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HomeMy WebLinkAbout31-07 • RESOLUTION NO. 31-07 A RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF LOS ALTOS HILLS SETTING A PUBLIC HEARING FOR THE CONSIDERATION OF A RESOLUTION INCREASING SEWER SERVICE CHARGES IN BOTH THE PALO ALTO AND LOS ALTOS SEWER BASINS, PRELIMINARILY APPROVING THE DRAFT SEWER SERVICE CHARGE STUDY, AND DIRECTING STAFF TO MAIL THE NOTICES REQUIRED BY LAW WHEREAS,The Town retained the services of a HF&H Consultants, L.L.C. to prepare an analysis of the adequacy of the Town's existing sewer service charges, and the HF&H has completed a draft report (Exhibit A)that recommends increases in the Town's existing sewer service charges. WHEREAS, the Town Council intends to consider adopting the proposed rate increases at a public hearing. WHEREAS, prior to taking action on the rate increases, the Town is required to provide 45 days' mailed notice of the public hearing to the parcel owners that would be subject to the increased rates. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the Town of Los Altos Hills does resolve as follows: 1. The City Council hereby declares its intention to conduct a public hearing on August 0"` 2007 at7in the City to consider the adoption of a resolution, pursuant to Los Altos Hills Municipal Code section 6-4.445, setting sewer service charges in both the Palo Alto and Los Altos sewer basins 2. The Sewer Service Charge and Connection Fee Study, attached hereto as Exhibit A, is preliminarily approved and adopted. 3. The City Manager is hereby directed to mail the notice of the proposed increase as required by California Constitution article XIIID section 6(a) and to provide any other notifications required by law. * * * * * * • ! PASSED AND ADOPTED at a regular meeting of the City Council of the Town of Los Altos Hills on this 14th day of June 2007,by the following vote: AYES: Mayor Warshawsky, Mayor Pro Tern Jones, Councilmember Kerr, Councilmember Mordo and Councilmember O'Malley NAYS: None ABSTAIN: None ABSENT: None By: -- ayor ATTES : City Cl- - • • LOSALTOS HILLS se CALIFORNIA TOWN OF LOS ALTOS HILLS SEWER SERVICE CHARGE AND CONNECTION FEE STUDY HF&H CONSULTANTS, LLC June 15, 2007 FINAL REPORT • • TOWN OF Los ALTOS HILLS TOWN HALL OFFICES 26379 FREMONT ROAD Los ALTOS HILLS,CA 94022 LOSALTOSHILIS CALIFORNIA SEWER SERVICE CHARGE AND CONNECTION FEE STUDY FINAL REPORT June 15, 2007 Iii11 HF&H CONSULTANTS,LLC 2175 North California Blvd.,Suite 990 Walnut Creek,CA 94596 Tel:(925)977-6953 Fax: (925)977-6955 • 0 0 HF&H CONSULTANTS,LLC Advisory Services to Northern California Municipal Management Southern California 2175 N.California Boulevard,Suite 990 Robert D.Hilton,CMC Walnut Creek,California 94596 John W.Farnkopf,PE Telephone:925/977-6950 Laith B.Ezzet CMC Fax:925/977-6955 www.hfh-consultants.com June 15,2007 Mr. Carl Cahill Town Manager Townf Los os Altos Hills Town Hall 26379 Fremont Road Los Altos Hills,CA 94022 Subject: Sewer Service Charge and Connection Fee Study Dear Mr. Cahill: The purpose of this letter report is to summarize the results of our sewer rate analysis for FY 2007-08,which includes a projection through FY 2016-17. The report contains the following sections: 1. Background 2. Revenue Requirements 3. Revenues 4. Projected Sewer Service Charges 5. Reserves 6. Connection Fees 7. Findings and Recommendations This report briefly describes our analysis,which led to our recommendation that the Town increase its annual sewer service charge to$733.00 per residence. For rate payers located in the Town, this a 29% increase from$570.34, and for rate payers located outside the Town, this is an increase of 54% from$476.04. A copy of the financial model and other relevant documents are included in the appendix to this report. 1. Background The Town of Los Altos Hills provides sanitary sewer service to 1,566 currently connected customers that are located inside the Town and an additional 108 customers located outside the Town. Wastewater is conveyed through the Town's facilities to either the Cities of Los Altos or Palo Alto and through their collection systems • • Mr. Carl Cahill June 15,2007 Page 2 eventually to the Palo Alto Regional Water Quality Control Plant (PARWQCP) where wastewater is treated and discharged to the Bay. There are an additional 1,854 septic tank users of which 1,192 could potentially connect to the Town's sanitary sewer collection system after certain facilities are constructed.1 For purposes of this study, none of the costs associated with the septic tank users is included in the sewer service charges. The Town charges customers for sewer service on the Santa Clara County tax rolls. Notwithstanding the fact that the sewer service charges are billed through the County, the Town's sewer service charge is legally considered to be a fee and not a tax or assessment. The current annual charge is$570.34 per residence located inside the Town;a copy of the enabling resolution is included with this report (see Resolutions 51- 01 and 30-03). The current annual charge is apparently$476.04 per residence located outside the Town (no resolution or ordinance is currently available to confirm this amount). The annual sewer service charges since FY 1982-83 are shown in Figure 1. Figure 1. Annual Sewer Service Charges ANNUAL ANNUAL% FISCAL YEAR CHARGE CHANGE 1982-83 $126.00 1983-84 $126.00 0.0% 1984-85 $150.00 19.0% 1985-86 $150.00 0.0% 1986-87 $150.00 0.0% 1987-88 $170.40 13.6% 1988-89 $217.56 27.7% 1989-90 $220.08 1.2% 1990-91 $240.00 9.1% 1991-92 $240.00 0.0% 1992-93 $268.80 12.0% 1993-94 $268.80 0.0% 1994-95 $476.04 77.1% 1995-96 $476.04 0.0% 1996-97 $476.04 0.0% 1997-98 $476.04 0.0% 1998-99 $476.04 0.0% 1999-00 $476.04 0.0% 2000-01 $476.04 0.0% 2001-02 $570.34 19.8% 2002-03 $570.34 0.0% 2003-04 $570.34 0.0% 2004-05 $570.34 0.0% 2005-06 $570.34 0.0% 2006-07 $570.34 0.0% The recently completed expansion study identifies$28,163,471 to$32,645,471 (depending on whether gravity or pressurized mains are constructed) in projects required to covert 1,192 septic tank users to the Town's collection system. In addition to these expansion facilities, additional treatment plant capacity would be needed from the I Cf.Los Altos Hills Sanitary Sewer System Expansion Study and Plan,prepared by WRECO,March 2007. • Mr. Carl Cahill June 15,2007 Page 3 PARWQCP. For purposes of this study, it was assumed that the costs of these expansion projects will be funded directly by those who connect to the sewer system through either connection fees or other appropriate financing mechanism undetermined at the time of this report. The Town retained HF&H to determine how much current sewer service charges need to increase to cover the increased costs of operations and capital improvement projects. A previous report draft was prepared that incorporated the conversion of septic tank users during the ten-year planning horizon. The assumptions concerning the timing for construction of the expansion projects and the rate at which conversions would subsequently occur were extremely speculative. It was therefore concluded that for present purposes, the rate analysis would not incorporate any septic conversions. However, our report does derive the cost per connection for customers that convert from septic tanks to the Town's sewage collection system. The increases in sewer service charges were determined using a financial model that projects expenses,revenues,and reserve fund balances. In the model, revenue from rates is compared with the revenue requirement(i.e., projected O&M and capital expenses as well as transfers to and from reserves) to determine rate adjustments over the ten-year projection period. These rate adjustments are moderated using reserves. Specific targets were set for these reserve funds so that adequate funds are maintained for working capital, capital improvements, and other ongoing liabilities. 