Oxnard Utility Ratepayers Advisory Panel digs in at 2-8-17 meeting

Contested rate-setting process moves along

By George Miller

  • Panel hears Capital Improvement Proposals (CIP)
  • Wastewater bonds BBB credit rating affirmed, with conditions
  • Infrastructure fee status unresolved
  • APWF charges unresolved
  • Many panel questions answered, some still outstanding
  • Staff still intends to present rate increase recommendations next week

The Oxnard Utility Ratepayers Advisory Panel held its third meeting  (Agenda) on 2-8-17. The Panel is assigned with reviewing the rate setting process, making recommendations, then presenting those recommendations to the City Council, which created it and to which it reports. This week, the presentations got into much more technical detail, with staff making presentations and providing volumes of materials.

Oxnard URAP Panel, (L-R): Aaron Starr, Dick Elzinga, Dave Littell, Rudy Rehbein: altrnates Steve Nash, Barbara Macri-Ortiz, Frank Brommenschenkel. Photo: CitizensJournal.us

Oxnard URAP Panel, (L-R): Manuel Herrera, El]va-Marie Lindsey, Nancy Lindholm. Photo: CitizensJournal.us

Staff intends to present rate recommendations next week, but still hasn’t presented the debt plan or options for replenishing badly depleted reserves.  The rate assistance program (for indigent ratepayers) was taken out of this meeting’s agenda. It doesn’t directly impact the Proposition 218 rate-setting process, nor can it legally be financed by the Enterprise Fund. It would have to be handled by some other means. Presentation materials are in the linked agenda package. (note: staff-proposed rate scenarios were released 2-13-17)

 

Event videos here:

http://www.ustream.tv/recorded/99774386  (Official City version- 1 of 2)

http://www.ustream.tv/recorded/99778019  (Official City version- 2 of 2)

 

Meeting proceedings

Agendized discussion items:

1. SUBJECT: Respond to questions by URAP members at the prior URAP meetings

2. SUBJECT: Review of the Infrastructure Use Fee

3. SUBJECT: Review of the planned CIP Projects

4. SUBJECT: Discussion of a Ratepayers Assistance Program

The last item was removed from the agenda, deferred.

Credit rating

Asst City Manager Jesus Nava announced that fixed rate WW revenue bonds had the “Triple A” rating affirmed. We think he meant triple B. He gave as reasons for this: The City’s decision to challenge measure M, the court restraining order “stay” on measure M, as well as Union Bank’s extension of the letter of credit. This gives the City some breathing room to resole the rates issue.

Panel elects Chair

A staff vs. Panel power struggle was resolved, via a special 2-6-17 meeting of the Utilities Task Force (Mayor Flynn and Councilman McDonald), which, after hearing all arguments, ruled that the Panel could decide if it wanted a chair or a continuation of the facilitation process run by Assistant City Manager Ruth Osuna.  At the 2-8-17 meeting, the Panel ended up going the chair route (Bill Littell was elected) at the meeting, but was amenable to having Osuna advise them, which seemed to work out pretty well. There was a brief struggle with the Assistant City Attorney, who took pains to tell them that Roberts Rules were inapplicable here. Nonetheless, they appeared to be utilizing a crude form of Robert’s Rules going forward.

Panel questions answered

Staff answered numerous Panel questions, some of which prompted challenges and/or more questions. Overall, the process was very informative. See video linked in this article for details. We’re trying to get readers a digital copy of answers for publication and will place it here as soon as we can. 

Infrastructure use fee

The infrastructure fee discussion was somewhat contentious, with staff and some members of the public saying it was justified. The City charges about $7.5 million annually in fees to the utilities, which ends up in the General Fund. Aaron Starr, Lary Stein, Phil Molina and others have claimed that the charges are excessive, not based on actual cost and can’t even legally be charged.  To some extent, this is merely taking money out of one city pocket and putting it into another, since all entities concerned are City-owned, even though the utilities are legally separate “Enterprise Funds.”  It does somewhat redistribute the costs differently over ratepayers, though.  This issue remains unresolved. It may come to a Panel vote, then be subject to staff arguments, Council action  and even then could be subject to legal maneuvering.

Here is the City’s study on this: H-15 2014 Enterprise allocation study for utilities

Aaron Starr proposed the following motion, but the Panel did not want to act on it at this time:

Motion concerning infrastructure use fee

Whereas, the City of Oxnard charges its three utilities an infrastructure use fee that amounts to over $7 million per year,

Whereas, the transfer of those moneys to the general fund has drained millions of dollars from the utilities and has led to our being out of compliance with required debt coverage ratios, and

Whereas, many other cities do not charge such a fee to their utility enterprises, therefore,

Be it resolved, the Utility Ratepayers Advisory Panel recommends that the City of Oxnard no longer charge the wastewater fund an infrastructure use fee.

