Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DIRECTOR OF PUBLIC WORKS

DATE: MAY 18, 2004

SUBJECT: ABALONE COVE SEWER MAINTENANCE FEE

RECOMMENDATIONS

  1. Request staff to prepare an annual report for FY 04 – 05 that includes a City subsidy of $ 10,540.
  2. Request staff to modify the FY 04 – 05 budget to include a General Fund appropriation of $ 10,540 for the Abalone Cove Sewer Maintenance District.

BACKGROUND

Construction of the Abalone Cove sewer system was completed in June 2001. To provide funding for the operation and maintenance of the system the City Council established the Abalone Cove Sewer Maintenance Fee for users of the system. The City Council annually conducts a public hearing at which time current and projected year's costs are reviewed and rates are set for the ensuing fiscal year. Fees paid by users of the system depend upon the amount of sewer discharge generated by the user, as well as what elements of the system serve the user.

When the Abalone Cove Sewer Service Maintenance Fee was established, the City Council agreed to have the city subsidize sewer operations in an effort to reduce fees to property owners and to help bring uniformity of fees. Based upon City Council direction the subsidy was reduced in FY 03 – 04, with an understanding that the subsidy would be eliminated for FY 04 – 05.

DISCUSSION

In preparation of the annual report for FY 04 – 05, staff is reviewing past and anticipated district costs. A history of district costs, City subsidy, and fees is as follows:

Year

Maintenance Budget

City Subsidy

Fees Collected

Area A Fee

Area B Fee

Area C Fee

Area C Fee

FY 01 – 02

$ 57,000

$ 35,000

$ 22,000

$ 119

$ 209

$ 130

$ 220

FY 02 – 03

$ 57,000

$ 35,000

$ 22,000

$ 119

$ 209

$ 130

$ 220

FY 03 – 04

$ 52,000

$ 17,500

$ 34,500

$ 127

$373

$ 173

$ 418

The ordinance that establishes fees also establishes a maximum fee for each zone. The City Council may increase fees up to the maximum fees established at a noticed Public Hearing. If the subsidy is eliminated for FY 04 – 05 the calculated rates will exceed the maximum rates as follows:

Zone

Maximum FY 04 -05 rate

FY 04 -05 rate with no subsidy

Current Fee

A

$129.46

$ 208.49

$ 127

B

$521.25

$ 454.20

$ 373

C

$ 175.73

$ 367.39

$ 173

D

$ 567.50

$ 613.10

$ 418

In accordance with the provisions of Proposition 218, to establish fees in excess of the maximum, notices must be mailed to system users with instructions that if they oppose the fee increase they should return their notice to the City Clerk. The City Council then conducts a public hearing at which time opposition ballots are counted. The new fee may only be established if the ballots of opposition total less than 50%. A cost estimate to conduct such a ballot process is $10,000.

This ballot process should be conducted at this time if elimination of the subsidy and the resulting higher fees were the only matter for consideration. However, a second issue, that of total district budget must be also be considered.

When the fee was initially established it was based upon the design engineer’s best estimate of what the maintenance would cost. In each year since 2001 the City has performed system maintenance and costs have remained fairly stable, however, staff has not completed a full cycle of system maintenance and we do not therefore have the confidence to conclude that maintenance costs have indeed stabilized. Staff is concerned that if an effort is made at this time to establish new rates based on the elimination of the City subsidy, the process may need to be repeated next year based upon a need to increase the overall maintenance budget. Because the cost of the ballot process is significant, $10,000, staff believes the best approach is to defer the ballot process until next year when staff has more confidence in total maintenance costs at which time both the issue of eliminating the subsidy and the total maintenance budget can be addressed.

The staff recommendations propose to increase fees to their maximum allowable level, and that the subsidy be set at its lowest possible level without creating the need for the mailed ballot process.

CONCLUSIONS

Adopting the staff recommendation will result in the preparation of an annual report that sets fees at their maximum allowable rate and the City subsidy at the minimum level of $10,540. A public hearing would be set for June 2004 at which time the new fees would be considered.

It is noted that the staff recommendation will require that a Prop 218 mailed ballot process be conducted next year when the subsidy would be eliminated and maintenance costs are known with greater certainty.

ALTERNATIVE ACTIONS

Request staff to prepare an annual report for the current district budget and no subsidy. This will require that the mailed ballot process described above be followed. Staff recommends against this option due to concern that a second mailed process may be required once again next year to address increased maintenance costs.

This action will also require the City Council to authorize the expenditure of up to $10,000 for the mailed ballot process.

FISCAL IMPACT

The fiscal impact of the staff recommendation is that the City would provide a $10,540 subsidy for FY 04 – 05, which would not be required if the alternative action is adopted.

Adopting the alternative action will require a mailed ballot procedure that would cost approximately $10,000.

Respectively submitted,

Dean E. Allison

Director of Public Works

Reviewed by,

Les Evans

City Manager