Resolution No. 2010-177RESOLUTION NO. 2010-177
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON ESTABLISHING THE RATES FOR THE SALE OF WATER
IN THE CITY OF VERNON IN ACCORDANCE WITH THE VERNON
CITY CODE AND ORDINANCE NO. 1029
WHEREAS, on May 16, 1995, the City Council of the City of
Vernon adopted Ordinance No. 1029 which, among other things,
established the water rates for the City of Vernon beginning July 1,
1995, with such rates being established by resolution thereafter; and
WHEREAS, Vernon City Code Section 25.1 provides that, except
as otherwise provided in Chapter 25 of the Vernon City Code, the rates
for the sale of water in the City are to be set by resolution; and
WHEREAS, by memo dated October 4, 2010, the Director of
Community Services and Water, has recommended that the rates
established for water services be raised effective January 1, 2011, to
reflect the City's increased cost and materials to provide water
services; and
WHEREAS, no interested party has filed a written request for
mailed notice of a meeting on new or increased fees or service
charges; and
WHEREAS, on December 6, 2010, the City Council of the City
,Y
Of Vernon held a public meeting to consider water rate increases
during which any and all oral or written presentations could be made
in accordance with Government Code Section 66016; and
WHEREAS, the City Council of the City of,Vernon wishes to
establish new rates for the sale of water in the City of Vernon in
accordance with the Vernon City Code.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
establish the rates for the sale of water in the City of Vernon
pursuant t.o Vernon City Code Sections 25.1 through 25.9, as set forth
in Exhibit A which is attached hereto and made a part hereof as though
fully set forth at length.
SECTION 3: The City Council of the City of Vernon hereby
declares that the applicable rates contained in this resolution shall
be effective on the first regular water reading for monthly billing
purposes in the month of January 2011.
SECTION 4.: The City Clerk of the City of Vernon shall
certify to the passage, approval and adoption of this resolution, and
the City Clerk of the City of Vernon shall cause this resolution and
the City Clerk's certification to be entered in the File of Resolutions
of the Council of this City.
APPROVED AND ADOPTED this 6th day of December, 2010.
Name: Hilario Gonzales
Title: Mayor / yor Tem
ATTE
Wil and G. Y m guc City Clerk
2
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution
No. 2010-177, was duly passed, approved and adopted by the City Council
of the City of Vernon at a regular meeting of the City Council duly
held on Monday, December 6, 2010, and thereafter was duly signed by the
Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this 1'*�" day of December, 2010, at Vernon, California.
(SEAL)
i
Willard G. a ag c i, City Clerk
- 3 -
EXHIBIT
Exhibit "A"
Water Rates for the City of Vernon Water System
. Effective January 1, 2011
1.
Monthly Charge For Meters (V.C.C. Sec. 25.2):
Meter Size Monthly Minimum Charge
5/8"
$ 6.610
3,1"
9.915
In
16.525
1
33.051
2"
52.881
3"
99.152
4"
165.253
6"
330.506
8"
528.809
2.
Water Consumption Rates Per 100
Cubic Feet (V.C.C. Sec. 25.3):
For water used:
$1.28/100 cubic feet
3.
Standby Service Meter Charge W.C.C.
Sec. 25.3):
Meter
Minimum Monthly Consumption
Size
Allowance For Standby Service
Monthly Charge
2"
6,000 cubic feet per month
$ 122.42
3"
15,000 cubic feet per month
273.00
4"
30,00.0 cubic feet per month
512.95 -
6"
75,000 cubic feet per month
1,199.75
8"
150,000 cubic feet per month
2,267.30
The charge for water in excess
of the monthly consumption
allowance shall be the rate per
cubic foot.
A - 1
4. Minimum Rates for Meters for Fire -Related Services (V.C.C.
Sec. 25.4)
Sprinkler Connection Size Monthly Charge
4" $ 2.00
6" 2.00
811 2.00
10" 2.00
The charge for all water used shall be at the rate shown' in
Section 2 of Exhibit A, and shall be payable semiannually.
5. Minimum Rates for Unmetered Service for Fire Protection
Purposes (V.C.C. Sec. 25.4):
Monthly charge per sprinkler head: $0.25/head
6. Square Footage Charge (V.C.C. Sec. 25.5):
Monthly charge for fire -related services based on the square
footage of buildings: $0.003102619 per square foot.
7. Minimum Charge for Temporary Installation and Relocation
(V.C.C. Sec. 25.6) (each person, firm or corporation):
Initial temporary installation: $ 200.00
Relocation of said service: $ 50.00
The water furnished through said temporary
connection shall be charged at the rate of one and
one-half times the consumption rate set forth in
Section 2 of Exhibit A.
8. Bond or Deposit for Temporary Connection to Fire Hydrant
(V.C.C. Sec. 25.7) (each person, firm or corporation):
Amount of each bond or deposit: $500.00
A - 2
9. Rates for Retail Water Business (V.C.C. Sec. 25.8) (each
person, firm or corporation):
The rate shall be one and one-half times the meter charge and
the.water consumption rate set forth in Sections 1 and 2 of
Exhibit A.
10. Water Rates per 100 Cubic Feet'of Reclaimed Water (V.C.C.
Seca 25.9) (each person, firm or corporation):
Malburg Generating Station $0.488/100 cubic feet
until January 1, 2019
Reclaimed water: $1.433/100 cubic feet
A - 3
CITY CLERK'S OFFICE
INTEROFFICE MEMORANDUM
DATE: December 13, 2010
TO: S. Kevin Wilson, Director of Community Services & Water
FROM: Willard Yamaguchi, City Clerk
RE: Resolution No. 2010-177 — A Resolu ion of the City Council of the City of
Vernon Establishing the Rates for the Sale of Water in the City of Vernon in
Accordance with the Vernon City Code and Ordinance No. 1029
Transmitted herewith is a copy of Resolution No. 2010-177, referenced above, which was
approved by City Council on December 6, 2010.
Thank you.
WY:dj
Attachment
c: Resolution No. 2010-177
City of Vernon
NOTICE OF PUBLIC HEARING
4305 Santa Fe Avenue
Vernon, CA 90058
(323) 583-8811
The City of Vernon will conduct a Public Hearing, which you may attend.
Place: Vernon City Hall
City Council Chambers
4305 Santa Fe Avenue
Vernon, CA 90058
Date & Monday, December 6, 2010 at 9:00 a.m.
Time:
The City Council of the City of Vernon will be conducting a Public Hearing regarding Vernon's proposed
water rate increase. The purpose of the hearing is to obtain testimony from affected and/or interested persons
regarding this subject. The public is also invited to submit written protests regarding the proposed increase. This
notice is intended to provide you with information on the water services provided by the City of Vernon, the
reasons for the increase in monthly service rates, and the methods by which you can protest this rate increase.
The new rate schedule is proposed to take effect on January 1, .2011.
The City of Vernon continues its quest to offer among the lowest water rates in the Los Angeles
region. However, the City is facing rising operating costs due to increased water supply costs and needed
capital improvements to its water facilities. The proposed rate increase is needed to, keep pace with these
increases in costs while maintaining a safe and efficient water distribution system.
Proposed Changes to Potable Water Charge and Recycled Water Charge
The City is proposing to increase the potable water rate per hundred cubic feet (HCF) by 10.93
percent. For a water customer with a 6" meter using 4500/HCF at the current rate your monthly water charge
would be $5,546.01 and will increase to $6,104.01 under the proposed water rate increase. For a water
customer with a 2" meter using 50/HCF at the current rate your monthly charge would be $110.88 and will
increase to $116.88 under the proposed water rate increase.
The City is proposing to decrease its monthly square -footage charge assessed on the square -footage of
your building or outside storage by 7.93 percent. For a customer who occupies a building with approximately
200,000 square -feet at the current rate your monthly square -footage charge would be $674.00 and would
decrease to $620.00 under the proposed rate. For a customer who occupies a building with approximately
50,000 square -feet at the current rate your monthly charge would be $168.50 and would decrease to $155.13
under the proposed rate. There are no other increases in costs to the potable water rate structure.