Review of the planned CIP Projects

This was by far the longest, most technical and intense portion of the meeting. Staff presented “Goldilocks” options: small, medium and high-end 5 year plans, starting with the minimum holding action to keep the plant running legally and safely for a 5 year period ($63 million) and set the stage for 6-10 years plans; a more substantial one ($83 million) and a more intense one ($122 million).

Wastewater Division Manager (he is also currently running the Water Division) Ng Thien told us that he was told by Utilities Director Dan Rydberg to set aside the current Utilities Master Plan for Wastewater and develop tighter plans to get the biggest bang for the buck while maintaining service, safety and legal compliance. Some of this involved pushing some plans further out in the future and some involve different approaches.

Thien told us at the meeting these plans involve a gradual move into more advanced and efficient technologies.  He reinforced that to me privately an at  a facility tour on 2-10-17 that all three proposed alternative plans incorporate eliminating the risk of “single points of failure” which could shut down the operation.

There are actually three competing capital projects spreadsheets floating around:

  • Official city version with three scenarios: $63, $83 and $122 million
  • Aaron Starr version
  • Dick Elzinga (published with our  report of last week’s meeting)

Hopefully, these will be reconciled before rates are finally recommended.

Other notes

About 30 residents attended, plus the Panel and alternates (10), staff, media, support people and consultants- at least 50+ in total

Aaron Starr and Larry Stein have both protested certain charges to Wastewater for activities that support the Advanced Water Purification Facility (AWPF)

At the 2-7-17 Council meeting, Aaron Starr again noted significant discrepancies in Wastewater numbers released by the City. This example notes  a $7 million increase in projected Wastewater annual revenues in two City releases only two months apart: Meeting handout: 2017_02_07 City Council Handouts  – from $23 million to $30 million.  City Manager Greg Nyhoff apologized for shaky numbers, noted severe bookkeeping/Finance Dept. problems in the past, some of which they are still trying to resolve and said staff is doing everything it possibly can to present the most accurate numbers possible,

There was concern by Mayor Flynn at the 2-6-17 Task Force meeting that the Panel might take too much time to perform a virtual “forensic audit” of the process and not get it done in the allotted time. This did not occur. The first two meetings’ agendi were completed. They did have to skip the Ratepayers’ Assistance program at this meeting, which went 25 minutes over, due to addition of the election, etc., but this has no effect on the Prop 218 rate setting process.  There is intensive interest in this, though. But there were some fairly exhaustive questions about what the capital improvement projects were, what they would cost and how necessary they were.

The Utilities and Finance Depts. recently went back at the Wastewater Master Plan and attempted to winnow out non-vital projects and find cheaper ways to achieve lowest lifecycle costs while maintaining service. They did manage to slice some out but also thought of some new things needed, which were not in the previous plans released.

Panel member Manuel Herrera and I managed to attend the 2-9-17 plant tour (my second), which was helpful in visualizing what was covered at the meeting on capital improvement plans. We were also able to ask pointed questions as well. Four facility employees were there for most of the tour, from Manager Ng Thien on down to a key foreman.  We believe that most of the Panel members have done the tour.

 

Comments from Steve Dickmeyer (this is the full text version- not all presented at meeting)

February 8, 2017

Last week I attended the meeting on propose sewer rate increase, and that meeting caused me to have the following questions:

Mr. Starr said that the rate payers have had to pay for work on the sewer lines that was not done. In fact, the rate payers were required to pay for the work in several following rate increases.

  1. I would like to know if the City in the past has paid a company to do the proposed work, but it did not do the work. If the work was paid for, but the work was not done, then there should be a law suit against the company. If the city had not paid for the work to be done, where is the money?
  2. I could not believe that in less than one year the cost of the projects have gone up so much!
  1. Did the city put out to bid the contract to repair and rebuild parts of the sewer plant?
  1. Last week a gentleman from the City spoke of new technology that could be used at the sewer plant and a member of your panel spoke in favor of new technology at the sewer plant. I am also in favor of new technology as long as it pays for itself and lowers the cost of doing business. Will the new proposed technology reduce cost?
  1. Last week the spokesperson for the sewer department said that the department was short twenty (20) people, and the department was filling in the gape with contract workers. Is it more cost effective to use contract workers than to have full time employees with all of their benefits? Also, using contract employees allows flexibility in the amount of man hours needed day by day.
  1. Last week at this meeting, the City’s CFO spoke of when a new development is proposed, and the existing sewer line in the neighborhood does not have the capacity handle the increase waste water from the development, the developer only has to pay for the incremental difference between the existing sewer line and the larger one. That means that if the existing line is twelve (12) inches and the new line needs to be eighteen inches, that the developer pays only a portion of the cost of the new pipe. That means that the rate payers pay for the rest of the new pipe. That is so unfair to the rate payers for the existing line had been adequate before the development. The developer should have to pay for the entire new sewer line.
  1. When the drought is over, and water usage increase, will there be an automatic downward adjustment to the sewer rate?
  1. If the City diverted the sewer monies to other departments, then the City needs to pay back to money to the sewer department to lower the cost of the sewer usage charge and to add money the sewer reserves.
  1. Did the River Park development pay monies for the expansion of the sewer facility to handle the tremendous increase of waste water that the development would produce? If the development did so and is continuing to do so as the project is being built out, where is the money?
  1. What really bothers me is the concept that new capital facilities that have a long life have to be paid for in five (5) years by the rate payers. The cost of the facilities should be spread out over a period of thirty or more years for the rate payers. I would like think that the City issues bonds to pay for large capital expenditures. Perhaps the City could put out to bid the building and ownership of the new facilities and then lease back the facilities.

