARGE TO BE COLLECTED ON FISCAL YEAR 2021-22 TAX ROLLAGENDA ITEM NO. 15
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: June 15, 2021
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: PUBLIC HEARING REGARDING CITYWIDE SEWER SERVICE CHARGE TO BE
COLLECTED ON FISCAL YEAR 2021-22 TAX ROLL
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO.2021-69 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WEST COVINA, CALIFORNIA APPROVING THE SEWER SERVICE CHARGES TO BE
COLLECTED ON THE FISCAL YEAR 2021-22 TAX ROLL
BACKGROUND:
From 1968 to 1978, the City of West Covina funded the costs of sewer maintenance and operation through the
Improvement Act of 1911, which provided an ad -valorem (according to value) levy used to pay for these costs.
With the passage of Proposition 13, the revenues generated from the 1911 Act were reduced considerably, which
made it necessary to find an alternative method of funding sewer maintenance and operation costs. In Fiscal Year
(FY) 1978-79, the City Council established the Citywide Sewer Service Charge pursuant to Section 38902 of the
Government Code as that alternative method.
The Sewer Service Charge funds the maintenance and operation of the City's sewer system assuring that lines are
clear and flowing properly. This includes routine video inspections, jetting, and cleaning of sewer lines. The fees
also fund capital improvements including purchase of sewer equipment and rehabilitation/replacement of sewer
mainlines and appurtenances. The Sewer Service Charge 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.
State law requires that a specific procedure be followed to collect the Citywide Sewer Service Charge on the annual
property tax bill. The initial step is to adopt a resolution setting a date for a public hearing on the proposed rates and
method of collection. The process requires that a public notice be published in a locally circulated newspaper
announcing the public hearing. Mailing notices to each property owner is only required when the charges are
increased above the current Consumer Price Index (CPI).
DISCUSSION:
Although sewer charges are exempt from voter approval under Proposition 218, if a new or increased sewer charge
is to be imposed (more than the CPI increase), the City Council must conduct a protest hearing forty-five (45) days
after mailed notice to property owners. If more than 50% of the property owners protest against the fees, the
new/increased fees may not be imposed.
In 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 2017-18 rate by 5% each year. The City did
not receive majority protest against the proposed increase. Following the hearing, the City Council adopted the rate
increases for the subsequent five years. The remaining rates approved in those proceeds are as follows:
FY 2021-22
• $82.02 per Service Unit
The Council approved these rates in 2017 by Resolution No. 2017-55. The rates automatically take effect each year.
On May 18, 2021, the City Council adopted Resolution No. 2021-47, declaring its intention to collect sewer service
charges on the County tax roll for FY 2021-22 and setting June 15, 2021 for the public hearing regarding the
charges to be collected. The purpose of the hearing is to allow property owners to object if they believe that the
amount the City intends to collect against their parcel is incorrect. After the hearing, the City Council can adopt a
resolution that approves the charges listed on the report and orders the report be transmitted to the County for
collection on the tax roll.
The increase to the Sewer Service Charge for FY 2021-22 is from $78.12 to $82.02 (an increase of about 33 cents
per month or $3.91 per year) for residential dwelling units, and per 667 square feet of floor area for commercial
units.
LEGAL REVIEW:
The City Attorney's Office has reviewed the resolution and approved it as to form.
OPTIONS:
The City Council has the following options:
1. Adopt Staffs recommendation to increase assessment rate by 5% based on the Sewer System Revenue
Sufficiency Analysis to increase revenues and stabilize the reserves for Fiscal Year 2021-22; or
2. Maintain the assessment rates at their current level; reserves would be depleted sooner and result in the need
to reduce services or subsidize the district with General Funds; or
3. Provide alternative direction.
Prepared by: Michael Ackerman, PE, City Engineer
Fiscal Impact
FISCAL IMPACT:
For FY 2021-22, the Citywide Sewer Service Charge rates will increase by 5% from $78.12 to $82.02 per unit per
year and generate an additional $184,847 in sewer service charge. The total proposed sewer rate is projected to
generate a total of $3,884,780. In addition, $210,000 is projected to be received from the pre-existing ad valorem
(according to value) and $4,517, from cash balance interest. The total projected revenue is $4,099,297. Including
the $2,258,624 balance from the previous year, the total funds available is $6,357,921.
The preliminary operating budget for FY 2021-22 is $2,322,925. 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. The annual administration cost is $7,177.50 and will be paid
from Account No. 189.71.4133.6110.