The City is proposing to increase the recycled water rate per hundred cubic feet (HCF) by 1.67 percent
for the Malburg Generating Station (MGS) and 69.39 percent for all other customers. There are currently no
recycled water customers other than MGS.
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Malburg
StationGenerating
\
i�
Information About Potable Water Charges
A. Basis upon which the charges were calculated —The monthly potable water charge is the sum of
three components: a commodity charge, a meter charge, and square footage charge. The commodity charge is
based on providing revenue to cover all of the non -labor costs of water service and half of the labor costs of
water service. The meter charge is based on providing revenue to cover the other half of the labor costs of
providing water service. The square footage charge is based on providing revenue to cover all of the fixed
costs for providing ample water and pressure to the fire hydrants and automatic fire protection systems that
serve customers' properties.
B. Reason for charges — The proposed increase in the commodity charge will be used to cover the
increased costs of providing water service, including the increased Replenishment Assessment imposed.by the
Water Replenishment District for accessing groundwater supplies and the cost of acquiring water from the
Metropolitan Water District for surface water supplies, and to cover the increased fixed costs per hundred
cubic feet of water consumed due to a reduction in water consumption by the City's water customers.
C. Charge per parcel — The table below provides the proposed potable water charge increase and
proposed square -footage decrease. If you need assistance determining the amount of your potable water
charge, you may contact Scott B. Rigg by calling 323-583-8811 or by mail or in person at 4305 Santa Fe
Avenue, Vernon, CA 90058. .
Change
Current Commodity Charge CF
Proposed Commodity Charge CF
Percent +/-
10.93%
$1.16
$1.28
(Increase)
Change
Current Monthly Square -Footage Charge
Proposed Monthly Square -Footage Charge
Percent +/-
7.93%
$0.00337
$0.003102619
Decrease
Information About Recycled Water Charges
A...Basis upon which the charges were calculated — The recycled water charge is the sum of six
components: water, power, supply, depreciation, administrative costs, and capital credits.
B. Reason for charges — The proposed increase in the recycled charge will be used to cover the
increased costs associated with recycled water service, power, supplies, depreciation, and administrative costs.
C. Charge per parcel — The table below provides the proposed recycled water charge increase. If
you need assistance determining the amount of your recycled water charge, you may contact Scott B. Rigg by
calling 323-583-8811 or by mail or in person at 4305 Santa Fe Avenue, Vernon, CA 90058.
Current Recycled Water Rates Per CF
Proposed Recycled Water Rates Per CF
Malburg
Generating Station
1.67%
$0.480
$0.488
(Increase)
All Other
69.39%
Customers
$0.846
$1.433
(Increase)
Public Hearing
At the public hearing, the City will hear and consider all objections or protests to the proposed charges.
Written protests regarding the proposed potable water charge increase and/or the proposed recycled water
charge increase must be filed with the City Clerk prior to the conclusion of the public hearing. Written protests
may be delivered to the City Clerk at the public hearing or mailed or delivered to the City Clerk at Vernon City
Hall, 4305 Santa Fe Avenue, City of Vernon, California 90058. Protests which are mailed or delivered to
Vernon City Hall must arrive at Vernon City Hall by 9:00 a.m. on December 6, 2010 to be counted. If at the
conclusion of the public hearing, written protests against the proposed potable water charge increase or
recycled water charge increase have been filed (and not withdrawn) by the owners of a majority of the parcels
subject to the respective proposed increase; the City Council will not adopt the respective increase.
Questions
For more information about the proposed water charges you may contact Scott B. Rigg at 323-50-
8811. The documentation supporting the proposed water charges is available in the office of Community
Services, Vernon City Hall, 4305 Santa Fe Avenue, between the hours of 7:15 a.m. and 5:15 p.m. Monday
through Thursday.
Dated: fV1/d
STAFF REPORT
RECEIVED
NOV 0 2 2010
CITY CLERK'S OFFICE
COMMUNITY SERVICES & WATER DEPARTMENT
DATE: October 4, 2010
TO: Honorable Mayor and City Council
FROM: Samuel Kevin Wilson, irector of Community Services &Water
RE: Water Rate Increase Recommendation
In 1995 the City of Vernon (City) retained Donald R. Howard ConsultingEngineers, Inc.
(Howard Study) to prepare a cost of service and rate design study for the City of Vernon Water
Department. The rate design principles established in the Howard Study have been utilized to develop the
proposed rate increase.
The City last increased its water rates on July 16, 2007. Since that time the cost to produce water
has increased significantly. A vast majority of the water the City distributes is extracted from groundwater
supplies using production wells to facilitate this process. The City is required to pay the Water
Replenishment District (WRD) a Replenishment Assessment (RA) of $205.00 for every acre-foot of
water produced. The RA water is purchased by WRD and used to replenish groundwater supplies that are
consumed by local water purveyors. Recent environmental courtrulings along with persistent drought
conditions have greatly curtailed WRD's ability to secure replenishment water. As a result WRD has been
unable to purchase replenishment water from Metropolitan Water District (MWD) since May of 2007.
This has forced WRD to secure replenishment water at exceedingly high costs. These costs have been
passed on to local purveyors by way of rate increases of 34-percent in just two years. Table No. 1
illustrates the cost escalation:
Table No.1
Date of Increase
WRD Replenishment Fee Per Acre -Foot
Prior to July 1, 2009
$153.00
July 1, 2009
$181.85
July 1, 2010
$205.00
Total Increase: 34-Percent
Environmental court rulings coupled with drought conditions have greatly reduced the surface
water supplies available from the State Water Project. This has limited MWD's ability to deliver water to
its member agencies and has resulted in an escalation of surface water costs. The cost MWD charges for
an acre-foot of water have increased by nearly 35-percent in a one and a half year period. Table No. 2
illustrates the cost increases-
Table No. 2
Date
of Increase -Potable Water
Cost Per Acre -Foot
Prior to July 1, 2009
$635.00
July 1, 2009
$653.00
September 1, 2009
$781.00
January 1, 2010
$791.00
July 1, 2010
$805.00
January 1, 2011
$855.00
Total Increase: 34.64-Percent
Table No. 3
Date of Increase -Recycled Water
Units
Cost Per Acre -Foot
Prior to July 1, 2009-CBMWD
Service Area
0-25:
$444.00
25-50
$444.00
50-100
$413.00
100+
$413.00
Prior to July 1, 2009-Malburg
Generating Station
0-25
$337.00
25-50
$313.00
50-100
$290.00
100+
$267.00
July 1, 2009-CBMWD Service
Area
0-25
$477.00
25-50 -
$477.00
50-100
$434.00
100+
$434.00
July 1, 2009-Malburg Generating
Station
0-25
$347.00 _
25-50
$322.00
50-100
$299.00
100+
$275.00
January 1, 2010-CBMWD Service
Area
0-25
$487.00
25-50
$487.00
50.100
$444.00
100+
$444.00
January 1, 2010-Malburg
Generating Station
0-25
$357.00
25-50
$332.00
50-100
$309.00
100-F
$285.00
July 1, 2010-CBMWD Service
Area
0-25
$506.00
25-50
$506.00
50-100
$460.00
100+
$460.00
July 1, 2010-Malburg Generating
Station
0-25
$357.00
2
25-50
$332.00
50-100
$308.00
100+
$283.00
Total Increase-CBMWD Service
Area
0-25
13.96%
25-50
13.96%
50-100
11.38%
100+
11.38%
Total Increase-Malburg
Generating Station
0-25
5.93%
25-50
6.07%
50-100
6.21%
100+
5.99%
It is estimated that the City will purchase approximately 8,200 acre-feet of water for the next
fiscal year. Of this, approximately 7,700 acre-feet will be extracted utilizing the City's adjudicated water
rights. Moreover, there has been a significant reduction in water sales due to conservation measures
enacted by the City in 2009 and a decline in economic activity in the City. Irt fiscal year 2007-2008 the
City distributed 10,912 acre-feet of water by way of a combination of pumped and purchasedwater. For
fiscal year 2010-2011 it is anticipated that the City will distribute approximately 8,200 acre-feet of water
which equates to a 33-percent reduction in water production. Although this reduction in water sales has
made the City less reliant on expensive Central Basin Municipal Water District (CBMWD) imported
water supplies, it requires fixed costs that are not dependent on water sales, such as labor costs to
maintain the system, to be absorbed into the commodity rate at a higher rate to cover the costs. It should
be noted that the Water Department has had a reduction in staffing that has resulted in a decrease in labor
costs. The'staffing reductions will serve to offset some of the cost increases' associated with an increase in
water costs.