Side Note: The City built a waste water facility to purify the waste water. That water should be sold at the cost of the water plus depreciation, or pumped it into aquafer and sold to the city water department at its cost. This water would reduce the amount of water that the city needs to purchase from outside sources. This would increase the flow of money into the department and reduce the amount of the rate increase.

The City should have a policy that when a new development is proposed that one of the requirements of the development is that it has to pay for the expansion of the sewer plant to meet the future needs of the development. This should also pertain to new industries. These monies should be placed in an escrow account and held until the expansion is needed to be built.

Steve Dickmeyer

 

————————————–

A subsequent email exchange between Panel Alternate and former member Steve Nash and City Treasurer Phil Molina is relevant:

—–Original Message—–
From: Phillip Molina
To: Steven Nash
Sent: Sun, Feb 12, 2017 10:26 am
Subject: Re: URAP/IUF

Steve,
 
As the California AG has written,  a private citizen can send email and talk to every elected official on the same topic. That does NOT create a serial meeting. It is only the elected members of the legislative body (city council and mayor) who are prohibited from talking or sending emails to each other on matters of public concern.  Our DA has added city staff to the list of those who could cause a serial meeting if the position of one elected official is provided by staff to another elected official or if staff asks a member of the legislative body to make a decision on a public matter in a private setting.  (We can both see the loop holes in this, but that’s life I guess.)
 
To your questions.  They are in my mind exactly the questions that need to be addressed publicly by the panel. While a few of your questions were addressed specifically in Court cases, they as well as others should be publicly addressed so that We the People can better understand why the city can and cannot include certain costs when establishing the rates. Only once this is done can the public start to trust the methodology the city uses in setting rates. Why the City won’t do this is beyond my understanding.
 
Because I function as the City Treasurer, and not the City Attorney I can only suggest you read the findings of the court in 2 cases attached: Court of Appeal san juan capiatrano case   Court of Appeal Fresno v HJTaxpayers. Notice that the courts state no charge can the placed on city utilities that are provided citywide, no charges can be estimated based on engineer’s estimates using the M-1 manual, no charge can be placed on below average consumers for water production such as desalination plants because the below average consumer is not the generating reason for such a plant; an infrastructure use fee can be charged but only when it has actual usage basis and NOT as an alternative to property taxes; rate increases can be used to pay for facilities which will provide services to the ratepayers within 5 years of setting the rates;  the portion of rates that are based on process must be the same for all users as long as the same process is being used for all users; etc.
 
Phillip Molina
private citizen
 

On Sun, Feb 12, 2017 at 7:23 AM, Steven Nash wrote:

Hi, Phil. FYI, here are some questions I submitted to staff about the infrastructure use fee and other items. Maybe you can give me your take on them and what I should expect from staff. Please don’t forward to anyone as that could lead to a “serial meeting” and thus, violate the Brown Act’s restrictions. Thanks.

URAP Questions

Steve Nash,

Residential Alternate (scheduled to sit in for absent residential member at the 2-15-17 meeting)

Good morning, here are some questions and points of clarification I think should be addressed in order to expedite Wednesday’s meeting and, hopefully, allow the Panel to take a vote and make its recommendation. It is deleterious to the group’s mission to have Mr. Starr and other Panel members going over the same territory that has already been covered or should have been covered. I, for one, am not anxious to draw out this process into additional meetings. Thank you for your forbearance.

The Infrastructure Use Fee (IUF) is problematic because the City is forcing residents to pay higher wastewater utility rates for hard-to-verify financial impacts to public safety and roads.

Mr. Starr referenced Camarillo, Thousand Oaks and Simi Valley as not imposing an IUF on their utility rates. Can staff please verify this claim and investigate whether these cities employ an alternative method of recouping lost property tax from their enterprise-related properties?

The Panel’s request to see the cost-of-service spreadsheet needs to be addressed. A brief presentation by staff outlining the relatively stable and predictable costs and how much they might vary from year to year might be helpful.