There is one Capital Improvement Projects scheduled to begin in FY 2021-2022:
1. Sewer Main Replacement — Portions of Glenview Rd., Michelle St., Azusa Ave.
Budget: $2,000,000
The ending fund balance for FY 2020-2021 of $2,258,624 will be used to fund upcoming scheduled Capital
Improvement Program projects (CIP) according to the Sewer Maintenance Capital Improvement Program from
the 2016 SSMP.
The Preliminary Financial Report for FY 2021-22 contains the following components:
1. Budget and Revenue Summary
2. Capital Improvement Project Fund
3. Proposed Assessment Rate
4. Revised Projected Reserve (FY 2021-22)
5. Preliminary Sewer Charge Roll
There are no 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 - 15 Year Rate History
Attachment No. 2 - Preliminary Financial Report for Fiscal Year 2021-2022
Attachment No. 3 - 10 Year Fiscal Projection
Attachment No. 4 - Resolution No. 2021-69
Attachment No. 5 - Sewer Maintenance Capital Improvement Program from 2016 Sewer System Management Plan
CITY COUNCIL GOALS & OBJECTIVES: Enhance City Facilities and Infrastructure
Enhance the City Image and Effectiveness
ATTACHMENT NO. 1
West Covina
Citywide Sewer Service Charges
15 Rate History
Unit/Month
Unit/Year
2021-22
$6.84
$82.02
2020-21
$6.51
$78.12
2019-20
$6.20
$74.40
2018-19
$5.91
$70.86
2017-18
$5.62
$67.49
2016-17
$4.69
$56.24
2015-16
$4.61
$55.30
2014-15
$4.59
$55.02
2013-14
$4.54
$54.48
2012-13
$4.44
$53.31
2011-12
$4.36
$52.26
2010-11
$4.19
$50.25
2009-10
$3.81
$45.68
2008-09
$2.76
$33.10
2007-08
$2.34
$28.05
ATTACHMENT NO. 2
City of West Covina
Citywide Sewer Service Charge
FISCAL YEAR 2021/2022
PRELIMINARY FINANCIAL REPORT
Intent Meeting: May 4, 2021
Public Hearing: June 15, 2021
W WILLDAN
BUDGET AND REVENUE SUMMARY
Previous Fiscal Year Fund Balance
Revenues
Assessment Income (Total Balance to Levy)
Property Tax Revenue (Ad Valorem)
Interest
Total Projected Revenue
Expenditures
Operating
Maintenance
Personnel Services
Material and Services
Professional Services
Maintenance Contracts
Utilities
Vehicles
Fuel and Oil
Property & Liability Insurance
Total Maintenance
Engineering & Incidental
Personnel Services
Materials & Services
Consultant Services
Property & Liability Insurance
Administration & Overhead
Total Engineering & Incidental
Community Enhancement
Personnel Services
Total Community Enhancement
Capital Improvement t't
Total Operating and Capital Budget
Fund Balance
(1) See Capital Improvement Project Fund Section
$3,884,780
210,000
4,517
$1,089,520
43,989
291,852
105,541
10,000
24,700
15,617
146,098
$1,727,317
$383,553
10,330
23,767
5,272
139,901
$562,823
$32,785
$32,785
$2,000,000
11Y W I LLDAN
$2,258,624
$4,099,297
$4,322,925
2.034.996
2021-22 City of West Covina -Citywide Sewer Service Charge Page 1
W WILLDAN
CAPITAL IMPROVEMENT PROJECT FUND
For Fiscal Year 2021-22, below are the Capital Improvement Projects scheduled:
Sewer Main Replacement -
Portions of Glenview Rd, $2,000,000
Michelle St, and Azusa Ave
2021-22 City of West Covina -Citywide Sewer Service Charge Page 2
W"WILLDAN
PROPOSED ASSESSMENT RATE
In Fiscal Year (FY) 2017-18, the Citywide Sewer Service Charge (the "Sewer Service
Charge") rate was increased by 20% and is proposed to increase by 5% thereafter for
four (4) years. For FY 2021-22, the rate will increase from $78.12 to $82.02 per unit, for
an increase of approximately 32 cents per month or $3.90 per year. The following table
shows proposed rate increases:
Residential 1 DU = 1 unit
Commercial 667 sq ft = 1 unit
Notice of said increases were sent to landowners in FY 2017-18 in accordance with the
provisions of Proposition 218 indicating the proposed rates and the date of public hearing.