The City's water rates are split into three components: a meter charge; a commodity charge, and;
a square footage charge. The Howard Study determined how the Water Department's costs should be split
among the three charges to accurately capture costs. Each expense account is split into a fire related cost,
a commodity labor cost, and a commodity non -labor cost. The commodity rate is based on providing
revenue to cover 100-percent of the commodity non -labor costs and 50-percent of the commodity labor
costs. The meter charges are set so that revenues collected will equal the remaining 50-percent of the
commodity related labor expenses. Finally, the square footage revenues should cover 100-percent of the
fire related expenses.
Based on the proposed 2010-2011 fiscal year budget the water rates should be adjusted. This
budget includes a projected need of one million in capital improvements during the course of the year.
These expenses will be covered by $400,000 in. depreciation costs and $600,000 capital improvements
budgeted next year. The Water Department prefers to fund its small capital projects on,a pay as you go
formula, as opposed to bonding for the funds and incurring additional interest and administrative costs.
The Water Department is estimating that water rates will need to be adjusted based on the
proposed budget. The current and proposed rates for potable and recycled water are illustrated in Table
Nos.>4 and 5:
3
Table No. 4
Current Rate
Proposed Rate
Percent Difference
Commodity Rate
1.159
1.28
10.93-Percent Increase
Meter Rates
Varies on meter size
Varies
0
Square Footage Rate
0.00337
0.003102619
-7.93-Percent Decrease
CBMVVD has constructed a backbone recycled water distribution system in the southeast area of
Los Angeles County. This system provides the recycled water to the City. CBMWD has established
certain water rates for its retail customers, one for the Malburg Generating Station, and another for all
other customers. Similarly, the City's retail rate is also made up of two rates. The rates were established
based on a composite of the cost of water, administrative costs, depreciation, and supplies.
The City has entered into an agreement with CBMWD for the purchase of recycled water for the
Malburg Generating Station. This agreement sets forth the cost of recycled water to the City for this
project. As set forth in the agreement, CBMWD is limited to a 3% annual increase in water costs for the
Malburg Generating Station. In addition, the City is responsible for all electrical costs for the booster
plant serving the Vernon area. The City paid for the construction' of the pipeline extension. The parties
agreed that the City will get a capital credit over time to repay the City for its initial expenditure on the
pipeline. The capital credit of $200.00 per acre-foot was subtracted from the water cost in order to
determine the Malburg Generating Station rate. The proposed recycled water rates are illustrated in Table
No. 5:
Table No. 5
Current Rate -
Proposed Rate
-Percent Difference
Recycled-CBMWD
Service Area
$0.846
$1433
69.39 (Increase)
Recycled-Malburg
Generating Station
$0.480
$0.488
1.67% (Increase)
The City of Vernon performed a cost comparison study to ascertain how" Vernon's current and
proposed potable rate structure compares with that of neighboring cities. Two, manufacturing operations
in the City were used in the study. The results of the study, illustrated; in Table No. 6, demonstrate that .
Vernon's proposedrate structure remains exceedingly low when compared to neighboring cities:
Table No. 6
Agency/Com,pany
Business
Cost Per
HCF
Monthly Water
Consumption in
HCF/Units
Average Monthly
Cost
Average
Annual Cost
City of Vernon (Current)
Business "A"
$1.16
37,000
$42,883.00
$514,596.00
City of Vernon (Proposed)
Business "A"
$1.28
37,000
$47,471.00
$569,652.00
City of Industry -La Puente
Business "A"
$1.36
37,000
$50',320.00
$603,840.00
City of Vernon (Proposed with SF)
Business "A"
$1.73
37,000
$64,180.20
$770,162.40
Carson -Cal Water Service
Business "A"
$2.38
37,1Q0
$88,015.60
$1,056,187.20
Carson -Golden State
Business "A"
$2.49
37,000
$92,130.00
$1,105,560.00
City of Santa Fe Springs -Golden State
Business "A"
$2.49
37,000
$92,130.00
$1,105,560.00
City of Industry -Rowland
Business "A"
$2.60
37,000
$96,200.00
$1,154,400.00
City of Commerce -Cal Water Service
Business "A"
$2.78
37,000
$102,719.40
$1,232,632.80
City of Santa Fe Springs
I Business "A"
$3.04
37,000
$112,480.00
$1,349,760.00
rd
LADWP
Business "A"
$3.87
37,000
$143,227.00
$1,718,724.00
City of Vernon (Current)
Business `B"
$1.16
9,500
$11,010.50
$132,126.00
City of Vernon (Proposed)
Business "B"
$1.28
9,500
$12,160.00
$145,920.00
City of Industry -La Puente
Business "B"
$1.36
9,500
$12,920.00
$155,040.00
City of Vernon (Proposed with SF)
Business "B"
$1.73
9,500
$16,435.00
$197,220.00
Carson -Cal Water Service
Business "B"
$2.38
9,500
$22,610.00
$271,320.00
City of Industry -Rowland
Business `B"
$2.60
9,500
$24,700.00
$296,400.00
City of Santa Fe Springs -Golden State
Business "B"
$2.49
9,500
$23,655.00
$283,860.00
Carson -Golden State
Business "B"
$2.49
9,500
$23,655.00
$283,860.00
City of Commerce -Cal Water Service
Business "B"
$2.78
9,500
$26,410.00
$316,920.00
City of Santa Fe Springs
I
Business `B"
$3.04
9,500
$28,880.00
$346,560.00
LADWP
I
Business "B"
1 $3.87
1
9,500
$36,765.00
$441,180.00
A vast majority of water agencies do not have a square footage charge. For comparison purposes
the square footage rate could be converted into a commodity rate by dividing the cost assigned to the
square footage charge and dividing it by the units of water sold. By making this calculation the square
footage would equate to a commodity rate of $0.4516/HCF. Adding that to the proposed commodity rate
of $1.28 equates to a net equivalent rate of $1.7341CF. Table No. 7 illustrates a comparison of this
equivalent rate with water purveyors in close proximity to the. City of Vernon:
Table No. 7
City of Anaheim
$1.72
City of Vernon (Proposed with SF)
$1.73
Maywood; Mutual No. 3
$1.95
City of Glendale
$2.12
City of Long Beach Tier II Rate
$2.43
City of Pasadena Block 2 Rate
$2.50
California Water Service -Commerce
$2.78
City of Santa Fe Springs
$3.04
Table No. 6 and Table No. 7 results demonstrate the City of Vernon proposed rate is among the
lowest in the Central Basin region. Therefore, it is my recommendation that the City Council approve the
increase in water rates at its December 6, 2010 City Council meeting.
Attached herewith are the water commodity, meter, and square footage rate calculations along
with the 2010-2011 budget broken into.commodity labor, commodity non -labor, and fire related costs.