2. Revenue Requirements The revenue requirement projections represent the amount of revenue that must be generated by sewer service charges. The projections were based on the Town's preliminary operating and capital budget for FY 2007-08, which were extrapolated to FY 2016-17 based on inflation, growth, and other associated factors (see Table 1B of the model). The projections reflect certain key assumptions: • Financing capital projects for facilities replacement -Capital projects for replacing existing facilities have been budgeted by the Town and will be funded on an on-going basis to insure that facilities are properly maintained. These projects are appropriately funded from rates to avoid financing costs. Initially, however,Staff has proposed that a$900,000 loan will be required from the General Fund. For rate-setting purposes, it is assumed that this loan will be repaid within the ten-year planning period, including interest. • Financing capital projects for system expansion-It is assumed that the cost of the expansion projects in the WRECO report will be funded only by future customers and that no revenue from sewer service charges will be used. Whether this cost is paid • • Mr. Carl Cahill June 15,2007 Page 4 through connection fees,land-based assessments or taxes, or some other means has not been determined at this time. • Reserves -The Town's existing sewer service charges contribute funds to the Sanitary Sewer Reserve Fund. For modeling purposes,we divided the Sanitary Sewer Reserve Fund into operating and capital components, each of which has a target balance to meet as discussed below. Figure 2 indicates the major components of the revenue requirements. Figure 2. Major Components of Revenue Requirements $3,000000 ❑Transfers to Capital and General Fund $2.500,000— ■Wastewater Treatment - - ■Operations and Maintenance $2.000.000--- - - - – --- $1,500,000rt --- 3 $1,000,000-- $500,000— - __ $0 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 The following is noteworthy about the revenue requirement components: • Operations and Maintenance - Additional staffing for system management is budgeted in FY 2007-08, after which only gradual inflationary cost increases are projected. • Wastewater treatment-This is the largest component and is based on the contractual charges paid by the Town to the Cities of Los Altos and Palo Alto. • Transfers - This component of the revenue requirement includes transfers to the Capital Replacement Reserve and to the General Fund. The Capital Replacement Reserve transfers are for on-going capital improvements. The General Fund transfers reimburse the Town for governmental overhead and to repay the • • Mr. Carl Cahill June 15, 2007 Page 5 $900,000 loan. Overall, the annual transfers fluctuate slightly as various annual capital improvements are completed,but the trend over time is an increase based on estimated inflation. 3. Revenues Revenue from the Town's current sewer service charges was projected in order to determine the baseline funding position. Figure 3 shows this projection. Estimated growth from new connections (including remodeling) is relatively minimal. The septic tank conversions are shown as zero, again, because not enough is currently known about when the expansion projects will be constructed, only after which can the conversions can occur. Figure 3. Projected Growth and Revenue from Current Rates FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Revenue from Current Rates-Inside Town Beginning-of-Year Connections 1,566 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 New Connections(Growth) 2 2 2 2 2 2 2 2 2 2 2 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 2 2 2 2 2 2 2 2 2 2 2 End-of-Year Connections 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 1,588 Beginning-of-Year Connections 1,566 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 Current Service Charge $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $893,152 $894,293 $895,434 $896,574 $897,715 $898,856 $899,997 $901,137 $902,278 $903,419 $904,559 Annual Change 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Revenue from Current Rates-County Beginning-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 New Connections(Growth) 0 0 0 0 0 0 0 0 0 0 0 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 0 0 0 0 0 0 0 0 0 0 0 End-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 Beginning-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 Current Service Charge $476.04 $476.04 5476.04 5476.04 5476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 Annual Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Revenue from Current Rates-Total Beginning-of-Year Connections 1,674 1,676 1,678 1,680 1,682 1,684 1,686 1,688 1,690 1,692 1,694 New Connections(Growth) 2 2 2 2 2 2 2 2 2 2 2 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 2 2 2 2 2 2 2 2 2 2 2 End-of-Year Connections 1,676 1,678 1,680 1,682 1,684 1,686 1,688 1,690 1,692 1,694 1,696 Avg.Connections during Year 1,675 1,677 1,679 1,681 1,683 1,685 1,687 1.689 1,691 1,693 1,695 Total Revenue from Current Rates $944,565 $945,705 $946,846 $947,987 $949,127 $950,268 $951,409 $952,550 $953,690 $964,831 $955,972 Annual Change 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Clearly, these revenue estimates will need to be updated as the expansion plan becomes refined because the pace at which septic tank conversions occurs has a profound influence on the revenue projections. • • Mr. Carl Cahill June 15, 2007 Page 6 4. Projected Sewer Service Charges Revenue increases are calculated by comparing the revenue requirements with the revenue from existing sewer service charges and factoring in growth,as shown in Figure 4. A deficit is projected for FY 2006-07 and additional, increasingly large deficits are projected in subsequent years without rate increases. Figure 4. Projected Revenue Increases Budget Projected FY 2006-07 FY 2007-08 FY 2008.09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Revenue from Current Rates $944,565 $945,705 $946,846 $947,987 $949,127 $950,268 $951,409 $952,550 $953,690 $954,831 $955,972 Net Revenue Requirements $1,276,834 $1,520,750 $1,570,752 $1,672,801 $1,726,981 $1,833,378 $2,017,084 $2,103,194 $2,216,804 $2,233,019 $2,301,944 Surplus/(Deficit)before rate increase ($332,269) ($575,044) ($623,906) ($724,814) ($777,853) ($883,110) ($1,065,676) ($1,150,644) ($1,263,114) ($1,278,188) ($1,345,972) Revenue Required from Rates $944,565 $1,229,417 $1,477,080 $1,626,745 $1,791,573 $1,937,224 $2,094,714 $2,097,225 $2,225,721 $2,228,383 $2,364,908 EDUs 1,676 1,678 1,680 1,682 1,684 1,686 1,688 1,690 1,692 1,694 1,696 Increased Rate per EDU2 $563.58 $732.67 $879.21 $967.15 $1,063.88 $1,149.01 $1,240.94 $1,240.96 $1,315.44 $1,315.46 $1,394.40 Required Revenue Increase - 30% 20% 10% 10% 8% 8% 0% 6% 0% 6% Revenue from Rates with Increase $944,565 $1,229,417 $1,477,080 $1,626,745 $1,791,573 $1,937,224 $2,094,714 $2,097,225 $2,225,721 $2,228,383 $2,364,908 Net Revenue Requirements $1,276,834 $1,520,750 $1,570,752 $1,672,801 $1,726,981 $1,833,378 $2,017,084 $2,103,194 $2,216,804 $2,233,019 $2,301,944 Surplus/(Deficit)before rate increase ($332,269) ($291,333) ($93,672) ($46,056) $64,592 $103,846 $77,629 ($5,969) $8,916 ($4,636) $62,964 1.EDU-Equivalent Single-Family Dwelling Unit 2.The rate for FY 2006-08 represents the weghted average of the rates inside and outside the Town. A series of revenue increases is proposed that will generate sufficient additional revenue to cover the increasing revenue requirements. The financial performance of the Sewer Fund is very sensitive to the underlying assumptions, particularly over the long run. For purposes of setting rates in the short run, it is important to remember that future rate increases should be subject to further review and adjusted to reflect changed conditions. For FY 2007-08, a 30% increase in revenue is indicated. With a 30% increase in overall revenue,the current sewer service charge of$570.34 per equivalent single-family dwelling unit(EDU) located inside the Town and $476.04 outside the Town would both increase to $733.00. In other words, the rates outside the Town would increase more to catch up with the inside-Town rates because there is no justification for outside-Town rates to be lower for the same service provided inside the Town. Indeed, it is a common practice for rates to be higher to provide service outside city limits because of the typically higher cost to serve customers that are farther away and who may not be providing a proportionate share of property taxes. Figure 5 shows how the rate increase for FY 2007-08 compares with the trend line for the historical inside-Town rates. • Mr. Carl Cahill June 15, 2007 Page 7 Figure 5. Service Charges Compared With Trend Line $800 �iANNUAL CHARGE $700 - - Linear Trend for Annual Charge $600 $500 -f $400 • c _ $300 $200 • $100 , - $0 I I I I I I ! I I I I I I I I I I I I I I I w rn a" rn 8 m rn rn m 8 o 0 0 0 o g cvga44 elm m m rn s,5a COrn m m 8 o 0 0 o c� o 0 0 p. sp. F..' a' rn ^� ^> m ^� a� of o' rn ^� N N N N N N N N Fiscal Year Figure 6 shows how the current and proposed annual bill for the Town's single-family residential customers compares with similar communities. The costs are plotted against the population served in each community. Because of the Town's smaller size, it has somewhat higher rates but its rates are near the trend line. 41111 • Mr. Carl Cahill June 15,2007 Page 8 Figure 6. Annual Sewer Service Charges Compared With Population • 01,000 . Hillsborough 01,400- - -. $1,200 Belvedere Proposed& Current $1.000 • m 1/ Los Phos Hills Proposed& urrent $800 / • Belmont Current&Proposed 5800 • Burlingame San Bono MIIbra yyoge Tburon San Canon $100 • ♦ Proposed& Redwood City ♦ Current - ♦ —--- 4 San Meted Atherton West Bay SD • Palo Frio $200 $0 0 10,000 20,000 30,000 40.000 50,000 60,000 70,000 00,000 80,000 100,000 Population 5. Reserves Reserves have been provided for in deriving the sewer service charges. The Town currently has one reserve for the Sewer Fund. For modeling purposes,we have created reserves for operations and for capital projects with target balances for each: • Operating Reserve. The minimum balance for the operating reserve is set at 75% of the revenue requirement. A minimum balance of this magnitude is needed because the Town receives its revenue from the County only twice per year. By meeting this target,the Sewer Fund should be able to meet its month-to-month cash flow needs without relying on the General Fund for loans to cover operating expenses. • Capital Replacement Reserve. The target balance for the capital reserve equals the average annual cost for replacement projects over the projection period. With this reserve,sufficient capital is available to undertake cash-funded capital projects without significant funding constraints. • • Mr. Carl Cahill June 15,2007 Page 9 • Capital Expansion Reserve. We recommend that the Town establish a Capital Expansion Reserve. Revenue from connection fees should be separately accounted for in this reserve so that the Town is in compliance with the Mitigation Fee Act(California Government Code Section 66000 et seq..) This reserve can be used to account for bond proceeds, annual expenditures, and on- going cash flow. Although no target balance is needed,a negative balance would trigger the need for an interfund loan or the curtailment of capital expenditures. The rate increases shown in Figure 4 are intended to generate sufficient revenue to cover the revenue requirements,which include transfers to the Operating and Capital Replacement Reserves. Figure 7 shows the Sewer Fund balance for the ten-year planning period. The graph further demonstrates that the current sewer service charges cannot fund the projected revenue requirements without rate increases. Either costs need to be reduced or rates increased. In determining how much to increase rates,the following objectives were followed: • Rates should never be set higher than needed at any time. • Rates for current customers should not include any costs associated with expanding the system to convert septic tank users to the Town's sewer system. • The Sewer Fund balance should never drop below the minimum required balance. By staying above the minimum required balance, the Sewer Fund should be able to meet its operating cash flow needs without relying on the General Fund. • Annual rate adjustments should be moderated to avoid "rate shock." Initially, however, large rate increases are needed to provide the required level of funding without dropping below the minimum required fund balance. Spending levels would have to be cut back to reduce the rate increase. • The Sewer Fund balance should try to maintain or slightly exceed the target balance,but can drop below the target balance for periods of time to fund construction. O • Mr. Carl Cahill June 15, 2007 Page 10 Figure 7. Fund Balance With and Without Rate Increases $3.0 - $2.5 N �+ Y \\ C A mT. $1.5 a LL \ r $0.5 \ $0.0 \ . FY 2006-07 FY 2007-08 FY 2006-09 FY 2009-10\ FY 2010-11 FY 2011-12 FV 2012-13 FY 2013-14 FY 2014-15 FV 2015-16 FY 2016-17 ($0.5) ($1.0) - \ —�Fund balance without rate increases—a–Fund balance with rate increases—a—Target balance—of—Minimum recommended balance 6. Connection Fees The Town currently has a connection feet of$7,950 per EDU (see attached Ordinance No. 443) that was based on a Staff Report that did not include the expansion projects. Revenue from this connection fee is used to fund capital replacement projects. One method of funding the capital expansion projects would be with a connection fee that would charge those who convert from septic tanks to the Town's sewers for the cost of the expansion projects. The expansion study provides the data required to make the calculation. Figure 8 summarizes the connection fee calculation(see Table 7 of the model). Based on current construction cost estimates, including an estimate of the cost of capacity from the PARWQCP, the cost per connection associated with these growth- related projects is $24,466. It is premature to adopt a connection fee for the expansion projects. Additional interaction between the Town and those who can potentially convert to its sewers should occur to determine the appropriate method of funding. For example, special assessments,rather than connection fees, may be a preferred financing mechanism. It is likely that whatever financing mechanism is used, debt will be issued, in which case the cost of interest would have to be included. The$24,466 cost per connection does not include the cost of interest,nor does it include construction cost inflation between now and when the projects are constructed. 