HomeMy WebLinkAboutMinutes 2009-03-25 (3)~zx sA,v~
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o CITY COUNCIL
c'~LIFOR~~~ OF THE
CITY OF SOUTH SAN FRATICISCO
P.O. Box 711 (City Hall, 400 Grand Avenue)
South San Francisco, California 94083
Meeting held at:
MUNICIPAL SERVICES B~U]:LDING
BETTY WEBER ROOI\/I
33 ARROYO DRIVE
SOUTH SAN FRANC'ISCC-, CA
WEDNESDAY, MARCH :? 5, 2009
Called to Order: 8:33 p.m.
Roll Call:
Present: Councilmen Garbarino, Gonzalez
acid Mullin, Vice Mayor Addiego,
acid Mayor Matsumoto.
Absent: None.
Public Comments -Comments weYe limited to items o~z the Special NI-eeting Agenda.
Resident Dennis Beedie raised concerns over the proposed 41'% increase in the sewer rate. He
stated the increase should not be shouldered by resident. Rather, the City should look internally
to items such as salaries to come up with the funds. Going forward it would be important to
consider whether total. replacement or better maintenance oil sewer lines was :necessary.
Resident Gino 13aldisseri stated the City should look to avenues other than taxing residents to
improve the sewer system. Given the current economic situation, residents should not be
expected to bear the brunt of the cost. He questioned whether the money collected would go into
a sewer fund or other separate account.
Mayor Matsumoto explained the current discussion was very ~~reliminary and staff would explain
more about the precise proposal at a public hearing in June.
Vice Mayor Addiego stated he was happy to see concerned residents at the meeting.
2. Discussion of five (5) year Sewer Rate Increase Plan.
Director of Public Works White presented the staff report and explained it was intended to
provide Council with an update on the propose rate structure fir the next five (5) years. He
explained Public Works staff would be working very closel}~ v~rith Finance Department staff
throughout the process.
Director White explained that in April of 2004 the City dompl ied with Proposition 218 and
notified South San Francisco property owners of a 25% date increase for sewer service for the
2004-2005 fiscal year, and then annual increases of up tc~ 9°io each year for fiscal years 2005/2006
through 2008/2009. The increases were necessary to finance capital improvements for the City's
Water Quality Control Plant and sanitary sewer system. In the meantime, the City had been
issued a new NPDES permit by the State Regional Water Quality Control Board which
established new criteria for the operations of the plant for the next five (5) years. Required
improvements to the plant would total $25.9 million over the next five (5) years. Additional
green technology improvements could be accomplished for ,another $5 million over the five (5)
years after rebates.
Mayor Matsumoto questioned the rate breakdown between businesses and residents.
Director White estimated residential users paid 65-69% of what industrial commercial users pay.
Finance Director Steele advised the effluent produced by industrial commercial users was much
more complex than what a typical house produces.
Director White °xplained the most highly regulated item in the entire City was the sewer
treatment plant. The City could be fined up to $25,000/day for ongoing leaks of raw sewage that
found their way to the Bay. In addition, the regulatory power of the State Board was an
unavoidable reality. He then presented a series of slides demonstrating the various rate increase
options. Option 1 a included the scenario of base costs with required improvements for reliability
and yielded a 17% increase in year one (1) followed by ~%, 5°''/o and 0% increases in years two
(2), three (3), four (4), and five (5), respectively. Option lb included the scenario of energy
saving upgrades added to the base CIP required improvements and yielded a 17% increase in year
one (1) followed by 10%, 5% and 0% increases in years'twa (:Z), three (3), four (4), and five (5),
respectively. Finally Option II included the scenarios set fo~rth~ in options la and lb with the
inclusion of recycled water and yielded a 20% increase ih year one (1) followed by 10%, 5% and
0% increases in years two (2), three (3), four (4), and five (5~), respectively.
Vice Mayor Addiego questioned how the City could avaid any increases at all in the next three
(3) years.
Director White advised that based on routine maintenance anal required improvements it would
be nearly impossible to get away from an increase in the immediate future. He further advised of
a "what if scenario" that included mandated environmerutal costs the State Board could impose,
yielding even greater increases. A slide reflecting some of the; potential requirements was
displayed.
SPECIAL CITY COUNCIL MEETING MARCH 25, 2009
MINUTES PAGE 2
Councilman Garbarino questioned whether the three (3) tanks displayed were underground.
Director White explained the three (3) tanks were underground and the land above was owned by
the City and leased to Costco. He noted he hoped the "what if scenario" would not come to
fruition.
Director White closed his presentation by summarizing the considerations as the needs of the
plant, San Bruno as a partner, State Water Board requirements, rate payers and reserve and loan
requirements.
Director Steele returned to Vice Mayor Addiego's questz~on ;and noted the higher rates were
required in the first three (3) years because capital improvement upgrades were necessary. Those
costs would fall out by the third year, but operating costs would increase at that time.
Director White noted that staff related costs, such as salaries, made up roughly 20% of the cost of
the plant. Most of the remaining 80% related to maintaining and improving the plant to keep up
with environmental upgrades and the processing costs of sewage.
Resident Beedie suggested the information presented by Director White should be made available
on the City's website.
Director White advised Option II, including the recycled water scenario, was the option staff
recommended. This option would include required improvements, make the commitment
towards solar and. wind power and. incorporate recycled water. In the future, t:he green
improvements might be viewed as good investments. If Council directed staff to continue
pursuing this option, staff would continue to crunch the ~umbf,rs and refine the rate plan.
Councilman Garbarino thanked Mr. Baldisseri and Mr. Beedie for their comments and requested
that the information presented by the Public Works Department be placed on the City's website.