The City of West Covina (the "City") did not receive majority protest against the proposed
increase, the City may now impose the Sewer Service Charge at the maximum proposed
level or less.
REVISED PROJECTED RESERVE
Fund Balance (as of 6/30/21) $2,258,624
Projected Revenue for FY 2021-22 4,099,297
Appropriations (Operating & Capital) for FY 2021-22 (4,322,925)
Projected Fund Balance (as of 6/30/22) $2,034,996
PRELIMINARY SEWER CHARGE ROLL
The FY 2021-22 preliminary sewer charge roll is voluminous, has been submitted to the
City Clerk, and is hereby included by reference.
2021-22 City of West Covina - Citywide Sewer Service Charge Page 3
ATTACHMENT NO.3
Assessment Income
Interest(1)
Property Tax Revenue (Ad Valorem)
Prior Year Balance
Total Funding
Maintenance Costs (2)
Capital Improvements
Total Cost
West Covina Citywide Sewer Charges
10 Year Fiscal Proiection
780 $3,884,780 $3,884,780
780
4,517
4,070
3,482
2,750
1,869
833
(362)
(1,720)
(3,248)
210,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
2,258,624
2,034,996
1,741,233
1,375,104
934,311
416,486
(180,808)
(860,084)
(1,623,929)
$6,357,921
$6,133,846
$5,839,495
$5,472,634
$5,030,959
$4,512,099
$3,913,611
$3,232,976
$2,467,603
2,322,925
2,392,613
2,464,392
2,538,323
2,614,473
2,692,907
2,773,694
2,856,905
2,942,612
Ending Balance
$2,034,996
$1,741,233
$1,375,104
$934,311
$416,486
($180,808)
($860,084)
($1,623,929)
($2,475,009)
Cash Flow
1,161,463
1,196,307
1,232,196
1,269,162
1,307,237
1,346,454
1,386,847
1,428,453
1,471,306
Over/Under
873,533
544,926
142,908
(334,851)
(890,750)
(1,527,261)
(2,246,931)
(3,052,382)
(3,946,316)
Charges per Unit
$82.02
$82.02
$82.02
$82.02
$82.02
$82.02
$82.02
$82.02
$82.02
Notes:(1) Interest is 0.4% of one-half of the previous year ending balance
(2) 3 % increase in maintenance cost each year due to inflation.
I:IIIV:T .h�f` J LILYIf►[IXI
RESOLUTION NO.2021-69
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WEST COVINA, CALIFORNIA, APPROVING THE SEWER
SERVICE CHARGES TO BE COLLECTED ON THE
FISCAL YEAR 2021-22 TAX ROLL
WHEREAS, on June 26, 1978, in accordance with Section 38902 of the California
Government Code, the City Council adopted Resolution No. 5726, establishing a sewer service
charge exclusively for sewer operation, maintenance, and capital costs. The City collects the sewer
service charge as part of the property tax roll and
WHEREAS, on April 27,1987, the City Council adopted Resolution No. 8019, amending
Resolution No. 5726 to adjust the schedule of charges so that the fees collected bear a reasonable
relationship to the cost of providing the services; and
WHEREAS, on June 6, 2017, the City Council adopted Resolution No. 2017-55, adopting
a five-year schedule of annual sewer service charges for Fiscal Years 2017-18, 2018-19, 2019-20,
2020-21, and 2021-22; and
WHEREAS, the five-year schedule was adopted following proceedings conducted
pursuant to Article X111 D, Section 6(a) of the California Constitution, which was added to the
California Constitution in 1996 as part of Proposition 218; and
WHEREAS, a report has been filed with the City Clerk containing a description of each
parcel of real property receiving sewer services and the amount of the charge for each parcel for
Fiscal Year 2021-22, computed in conformity with the schedule of charges previously adopted by
the City Council (the "Report'); and
WHEREAS, the Report is on file in the Office of the City Clerk, available for public
inspection, and incorporated herein by reference; and
WHEREAS, by Resolution No. 2021-47, adopted on May 18, 2021, the City Council
elected to collect the sewer service charges for Fiscal Year 2021-22 on the tax roll in the same
manner, by the same persons, and at the same time as, together with and not separately from, the
City's general taxes; and
WHEREAS, Resolution No. 2021-47 also set June 15, 2021, at 700 p.m. in the City
Council Chambers located at 1444 West Garvey Avenue South in the City of West Covina as the
time and place for a public hearing (the "Hearing') on the Report; and
WHEREAS, notice of the Hearing was published as required by law; and
WHEREAS, at the Hearmg, the City Council heard and considered all objections or
protests, if any, to the Report; and
WHEREAS, the City Council now desires to cause the collection of the sewer service
charges as listed in the Report.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council determines that the charges set forth in the Report are
correct and approves each such charge.