SKW/sr
Enclosures
5
Calculation of City of Vernon Water Rates
Service Charge Calculation
Meter Size
Number of Meters Capacity Factor
Number of Meters X
(X)
Capacity Factor
5/8"
27
1
27
3/4"
37
1.5
55.5
1"
254
2.5
635
1.5"
174
5
870
2.0"
531
8
4248
3.0"
52
15
780
4.0"
58
25
1450
6.0"
24
50
1200
8.0"
1
80
80
Total
1158
9345.5
X = Commodity Related Labor Expense =
S = Standby Revenues =
R = Hydrant Meter Revenues =
B = Adjusted Commodity Related Labor Expense
X-(S+R) = B
Y = 50% of the Adjusted Commodity Related Labor Expense
Monthly Meter Charge Factor = Z
Z x 9345.5= Y/12
$1,492,596.300
$8,000.000
$2,000.000
$1,482,596.300
$741,298.150
6.610116723 _
Proposed Meter Charge
Meter Size (Z)(X) Factor
Proposed Monthly
Present Monthly
Meter Charge
Meter Charge
5/8" 1 x 5.80
$6.610
$6.610
3/4" 1.5 x 5.80
$9.915
$9.910
1" 2.5 x 5.80
$16.525
$16.520
1.5" 5 x 5.80
$33:051
$33.050
2.0" 8 x 5.80
$52.881
$52.880
3.0" 15 x 5.80
$99.152
$99.150
4.0" 25 x 5.80
$165.253
$165.250
6.0" 50 x 5.80
$330.506
$330.500
8.0" 80 x 5.80
$528.809
$528.800
0.00%
percent increase
Commodity Calculation
Charge
- -
B = Adjusted Commodity Related Costs =
$1,482,596.300
50% of Adjusted Commodity Labor Costs =
$741,298.150
C = Construction Related Projected Revenues
$75,000.000
Note: 63.2% of Construction Related Revenues assigned
as a credit against Commodity Charge
N = Commodity Non Labor Costs =
$3,521,898.600
Projected Water Sales in acre feet =
7,544.00
A = projected water sales in 100 CF
3,286,166.40
Proposed Commodity Charge = (.5 B - .632 C+N) / A $1.283
Current commodity Charge = $1.159
10.69% percent increase
Square Footage Charge
36.8 % of Construction Related Revenues Assisgned Credit to Fire Related Cost
U = Fire Related Costs =
$1,576,883.100
V = Metered Fire Service Revenues =
$65,000.000
T = Adjusted Fire Related Costs
T = U - V =
$1,511,883.100
C = Projected Construction Related Revenues =
$75,000.000
Note: 36.8% of Construction Related Revenues assigned
as credit towards Square Footage Charge
R = Total Square Feet in Service Area =
39,866,402.00
Proposed Square Footage Charge per year = (T - .368C) / R =
0.037231429
Proposed Suare footage charge per month =
0.003102619
Current Square foot charge per month =
0.00337
-7.93% Percent increase
Meter
Number of 5/8" meters
Number of 3/4" meters
Number of 1" meters
Number of 1.5" meters
Number of 2" meters
Number of 3" meters
Number of 4" meters
Number of 6" meters
Number of 8" meters
Consumption
Square foot
Total revenue under proposed rates
27
$6.610
$2,141.68
37
$9.915
$4,402.34
254
$16.525
$50,369.09
174
$33.051
$69,009.62
531
$52.881
$336,957.31
52.
$99.152
$61,870.69
58
$165.253
$115,016.03
24
$330.506
$95,185.68
1
$528.809
$6,345.71
$741,298.15
Standby Revenues =
Hydrant Meter Revenues =
Construction Related projected revenues =
Metered Fire Service Revenues
$1.283 3,286,166.40 $4,215,796.750
0.003102619 39,866,402.00 $1,484,283.100
$8,000.000
$2,000.000
$75,000.000
$65,000.000
Total revenues
$6,591,378.00
Total revenue under current rates
Meter
Number of 5/8" meter
27
$6.610
Number of 3/4" meter
37
$9.910
Number of 1 " meters
254
$16.520
Number of 1.5" meter
174
$33.050
Number of 2" meters
531
$52.880
Number of 3" meters
52
$99.150
Number of 4" meters
58
$165.250
Number of 6" meters
24
$330.500
Number of 8" meters
1
$528.800
Consumption
$1.159 3,286,166.40
Square foot
0.00337 39,866,402.00
Standby Revenues =
Hydrant Meter Revenues =
Construction Related projected revenues =
Metered Fire Service Revenues
Total revenues
$2,141.64
$4,400.04
$50,352.96
$69,008.40
$336,951.36
$61,869.60
$115,014.00
$95,184.00
$6,345.60
$741,267.60
$3,808,666.858
$1,612,197.297
$8,000.000
$2,000.000
$75,000.000
$65,000.000
$6,312,131.75
Variables
Commodity Related Labor Expense = $1,492,596.300
Standby Revenues = $8,000.000
Hydrant Meter Revenues = $2,000.000
Construction Related projected revenues = $75,000.000
Commodity Non Labor Costs $3,521,898.600
Projected AF of Water Sales = 7,544.00
Fire Related Costs = $1,576,883.100
Metered Fire Service Revenues $65,000.000
Total square feet of building area in service are 39,866,402.00
Number of 5/8" meters
27
Number of 3/4" meters
37
Number of 1" meters
254
Number of 1.5" meters
174
Number of 2" meters
531
Number of 3" meters
52
Number of 4" meters
58
Number of 6" meters
24
Number of 8" meters
1
Current commodity rate
1.159
Current square footage rate per month
0.00337
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Q
RECYCLED WATER RATES
Central Basin Municipal Water District (CBMWD) has constructed a backbone recycled water
distribution system in the southeast area of Los Angeles County. This system serves the City of Vernon.
CBMWD has established certain water rates for its retail customers, one for the Malburg Generating
Station (MGS), and another for all other customers. Similarly, the City's retail rate is also made up of
two rates. The rates were established based on a composite of the cost of water, administrative costs,
depreciation, and supplies.
The City of Vernon has entered into an agreement with CBMWD for the purchase of recycled
water for the MGS. This agreement sets forth the cost of recycled water to the City for this project. As
set forth in the agreement, CBMWD is limited to a 3% annual increase in water costs for the MGS. In
addition the City is responsible for all electrical costs for the booster plant serving the Vernon area. The
City paid for the construction of the pipeline extension. The parties agreed that the City will get a capital
credit over time to repay the City for its initial expenditure on the pipeline. This capital credit of $200.00
per acre foot was subtracted from the water cost in order to determine the Malburg Generating Station
rate. -
Enclosed herewith is a cost analysis of the recycled water rate structure.
Based on the cost analysis, it is recommended that the recycled water rate for the MGS be set at
$0.488 per hundred cubic feet and the recycled water rate for all other customers be set at $1.433 per
hundred cubic feet.
VERNON RECYCLED WATER CONSUMPTION
ACRE-FEET
POWER
May 2009
77.69
$695.32 "
June 2009
70.75
$944.76
July 2009
73.90
$1,250.32
August 2009
81.66
$1,587.85
September 2009
78.81
$1,147.20
October 2009
74.20
$842.44
November 2009
68.36
$674.45
December 2009
70.19
$686.74
January 2010
79.60
$593.19 -
February 2010
69.48 .
$630.00
March 2010
71.70
$808.00
April 2010
73.37
$740.25
TOTAL
889.71
$9792.52
Average Monthly
74.14
Annual Capital Credit ($200) (889.71)
= $177,942
Central Basin Rates (2010/2011)
VOLUME
CBMWD
MGS
0 — 25
$506/af
$357/af _
25 — 50
$506/af
$332/af "
50 — 100
$460/af
$308/af
100+
$460/af
$283/af
AVERAGE MONTH COMMODITY COST OF RECYCLED WATER
FOR MALBURG GENERATING STATION
0 — 25 (25) ($357) _ $8,925
25 — 50 (25) ($332) _ $8,300
50 —100 (24.14) ($308) _ $7,435.12
74.14 $24,660.12
Annual Commodity Cost = ($24,660.12) (12)
Annual Capital Credit = ($200) (74.14) (12) _
All Costs for Recycled Water
Water
$295,921
Power*
$10,772
Supplies
$500
Depreciation
$25,000
City Administrative
$35,000
Capital Credit
- 177 936
Total Cost
$189,257
* Assume 10% increase in power costs
Commodity Cost
$189,257 / (889.71) (435.60) _ $0.488 per ccf
$295,921
$177,936
ALL OTHER RECYCLED WATER CUSTOMERS
Assume 25 acre-feet of recycled water consumed per month.
Commodity Cost Per Year
($506) (25) (12) _ $151,800
All Costs
Water $151,800
Supplies $500
Depreciation $25,000
City Administrative 10 000
Total Cost $187,300
Commodity Cost
$187,300 / (300) (435.60) _ $1.433 per ccf
RECEIVED
O C T 0-5 2010
CITY CLERK'S OFFICE
STAFF REPORT
COMMUNITY SERVICES & WATER DEPARTMENT
DATE: October 4, 2010
TO: Honorable Mayor and City Council /0
FROM: Samuel Kevin Wilson, Director of Community Services & Water
RE: Water Rate Increase Recommendation
In 1995 the City of Vernon (City) retained Donald R. Howard Consulting Engineers, Inc.