Does Wastewater pay tipping fees for its roll-offs and bio-solids disposal?

What are the types and numbers of wastewater vehicles?

What are their tare weight and laden weight?

What are the average daily trips of each class of vehicle, including Vactors, chemical delivery, bio-solids disposal and lift-station maintenance trucks?

IUF are collected for police, fire and roads. I think a solid case can be made for fire and roads. Police costs seem much be tenuous as the URAP has not seen any documentation detailing call and response from the OPD. Can staff clarify this apparent discrepancy in allocating impact costs and provide URAP with an actual breakdown of recent costs directly attributable to wastewater activities?

Please include odometer readings and the year the vehicle was purchased with an average annual mileage provided as well, if possible.

The IUF has been justified, in part, to recapture a portion of the property taxes that the City does not pay for its properties and improvements. What is the value of wastewater-related properties, including capital improvements?

If we delay the purchase of the requested vehicles, what would be the consequences?

What are the anticipated pay raises for wastewater employees in the next five years, in both percentage of budget and annual cost increase?

Thank you.


Here are additional materials which were not provided with the online meeting agenda package:

​​1. Digital copy of the $69 million capital improvement scenario spreadsheet presented at the 2-8-17 URAP meeting- entitled “Wastewater Divsion- FY 2017 to FY 2022 Capital Improvement Program (CIP)?  This scenario was missing from the agenda package.

.

2. Digital copy of City of Oxnard Wastewater Division Wastewater Treatment Plant Capital Improvement Projects handout

.

​​3. Digital copy of City of Oxnard Wastewater Division Wastewater Collection System Capital Improvement Projects handout

.

​​4. Digital copy of City of Oxnard Wastewater Treatment Plant Improvements 5 slide handout at 2-8-17 meeting.

.

​​5. Digital copy of City of Oxnard Wastewater Treatment Plant Improvements 10 slide handout at 2-8-17 meeting, entitled “Utility Ratepayers Advisory Panel 2/8-17”

 
 

————————————-

From City of Oxnard web site

2017 Utility Ratepayers Advisory Panel (URAP) Meetings

2017 Meeting Schedule and Facility Tours Flyer (Download the Flyer)

1/25/17 URAP Meeting

1/30/17 Utilities Task Force – Utility Ratepayers Advisory Panel Special Meeting – Wastewater Treatment Plant Tour

2/1/17 URAP Meeting

2/6/17 Utilities Task Force – Special Meeting

2/8/17 URAP Meeting

 

2/15/17 URAP Meeting


1/17/17 Utility Task Force Meeting (UTF)-Including URAP Panel Selection

1/17/17 UTF Meeting Video (View it here)    

1/17/17 UTF Agenda (Download)

1/17/17 UTF PowerPoint (Download)

7/1/16 – 11/30/16 Utilities Financial Report (Download)

12/16 Wastewater Division Monthly Report (Download)

12/16 Water Division Quarterly Report (Download)

 

Some previous CitizensJournal.us articles on Oxnard Wastewater


George Miller is Publisher of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard


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Steven Nash

The City really shoots itself in its foot when it cannot (does not) answer these very simple questions on how rates are calculated. Staff should know by now that there are some pretty bright cookies looking over their shoulders and non-answers or indefensible answers is really only pulling on the tiger’s tail. Hopefully, we can get everybody satisfied with the proper info.

Tom

I won’t be able to be at the meeting tonight.

Tom

I have a question that was not answered in last week’s city council meeting, namely how is the variable cost of water determined?

The city defines tier1 from 0 to 6 HFC (@$3.09/HCF), Tier2 from 7 to 12 HFC (@$3.43/HFC) and Tier3 over 12 HCF (@$4.81/HCF). (Single Family Residential)

What is the water cost of someone that uses 6.5 HCF:
$3.09*6 plus 0.5 *? = Who knows.

The cost of the 0.5 HFC that lies between 6 and 7 HFC is undefined. In fact, anyone that uses more than 7 HCF per month uses 1 HCF of water that has a cost that is undefined.

On Feb 8, I Emailed the Chief Financial Officer of Oxnard asking for a clarification on the calculation of the cost of water since he made the presentation at last Tuesday’s council meeting on the pass-through water rate increases. I have not yet received a reply.

Included in the pass-through water increases is an increase in the fixed charge depending on the meter connection size. In 2015 the fixed cost for a single-family residence was $16.89 that will be $17.33 beginning in Mar 15, 2017 if the proposed rates are approved. In last week’s council meeting it was mentioned that the pass-through of the increase the city pays for water did not require council approval. Does the increase in the fixed charge require council approval?
Sources:
Proposed Water Pass-Through Rates (5/15/20)
NOTICE OF PUBLIC HEARING – January 19, 2016 Proposed Utility Rate Increases