13 - Public Hearing Liquid Waste Charges Costa Mesa Sanitary District
…an Independent Special District
Protecting our community’s health and the environment by providing solid was te and sewer collection services.
www.cmsdca.gov
Memorandum
To: Board of Directors
From: Scott Carroll, General Manager
Date: June 27, 2013
Subject: Liquid Waste Annual Charge
Summary
Recently, the District conducted a comprehensive analysis of the District’s liquid waste
charges. The analysis (“Costa Mesa Sanitary District Sewer Rate Study” prepared by
HF&H Consultants) concluded that an adjustment to each user class is recommended to
ensure fairness and equity among all the users and to ensure there are adequate
revenues to fund operating and c apital components of the District’s wastewater collection
system to meet California General Waste Discharge Requirements. Under Proposition
218, the amount of a charge must not exceed the proportional cost of a service attributable
to a parcel.
The analysis looked at charges for the next five years (FY 2013-14 through 2017-18) and
because some classes are recommended to have their charges increase, the District
followed Proposition 218 procedures by notifying all property owners located within the
Distric t’s service area. Property owner have until 6:00 p.m. on April 18, 2013 to notify the
District of their written protest to the proposed charge adjustments. If the District receives
a majority protest of 13 ,039 protests, then the proposed adjustment will not go into effect.
Staff Recommendation
That the Board of Directors conduct the protest hearing and, if a protest does not occur,
approve the charges.
ITEM NO. 13
Board of Directors
June 27 , 2013
Page 2 of 5
Analysis
Revenue Needed to Operate the System
To determine the proposed charges will generate eno ugh revenue for the District’s
wastewater collection system staff performed the following calculations.
FY 2013 -14
Revenues:
Annual charges 5,110,130 (from sewer rate study)
Permit & Inspection Fees 80,000
Connection Fees 75,000
Investm ent Earnings 60,000
Other 25,000
TOTAL: $5,345,130
Expenditures:
Salaries & Benefits 1,377,292 (from proposed spending plan on 3 -28 -13)
M&O 2,467,475 (from proposed spending plan on 3 -28 -13)
Sub -Total: $3,844,767
$5,345,130 - $3,844,767 = $1,500,363
The balance of $1,500,363 is transferred into the Asset Management Fund, which funds
the District’s Capital Improvement Projects (CIP).
Asset Management:
Balance 5,140,000
Transfer In 1,500,363
TOTAL: $6,640,363
Funds are then transferred out of the fund balance to budget for CIP
Balance 5,140,000
Transfer In 1,500,363
TOTAL: $6,640,363
Transfer Out 1,960,000 (from proposed spending plan on 3 -28 -13)
Net Balance $4,680,363
Board of Directors
June 27 , 2013
Page 3 of 5
Below are the proposed total expenditures
Salaries & Benefits 1,377,292
M&O 2,467,475
CIP 1,960,000
TOTAL: $5,804,767
FY 2014 -15
Revenues:
Annual charges 5,212,332 (from sewer rate study)
Permit & Inspection Fees 80,000
Connection Fees 75,000
Inv estment Earnings 60,000
Other 25,000
TOTAL: $5,447,332
Expenditures:
Salaries & Benefits 1,484,800 (from proposed spending plan on 3 -28 -13)
M&O 2,330,390 (from proposed spending plan on 3 -28 -13)
Sub -Total: $3,815,190
$5,447,3 32 - $3,815,190 = $1,632,142
The balance of $1,632,142 is transferred into the Asset Management Fund, which funds
the District’s Capital Improvement Projects (CIP).
Asset Management:
Balance 4,727,167 *
Transfer In 1,632,142
TOTAL: $6,359,309
*Assuming balance from FY 2013 -14 earned 1% interest
Funds are then transferred out of the fund balance to budget for CIP.
Asset Management:
Balance 4,727,167*
Transfer In 1,632,142
TOTAL: $6,359,309
Transfer Out 1,957 ,000 (from proposed spe nding plan on 3 -28 -13)
Net Balance $4,402,309
Board of Directors
June 27 , 2013
Page 4 of 5
Below are the proposed total expenditures.
Salaries & Benefits 1,484,800
M&O 2,330,390
CIP 1,957,000
TOTAL: $5,772,190
Attachment A is a ten year analysis of the Liquid Waste charge and the Asset
Management Fund . The Board set a goal to maintain a minimum balance of $5 million in
the Asset Ma nagement Fund and as shown in the attachment, the analysis demonstrates
that the District cannot achieve this goal with the proposed spending plan.
Attachment B is proposed spending cuts for Fiscal Year 2013 -14 & Fiscal Year 2014 -15.
When these cuts are applied to the ten year analysis, the District is able to achieve the
minimum Asset Management Fund balance on a long term basis, as demonstrated in
Attachment C.
Proportionality of the Charges to the Service Received
Proposition 218 requires that the charges imposed on parcels be proportional to the
services received by the parcel. HF&H analyzed the cost of service and the District’s
current charge s and is recommending a rate structure that is more proportional with the
cost of service actually provided to the various parcels in the District. The analysis of the
proportionality of the charges is set forth in detail in pages 11 -22 of the study .