(Howard Study) to prepare a cost of service and rate design study for the City of Vernon Water
Department. The rate design principles established in the Howard Study have been utilized to develop the
proposed rate increase.
The City last increased its water rates on July 16, 2007. Since that time the cost to produce water
has increased significantly. A vast majority of the water the City distributes is extracted from groundwater
supplies using production wells to facilitate this process. The City is required to pay the Water
Replenishment District (WRD) a Replenishment Assessment (RA) of $205.00 for every acre-foot of
water produced. The RA water is purchased by WRD and used to replenish groundwater supplies that are
consumed by local water purveyors. Recent environmental court rulings along with persistent drought
conditions have greatly curtailed WRD's ability to secure replenishment water. As a result WRD has been
unable to purchase replenishment water from Metropolitan Water District (MWD) since May of 2007.
This has forced WRD to secure replenishment water at exceedingly high costs. These costs have been
passed on to local purveyors by way of rate increases of 34-percent in just two years. Table No. 1
illustrates the cost escalation:
Table No- 1
Date of Increase
WRD Replenishment Fee Per Acre -Foot
Prior to July 1, 2009
$153.00
July 1, 2009
$181.85
July 1, 2010
$205.00
Total Increase: 34-Percent
Environmental court rulings coupled with drought conditions have greatly reduced the surface
water supplies available from the State Water Project. This has limited MWD's ability to deliver water to
its member agencies and has resulted in an escalation of surface water costs. The cost MWD charges for
an acre-foot of water have increased by nearly 35-percent in a one and a half year period. Table No. 2
illustrates the cost increases:
Table No. 2
Date of Increase -Potable Water
Cost Per Acre -Foot
Prior to July 1, 2009
$635.00
July 1, 2009 '
$653.00
September 1, 2009
$781.00
January 1, 2010
$791.00
July 1, 2010
$805.00
January 1, 2011
$855.00
Total Increase: 34.64-Percent
Table No. 3
Date of Increase -Recycled Water
Units
Cost Per Acre -Foot
Prior to July 1, 2009-CBMWD
Service Area
0-25:
$444.00
25-50
$444.00
50-100
$413.00
100+
$413.00
Prior to July 1, 2009-Malburg
Generating Station
0-25
$337.00'
25-50
$313.00
50-100
$290.00
100+
$267.00
July 1, 2009=CBMWD Service
Area
0-25
$477.00
25-50
$477.00
50-100
$434.00
100+
$434.00
July 1, 2009-Malburg Generating
Station
0-25
$347.00
25-50
$322.00
50-100
$299.00
100+
$275.00
January 1, 2010-CBMWD Service
Area
0-25
$487.00
25-50
$487.00
50-100
$444.00
100+
$444.00
January 1, 2010-Malburg
Generating Station
0-25
$357.00
25-50
$332.00
50-100
$309.00
100+
$285.00
July 1, 2010-CBMWD Service
Area
0-25
$506.00
25-50
$506.00
50-100
$460.00
100+
$460.00
July 1, 2010-Malburg Generating
Station
0-25
$357.00
25-50
$332.00
2
50-100
$308.00
100+
$283.00
Total Increase-CBMWD Service
Area
0-25
13.96%
25-50
13.96%
50-100
11.38%
100+
11.38%
Total Increase-Malburg
Generating Station
0-25
5.93%
25-50
6.07%
50-100
6.21%
100+
5.99%
It is estimated that the City will purchase approximately 8,200 acre-feet of water for the next
fiscal year. Of this, approximately 7,700 acre-feet will be extracted utilizing the City's adjudicated water
rights. Moreover, there has been a significant reduction in water sales due to conservation measures
enacted by the City in 2009 and a decline in economic activity in the City. In fiscal year 2007-2008 the
City distributed 10,912 acre-feet of water by way of a combination of pumped and purchased water. For
fiscal year 2010-2011 it is anticipated that the City will distribute approximately 8,200 acre-feet of water
which equates to a 33-percent reduction in water production. Although this reduction in water sales has
made the City less reliant on expensive Central Basin Municipal Water District (CBMWD) imported
water supplies, it requires fixed costs that are not dependent on water sales, such as labor costs to
maintain the system, to be absorbed into the commodity rate at a higher rate to cover the costs. It should
be noted that the Water Department has had a reduction in staffing that has resulted in a decrease in labor
costs. The staffing reductions will serve to offset some of the cost increases associated with an increase in
water costs:
The'City's water rates are split into three components: a meter charge; a commodity charge, and;
a square footage charge. The Howard Study determined how the Water Department's costs should be split
among the three charges to accurately capture costs. Each expense account is split into a fire related cost,
a commodity labor cost, and a commodity non -labor cost. The commodity rate is based on providing
revenueto cover 100-percent of the commodity non -labor costs and 50-percent of the commodity labor
costs. The meter charges are set so that revenues collected will equal the remaining 50-percent of the
commodity related labor expenses. Finally, the square footage revenues should cover 100-percent of the
fire related expenses.
Based on the proposed 2010-2011 fiscal year budget the water rates should be adjusted. This
budget includes a projected need of one million in capital improvements during the course of the year.
These expenses will be covered by $400,000 in depreciation costs and $600,000 capital improvements
budgeted next year. The Water Department prefers to fund its small capital projects on a pay as you go
formula, as opposed to bonding for the funds and incurring additional interest and administrative costs.
The Water Department is estimating that water rates will need to be adjusted based on the
proposed budget. The current and proposed rates for potable and recycled water are illustrated in Table
Nos. 4 and 5:
Table No. 4
Current Rate
Proposed Rate
Percent Difference
Commodity Rate
1.59
1.283
10.69-Percent Increase
Meter Rates
Varies on meter size
Varies
0
Square Footage Rate
0.00337
0.00310
-7.93-Precent Decrease
3
i
CBMWD has constructed a backbone recycled water distribution system in the southeast area of
Los Angeles County. This system provides the recycled water to the City. CBMWD has established
certain water rates for its retail customers, one for the Malburg Generating Station, and another for all
other customers. Similarly, the City's retail rate is also made up of two rates. The rates were established
based on a composite of the cost of water, administrative costs, depreciation, and supplies.
The City has entered into an agreement with CBMWD for the purchase of recycled water for the
Malburg Generating Station. This agreement sets forth the cost of recycled water to the City for this
project. As set forth in the agreement, CBMWD is limited to a 3% annual increase in water costs for the
Malburg Generating Station. In addition, the City is responsible for all electrical costs for the booster
plant serving the Vernon area. The City paid for the construction of the pipeline extension. The parties
agreed that the City will get a capital credit over time to repay the City for its initial expenditure on the
pipeline. The capital credit of $200.00 per acre-foot was subtracted from the water cost in order to
determine the Malburg Generating Station rate. The proposed recycled water rates are illustrated in Table
No. 5:
Table No.'S
Current Rate
Proposed Rate
Percent Difference
Recycled-CBMWD
Service. Area
$0.846
$1.433
69.39 (Increase) .