He questioned director White as to whether staff's recorrimendation could be characterized as
"bare bones."
Director White responded that equipment at the plant needed to be replaced. Accordingly Option
la, which addressed this need only, would be considered bare bones. Selecting Option la would
mean. opting ou'~ of funding recycled water and energy sawing improvements to the plant.
However, the opt out would only save residents $18.00/dear, which is why staff recommended
going forward with Option II.
Councilman Gonzalez questioned San Bruno's share of the cost.
Director White responded San Bruno's share of the cost wa:> r~~ughly 25% but was contingent
upon flow capabilities. San Bruno would increase its rates pw-suant to a complex agreement with
the City.
Mr. Beedie recommended the use of solar and wind power a.t the plant, including the use of
vertical turbines.
SPECIAL CITY COUNCIL MEETING MARCH 25, 2009
MINUTES PAGE 3
Director White reported that the City had commissioneda study of the use of wind and solar
power at the plant. The study revealed that a standing wind de-vice would work at the plant, but
might not be seismically feasible.
Mayor Matsumoto questioned the type of growth being factorc;d into the rate analysis.
Director White responded enough capacity for three (3) millio:r~ gallons per day of growth had
been factored in. He further noted the environmental upgrades would yield more storage and
actually allow the City to gain some additional capacity.
Councilman Gonzalez questioned the percentage increase over five (5) years based upon Option
II.
Director White responded the percentages would break down as follows: 20°% (Year 1), 10%
(Year 2), 5% (Year 3) and 0% (Years 4 and 5).
Councilman Gonzalez questioned whether the increase had to be as high as 20% in the first year.
Director White responded the increase was necessary baked on cash flow requirements. He
further noted that no matter what option was pursued, a minimum first year increase of 13%
would be required.
Vice Mayor Addiego commented that the rate increase vu~as coming at the worse possible time,
given the economy was not expected to turn around for a while. He requested that staff look at a
more equitable distribution of the rate increase over the five (5) year period.
Director Steel reminded Council that certain improvements :had to occur within a specific time
period. Accordingly, to a certain extent, inequitable distribu~.tion of the increase could not be
avoided. He noted, however, that some of the cost might be financed.
Director White advised the City might also receive roughly'~600,000 in federal stimulus money
to fund outfall repair, which could affect the amount of the rate increase. He cautioned, however,
that the City might not be advised of receipt of such funds until after the rate increase was
approved.
Mr. Baldisseri questioned the number of households presently in the City.
Assistant City Manager Van Duyn advised the City had about 20,000 households.
Councilman Mullin questioned whether the recycled water piece would help with the Water
Board.
Director White responded that enabling recycled water capabilities might be viewed as a double
edged sword in relation to the Water Board. Once the City bel;an to create tertiary treated water,
the Board could mandate the City to expand its use of such treatment at additional cost to the
City.
SPECIAL CITY COUNCIL MEETING MARCH 25, 2009
MINUTES PAGE 4
City Attorney Mattas advised. the Board had extensive authority to order entities to increase
treatment in order to improve conditions in the Bay. In aiddi~tion, the availability of water was
such a large issue that regulatory constraints could be placed upon the City once it undertook to
perform tertiary treatment.
Councilman Mullin questioned building capacity for the next few years.
Director White responded the City currently had five (5) diges~~ers. The question was when a
sixth (6t") should. be added. He noted some capacity could be added without extending the
plant's footprint.
Vice Mayor Addiego suggested a rate option that would be based upon actual water usage as
opposed to the current flat rate per parcel method. He stated that Cal Water could supply a range
of usage to provide a basis for a fee determination.
Councilman Mullin questioned whether other local Cities pursued dynamic pricing.
Director White responded that he believed Daly City applied dynamic pricing. In addition, the
City already employed dynamic pricing to a limited extent in that it established a lower rate for
residents of trailer parks.
Vice Mayor Addiego stated that as a starting point, he would bike to know how dynamic pricing
works where it is applied in San Mateo County, including in Daly City.
Mayor Matsumoto requested Council to provide direction to staff as to which option to pursue.
Councilman Gonzalez stated he was leaning towards Option II, but would like to see the rate
more equitably distributed over the five (5) year period.
Vice Mayor Addiego stated he might be inclined to hang back on the recycled water piece,
because he wanted to make sure there was a benefit to the corr~munity and residents.
Councilman Garbarino stated he wouldn't want the City to be penalized for its success related to
recycled water.
Director White explained staff would be coming back to Council with updates on progress with
respect to recyc~ed water. He noted negotiations with the PUC', San Bruno and Cal Water were
pending. Accordingly, the City could be a year or more away from any solid movement with
respect to recycled water.
City Attorney Mattas advised the City could keep the recycled water piece factored into the rate
analysis throughout the Prop 218 process and set the rats lower if recycled water did not come to
fruition. However, it could not set a rate that excluded the cost of recycled water and exceed the
rate if recycled water became available.
Councilman Mullin stated he did not want to abandon the recycled water concept and noted he
would prefer flexibility with respect to including it in the rate ,and backing down from it as
SPECIAL CITY COUNCIL MEETING MARCH 25, 2009
MINUTES PAGE 5
necessary. Accordingly, he preferred Option II as well a~ consideration of dynamic pricing.
Mayor Matsumoto commented she would like to see the impact of financing factored into the
analysis.
3. Adjournment.
Being no further business, Mayor Matsumoto adjourned the meeting at 10:00 p.m.
Submitted by: Approved:
~ r ~
Krista inell~ arson, City Clerk Karyl Matsumoto, Mayor
City of Sout Cisco City of South San Francisco
SPECIAL CITY COUNCIL MEETING MARCH 25, 2009
MINUTES PAGE 6