2 Connection fees are a type of development impact fee that are paid once at the time of connection. • Mr. Carl Cahill June 15, 2007 Page 11 Figure 8. Cost Per Connection Related to the Expansion Projects Project Cost Connections Cost Per Projects (2007 Dollars) (EDUs) Connection Expansion Study Projects' Priority 1 $1,971,980 37 Priority 2 $5,253,537 204 Priority 3 $12,239,771 600 Priority 4 $5,942,389 240 Priority 5 $2,755,796 111 $28,163,473 1192 $23,627 Treatment Capacity(PARWQCP)2 $1,000,000 1,192 $839 $29,163,473 $24,466 1. Source:Los Altos Hills Sanitary Sewer Expansion Study and Plan,3/22/07,Prepared by WRECO. 2. Source:Town estimate. Revenue from connection fees should be separately accounted for in an interest-bearing reserve. At such time as funding is determined for the projects (e.g., low-interest State Revolving Fund loan), the fee should be adjusted to include the interest cost associated with financing. In this way, the entire cost of the expansion projects will be funded by those who benefit from the facilities. 7. Findings &Recommendations The following briefly summarizes our findings and recommendations for setting rates for FY 2007-08: • Increased revenue requirements- Revenue requirements are projected to increase to fund additional staffing for system management. • Loan from General Fund- A$900,000 loan from the General Fund is proposed to fund capital replacement projects in the short run. The loan would be repaid with interest during the ten-year planning period. • Rate increase required for FY 2007-08-The current sewer service charge should be increased to$733.00 per equivalent single-family dwelling effective in FY 2007-08. This rate would apply to rate payers located inside and outside the Town. The sewer service charge would be added to the Santa Clara County tax rolls by August 10. • Future rate increases - The proposed increase and subsequent increases will be needed to fund the projected operating and capital budgets and to repay the loan from the General Fund. Prior to adopting future rate increases, the rate model should be updated to reflect changes in estimated expenditures,construction schedules for the expansion projects, and assumed rates of growth. • • Mr. Carl Cahill June 15, 2007 Page 12 • Operating Reserve minimum balance. As a safeguard against cash flow shortfalls, the minimum balance for the Operating Reserve should be set equal to at least 75% of the revenue requirements. • Connection fees - The current cost per connection for the future expansion projects is $24,466. Connection fees should be calculated for those that convert from septic tanks to the Town's sewers at the time that the funding mechanism is determined so that the costs of the expansion projects will be funded by those that benefit from the projects. • Future connection fee increases - Connection fees (i.e., the existing connection fee as well as the future connection fee for the expansion projects) should be increased to reflect on-going construction cost inflation as well as the cost of financing at the time that financing is secured. • New Capital Expansion Reserve - A Capital Expansion Reserve should be created to account for connection fee revenue and the cost of the expansion projects. We greatly appreciate this opportunity to assist the Town with its sewer rates and connection fees. Very truly yours, HF&H CONSULTANTS,LLC Jo W. Farnkt, . , P.E. enior Vice President Attachments: A) Rate model: Table 1A. Overview Table 1B. General Table 2. Revenue Requirements Table 3. Revenue Increases Table 4. Reserve Funds Table 5. Revenues Table 6. Capital Improvements Table 7. Connection Fees B) Resolutions 51-01 and 30-03 C) Ordinance No. 443 • S ATTACHMENT A Rate Model: Table 1A. Overview Table 1B. General Table 2. Revenue Requirements Table 3. Revenue Increases Table 4. Reserve Funds Table 5. Revenues Table 6. Capital Improvements Table 7. Connection Fees • • A I B I C I D I E I F I G 1 H I 1 I J I K I L I M 1 Town of Los Altos Hills 2 Sewer Rate Analysis-Without Septic Tank Conversions 3 Table 1A.Overview 4 5 Without Sewer Conversions 6 Projected 7 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Notes 8 Increase in Revenue 0% I 30% 20% 10% 10% 8% 8% 0% 6% 0% 6% ITo Tables 3.4,9 9 Cumulative Increase in Revenue 30% 56% 72% 89% 104% 120% 120% 133% 133% 147% Front Table 3 10 11 Annual Sewer Charge-LAH $570 $734 $880 $968 $1,065 $1,150 $1,242 $1,242 $1,317 $1,317 $1,396 12 Monthly Cost $48 $61 $73 $81 $89 $96 $104 $104 $110 $110 $116 13 Rate Increase 29% 20% 10% 10% e% 8% 0% 6% 0% 6% 14 155 Annual Sewer Charge-County $476 $734 $880 $968 $1,065 $1,150 $1,242 $1,242 $1,317 $1,317 $1,396 16 Monthly Cost $40 $61 $73 $81 $88 $96 $104 $104 $110 $110 $116 17 Rate Increase 54% 20% 10% 10% 8% 8% 0% 6% 0% 6% 18 19 20 21 22 $3.0 - 23 24 25 26 $2.55 - 27 28 m 29 C 30 --got31 $2.0 32 \ 33 V 34 s i $1.5 \ 36 \ 37 'D ‘ 38 7 40 '0 Nre 41 W \ 42 w \ 40- $0.5 \ 44 Y 45 \ 46 47 $0.0 -, 4 49 FY 200607 FY 2007-09 FY 200609 FY 2009-10\ FY 2010-11 FY 2011-12 FY 2012-13 FY 201314 FY 2014-19 FY 2015-16 FY 2016-17 50 \ 51 \ 52 ($0.5) .91 53 54 \ 55 \ 57 ($1.0) _ 58 59 60 —.—Fund balance without rate increases—a--Fund balance with rate increases s z —�—Target balance —a—Minimum recommended balance 63 64 65 66 67 68 53.000,000 69 70 71 72 73 0 Transfers to Capital and General Fund 74 52.500000 75 ■Wastewater Treatment • 76 ■Operations and Maintenance 4 78 so 81 52000.000 - — • 82 83' 21 64 — eb 3q j8 51.500.000. 88 LiL , JIti }IJ1 i, lrl - 94 95 96 97 98 99 $503.003- 100 101 102 103 104 105 so 106 __M»,- - - _ •:DO, -.2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 107 108 109 110 HFBH Consultants,LLC LAH No Conversions I3Jun07.sls 6/15/2007 9:09 AM 1 1A.Overview A l B I C D I E I F G I H I l J 1 K L I M I N 1 Town of Los Altos Hills 2 Sewer Rate Analysis-Without Septic Tank Conversions 3 Table 1B.General 4 5 Budget Projected 6 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Notes 7 Factors 8 a. Interest on fund balance 3.0% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% To Table 4 9 b. General inflation Per Budget 3.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% To Table 2 10 c. Construction cost escalation 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% ° 3.0/° 3.0% To Table 6 11 d. Sewered connections 1,675 1,677 1,679 1,681 1,683 1,685 1,687 1,689 1,691 1,693 1,695 From Table 5 12 e. Annual increase in connections 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12% To Table 2 13 14 List of Model Tables 15 Table 1A.Overview 16 Table 1B.General • 17 Table 2.Revenue Requirement 18 Table 3.Revenue Increases 19 Table 4.Reserve Funds 20 Table 5.Revenues 21 Table 6.Capital Improvements 22 Table 7.Connection Fees 23 Table 8.Debt 24 Table 9.Debt Coverage 25 Table 10.Single-Family Rate Comparison 26 Table 11.Historical Charges Adjusted for Inflation 27 28 Data Input and Source Legend 29 (Town of Los Altos Hills Assumptions 30 31 'Enter from Current Budget 32 33 Enter Beginning unrestricted cash balances 34 35 Manually adjust to balance to target balances 36 37IIIM Enter from Town of Los Altos Hills Customer/Billing Account Data • 38 HF&H Consultants,LLC LAH No Conversions 13Jun07.xls 6/15/2007 9:09 AM 2 1B.General Al B I C I D I E l F I G I H I I I J I K I L I M I N 1 Town of Los Altos Hills 