Str ategic Plan Element & Goal
This item adheres to the objective and strategy of Strategic Element 7 .0, Finance , which
states:
“Objective: To ensure the short and long -term fiscal health of the District
Strategy: The District will forecast and plan revenue and expenditures and maintain
appropriate reserves and investments to provide financial resources to fund current and
planned operations and projects .”
Legal Review
District Counsel has reviewed and approved this report.
Financial Review
Attachment A a nd C are long term forecast of revenues and expenditures for the Liquid
Waste Fund. Adopting a resolution will establish the following charges for the next five
Board of Directors
June 27 , 2013
Page 5 of 5
consecutive years. The Sewer Rate Study, dated December 7, 2012 describes the
projected reven ues the charges below will generate.
Proposed Annual Wastewater Rates
Current Proposed Proposed Proposed Proposed Proposed
Customer Class Rate * 7/1/2013 7/1/2014 7/1/2015 7/1/2016 7 /1/2017
Residential (Per Dwelling Unit)
Single Family 69.00 85.34 87.05 88.79 90.57 92.38
Multi Family 53.77 50.09 51.09 52.11 53.15 54.21
Non -Residential (Per 1,000 sq. ft.)
Commercial - Ave Strength 38.69 37.96 38.72 39.49 40 .28 41.09
Commercial - High Strength 43.66 41.40 42.23 43.07 43.93 44.81
Industrial 113.72 97.44 99.39 101.38 103.41 105.48
Public Notice Process
Copies of the HF&H study and this report are on file and will be included with the entire
agenda packet f or the June 27 , 2013 Board of Directors regular meeting at District
Headquarters and on District’s website. The mailed notice was mailed 45 days before the
April 18 , 2013 meeting. Published notice was also provided in accordance with
Government Code Sect ion 6066 and Health and Safety Code Section 5473.1 in the Daily
Pilot. Copies of those notices are available.
Alternative Actions
1. R efer the matter back to staff.
Reviewed by:
Marc Davis
District Treasurer/Interim Accounting Manager
Attach ments A: L ong Term Revenues and Expendit ures Forecast
B: Proposed spending cuts
C: Long Term Revenues and Expenditures Forecast after proposed
spending cuts are applied.
D: Resolution No. 2013 -83 4 Adopting Proposed Annual L iquid Waste
Rates
E: HF&H Analysis - Costa Mesa Sanitary District Sewer Rate Study
ATTACHMENT A
Public Hearing
Liquid Waste Annual Charges
Board of Directors Meeting
June 27, 2013
ITEM NO. 13
Liquid Waste Annual Charges
Revenues:
Annual charges 5,091,000
Charges for services 155,000
Investment earnings 60,000
Other 20,000
TOTAL: $5,326,000
1. Proposed charge will not exceed the funds
required to provide the service
Liquid Waste Annual Charges
Expenditures:
Salaries & Benefits 1,077,700
M&O 2,500,300
Sub -Total: $3,578,000
$5,326,000 - $3,578,000 = $1,748,000
Liquid Waste Annual Charges
Asset Management :
Balance 5,140,291
Transfer In 1,748,000*
TOTAL: $6,888,291
* In budget document $1,748,00 is Transfer out
Liquid Waste Annual Charges
Asset Management :
Balance 5,140,291
Transfer In 1,748,000
TOTAL: $6,888,291
Transfer Out 1,810,000 * - CIP
Net Balance $5,078,291
* In budget document $1,810,00 is Transfer in
Liquid Waste Annual Charges
Annual Liquid Waste Rates
Customer Class 2012 2013 2014 2015 2016 2017
Residential (Per Dwelling Unit)
Single Family 69.00 85.34 87.05 88.79 90.57 92.38
Multi Family 53.77 50.09 51.09 52.11 53.15 54.21
Non -Residential (Per 1,000 sq. ft.)