Recycled-Malburg
Generating Station
$0.480
$0.488
1.67% (Increase)
The City of Vernon performed a cost comparison study to ascertain how Vernon's current and
proposed potable rate structure compares with that of neighboring cities. Two manufacturing operations
in the City were used in the -study. The results of the study, illustrated in Table No. 6,demonstrate that
Vernon's proposed rate structure remains exceedingly low when compared to neighboring cities:
Table No. 6
Agency/Company
Business
Cost Per
HCF
Monthly Water
Consumption in
HCF/Units
Average Monthly
Cost '
Average
Annual Cost
City of Vernon (Current)
Business "A"
$1.16
37,000
$42,883.00
$514,596.00
City of Vernon (Proposed)
Business "A"
$1.28
37,000
$47,471.00
$569,652.00
City of Industry -La Puente
Business "A"
$1.36
37,000
$50,320.00
$603,840.00
City of Vernon (Proposed with SF)
Business "A"
$1.73
379000
$64,180.20
$770,162.40
Carson -Cal Water Service
Business "A"
$238
37,000
$88,015.60
$1,056,187.20
Carson -Golden State
Business "A"
$2.49
37,000
$92,130.00
$1,105,560.00
City of Santa Fe Springs -Golden State
Business "A"
$2.49
37,000
$92,130.00
$1,105,560.00
City of Industry -Rowland
Business "A"
$2.60
37,000
$96,200.00
$1,154,400.00
City of Commerce -Cal Water Service
Business "A"
$2.78
37,000
$102,719.40
$1,232,632.80
City of Santa Fe S rin s
Business ` A"
$3.04
37,000
$112,480.00
$1,349,760.00
LADWP
City of Vernon (Current)
Business "A"
Business "B"
$3.87
$1.16
37,000
9,500
$143,227.00
$11,010.50
$1,718,724.00
$132,126.00
City of Vernon (Proposed)
Business `B"
$1.28
9,500
$12,160.00 7$145,920.00
City of Industry -La Puente
Business `B"
$1.36
9,500
$12,920.00
$155,040.00
City of Vernon (Proposed with SF)
Business `B"
$1.73
9,500
$16,435.00
$197,220.00
Carson -Cal Water Service
Business `B"
$2.38
9,500
$22,610.00
$271,320.00
City of Industry -Rowland
Business `B"
$2.60
9,500
$24;700.00
$296,400.00
City of Santa Fe Springs -Golden State
Business `B"
$2.49
9,500
$23,655.00
$283,860.00
Carson -Golden State
Business `B"
$2.49
9,500
$23,655.00
$283,860.00
City of Commerce -Cal Water Service
Business "B"
$2.78
9,500
$26,410.00
$316,920.00
City of Santa Fe Springs
Business `B"
$3.04
91500
$28,880.00
$346,560.00
LADWP
Business `B"
$3.87
9,500
$36,765.00
$441,180.00
A vast majority of water agencies do not have a square footage charge. For comparison purposes
the square footage rate could be converted into a commodity rate by dividing the cost assigned to the
square footage charge and dividing it by the units of water sold. By making this calculation the square
footage would equate to a commodity rate of $0.45.16/HCF. Adding that to the proposed commodity rate
of $1.283 equates to a net equivalent rate of $1.73/HCF. Table No. 7 illustrates a comparison of this
equivalent rate with water purveyors in close proximity to the City of Vernon:
Table No. 7
City of Anaheim
$ l .72
City of Vernon (Proposed with SF)
$1.73
Maywood Mutual No. 3
$1.95
City of Glendale
$2.12
City of Long Beach Tier II Rate
$2.43
City of Pasadena Block 2 Rate
$2.50
California Water Service -Commerce
$2.78
City of Santa Fe Springs
$3.04
Table No. 6 and Table No. 7 results demonstrate the City of Vernon proposed rate is among the
lowest in the Central Basin region: Therefore, it is my recommendation that the City Council approve the
increase in water rates at its December 6, 2010 City Council meeting. Thank you.
SKW/sr
Enclosures
5
COMMUNITY SERVICES & WATER DEPARTMENT
OFFICE MEMORANDUM
TO: Mark Whitworth, City Administrator
FROM: Samuel Kevin Wilson, Director of Community Services & Water
DATE: October 4, 2010
SUBJECT: Public Hearing Proposed Water Rate Increase
The City of Vernon is proposing to increase its water rates in order to meet rising water costs, needed
capital improvements, and reduction in water sales. The Department of Community Services and Water
(Department) is respectfully requesting that you schedule a Public Hearing to obtain testimony regarding the
subject rate increase on December 6, 2010 at 9:00 A.M.
The proposed water rate increase is subject to the provisions of Proposition 218 which requires that
public utility providers follow a strictly defined process for increasing rates. Generally speaking, the City must
inform affected property owners of the proposed rate increase; clearly demonstrate the amounts of the proposed
rate increase, and hold a public hearing no less than 45-days after providing official notice to the property
owner, and hear all protests to the proposed rate increase. These rates are subject to "majority protest," meaning
they cannot be imposed if a majority of property owners affected by the rate change submit written protests
opposing the increase.
Enclosed herewith is a Notice of Public Hearing and a Staff Report recommending a potable and
recycled water rate increase. Please forward the notice to the City Clerk to be executed. My Department will
ensure that the notice is published. Thank you.
SKW/sr
Enclosures
�iaztertt (Groula ixt-Iliratio its, ,ttx-
The Only All Hispanic Owned Chain of Bilingual Newspapers
111 S. Avenue 59, Los Angeles, CA 90042-4211
Ph 323.341-7970 • Fax 323.341-7976 • www.egpnews.com
PROOF OF PUBLICATION
(2015.5 C.C.P.)
STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES
I am a citizen of the United States and a resident
of the County aforementioned; I am over the age
of eighteen years, and not a party to or interested
in the above -entitled matter. 1 am the principal
clerk of the printer of
EASTERN GROUP PUBLICATIONS'
EASTSIDE SUN, MEXICAN AMERICAN SUN,
NORTHEAST SUN, BELL GARDENS SUN,
VERNON SUN, COMMERCE COMET,
CITYTERRACE COMET, MONTEBELLO COMET,
MONTEREY PARK COMET,
E.L.A. BROOKLYN BELVEDERE COMET
AND WYVERNWOOD CHRONICLE,
newspapers of general circulation, printed
and published THURSDAYS in the County of
Los Angeles, and which newspaper has been
adjudicated a newspaperof general circulation by
the Superior Court of the County of Los Angeles,
State of California, under the
date of JUNE 21, 1966.
CASE NUMBER 884861;
that the notice, of which the annexed is a printed
copy (set in type not smaller than nonpareil), has
been published in each regular and entire issue
of said newspaper and not in any supplement
thereof on the following dates, to -wit:
OCTOBER 14,
all in the year 2010.
I certify (or declare) under penalty of perjury that
the foregoing is true and correct.
Dated at LOS ANGELES, California,
this Whh day of OCTOBER, 2010.
Wxnrisl__71
Signature
This space is for the County Clerk's Filing Stamp
CITY OF VERNON
Proof of Publication of
Notice of Public Hearing:
Monday, December 6. 2010 ... regarding
Vernon's proposed water rate increase
Mill
TleCityofVernonwillconductaF'ubhcHearng whichyoiJmay,
,.. ;
Place , Vefrton ¢1, Hall City Council Champers
9305 Sanfs Fe Aden4a �Vernoq CA 90b5Br�
Date &!(,Time Mo et 9
aloriday:D-616
Cqun Citj%of Vem�}i�will be a
Treaty ilQofztle condutCting
HV"F4(I
the hearing is to#dbtain test�motjy teom a(fected ,
rteos
p#
eeoec
:rpeek�itoeo p Vfniehttn)f p
ioTs
regthaa4ridninpgr
s�Sy�ue�bs(i�ad�
rttnhgis�sUrti�lec;"�tne
egrrjghe (opoi 6 iq1§ !teh
abntshe'�rh(4
trn,dttyt
Yytvdicde=
cc)Tirehmsecl as
he egsonsi 6r,t5nl
by u�ihtch �oti Can protgst,this fates i$e�easg The ne egg,,?