2 Sewer Rate Analysis-Without Septic Tank Conversions 3 Table 2.Revenue Requirement 4 Estimated 5 Budget Projected 6 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Notes 7 Operating Expenses 8 Operation and Maintenance 9 Annual Palo Alto Basin Sewer System Maintei $39,156 $40,575 $42,248 $43,990 $45,804 $47,693 $49,660 $51,708 $53,839 $56,059 $58,371 Table 1B Factors b.and e. 10 Sanitary Sewer Rehab and Storm Drain Impro $230,553 $238,907 $248,760 $259,018 $269,700 $280,821 $292,400 $304,457 $317,010 $330,081 $343,689 Table 1B Factors b.and e. 11 Sewer Cleaning and TV Inspection $10,034 $10,397 $10,826 $11,273 $11,737 $12,221 $12,725 $13,250 $13,796 $14,365 $14,958 Table 1B Factors b.and e. 12 Hydraulic Assessment for Sewer Basins $4,700 $4,870 $5,071 $5,280 $5,498 $5,725 $5,961 $6,207 $6,462 $6,729 $7,006 Table 1B Factors b.and e. 13 Sanitary Sewer Management Plan $24,940 $25,813 $26,845 $27,919 $29,036 $30,197 $31,405 $32,662 $33,968 $35,327 $36,740 Table 1B Factor b. 14 System Management $0 $110,000 $114,400 $118,976 $123,735 $128,684 $133,832 $139,185 $144,752 $150,543 $156,564 Table 1B Factor b. 15 Subtotal $309,383 $430,563 $448,151 $466,457 $485,511 $505,342 $525,984 $547,468 $569,829 $593,103 $617,328 16 Annual Change 39.17% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 17 Wastewater Treatment 18 Los Altos Basin $318,027 $329,551 $343,142 $357,293 $372,026 $387,367 $403,340 $419,971 $437,287 $455,316 $474,088 Table 1B Factors b.and e. 19 Palo Alto Basin $309,424 $320,636 $333,859 $347,627 $361,963 $376,888 $392,429 $408,610 $425,458 $442,999 $461,264 Table 1B Factors b.and e. • 20 Subtotal $627,451 $650,187 $677,001 $704,920 $733,989 $764,256 $795,769 $828,581 $862,745 $898,316 $935,352 21 Annual Change 3.62% 4.12% 4.12% 4.12% 4.12% 4.12% 4.12% 4.12% 4.12% 4.12% 22 Total Operating Expenses $936,834 $1,080,750 $1,125,152 $1,171,377 $1,219,500 $1,269,598 $1,321,753 $1,376,049 $1,432,574 $1,491,419 $1,552,680 23 Annual Change 15.36% 4.11% 4.11% 4.11% 4.11% 4.11% 4.11% 4.11% 4.11% 4.11% 24 Debt Service 25 Debt Service Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 26 27 Transfers to/(from) 28 Capital Replacement Reserve $200,000 $300,000 $300,000 $350,000 $350,000 $400,000 $525,000 $550,000 $600,000 $550,000 $550,000 From Table 4 29 General Fund $140,000 $140,000 $145,600 $151,424 $157,481 $163,780 $170,331 $177,145 $184,230 $191,600 $199,264 Table 1B Factor b. 30 Subtotal $340,000 $440,000 $445,600 $501,424 $507,481 $563,780 $695,331 $727,145 $784,230 $741,600 $749,264 31 32 Net Revenue Requirement $1,276,834 $1,520,750 $1,570,752 $1,672,801 $1,726,981 $1,833,378 $2,017,084 $2,103,194 $2,216,804 $2,233,019 $2,301,944 To Table 3 33 34 Source:Town of Los Altos Hills 2006-07 Budget • HF&H Consultants,LLC LAN No Conversions 13Jun07.xls 6/15/2007 9:09 AM 3 2.Rev Reqmt Town of Los Altos Hills Sewer Rate Analysis-Without Septic Tank Conversions Table 3.Revenue Increases Budget Projected FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Notes Revenue from Rates without Rate Increases Revenue from Current Rates $944,565 $945,705 $946,846 $947,987 $949,127 $950,268 $951,409 $952,550 $953,690 $954,831 $955,972 From Table 5 Net Revenue Requirements $1,276,834 $1,520,750 $1,570,752 $1,672,801 $1,726,981 $1,833,378 $2,017,084 $2,103,194 $2,216,804 $2,233,019 $2,301,944 From Table 2 Surplus/(Deficit)before rate increase ($332,269) ($575,044) ($623,906) ($724,814) ($777,853) ($883,110) ($1,065,676) ($1,150,644) ($1,263,114) ($1,278,188) ($1,345,972) Revenue from Rates with Rate Increases Increase in Revenue from rates 30.0% 20.0% 10.0% 10.0% 8.0% 8.0% 0.0% 6.0% 0.0% 6.0% From Table 1A Cumulative Increase 30.0% 56.0% 71.6% 88.8% 103.9% 120.2% 120.2% 133.4% 133.4% 147.4% To Table 1A • Total Revenue from Existing Rates Revenue from Current Rates $944,565 $945,705 $946,846 $947,987 $949,127 $950,268 $951,409 $952,550 $953,690 $954,831 $955,972 From Above Revenue from Rate Increases FY 07-08(effective 7/1/07) $283,712 $284,054 $284,396 $284,738 $285,080 $285,423 $285,765 $286,107 $286,449 $286,791 FY 08-09(effective 7/1/08) $246,180 $246,477 $246,773 $247,070 $247,366 $247,663 $247,959 $248,256 $248,553 FY 09-10(effective 7/1/09) $147,886 $148,064 $148,242 $148,420 $148,598 $148,776 $148,954 $149,132 FY 10-11 (effective 7/1/10) $162,870 $163,066 $163,262 $163,457 $163,653 $163,849 $164,045 FY 11-12(effective 7/1/11) $143,498 $143,670 $143,843 $144,015 $144,187 $144,359 FY 12-13(effective 7/1/12) $155,164 $155,350 $155,536 $155,722 $155,908 FY 13-14(effective 7/1/13) $0 $0 $0 $0 FY 14-15(effective 7/1/14) $125,984 $126,135 $126,286 FY 15-16(effective 7/1/15) $0 $0 FY 16-17(effective 7/1/16) $133,863 Subtotal-Revenue from Rate Increases $0 $283,712 $530,234 $678,759 $842,446 $986,956 $1,143,305 $1,144,676 $1,272,030 $1,273,552 $1,408,936 Total Rate Revenue $944,565 $1,229,417 $1,477,080 $1,626,745 $1,791,573 $1,937,224 $2,094,714 $2,097,225 $2,225,721 $2,228,383 $2,364,908 Net Revenue Requirements $1,276,834 $1,520,750 $1,570,752 $1,672,801 $1,726,981 $1,833,378 $2,017,084 $2,103,194 $2,216,804 $2,233,019 $2,301,944 From Table 2 Surplus/(Deficit)after Rate Increase ($332,269) ($291,333) ($93,672) ($46,056) $64,592 $103,846 $77,629 ($5,969) $8,916 ($4,636) $62,964 To Table 4 • HF&H Consultants,LLC LAH No Conversions 13Jun07.xls 6/15/2007 9:09 AM 4 3.Revenue Increase 1 Town of Los Altos Hills A I B I C I D I E I F 1 G I H I I I J I K I L I M 2 Sewer Rate Analysis-Without Septic Tank Conversions 3 Table 4.Reserve Funds 4 Projected 5 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FV 2016-17 Notes 6 7 Reserve Funds Without Rate Increases 8 Sewer Operations Fund 9 Beginning Balance $2,297,334 $1,586,267 $1,046615 $437,504 10 Surplus/(Deficit) ($332,269) ($287,310) ($1,065,163) ($1,948,273)06 ($3,013,949)15 ($1,63, 4) ($5,478,188) ($6,705,895)1 ($575.044) ($623,906) (5724,814) ($777,853) ($883,110) ($1,065,676) ($1.150,644) ($1,263,114) ($1,278,188) (51.345,972) From Table 3 11 Transfer(To)/From Capital Replacement Fund ($425,000) $0 $0 $0 SO $0 $0 $0 $0 $0 $0 From below 12 Transfer(To)/From Capital Expansion Fund $0 $0 $0 $0 SO $0 $0 SO $0 $0 SO From below 13 Subtotal $1,540,065 $1,011,222 $422,709 ($287,310) (51,065,163) ($1,948,273) ($3,013,949) ($4,164,593) ($5,427,707) (56,705,895) ($8,051,867) 14 Estimated interest earnings $ 46,202 $ 35,393 $ 14,795 $ - $ - $ - $ - $ - $ - $ $ Table 18 Factor a. 15 Ending Balance $1,586,267 $1,046,615 $437,504 ($287,310) ($1,065,163) ($1,948,273) ($3,013,949) ($4,164,593) ($5,427,707) ($6,705,895) ($8,051,867) 16 Minimum Balance(75%of Rev RegmO $957,625 $1,140,562 $1,178,064 $1,254,601 $1,295,235 $1,375,034 $1,512,813 $1,577,395 $1,662,603 $1,674,764 $1,726,458 17 18 Reserve Funds With Rate Increases 19 Revenue Increases 30.0% 20.0% 10.0% 10.0% 8.0% 8.0% 0.0% 6.0% 0.0% 6.0% From Table 1A 20 21 Sewer Operations Fund 22 Beginning Balance $2,297,334 $1,586,267 $1,340,257 $1,290,215 $1,287,705 $1,399,628 $1,556,096 $1,690,905 $1,743,910 $1,814,175 $1,872,873 2006-07 From above 23 Surplus/(Deficit) ($332,269) ($291,333) ($93,672 24 Transfer(To)/From General Fund $0 $0 $0 $0 Below($93,672) ($46,056) $64,592 $103,846 $77,629 ($5,9$0) $8,90 ($4,636) $62,964From Table 3 $0 $0 $0 $0 $0 $0 $0 $O To BIII 25 Transfer(To)/From Capital Replacement Fund ($425,000) $0 $0 $0 $0 SO $0 $0 $0 $0 SO To Below 26 Transfer(To)/From Capital Expansion Fund $0 SO $0 SO SO $0 $0 SO $0 $0 $0 To Below 27 Subtotal $1,540,065 $1,294,934 $1,246,585 $1,244,160 $1,352,298 $1,503,474 $1,633,725 $1,684,937 $1,752,826 $1,809,539 $1,935,837 28 Estimated interest earnings $ 46,202 $ 45,323 $ 43,630 $ 43,546 $ 47,330 $ 52,622 $ 57,180 $ 58,973 $ 61,349 $ 63,334 $ 67,754 Table 1B Factor a. 29 Ending Balance $1,586,267 $1,340,257 $1,290,215 $1,287,705 $1,399,628 $1,556,096 $1,690,905 $1,743,910 $1,814,175 $1,872,873 $2,003,591 30 Minimum Balance(75%of Rev Regmt) $957,625 $1,140,562 $1,178,064 $1,254,601 $1,295,235 $1,375,034 $1,512,813 $1,577,395 $1,662,603 $1,674,764 $1,726,458 31 32 Sewer Capital Replacement Fund 33 Beginning Balance $0 $436,627 $431,599 $444,828 $500,388 $495,964 $506,775 $538,217 $554,461 $585,692 $580,342 34 (10)/From Rev Reqmts $200,000 $300,000 $300,000 $350,000 $350,000 $400,000 $525,000 $550,000 $600,000 $550,000 $550,000 To Table 2 35 Transfer(To)/From General Fund(Loan) $0 $900,000 $0 SO ($50,000) ($75,000) ($170,000) ($200,000) ($225,0$0) ($200,000) ($211.2$0) To Below36 Transfers(To)/From Operations Fund $425,000 $0 $0 $0 $O $0 $0 $0 $0 $0 $0 From Above 37 Transfer(To)/From Expansion Fund $0 $16,377 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 From Below 38 Capital improvement Projects ($201,090) ($1,236,000) ($318,270) ($327.818) ($337,653) (9347,782) ($358,216) ($368,962) ($380,031) ($391.432) ($403,175) From Table 6 39 Subtotal $423,910 $417,004 $429,786 $483,467 $479,192 $489,638 $520,016 $535,711 $565,886 $560,717 $532,403 40 Estimated interest earnings $ 12,717 $ 14,595 $ 15,043 $ 16,921 $ 16,772 $ 17,137 $ 18,201 $ 18250 $ 19,806 $ 19,625 $ 18,634 Table lB Factor a. 41 Ending Balance $436,627 $431,599 $444,828 $500,388 $495,964 $506,775 $538,217 $554,461 $585,692 $580,342 $551,038 42 Target Balance(Average Annual Replacement budget) $563,460 $600,000 $636,540 $655,636 $675,305 $695,564 $716,431 $737,924 $760,062 $782,864 $806,350 From Table 6 43 44 Fund balance without rate increases $2,022,894 $1,478,215 $882,333 $213,078 ($569.199) ($1.441,498) ($2,475,732) ($3.610,132) ($4,842,014) ($6,125,553) ($7,500,829) 45 Fund balance with rate increases $2,022,894 $1,771,856 $1,735,044 $1,788,093 $1,895,592 $2,062,871 $2,229,122 $2,298,371 $2,399,667 $2,453,215 $2,554,628 46 Minimum recommended balance $957,625 $1,140,562 $1,178,064 $1,254,601 $1,295,235 $1,375,034 $1,512,813 $1,577,395 $1,662,603 $1,674,764 $1,726,458 47 Percent of Minimum Balance 211% 155% 147% 143% 146% 150% 147% 146% 144% 146% 148% 48 Target balance $1,521,085 $1,740,562 $1,814,604 $1,910,237 $1,970541 $2,070,598 $2,229,245 $2,315,320 $2,422,665 $2,457,628 $2,532,808 49 50 General Fund Loan 51 Beginning Balance $0 SO ($931,500) ($964,103) ($997,846) ($981,021) ($937,731) ($794,602) ($615,413) ($404,078) ($211,220) 52 Transfers(To)/From Replacement Fund $0 ($900,000) $0 $0 $50,000 $75,000 $170,000 $200,000 $225,000 $200,000 $211,220 See above 53 Transfers(To)/From Operations Fund $0 SO $0 $0 S0 SO SO $0 $0 SO $0 See above 54 Subtotal $0 ($900,000) ($931,500) ($964,103) ($947,846) ($906,021) ($767,731) ($594,602) ($390,413) ($204,078) EO • 55 • Estimated interest earnings SO ($31,500) ($32,603) ($33,744) ($33,175) ($31,711) ($26,871) ($20,811) (513,664) ($7,143) $0 Table 1B Factor a. 56 Ending Balance $0 ($931,500) ($964,103) ($997,846) ($981,021) ($937,731) ($794,602) ($615,413) ($404,078) ($211,220) $0 57 Sewer Capital Expansion Fund 58 Beginning Balance EO $16,377 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 59 Bond Proceeds SO $0 $0 $0 SO SO $0 $0 $0 SO $0 From Table 8 60 Connection Fee Revenue $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 From Table 5 61 Transfers(To)/From Replacement Fund $0 ($16,377) ($16,457) (S16,457) (516,457) ($16,457) ($16,457) ($16,457) ($16,457) ($16,457) ($1fi,4$0) To Below $0 62 Transfers(To)/From Operations Fund $0 SO SO SO SO SO $0 $0 SO SO $0 From Above 63 Capital improvement Projects $0 SO SO SO SO SO $0 $0 SO SO SO From Table 6 64 Debt Service EO SO SO SO SO $0 $0 $0 $0 $0 $0 From Table 8 65 Subtotal $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 66 Estimated interest earnings $ 477 $ 557 $ 557 $ 557 $ 557 $ 557 $ 557 $ 557 $ 557 $ 557 $ 557 Table 1B Factor a. 67 Ending Balance $16,377 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 $16,457 68 69 Fund balance without rate increases $2,022,894 $1,478,215 $882,333 $213,078 ($569.199) ($1,441,498) ($2,475,732) ($3,610,132) ($4,842.014) ($6,125,553) ($7.500,829) 70 Fund balance with rate Increases $2,039,271 $1,788,313 $1,751,500 $1,804,550 $1,912,048 $2,079,328 $2,245,579 $2,314,827 $2,416,324 $2,469,671 $2,571,085 71 Minimum recommended balance $957,625 $1,140,562 $1,178,064 $1,254,601 $1,295,235 $1,375,034 $1,512,813 $1,577,395 $1,662,603 $1,674,764 $1,726,458 72 Percent of Minimum Balance 213% 157% 149% 144% 148% 151% 148% 147% 145% 147% 149% 73 Target balance $1,521,085 $1,740,562 $1,814,604 $1,910,237 $1,970,541 $2,070,598 $2,229,245 $2,315,320 $2,422,665 $2,457,628 $2,532,808 HF&H Consultants,LLC LAN No Conversions 13Jun07.xls 6/15/2007 9:09 AM 5 4.Reserves Town of Los Altos Hills Sewer Rate Analysis-Without Septic Tank Conversions Table 5.Revenues FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Notes Revenue from Current Rates-Inside Town Beginning-of-Year Connections 1,566 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 New Connections(Growth) 2 2 2 2 2 2 2 2 2 2 2 To Table 8 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 2 2 2 2 2 2 2 2 2 2 2 End-of-Year Connections 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 1,588 Beginning-of-Year Connections 1,566 1,568 1,570 1,572 1,574 1,576 1,578 1,580 1,582 1,584 1,586 Current Service Charge $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 $570.34 From Below $893,152 $894,293 $895,434 $896,574 $897,715 $898,856 $899,997 $901,137 $902,278 $903,419 $904,559 Annual Change 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Revenue from Current Rates-County Beginning-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 ID New Connections(Growth) 0 0 0 0 0 0 0 0 0 0 0 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 0 0 0 0 0 0 0 0 0 0 0 End-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 Beginning-of-Year Connections 108 108 108 108 108 108 108 108 108 108 108 Current Service Charge $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $476.04 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 $51,412 Annual Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Revenue from Current Rates-Total Beginning-of-Year Connections 1,674 1,676 1,678 1,680 1,682 1,684 1,686 1,688 1,690 1,692 1,694 New Connections(Growth) 2 2 2 2 2 2 2 2 2 2 2 Septic Conversions to Sewer 0 0 0 0 0 0 0 0 0 0 0 Total Added Connections 2 2 2 2 2 2 2 2 2 2 2 End-of-Year Connections 1,676 1,678 1,680 1,682 1,684 1,686 1,688 1,690 1,692 1,694 1,696 Avg.Connections during Year 1,675 1,677 1,679 1,681 1,683 1,685 1,687 1,689 1,691 1,693 1,695 To Table 1B Total Revenue from Current Rates $944,565 $945,705 $946,846 $947,987 $949,127 $950,268 $951,409 $952,550 $953,690 $954,831 $955,972 To Table 3 Annual Change 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Revenue from Connection Fees New Connections(Growth) 2 2 2 2 2 2 2 2 2 2 2 Septic Conversions to Sewer,Paid 0 0 0 0 0 0 0 0 0 0 0 From Table 7 • Total Annual Connections 2 2 2 2 2 2 2 2 2 2 2 Connection Fee $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 $7,950 From Tables 7,8 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 $15,900 To Table 4 Remaining Septic Connections Not Connected to Sewer 