SECTION 2. The City Clerk is directed to file a copy of the Report with the Los Angeles
County Auditor -Controlled pursuant to Section 5473.4 of the California Health & Safety Code.
SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall enter
the same in the book of original resolutions and it shall become effective irrn iediately
APPROVED AND ADOPTED this 15th day of June, 2021.
APPROVED AS TO FORM
Thomas P. Duarte
City Attorney
Letty Lopez-Viado
Mayor
ATTEST
Lisa Sherrick
Assistant City Clerk
I, LISA SBERRICK, Assistant City Clerk of the City of West Covina, California, do
hereby certify that the foregoing Resolution No. 2021-69 was duly adopted by the City Council of
the City of West Covina, California, at a regular meeting thereof held on the 15th day of June
2021, by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk
Memorandum
January 31, 2017
Sewer System Revenue Sufficiency Analysis
ATTACHMENT NO.5
*,4/WILLDAN
Financial services wcn
$
9oo,000 $-
Cameron Avenue Sewer Rehabilitation
Azusa Lift Station Construction
600,000
-
-
-
-
- -
ClosedCircuitTVinspection
100,000
100,000
100,000
100,000
100,000
100,000 100,000
New Sewer Maintena nce Truck and
190,000
-
-
-
-
- -
Camera
Sewer Cured In Place Pipe Lining
152,600
152,600
152,600
152,600
152,600
152,600 152,600
-
1,345,200
-
-
-
- -
82-1; Sewer Main Replacement Area 82
POWE R; I nsta 11 Emergency Be coup
-
64,800
-
-
-
- -
Power at City Lift Stations
SCADA; I nsta II SCADA Cc ntrols at City
-
56,700
56,700
-
56,700
56,700 -
Lift Stations
4-1; Sewer Me in Replacement Area 4
-
-
286,400
-
-
- -
80- I; Sewer Main Replacement Area 80
-
-
-
-
-
- -
116-3; Sewer Me in Replacement Area
-
-
254,000
-
-
- -
62-2; Sewer Main Replacement Area 62
-
-
-
191,800
-
- -
116-2; Sewer Me in Replacement Area
-
-
-
825,000
-
- -
132-1; Sewer Me in Replacement Area
-
-
-
390,700
-
- -
117-1; Sewer Me in Replacement Area
-
-
-
-
939,100
- -
82-3; Sewer Me in Replacement Area 82
-
-
-
-
-
804,200 -
82-4; Sewer Me in Replacement Area 82
-
-
-
-
-
399,200 -
62- I; Sewer Main Replacement Area 62
-
-
-
-
-
- 1,359,800
82-2; Sewer Main Replacement Area 82
-
-
-
-
-
- -
116-1; Sewer Me in Replacement Area
-
-
-
-
-
- -
161-1; Sewer Me in Replacement Area
-
-
-
-
-
- -
100,000 100,000
152,600 152,600
64,800 259,200
56,700 56,700
1,391,400
666,000
143,900
Total $ 1,942,600 $ 1,719,300 $ 849,700 $ 1,660,100 $ 1,248,400 $ 1,512,700 $ 1,612,400 $ 1,765,500 $ 1,378,400
Outstanding Debt Service
Based on review of the City's financial documents, as well as discussions with the City, it is our understanding
that the City does not have any outstanding sewer related debt. For the purpose of this Analysis, any forecasted
future debt is assumed to have a 1.50X debt service coverage requirement.
General Assumptions
In order to develop the financial and rate projections, certain assumptions were made with regard to elements
of the Analysis. A summary of those assumptions is presented below.
Growth
Based on discussion with the City, the Utility is mostly built -out. As such, it was assumed that growth in the
Utility's customer base, and requisite flows, would be 0.0% per year during the forecast period.
Operating Projections
For the purposes of forecasting Operating requirements of the Utility, the following escalation factors are
use for the various budget line -items.
Personnel Services - 5.0%
Materials & Services- 3.0%
Capital Assets - 2.0%
Allocations - 3.0%
Filename: Technical Memo 01-31-2017 V6
Page 15