p oposed to (akeie egt op Jaffarvy 2d{Y
Tlie City ofternon cohttnues its'q es atotoffef q[p¢ng he
water rgtq�,i thg os A%�eles, egion, Howbver the i)yts [a�itsi
operatirlgicpsts (it�e {o+mcreas�tl water supplykcosts1�nd d reer
wate(f)cititles The r�ie ine�esse is
imptoVmdntafoits )3roposec)
to keep pace�wrti�hese i�icreases i(�coSS. While mlhtami�g a}st
e[ficie�t w tejr tlis{rlgutlotl�systQin (VF( rP ry
troposed Changes to Pople Watef Charge and Rceled�
l
The City to inctease the potal;le watef fa,e per ti
propgsigg
oubic,feet (HC�) by�1093 p�erperi4 for a wate�r6ustomelW�th a 6J
usmg'500/H0 atCthe current rate=yogi,montly,Water{Charge'
be $5,5d6 01) and wiq increase to $fi 104 01 Uhder the pro45 pose
r�te,inerease For a water er3stomer v)ith afi2jt, meter using!50/k
currett't'ra(e your--Tont�ily�¢ha�ge would b'e $110 $8'and will inert
er
$116 88 under the�proposed w$tjk-
< Tfie City istiroposing to decrease i�symthl� square' footage`,
assessed oi) Yhq square footaY a gfiyout building or p4ts�de, stor
7 93 percent For,a,t:'stgpigrwho bcupies a bia�ng with a�pF§px
200 000 s uar�-feetrat, ithe cuf(ent ;rate yoyr` onthl�sgrf�re.1
charge would bel $674� OOp�aand)v�outd tle�crease toi,�62,0, O�Oi,Ln`l
pr9posetl rate For a customer who dct spies Fbwlding,witft approx
50 000'zsgy re'feet at the`burrentt rate riiontitly charge We
yo'01
$168 5Q an(� uyoulli decrease to $15513 Undef (he proRosetl rate;
are po;other i�icreaees iq costs �o theopotaWe,vfaief rate s4ruct�fret
tThe bits is proposing to Iricrdase the recycled watgr.,rat peryf
Cubic feet (HCF) bygl 67,,pgrcent fore xMalburg`;Generati€�g
(MGS)a'and 69 39 percen(fo'rt�ll t�ieF customerrs Tliere a_,y eurE
recycled water customers other t��an MC�S�+ t+'a, , 'r � , t
Meter; i
Currently t Y �'
Proposec��
.Char!
Sae ) , t
Monthly
�MBhthly 4� 7
Perc4
l ,a
harge
'CIOU
1 r
1 5'
20,
3
6 0 , -,> `
r;$330 51
80 ?
\$5288-1,J, t.,.,,,$528B�1'`
Current Comrtrdiiity
Proposed Comniodlty
Change F
Charge (HCF)
Charge (HFC) 1
Current Monthly
Srjuare Footage Charge
Propo§ed Mgnfhly x
h_quare Footage Charge
C1lange
;
$0 Q0337 ,
$0 Q0,3402619
7;93°/? (De
l�=
RECYCLED WATER RATES
Central Basin Municipal Water District (CBMWD) has constructed a backbone recycled water
distribution system in the southeast area of Los Angeles County. This system serves the City of Vernon.
CBMWD has established certain water rates for its retail customers, one for the Malburg Generating
Station (MGS), and another for all other customers. Similarly, the City's retail rate is also made up of
two rates. The rates were established based on a composite of the cost of water, administrative costs,
depreciation, and supplies.
The City of Vernon has entered into an agreement with CBMWD for the purchase of recycled
water for the MGS. This agreement sets forth the cost of recycled water to the City for this project. As
set forth in the agreement, CBMWD is limited to a 3% annual increase in water costs for the MGS. In
addition the City is responsible for all electrical costs for the booster plant serving the Vernon area. The
City paid for the construction of the pipeline extension. The parties agreed that the City will get a capital
credit over time to repay the City for its, initial expenditure on the pipeline. This capital credit of $200.00
per acre foot was subtracted from the water cost in order to determine the Malburg Generating Station
rate.
Enclosed herewith is a cost analysis of the recycled water rate structure.
Based on the cost analysis, it is recommended that the recycled water rate for the MGS be set at
$0.488 per hundred cubic feet and the recycled water rate for all other customers be set at $1.433 per
hundred cubic feet.
ACRE-FEET
May 2009
77.69
June 2009
70.75
July 2009
73.90
August 2009
81.66
September 2009
78.81
October 2009
74.20
November 2009
68.36
December 2009
70.19
January 2010
79.60
February 2010
69.48
March 2010
71.70
April 2010
73.37
TOTAL
889.71
Average Monthly 74.14
Annual Capital Credit ($200) (889.71) = $177,942
Central Basin Rates (1010/2011)
VOLUME
0-25
25 — 50
50 — 100
100--k
CBMWD
$506/af
$506/af
$460/af
$460/af
POWER
$695.32
$944.76
$1,250.32
$1,587.85
$1,147.20
$ 842.44
$674.45
$686.74
$593.19
$630.00
$808.00
740.25
9792.52
MGS
$357/af
$332/af
$308/af
$283/af
AVERAGE MONTH COMMODITY COST OF RECYCLED WATER
FOR MALBURG GENERATING STATION
0 — 25
(25) ($357) _
$8,925
25 — 50
(25) ($332) _
$8,300
50 — 100
24.14 ($308) =
$7,435.12
74.14
$24,660.12
Annual Commodity Cost = ($24,660.12) (12) _
$295,921
Annual Capital Credit = ($200)
(74.14) (12) _
$177,936
All Costs for Recycled Water
Water
$295,921
Power*
$105772
Supplies
$500
Depreciation
$25,000
City Administrative
$35,000
Capital Credit
- $t77,936
Total Cost
$189,257
* Assume 10% increase in power costs
Commodity Cost
$189,257 / (889.71) (435.60) $0.488 per ccf
ALL OTHER RECYCLED WATER CUSTOMERS
Assume 25 acre-feet of recycled water consumed per month.
Commodity Cost Per Year
($506) (25) (12)
All Costs
Water
Supplies
Depreciation
City Administrative
Total Cost
Commodity Cost
$187,300 / (300) (435.60)
$151,800
$151,800
$500
$25,000
10 000
$187,300
$1.433 per ccf
Meter Size
5/8"
3/4"
1"
1.5"
2.0"
3.0"
4.0"
6.0"
8.0"
Total
Calculation of City of Vernon Water Rates
Service Charge Calculation
Number of Meters Capacity Factor
(X)
Number of Meters X
Capacity Factor
27
1
37
1.5
254
2.5
174
5
531
8
52
15
58
25
24
50
1
80
1158
27
55.5
635
870
4248
780
1450
1200
80
9345.5
X = Commodity Related Labor Expense = $1,492,596.300
S = Standby Revenues = $8,000.000
R = Hydrant Meter Revenues = $2,000.000
.B = Adjusted Commodity Related Labor Expense
X-(S+R) = B = $1,482,596.300
Y = 50% of the Adjusted Commodity Related Labor Expense $741,298.150
Monthly Meter Charge Factor = Z
Z x 9345.5= Y/12 6.610116723
Proposed Meter Charge
r
Meter Size (Z)(X) Factor Proposed Monthly Present Monthly
Meter Charge Meter Charge
5/8"
1 x 5.80
$6.610
$6.610
3/4"
1.5 x 5.80
$9.915
$9.910
1"
2.5 x 5.80
$16.525
$16.520
1.511
5 x 5.80
$33.051
$33.050
2.011
8 x 5.80
$52.881
$52.880
3.0"
15 x 5.80
$99.152
$99.150
4.011
25 x 5.80
$165.253
$165.250
6.0"
50 x 5.80
$330.506
$330.500
8.0"
80 x 5.80
$528.809
$528.800
0.00% percent increase
Commodity Calculation Charge
B = Adjusted Commodity Related Costs = $1,482,596.300
50% of Adjusted Commodity Labor Costs = $741,298.150
C = Construction Related Projected Revenues $75,000.000
Note: 63.2% of Construction Related Revenues assigned
as a credit against Commodity Charge
N = Commodity Non Labor Costs = $3,521,898.600
Projected Water Sales in acre feet = 7,544.00
A = projected water sales in 100 CF 3,286,166.40
Proposed Commodity Charge = (.5 B - .632 C+N) / A $1.2.83
Current commodity Charge = $1.159
10.69% percent increase
Square Footage Charge
36.8 % of Construction Related Revenues Assisgned Credit to Fire Related Cost
U = Fire Related Costs = $1,576,883.100
V = Metered Fire Service Revenues = $65,000.000
T = Adjusted Fire Related Costs
T = U - V = $1,511,883.100
C = Projected Construction Related Revenues = $75,000.000
Note: 36.8% of Construction Related Revenues assigned
as credit towards Square Footage Charge
R = Total Square Feet in Service Area = 39,866,402.00
Proposed Square Footage Charge per year = (T - .368C) / R = 0.037231429
Proposed Square footage charge per month = 0.003102619
Current Square foot charge per month = 0.00337
-7.93% Percent increase
Total revenue under current rates
Meter
Number of 5/8'
27
Number of 3/4'
37
Number of 1" r.