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 2006-07 from Town Septic Conversions to Sewer,in Service 0 0 0 0 0 0 0 0 0 0 0 From Above Remaining not Connected 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 1,854 Cumulative Septic Conversions-Paid 0 0 0 0 0 0 0 0 0 0 0 Cumulative Septic Conversions-Connected 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 HF&H Consultants,LLC LAH No Conversions 13Jun07.xls 6/15/2007 9:09 AM 6 5.Revenues Al B I C I D I E I F I G I H I I I J I K I L I M I N I 0 1 Town of Los Altos Hills 2 Sewer Rate Analysis-Without Septic Tank Conversions 3 Table 6.Capital Improvements 4 Projected 5 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 Total Notes 6 Summary of Expenditures 7 Replacement 8 Manhole Improvement at Anacapa Road $2,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,800 9 Sewer Connection for the Yard and LLF $14,490 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $14,490 10 Sanitary Sewer Expansion Study $57,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $57,000 _11 Newbridge Drive Sewer Replacement $62,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $62,000 12 Foothill Expwy Sewer Diversion Project,Design $0 $650,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $650,000 13 Sewer Fee Study $14,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $14,800 14 Eastbrook Sewer Improvement $0 $200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $200,000 15 Sewer Metering Station $50,000 $50,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $100,000 16 Annual Sewer Replacement $0 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $3,000,000 17 Subtotal $201,090 $1,200,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $4,101,090 18 Expansion 19 Sewer Expansion,Priority 1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 From Table 7 20 Sewer Expansion,Priority 2 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 From Table 7 21 Sewer Expansion,Priority 3 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 From Table 7 III 22 Sewer Expansion,Priority 4 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 From Table 7 23 Sewer Expansion,Priority 5 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 From Table 7 24 Subtotal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 25 Total $201,090 $1,200,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $4,101,090 30 Summary of Expenditures with Inflation 31 Inflation factor 3.0% 6.1% 9.3% 12.6% 15.9% 19.4% 23.0% 267% 30.5% 34.4% Table 18 Factor c. 32 Replacement 33 Manhole Improvement at Anacapa Road $2,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,800 34 Sewer Connection for the Yard and LLF $14,490 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $14,490 35 Sanitary Sewer Expansion Study $57,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $57,000 36 Newbridge Drive Sewer Replacement $62,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $62,000 37 Foothill Expwy Sewer Diversion Project,Design $0 $669,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $669,500 38 Sewer Fee Study $14,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $14,800 39 Eastbrook Sewer Improvement $0 $206,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $206,000 40 Sewer Metering Station $50,000 $51,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $101,500 41 Annual Sewer Replacement $0 $309,000 $318,270 $327,818 $337,653 $347,782 $358,216 $368,962 $380,031 $391,432 $403,175 $3,542,339 42 Subtotal $201,090 $1,236,000 $318,270 $327,818 $337,653 $347,782 $358,216 $368,962 $380,031 $391,432 $403,175 $4,670,429 To Table 4 43 Expansion 44 Sewer Expansion,Priority 1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 45 Sewer Expansion,Priority 2 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 46 Sewer Expansion,Priority 3 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 47 Sewer Expansion,Priority 4 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 48 Sewer Expansion,Priority 5 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 49 Subtotal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 To Tables 4,7 50 Total $201,090 $1,236,000 $318,270 $327,818 $337,653 $347,782 $358,216 $368,962 $380,031 $391,432 $403,175 $4,670,429 51 52 Average Annual Replacement Cost $424,584 53 Average Total Cost $424,584 54 Capital Replacement Fund Target Balance $563,460 $600,000 $636,540 $655,636 $675,305 $695,564 $716,431 $737,924 $760,062 $782,864 $806,350 2x inflated project cost;To Table 4 55 Source:Town of Los Altos Hills DPW 5-Year CIP Planning HF&H Consultants,LLC LAH No Conversions 13Jun07.xls 6/15/2007 9:09 AM 7 6.Capital Improvements or • Town of Los Altos Hills Sewer Rate Analysis-Without Septic Tank Conversions Table 7.Connection Fees Project Name Project ID Priority Connections Project Cost Notes Purissima Road North 34 1 17 $553,590 New Connections calculated from given Cost/Parcel Arastradero Road 36 1 20 $1,418,390 New Connections calculated from given Cost/Parcel PARWQCP Capacity 1 $1,000,000 Estimate Subtotal,Priority 1 37 $2,971,980 To Table 5 Robleda Road 30 2 126 $1,804,500 Moody Road 1G 2 78 $3,449,037 Subtotal,Priority 2 204 $5,253,537 To Table 5,#of New Conn.from Expansion Projects Only Berkshire Drive 11 3 55 $971,618 Altamont Road 18 3 75 $1,699,742 Elena Road North 24 3 39 $704,526 Purissima Road South 32 3 132 $1,794,600 Viscaino Drive 33 3 19 $603,419 La Cresta 35 3 10 $230,418 Edgerton Road 19G 3 25 $652,611 Natoma Road West 20G 3 52 $1,140,810 Barranca Road 21G 3 66 $1,629,972 Saddle Mt Drive 28G 3 29 $1,037,700 Olive Tree Lane West 7G 3 23 $394,335 Fernhill Drive 9G 3 75 $1,380,020 Subtotal,Priority 3 600 $12,239,771 To Table 5 Ridge Road 3 4 11 $173,784 Laura Court Drive West 4 4 15 $197,904 Camino Hermosa Drive 10 4 31 $697,070 Stonebrook Road 14 4 11 $217,668 Page Mill Road 15 4 43 $1,282,002 Byrd Lane 22 4 7 $141,900 Elena Road South 25 4 66 $1,884,702 Manuela Avenue 40 4 25 $520,205 Toyonita Road 41 4 7 $153,450 Yuba Lane 27G 4 7 $150,042 Burke Road 31G 4 17 $523,662 Subtotal,Priority 4 240 $5,942,389 To Table 5 Chaparral Way 2 5 4 $354,077 Edgecliff Place 5 5 11 $143,584 Laura Court Drive East 6 5 10 $134,403 Olive Tree Lane East 8 5 15 $386,856 Rolly Road 12 5 10 $172,598 Mora Glen Drive 13 5 16 $210,618 Via CerroGordo 16 5 5 $115,669 Briones Court 17 5 3 $173,314 Simon Lane 23 5 5 $41,850 Vinedo Lane 26 5 7 $251,485 Christopher's Lane 29 5 3 $79,329 Fremont Road 37 5 4 $123,000 Wild Plum Lane 38 5 9 $127,659 La Lanne Court 39 5 9 $441,354 Subtotal,Priority 5 111 $2,755,796 To Table 5 Total 1,192 $29,163,473 Original Cost $0 Inflated Cost,From Table 6 Connection Fee per equivalent single-family dwelling unit,original cost $24,466 'To Table 5 Connection Fee per fixture unit $408 Assumes 60 fixture units per equivalent dwelling unit Connection Fee per equivalent single-family dwelling unit,inflated cost $0 Connection Fee per fixture unit $0 Current Septic Systems 1,854 100.00% Conversions to Sewer 1,192 64.29% Not Converting 662 35.71% Source:Los Altos Hills Sanitary Sewer Expansion Study and Plan,3/22/07,Prepared by VVRECO. HF&H Consultants,LLC LAH No Conversions 13Jun07.xls 6/15/2007 9:09 AM 8 7.Connection Fees • ATTACHMENT B Resolution 51-01 Resolution 30-03 _:..+s.:. .. - ..�. .. _ -.ir.f a` - .ria• •1Z" , •-':, .__.... ^+• -.`'+. , .� . • w -.J lam.. . tig ra 10i RS" 0WTJOMa 51-01 , ( ESOtL. 