Commercial - Ave Strength 38.69 37.96 38.72 39.49 40.28 41.09
Commercial - High Strength 43.66 41.40 42.23 43.07 43.93 44.81
Industrial 113.72 97.44 99.39 101.38 103.41 105.48
2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 2019 -20 2020 -21 2021 -22 2022 -23
Revenues
5,091,000 5,212,000 5,316,240 5,422,564 5,531,369 5,531,369 5,531,369 5,531,369 5,531,369 5,531,369
60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
5,326,000 5,447,000 5,551,240 5,657,564 5,766,369 5,766,369 5,766,369 5,766,369 5,766,369 5,766,369
Expenditures
1,077,700 1,156,500 1,191,195 1,226,930 1,263,738 1,301,650 1,340,700 1,380,921 1,422,349 1,465,019
2,500,300 2,495,680 2,570,550 2,647,666 2,727,096 2,808,909 2,893,176 2,979,971 3,069,370 3,161,451
Balance
1,748,000 1,794,920 1,789,495 1,782,968 1,775,535 1,655,810 1,532,493 1,405,477 1,274,650 1,139,899
CIP
1,810,000 1,787,000 1,666,958 1,035,079 1,870,800 1,700,000 1,700,000 1,700,000 1,800,000 1,800,000
Total Expenses ,
5,388,000 5,439,080 5,428,703 4,909,675 5,861,634 5,810,559 5,933,876 6,060,892 6,291,719 6,426,470
Asset Mgt
5,140,291 5,129,073 5,188,362 5,364,008 6,173,016 6,138,528 6,155,281 6,047,652 5,810,660 5,338,163
Transfer In
1,748,000 1,794,920 1,789,495 1,782,968 1,775,535 1,655,810 1,532,493 1,405,477 1,274,650 1,139,899
Total AM
6,888,291 6,923,993 6,977,857 7,146,976 7,948,551 7,794,338 7,687,774 7,453,129 7,085,310 6,478,062
Transfer Out
1,810,000 1,787,000 1,666,958 1,035,079 1,870,800 1,700,000 1,700,000 1,700,000 1,800,000 1,800,000
AM Balance
5.078,291 5,136,993 5,310,899 6,111,897 6,077,751 6,094,338 5,987,774 5,753,129 5,285,310 4,678,062
Notes
After 2014 -15, expenses increase 3% per year
Fund Balance earning 1% interest per year
Sewer Study
Liquid Waste Annual Charges
2. Revenue from the charge will not be used for any
purpose other than for which the charge is imposed.
a. No funds derived from the charges will be used
for solid waste programs.
3. The amount of a fee or charge imposed upon any
parcel or person as an incident of property ownership does
not exceed the proportional cost of the service attributable
to the parcel.
Liquid Waste Annual Charges
4. The fee or charge is not imposed for service unless the
service is actually use by, or immediately available to, the
owner of the property in question.
a. Properties are only charged if they are physically
connected to the sewer system. Vacant land or properties
with storage or other buildings not receiving sewer service
are not charged
Liquid Waste Annual Charges
5. No fee or charge is imposed for general governmental
services such as police, fire, ambulance, parks or streets
but is only imposed for sewer services.
Liquid Waste Annual Charges
Recommendation
That the Board of Directors approves
Resolution No. 2013 -834 confirming and
adopting this report and directing Clerk to
File with County Auditor.
RESOLUTION NO. 2013 -83 4
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
COSTA MESA SANITARY DISTRICT ADOPTING
ANNUAL CHARGES FOR LIQUID WASTE
WHEREAS, the Board provides transportation of sewage through its collection system
and various other services related thereto, including, but not limited to, services related to
complying with the State Water Resources Control Board Discharge Order and other federal
Clean Water Act mandates ; and
WHEREAS, pursuant to the authority granted to sanitary districts unde r Health and
Safety Code Sections 5470 et seq ., the District has determined to impose th e se charges for
these service s and collect that charge on the tax roll in the same manner as general taxes; and
WHEREAS, since imposing that annual charge on the Assess ment Roll, Proposition 218
was enacted, and since 1996, a mailed protest hearing was notice d and conducted before fees
were imposed; and
WHEREAS, the Board directed that a sewer rate study be prepared by HF&H
Consultants to de termine whether the District’s charges were proportional to the service
provided to the District’s parcels in accordance with Proposition 218 (Cal Constit Art XIIID); and
WHEREAS, the Board has considered that study and determined that rate adjustments
as set forth in that study would make those rates more proportional ; and
WHEREAS, the Board of Directors has determined to increase the rates for Single -
Family residential units and reduce the rates for annual charges for Multi -Family residential,
Commercial, and Industrial liquid waste this year , and desires to adopt the report imposing the
charges pursuant to the provisions of Health and Safety Code Sections 5470 et seq .; and
WHEREAS, the Board has also determined that the amount of revenue needed to
operate the sewer collection system for the next five years is accurately projected in the staff
report ; and
WHEREAS, the Board has also determined that the increases in the rates for the next
five years is an accurate forecast of what will be needed by the District for those operations, all
as set forth in the Study and agenda report ; and
WHEREAS, a new protest hearing was noticed since these new rates will increase some
rates, while decreasing others ; and
WHEREAS, mailed notice was provided 45 days in advance of the protest hearing ; and
WHE REAS, published notice was also provided in accordance with Government C ode
Section 6066 and H ealth and Safety C ode Section 5473.1 in the Daily Pilot; and
WHEREAS, the Board has conducted the protest hearing and determined that a majority
protest did not o ccur ;
NOW, THEREFORE, the Board of Directors of the Costa Mesa Sanitary District does
hereby RESOLVE as follows:
1. That after the protest hearing was conducted, it was determined that a successful
protest did not occur .
2. That the charges to be imposed m eet the substantive and procedural
requirements of Prop 218 (Cal. Constit., Art . XIIID ).
3. That the charges are hereby adopted and imposed on the property tax roll in
accordance with H ealth and S afety C ode Section 5473 .
PASSED AND ADOPTED by the Board of Directors of the Costa Mesa Sanitary District
at a regular meeting held on the 27 th day of June, 2013.
____________________________ __________________________
James Ferryman Arthur Perry
President of the Board of Directors Secretary of the Bo ard of Directors