254
Number of 1.5"
174
Number of 2" r.
531
Number of 3" r.
52
Number of 4" r
58
Number of 6" r.
24
Number of 8" r.
1
Consumption
$1.159
Square foot
0.00337
Standby Revenues =
Hydrant Meter Revenues =
Construction Related projected revenues =
Metered Fire Service Revenues
Total revenues
$6.610
$2,141.64
$9.910
$4,400.04
$16.520
$50,352.96
$33.050
$6908.40
$52.880
$336,951.36
$99.150
$61,869.60
$165.250
$115,014.00
$330.500
$95,184.00
$528.800
$6,345.60
$741,267.60
3,286,166.40
$3,808,666.858
39,866,402.00
$1,612,197.297
$8,000.000
$2,000.000
$75,000.000
$65,000.000
$6,312,131.75
Variables
Commodity Related Labor Expense = $1,492,596.300
Standby Revenues = $8,000.000
Hydrant Meter Revenues =
$2,000.000
Construction Related projected revenues =
$75,000.000
Commodity Non Labor Costs =
$3,521,898.600
Projected AF of Water Sales =
7,544.00
Fire Related Costs $1,576,883.100
Metered Fire.Service Revenues $65,000.000
Total square feet of building area in service are 39,866,402.00
Number of 5/8" meters
27
Number of 3/4" meters
37
Number of 1" meters
254
Number of 1.5" meters
174
Number of 2" meters •
531
Number of 3" meters
52
Number of 4" meters
58
Number of 6". meters
24
Number of 8" meters
1
Current commodity rate
1.159
Current square footage rate per month
0.00337
Total revenue under proposed rates
Meter
Number of 5/8" meters
Number of 3/4" meters
Number of 1" meters
Number of-1.5" meters
Number of 2" meters
Number of 3" meters
Number of 4" meters
Number of 6" meters
Number of 8" meters
Consumption
Square foot
Standby Revenues =
Hydrant Meter Revenues =
Construction Related projected revenues
Metered Fire Service Revenues
27
$6.610
$2,141.68
37
$9.915
$4,402.34
254
$16.525
$50,369.09
174
$33.051
$69,009.62
531
$52.881
$336,957.31
52
$99.152
$61,870.69
58
$165.253
$115,016.03
24
$330.506
$95,185.68
1
$528.809
$6,345.71
$741,298.15
$1.283 3,286,166.40 $4,215,796.750
0.003102619 39,866,402.00 $1,484,283.100
$8,000.000
$2,000.000
$75,000.000
$65,000.000
Total revenues
$6,591,378.00
Rigg, Scott
From: Wilson, Kevin
Sent: Thursday, September 09, 2010 6:08 PM
To: Rigg, Scott
Subject: FW: Staff Report Rate Increase
Attachments: Comments to notice for water rate increase (Vernon).PDF; Insert to notice for water rate
increase (Vernon).DOC
Can you incorporate the proposed changes made by the City Attorney's office.
From: Trisha Ortiz [mailto:TOrtiz@rwgiaw.com]
Sent: Thursday, September 09, 2010 2:51 PM
To: Wilson, Kevin
Cc: Laurence S. Wiener; Gena Stinnett
Subject: RE: Staff Report Rate Increase
Kevin, attached please find my suggested revisions to the public hearing notice. I am happy to discuss any questions
about the attached. Thank you very much.
Trisha Ortiz
Attorney at Law
Richards I Watson I Gershon
44 Montgomery Street, Suite 3800
San Francisco, California 94104-481 t
tel: (415) 421-8484, ext. 320
fax: (415) 421-8486
-----Original Message -----
From: Wilson, Kevin[mailto:KWi[son @ci.vernon.ca.us]
Sent: Thursday, September 09, 2010 9:19 AM
To: Trisha Ortiz
Subject: FW: Staff Report Rate Increase
Attached is the most current staff report on the water rate adjustments. We need to add a paragraph on the
recycle water rates.
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message and any attachments without copying or disclosing the contents. Thank you.
PROPOSED WATER RATE
CHANGES 2011
Donald R. Howard Rate Study 1995
• The rate design • The City's potable water
principles established in rates are split into three
the Donald R. Howard components: A meter
Study have been charge; a commodity
utilized to develop the charge, and a square
proposed rate changes footage charge to
accurately capture costs
Justification for Water Rate Changes
• Cost of WRD RA Fee has increased 37.58-percent
from July 1, 2007 through July 1, 2010
Date of Increase
WRD Replenishment Fee Per Acre -
Foot
July 1, 2007
$149.00
July 1, 2008
$153.00
July 1, 2009
$181.85
July 1, 2010
1 $205.00
Total Increase: 37.58-Percent
Justification Continued
Cost of MWD surface water supplies has increased
62.24-percent from July 1, 2007 through January 1,
2011
Date of Increase -Potable Water
Cost Per Acre -Foot
July 1, 2007
$527.00
July 1, 2008
$564.00
July 1, 2009
$653.00
September 1, 2009
$781.00
July 1, 2010
$805.00
January 1, 2011
$855.00
Total Increase: 62.24-Percent
Justification Continued
• CBMWD Service Area recycled water rates have
increased an average of 40.02-percent from
July 1, 2007 through July 1, 2010
Total Increase-CBMWD Service
Area from July 1, 2007 through
July 1, 2010 — Units/AF
Percent Increase
0-25
31.09
25-50
40.95
50-100
37.72
100+
50.33
Average Increase: 40.02-Percent
Justification Continued
• Malburg Generating Station recycled water rates
have increased an average of 9.21 percent from
July 1, 2007 through July 1, 2010
Total Increase-Malburg Generating
Station from July 1, 2007 through
July 1, 2010 — Units/AF
Percent Increase
0-25
9.17
25-50
9.21
50-100
9.22
100+
9.27
Average Increase: 9.21-Percent
Justification Continued
• Recent environmental
court rulings along with
persistent drought
conditions will result in
the continued
escalation of surface
water costs
• The City of Vernon has
experienced a 33-
percent reduction in
water sales since fiscal
year 2007-2008.
• The City of Vernon last
increased water rates
on July 16, 2007
PROPOSED RATE CHANGES
EFFECTIVE JANUARY 1, 2011
Current Commodity Rate Per/HCF
Proposed Commodity Rate Per/HCF
$1.159
$1.28
10.44-Percent Increase
Current Meter Rates
Proposed Increase
Varies on meter size
No Change
Current Square Footage Charge
Proposed Square Footage Charge
$0.00337
$0.003102619
7.93-Percent Decrease
PROPOSED RATE CHANGES
EFFECTIVE JANUARY 1, 2011
CBMWD Service Area Current Recycled
Water Rate Per/HCF
CBMWD Service Area Proposed Recycled
Water Rate Per/HCF
$0.846
$1.433
69.39-Percentlncrease
Malburg Generating Station Current
Recycled Water Rate Per/HCF
Malburg Generating Station Proposed
Recycled Water Rate Per/HCF
$0.480
$0.488
1.67-Percentlncrease
RATE COMPARISON STUDY
• A majority of water utilities do not have a square
footage charge. For comparison purposes, the square
footage charge was converted into a commodity rate
by dividing the cost assigned to the square footage
charge and dividing it by the units of water sold. By
making this calculation, the square footage would
equate to a commodity rate of $0.4516/HCF. Adding
that to the proposed commodity rate of $1.28/HCF
equates to a net equivalent rate of $1.73/HCF.
RATE COMPARISION STUDY
CONTINUED
Water Utility
Rate Per/HCF
City of Anaheim
$1.72
City of Vernon
$1.73
Maywood Mutual No. 3
$1.95
City of Glendale
$2.12
City of Long Beach Tier II Rate
$2.43
City of Pasadena Block 2 Rate
$2.50
California Water Service -Commerce
$2.78
City of Santa Fe Springs
$3.04