't.J't' ON1 OF ME CM'COUNICOL OF ME (., TOWN OF LOS ALTOS GULLS t'Is PROMS ME E. LOS ALTOS AND PALO ALTO SEWER SCE CAR E t; WHEREAS, Los .Altos milts Municipal Code Secifcns x.301 through 6-4.310, • in stve, =min pn cno for piacement off severer servtt;a themes on Town tat roll; ,:e am WB-IEREAS, the Sewer Agaaement between the C1ty of Loos Allam("Los A1tos')and the Town of Los Altos Hills Crown`)calls for the Town to review and approve the annual sewer sea vice costs set by Lae Altos; and r.. WHEREAS, the Sewer Agreement between the City oV Palo Alto ('Pato Alto-) and The Town calls for the Town to review and approve the annual sewer costs set by Palo Alto; , and 1 WHEREAS, Los Altos and Palohave recommended annual sewer sesvic3 charges, and the Town needs to set ask/ :a sewer basin reserve fund, as set out in the i.., attached Staff Report NOW, THEREFORE, the City Council of the Town does RESOLVE as follows: ice. 1. The Town approves the amount of the proposed annual sewer service v# charges to be charged by Los Altos and Palo Alto, to continue until amended by i, I 11 subsequent Town action. I;: 2_ Pursuant to California Health and Safety Code Section 5473.the yearly sewer service charge tor both the Los Altos and Palo Alto Sewer Service areas shall be$570.34 1:- until amended by subsequent Town action. 3. The Santa Clara County Assessor shell enter the charges against the respective lots and parcels of land as they appear on the current assessment roll for fiscal year 2001 -2002. M1 PASSED AND ADOPTED this 19th day ofY , 2001. 6y: Mayor ATTEST: f city ct S�=. PJB jf-OA ,1:. Irl''� �it�'•q='; -1 r.�+�. may. ��*�-•� ,.n.sem•- .S..y::-'•vw�� } 3� _��y�� ..»�,� s 7 �„ •✓" � �: ! u4;'•,`,;,iL,�SF^`�5:� < ��i '.•$ �-. q:".:1-- !:A',..,-W4.'--. ^rf 3 . �L�: Fri"'4¢F-�.�-+ .y^Lx���•�}; p t �T :rv�++U �' may. a.. NT.r'. _ _+i-•+(s?'F r -. r_`Sn.��J�':��:'r+, k;_ a'!'o:a• -.' �taS.'+�i-.:.%.�?`?r _ .. �� . • RESOLUTION NO. 30-03 RESOLUTION OF TSE T..WN OF LOS ALTOS -3QLL S APPROVING G AMD AUTHORIZING 2003 SEWER FEE SCHEDULE WHEREAS, the Town of Los Altos Hills (`Town") provides sanitary sewer services to 1,400 connections, of which 750 connections are in the Los Altos Basin and 650 connections are in the Palo Alto Basin; WHEREAS, the Town of Los Altos Hills Municipal Code Sections 6.4-201 and 6.4-203 provide that sewer connection and service fees shall be charged to pay for the privilege of connection to and use of the sanitary sewer facilities of the Town, in amounts to be determined by resolution of the City Council; - WHEREAS, the current Town Sewer Fee Schedule only accommodates residential connections; If11[F9lEREAS, a number of Los Altos Basin and Palo Alto Basin sewer connections are non-residential; Wib'HEREAS, the Town wishes to adopt a new Sewer Fee Schedule, attached as Appendix A hereto (`2003 Sewer Fee Schedule"), to allow for fees to be charged for non-residential sewer connections; NOW, THEREFORE, the City Council of the Town does RESOLVE as follows: 1. Public interest and convenience require the Town of Los Altos Hills to approve the "2003 Sewer Fee Schedule" attached as Appendix.A hereto; and 2. The Town of Los Altos Hills hereby approves the 2003 Sewer Fee Schedule, to replace and supersede any other sewer fee schedules in use by the Town. 114‘ - PASSED AND ADOPTED thisL) day of ,, 2003. ( By: Mayor - ATTE T' _ City Clerk - • • AppendiN A 2003 Sewer Fee Schedkfle i� 1 � t{{��U -• ..�'�""p 'vr�'«IUii. f��% �%�h' t„k W��!-v.; -•...-sYl�i} t.1' �fy+:�P'I J u?�ljy i ,• ! ����.a c.� ;i.i it t". &I(.���4}t e�..'.,,.} ' 'r 'i7. ) ,.":Lii6J ���fi%�Pil}.wkxtr»»�.+� •.. .�. ._'.'=m��t?4�� l;Ft+f4�:1 ��'�� n: Residence 1.00 Church 1.00 Country Club 2.68 Office 1.84 Fire Station 3.00 Elementary school 1.00 for each 26 students in average daily attendance Junior high school 1.00 for each 26 students in average daily attendance without gymnasium and/or cafeteria Junior high school 1.00 for each 20 students in average daily attendance with gym and/or cafeteria High school 1.00 for each 15 students in average daily attendance Junior college 1.00 for each 10 students in average daily attendance I Boarding 1.00 for each 3.5 resident students in average daily schools/convents attenriance, plus 1.00 for each 10 nonresident 2 630196v1 • ATTACHMENT C Ordinance No. 443 • • ORDINANCE NO. 443 AN ORDINANCE OF THE CITY COUNCIL OF THE TOWN OF LOS ALTOS HILLS ADOPTING A REVISED SEWER CONNECTION FEE SCHEDULE APPLICABLE TO THE LOS ALTOS SEWER BASIN AND THE PALO ALTO SEWER BASIN RECITALS WHEREAS, the City Council held an open and public meetings regarding the adoption of a sewer connection fee schedule for property within the Palo Alto Basin and the Los Altos Basin, pursuant to Government Code Section 66016 and in all manner required by law; and WHEREAS, the City Council has complied with all statutory requirements for imposing the sewer connection fee as set forth in Government Code Sections 66013 and 66016; and WHEREAS, Section 15273 of the California Environmental Quality ACT(CEQA) guidelines states that CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, and other charges by public agencies which the public agency finds are for the purpose of: 1. Meeting operations and maintenance expenses, including employee wage rates and fringe benefits; 2. Purchasing or leasing supplies, equipment, or materials; 3. Meeting financial reserve needs and requirements; 4. Obtaining funds necessary for capital projects necessary to maintain service within existing service areas; and WHEREAS, the City Council finds and determines that this action is exempt from CEQA based on the foregoing provisions. NOW, THEREFORE, the City Council of the Town of Los Altos Hills does ORDAIN as follows: SECTION ONE: The Sewer Connection Fee Schedule of the Town of Los Altos Hills, a copy of which is on file in the office of the City Clerk, for property within the Los Altos Basin and the Palo Alto Basin, is amended to read as follows: Page 1 of 3 • • Sewer Connection Fee Schedule Type of Connection Units of Service Cost per Connection Residence(1 to 60 F.U.) 1.00 $7,950 Church 1.00 $7,950 Country Club 2.68 $ 21,306 Office I.84 $ 14,628 Fire Station 3.00 $23,850 School: Elementary and junior 1.00 for each 26 students in TBD high without gymnasium and/or average daily attendance • cafeteria Junior high with gym and/or 1.00 for each 20 students in TBD cafeteria average daily attendance High school 1.00 for each 15 students in TBD average daily attendance Junior college 1.00 for each 10 students in TBD average daily attendance Boarding schools/convents 1.00 for each 3-1/2 students in TBD average daily attendance; plus 12.00 for each 10 nonresident SECTION TWO: The City Council finds the above-listed adjustments are necessary to protect public health and safety in that they will be utilized, in part, to pay for necessary improvements to the sanitary sewer system; that the charges are not discriminatory or excessive; that public notice was provided pursuant to Government Code Section 54354.5; and that such modifications are in compliance with the law and have been adopted pursuant to the requirements of the State of California Government Code. SECTION THREE: This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: February 16,2006 PASSED: March 9, 2006 AYES: Mayor Kerr, Mayor Pro Tem Warshawsky, Councilmember Jones, Councilmember O'Malley and Councilmember Mordo NOES: None ABSENT: None ABSTENTIONS: None Page 2 of 3 • ATTEST: / �- City Clerk Mayor APPRO ' I AS TO FORM: APPROVED: City Attorney City Manager Page 3 of 3